Category Archives: Introduction to Operations Management

Linking Operations Management to Customers and Suppliers

• In the past most manufacturing organizations viewed operations strictly as an internal function that had to be buffered from the external environment by other organizational functions. Orders were generated by the marketing function supplier and raw materials were obtained through the purchasing function capital for equipment purchases came from the finance function the labor force was obtained through the human re sources function and the product was delivered by the distribution function Buffering the transformation process from the external environment as traditionally desirable for several reasons.
• Interaction with environmental elements e.g customers and salespeople on the production floor could have a disturbing influence on the transformation process .
• The transformation process was often more efficient than the prose es required for obtaining inputs and distributing finished goods.
• With certain processes e.g  auto assembly lines and continuous-flow processes such as petroleum refining maximum productivity was achieved only by operating at a continuous rate that assumed the market could absorb all of the product being manufactured. This meant that the production process had to shift at least some of the input and output activities to other parts of the firm.
• The managerial skills required for the successful operation of the transformation precess were often different from those required for the successful operation of boundary functions such as marketing and human resource for example.

However there were some inherent disadvantage when the transformation process was totally isolated One was that information lagged between the pro and the boundary functions which inevitably led to inflexibility Another was that for techie products particular communications between the shop floor and the could be extreme valuable in solving technical problem during production. As how Practice box Forbore Company Customer Friend Program provide a good example of how manufacturing now directly interacting with customer.

More and more firms are recognizing the competitive advantage achieved when the transformation process is not isolated as when customers are invited to view their operating facilities firsthand. For example Green Giant believes that the tours of their production facilities that they provided to Japanese distributors were a major factor in their ability to penetrate that market with their Green Giant food products Similarly  National  Services which offers a mail-order prescription service encourages insurance companies and HMO to visit their facilities to assure themselves of the high quality of its prescription filling process. In a like manner companies are working more closely with suppliers Firms like Toyota for example have suppliers deliver product directly to the factory floor, eliminating any need for a stockroom. Texas Instruments encourages many of its vendors to automatically replenish items on the factory floor without individual purchase orders or incoming reports every time a delivery is made. This trend toward having the transformation process work more closely with both suppliers and customers alike is often referred to as a product's value chain. We can define a value chain as consisting of all those steps that actually add value to the product without distinguishing where they are added. This concept attempts to eliminate all non value added
such a inspection and inventory and consequently results in a higher.

 

Advances in Technology

Advances in technology recent years also have had a significant impact on the opera- Cement function. Information technology (IT) now allows us to collector data 0f  that we can mass customize products to meet the needs of inner . The creased use of automation and robotics also ha permitted us to improve the quality of the goods that are being manufactured. Automated teller machines (ATM), which can provide customers with 24-hour service, are a good example of technology being applied in service operations  particularly in those countries with high labor costs. The explosive growth of the Internet in recent ears also has had an impact on operations. Electronic marketplaces a major factor in the emergence of  (business-to business) transactions quickly identify the lowest-priced suppliers. The wide use of e-mail now allows companies to communicate rapidly with suppliers customers and other operations within their respective organizations. Customer contact centers be they for making hotel or airline reservations receiving c stoker orders or handling customer complaints(or any combination of these) can ow be located anywhere in the world. However  advances in technology place new requirements on the workforce and even on customers especially in service operations For example customers now must have computer skills to access companies that are advertising on the Internet or the World Wide Web Consequently skilled workers are replacing unskilled worker in all types of operations. As we shall see in Chapter 10, an organization workforce would be considered its most valuable as only increasing in value as it become more educated.

Increased Global Competition

The world is rapidly transforming itself into a single global economy which also referred to as a global village or global land cape. Clarke once dominated by local or national companies are now vulnerable to competition from literally all corner If he world For example  in the 1960 only 7 percent of the firm world For example  in the 1960  only 7 percent of the firm  in the United Stones War exposed to foreign competition b the late 1980 this tigure exceded 70 percent and that

percentage  has continued to grow consequently as companies expand their businesses to  foreign markets so too must the  perations management function take a broader global perspective in order for companies to remain competitive. To survive and in such a global marketplace companies must excel in more than one competitive which previously was the norm. With the rise of the global economy comps are no longer limited as to where they can make or buy their products and components in Exhibit Ford’s Escort in Europe is assembled in two locations England and using components that are produced in no less than 15 countries from all over the The trend toward globalization has placed increased emphasis on the logistics of locate facilities and the issues associated with moving material long distances which are addressed.

The Ever-Changing World of Operations Management

Operations management is continuously changing to meet the new and exciting challenges of today's business world. This ever-changing world is characterized by increasing global competition and advances in technology. Emphasis is also shifting within the operations function to link it more closely with both customers and suppliers.

A New Paradigm for OM

sen Introduction to Operations Management provided whereas goods will refer to the tangible output and frangible output.) definition of Quality Future Direct the United States was the obvious world leader in as the result of several factors, including (a) available effort, (b) pent-up demand for consumer goods during the contraction of most of the  production capabilities of the other  the world. A Tom Peters aid,  You couldn't screw up between 1946 and 1973 if you tried.'? With demand Sigurd  period of time. ravisher was placed on output, •.•lly reacted to situation only when they occurred Coequally told operation managers to focus only on COD-

Founded in 1866. the Coca-Cola Company is the clear leader in its industry with more than 50% of the global soft drink market. Although its principal brand is Coca-Cola  it distributes more than 230 brands in  nearly 200 countries worldwide. With its focus on global growth  more than 70% of the company's income  comes from sales outside the United states As we shall see in Chapter 2, in the early 1970 Wick am Skinner at Harvard Business School introduced the notion of operations strategy. He propped that the operations function rather than being only reactive. could take a proactive role in developing the overall strategy for an organization. In other words, Skinner suggested that the operations function could actually add value to the products a company manufactured that adding value in terms of what a customer is willing to pay for the product  In developing this concept of
operations strategy he suggested that a firm could compete on dime ions other than cost to increase profit margins. These dimensions included quality speed of delivery and process flexibility Each of these dimensions in their own way adds value to the end product. Skinner's notion of an operations strategy resulted in a new paradigm for the operations function.