BU121 March 19 2013
Critical Success Factors – Indicators of business success.
- Achieving financial performance
- Meeting customer needs
- Providing quality products and services
- