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What Is Operations Management?

Organizing to Produce Goods and Services

Why Study OM?

What Operations Managers Do

The Heritage of Operations Management

Operations in the Service Sector

Differences between Goods and Services

Growth of Services

Exciting New Trends in Operations Management

Previous Presentation Summary (1/2)

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The Productivity Challenge

Productivity Measurement

Productivity Variables

Productivity and the Service Sector

Ethics and Social Responsibility

Previous Presentation Summary (2/2)

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Chapter 2: Operations Strategy in a Global Environment

Chapter 2: Operations Strategy in a Global Environment

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OutlineOutline

A Global View of Operations

Developing Missions And Strategies

Mission

Strategy

Achieving Competitive Advantage Through Operations

Competing On Differentiation

Competing On Cost

Competing On Response

Ten Strategic OM Decisions

Strategy Development Issues

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Outline Outline –– Continued Continued

Strategy development and implimentation

Global Operations Strategy Options

International Strategy

Multi domestic Strategy

Global Strategy

Transnational Strategy

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35 –

30 –

25 –

20 –

15 –

10 –

5 –

0 –| | | | | | | | | | |

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 (est*)

Year

Per

cen

t

Growth of World TradeGrowth of World Trade

Figure 2.1

Collapse of the Berlin Wall

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Some Multinational CorporationsSome Multinational Corporations

% Sales % AssetsOutside Outside

Home Home Home % ForeignCompany Country Country Country Workforce

Citicorp USA 34 46 NA

Colgate- USA 72 63 NAPalmolive

Dow USA 60 50 NAChemical

Gillette USA 62 53 NA

Honda Japan 63 36 NA

IBM USA 57 47 51

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Some Multinational CorporationsSome Multinational Corporations

% Sales % AssetsOutside Outside

Home Home Home % ForeignCompany Country Country Country Workforce

ICI Britain 78 50 NA

Nestle Switzerland 98 95 97

Philips Netherlands 94 85 82Electronics

Siemens Germany 51 NA 38

Unilever Britain & 95 70 64Netherlands

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Reasons to GlobalizeReasons to Globalize

Reasons to GlobalizeReasons to Globalize

1. Reduce costs (labor, taxes, tariffs, etc.)2. Improve supply chain3. Provide better goods and services4. Understand markets5. Learn to improve operations6. Attract and retain global talent

Tangible Reasons

Intangible Reasons

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Reduce Costs (1/6)Reduce Costs (1/6)

Foreign locations with lower wage rates can lower direct and indirect costs

World Trade Organization (WTO)

North American Free Trade Agreement (NAFTA)

European Union (EU)

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Improve the Supply Chain (2/6)Improve the Supply Chain (2/6)

Locating facilities closer to unique resources

Auto design to California

Athletic shoe production to China

Perfume manufacturing in France

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Provide Better Goods Provide Better Goods and Services (3/6)and Services (3/6)

Objective and subjective characteristics of goods and services

On-time deliveries (objective characteristic)

Cultural variables (subjective characteristic)

Improved customer service

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Understand Markets (4/6)Understand Markets (4/6)

Interacting with foreign customers and suppliers can lead to new opportunities Cell phone design from Europe Extend the product life cycle

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Learn to Improve Operations (5/6)Learn to Improve Operations (5/6)

Remain open to the free flow of ideas

General Motors partnered with a Japanese auto manufacturer to learn new approaches to production and inventory control

Equipment and layout have been improved using Scandinavian ergonomic competence

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Attract and Retain Global Talent (6/6)Attract and Retain Global Talent (6/6)

Offer better employment opportunities

Better growth opportunities and insulation against unemployment

Relocate unneeded personnel to more prosperous locations

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Companies Want To ConsiderCompanies Want To Consider

National literacy rate

Rate of innovation

Rate of technology change

Number of skilled workers

Political stability

Product liability laws

Export restrictions

Variations in language

Work ethic

Tax rates

Inflation

Availability of raw materials

Interest rates

Population

Number of miles of highway

Phone system

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Developing Missions and StrategiesDeveloping Missions and Strategies

MissionMission statements tell an organization where it is going

The StrategyStrategy tells the organization how to get there

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MissionMission

Mission - where are you going?

