KR: Chapter 1

Operations as a Competitive Weapon

Chapter OutlineWhat is a process?

Nested processCustomer-supplier relationshipsService and manufacturing processes

Differences and similaritiesDegree of customer contacts

Traditional Organizational Chart

(How traditional organizations are managed)

CEO

Sales Marketing Engineering Manufacturing Distribution Customer service

Information flows upward

Policy and decisions are deployed downward

Process view (How process-focused organizations work)

Orderplaced

ProductDelivered

Chain of events is horizontal

Core Process MapCustomer

Sales

Marketing

Finance

Distribution

Fieldengineering&Customerservice

CustomerOrder

1.1 Order placement

1.2 Order entry

1.3 Credit check

1.4 Pick and Pack

1.5 Schedule 1.7 Ship

1.6 Site prep

1.9 Invoice

1.8 Install

Deliveryacceptance

Process Hierarchy

Order fulfillment

Orderprocessing Production Staging and

installation

Order entry

Creditcheck

VerifyCustomeraddress

AssignCustomer

IdentificationNumber

EnterProduct

code

Core process (1)

Functional process (8 to 12)

Subprocesses (20 to 50))

Work steps (hundreds to thousands)

Five Process Groups with 12 Subprocesses

Process group A,Order processing

Process group B,contracting

Process group C, delivery

Process group D, billing

Process group E,Customer service

1 23

45 6 7

8

9 10

11 12

External

customersExternal

suppliers

Chapter OutlineWhat is a process?

Nested processCustomer-supplier relationshipsService and manufacturing processes

Differences and similaritiesDegree of customer contacts

Nature of ServicesIntangibleNo inventorySimultaneous production and consumptionVariety of servicesLabor intensive

Continuum of Continuum of CharacteristicsCharacteristics

More like a manufacturing organization

More like a service

organization

• Physical, durable product• Output can be inventoried• Low customer contact• Long response time• Regional, national or

International markets• Large facilities• Capital intensive• Quality easily measured

• Intangible, perishable product

• Output cannot be inventoried• High customer contact• Short response time• Local markets• Small facilities• Labor intensive• Quality not easily measured

Chapter OutlineWhat is a process?Value Chain

Core processSupport process

Internal Value-Chain Linkages Showing Work and Information

Flows

Figure 1.3Figure 1.3

Exte

rnal

sup

plie

rsExternal custom

ers

Support processes

Supplier relationship process

Order fulfillment process

New service/ product development process

Customer relationship process

Support ProcessesCapital Acquisition The provision of financial resources for the organization to do its

work and to execute its strategyBudgeting The process of deciding how funds will be allocated over a period

of timeRecruitment and Hiring

The acquisition of people to do the work of the organization

Evaluation and Compensation

The assessment and payment of the people for the work and value they provide to the company

Human Resource Support and Development

The preparation of the people for their current jobs and future skill and knowledge needs

Regulatory Compliance

The process that insure the company if meeting all laws and legal obligations

Information Systems

The movement and processing of data and information to expedite business operations and decisions

Enterprise and Functional Management

The systems and activities that provide strategic direction and ensure effective execution of the work of the business

Table 1.1 Examples of Support ProcessesTable 1.1 Examples of Support Processes

International Benchmarking Clearinghouse’s Standard Process

Classification

1. Understand markets and customers

2. Develop vision and strategy

3. Design products and services

4. Produce and deliver5. Manage improvement

and change6. Develop and manage

human resources

7. Manage information8. Market and sell9. Invoice and service

customers10. Execute environmental

management program11. Manage financial and

physical resources12. Manage external

relationships13. Manage improvement

and change

Chapter OutlineWhat is a process?Value ChainWhat is operations management?

Broad and narrow interpretationsOM as a set of decisionsOM as a function

The Operations The Operations Management SystemManagement System

Outputs• Goods• Services

External environment

Customer or client participation

Operations and processes

Information on performance

51

2

3

4

Inputs• Workers• Managers• Equipment• Facilities• Materials• Services• Land• Energy

Manufacturing Management Activities

Operations As A Basic Function

MARKETING FINANCE

OPERATIONS

Operations As The Technical Core

Operations

Finance

Capital Markets, Stockholders

Marketing

Customers

Wor

kers

Sup

plie

rs

Pur

chas

ing

Per

sonn

el

Chapter OutlineWhat is a process?Value ChainWhat is operations management?Productivity

Productivity

Productivity = OutputInput

Chapter OutlineWhat is a process?Value ChainWhat is operations management?ProductivityRoad map for competitive operationsOperations management as a competitive weapon

Operations Roadmap

Figure 1.6Figure 1.6

Competing with Operations

Operations As a Competitive Weapon

1

Operations Strategy2

Process Design Strategy3

Designing Value Chains

Supply Chain Design

9

Lean Systems11

Location10

Designing and Improving Processes

Process Analysis4

Process Performance and

Quality5

Process Capability

6

Process Layout

7

Planning andManaging Projects

8

Operating Value Chains

Information Technologyand Value Chains

12

Forecasting13

InventoryManagement

15

ResourcePlanning

16

Scheduling17

Aggregate Planning14

Outcomes

Operations Management Activities