OM Session1

Operations Strategy and Process PerformanceMeasurement

Operations Management - WS 2014/2015

Univ.Prof. Werner Jammernegg / Dr. Emel Arikan, M.Sc.

W. Jammernegg: Operations Strategy and Process Performance Measurement 1 43

Overview

1. Organizational matters and course schedule

2. Operations Strategy & Operations Management

3. Performance Measurement

4. Practical Example


Organizational matters and course schedule

Overview







Instructors

Univ.Prof. Werner Jammernegg

[email protected]

Office hour: by appointment

Dr. Emel Arikan, M.Sc.

[email protected]




Course Information

Learn@WUI SyllabusI DatesI DownloadsI ResultsI AssignmentsI . . .



Course scheduleSession Topic25/11/2014 Operations Strategy

Assignment 1: Application of Littles Law02/12/2014 Variability Basics

Assignment 2: Overall Equipment Effectiveness09/12/2014 Variability Interactions: Queuing Theory

Assignment 3: Lean production16/12/2014 Basics of Multi-Stage Queuing Systems

Assignment 4: Flow production at stochastic processing times13/01/2015 Capacity Management using Rapid Modeler

Assignment 5: Improving business processes with rapid modeling20/01/2015 Process and System Flexibility

Assignment 6: System flexibility26/01/2015 Final Exam



Literature

LiteratureW. Hopp/M. Spearman: Factory Physics, McGraw Hill, 3rd ed., 2008. (chapters8, 9, 10, 12)J.Van Mieghem: Operations Strategy: Principles and Practice, Dynamic Ideas,2008. (chapters 1, 5)

Introductory LiteratureG. Cachon/C. Terwiesch: Matching Supply with Demand: An Introduction toOperations Management, McGraw-Hill , 3rd ed, 2008. (chapters 1 - 9)

Additional Literature on Learn@WUJ. Ledolter: Statistical applications for process and quality improvement, WhitePaper, 2010.



Grading

In-class assignments 12 pointsHomework assignments 38 points

Exam 50 pointsTotal 100 points

I You have to reach at least 20 points at the final exam to pass the course!I You will be required to do regular group assignments (3 group members).

Each assignment will be due by the following session. We expect you to usethe official style sheet, which can be found on the course web page. Everygroup has to hand in the assignment on Learn@WU. Please pay attention tothe due date. Late assignments will not be accepted.

I Class participation is mandatory with continuous assessment of studentperformance. You are allowed to miss one session at most.



Tutor

Raphael Holzinger

[email protected]



Operations Strategy & Operations Management

Overview







What do operations leaders do?



Operations Strategy

GoalI Formulate an operations strategy

I Understand the key elements and decisionsI Analyze, Value and Optimize an operations strategy

I Analyze key drivers/decisions for each element in an operations strategyI Evaluate them qualitatively and financiallyI Develop recommendations and implementation plans

ApproachI Connect the strategic level with the operational level

I We will use detailed operational analysis to guide strategic decisions so theyare grounded in reality

I Our metric is value maximization using qualitative and quantitative toolsI We will draw on concepts from operations as well as the basics from finance

for overall evaluation (NPV, risk) and strategy



The concept of Operations Strategy

Competitive strategy"the search for a favorable competitive position in an industry, the fundamentalarena in which competition occurs. Competitive strategy aims to establish aprofitable and sustainable position against the forces that determine industrycompetition. . . . The essence of formulating competitive strategy is relating acompany to its environment." (Porter)

Operations strategyStrategy with the brightness turned up on choosing real assets (resources) &processes and building future capabilities:I It is less about industries and choosing a position, more about firms and

delivering, enhancing and protecting the value propositionI It must specify all real assets and processes in the value chain and plan for

the future being mindful of the companys strategy, other parts of theorganization, and the competition



Operations Management Framework



Operations Management and Operations Strategy

Operations managementI Is more about controlling, managing, and improving operational (daily)

repetitive economic activitiesI Is often concerned with a individual process and given set of resources and

products

Operations strategyI Is about choosing the asset bundle & processes and building future

capabilitiesI Is less about one process, more about the collectivityI Must specify all resources and processes in the value chain and plan for the

future



Definition of operations strategy

Operations strategy is a plan for developing resources and configuring processessuch that the resulting competencies maximize NPV.



Framework for Operations Strategy

Principle of alignmentOperations strategy should develop resources and configure processes such thatthe resulting competencies are aligned with (and adapt to) the competitiveposition that the firm seeks over time.



Key decisions of operations strategy



The "Four Stages" classification



Strategic Operational Audit



A balanced scorecard map



Product-Process Matrix


Performance Measurement

Overview







Relating operational measures

Littles LawInventory = Throughput Flow Time

I = R T

Inventory Turnover = Throughput/Inventory U = 1/T



Cheapest Car Rental



Solution Cheapest Car Rental



Balance Analysis

The Wall Street Journal reportedthat:". . . although GM and Toyota areoperating with the same number ofinventory turns, Toyotas throughput istwice that of GM."

The discrepancy, concluded thewriter:". . . could be due to much faster flowtimes and lower inventories by virtue ofToyotas production system (leanmanagement)."

QuestionAre these two statements consistent?



Balance Analysis - MBPF Inc.Consolidated Statement(1)



Balance Analysis - MBPF Inc.Consolidated Statement(2)



Balance Analysis - MBPF Inc.Inventory and Cost of Goods



Balance Analysis - MBPF Inc.Assessing Financial Flow Performance

I How long does it take for a cost dollar to be converted into recoveredrevenue?

I ProductionI Throughput R = e mio/year [Cost of goods sold]I Average Inventory I = e mio [Inventories]I Average Flow Time

T = IR==



Balance Analysis - MBPF Inc.Assessing Financial Flow Performance AR and AP

I Accounts-Receivable (AR)I Throughput RAR = mio/year [Net Sales]I Inventory IAR = mio [Accounts-Receivable]I Average Flow Time

TAR =IARRAR

=

I Accounts-Payable (AP)I Throughput RAP = mio/year [raw material + purchased parts]I Inventory IAP = mio [Accounts-Payable]I Average Flow Time

TAP =IAPRAP

=



Balance Analysis - MBPF Inc.Cash-to-Cash Cycle Time (CTC)

I CTC = Flow Time Production + Flow Time AR Flow Time AP= T + TAR TAP

I CTC =



Cash-to-Cash Cycle Times by Industry in the US:(measured in days)



Balance Analysis - MBPF Inc.Detailed Financial Flows



Balance Analysis - MBPF Inc.Detailed Flow Times



Balance Analysis - MBPF Inc.Flow time and Throughput


Practical Example

Overview






Practical Example

HPs CD-RW supply chainBase case


Practical Example

HPs CD-RW supply chainWinning Scenario


Practical Example

HPs CD-RW supply chainWinning Scenario


Organizational matters and course scheduleOperations Strategy & Operations ManagementPerformance MeasurementPractical Example

OM Session1

Documents

Transcript of OM Session1