Organization’s purpose for being

Answers ‘What do we provide society?’

Provides boundaries and focus

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Benefit to Society

Mission

Factors Affecting MissionFactors Affecting Mission

Philosophy and Values

Profitability and GrowthEnvironment

Customers Public Image

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Strategic ProcessStrategic Process

Marketing OperationsFinance/

Accounting

Functional Area Missions

Organization’s Mission

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StrategyStrategy

Action plan to achieve mission

Functional areas have strategies

Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

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Strategies for Competitive AdvantageStrategies for Competitive Advantage

Differentiation – better, or at least different

Cost leadership – cheaper

Response – rapid response

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Competing on Differentiation (1/3)Competing on Differentiation (1/3)

Uniqueness can go beyond both the physical characteristics and service attributes to encompass

everything that impacts customer’s perception of value

Safeskin gloves – leading edge products

Walt Disney Magic Kingdom – experience differentiation

Hard Rock Cafe – dining experience

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Competing on Cost (2/3)Competing on Cost (2/3)

Provide the maximum value as perceived by customer. Does not imply low quality.

Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment

Wal-Mart – small overhead, shrinkage (loss of inventory), distribution costs

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Competing on Response (3/3)Competing on Response (3/3)

Flexibility is matching market changes in design innovation and volumes

A way of life at Hewlett-Packard

Reliability is meeting schedules

German machine industry

Timeliness is quickness in design, production, and delivery

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Goods and Services and Goods and Services and the 10 OM Decisions (1/4)the 10 OM Decisions (1/4)

OperationsOperationsDecisionsDecisions GoodsGoods ServicesServices

Goods and service design

Product is usually tangible

Product is not tangible

Quality Many objective standards

Many subjective standards

Process and capacity design

Customers not involved

Customer may be directly involved

Capacity must match demand

Table 2.1

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Goods and Services and Goods and Services and the 10 OM Decisions (2/4)the 10 OM Decisions (2/4)

OperationsOperationsDecisionsDecisions GoodsGoods ServicesServices

Location selection

Near raw materials and labor

Near customers

Layout design Production efficiency Enhances product and production

Human resources and job design

Technical skills, consistent labor standards, output based wages

Interact with customers, labor standards vary

Table 2.1

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Goods and Services and Goods and Services and the 10 OM Decisions (3/4)the 10 OM Decisions (3/4)

OperationsOperationsDecisionsDecisions GoodsGoods ServicesServices

Supply chain Relationship critical to final product

Important, but may not be critical

Inventory Raw materials, work-in-process, and finished goods may be held

Cannot be stored

Scheduling Level schedules possible

Meet immediate customer demand

Table 2.1

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Goods and Services and Goods and Services and the 10 OM Decisions (4/4)the 10 OM Decisions (4/4)

OperationsOperationsDecisionsDecisions GoodsGoods ServicesServices

Maintenance Often preventive and takes place at production site

Often “repair” and takes place at customer’s site

Table 2.1

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Managing Global Service and Manufacturing Managing Global Service and Manufacturing OperationsOperations

Capacity planning

Location planning

Facilities design and layout

Scheduling

Requires a different perspective on:Requires a different perspective on:

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Process DesignProcess Design

Low Moderate HighVolume

High

Moderate

Low

Var

iety

of

Pro

du

cts

Process-focusedJOB SHOPS

(Print shop, emergency room, machine shop,

fine-diningrestaurant)

Repetitive (modular) focus

ASSEMBLY LINE(Cars, appliances,

TVs, fast-food restaurants) Product focused

CONTINUOUS(Steel, paper,

bread, petroleum product, chemical

production)

Mass CustomizationCustomization at high

Volume(Dell Computer’s PC,

cafeteria)

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Summary of Today's PresentationSummary of Today's Presentation

A Global View of Operations

Developing Missions And Strategies

Mission

Strategy

Achieving Competitive Advantage Through Operations

Competing On Differentiation

Competing On Cost

Competing On Response

Ten Strategic OM Decisions

Strategy Development Issues

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End of PresentationEnd of Presentation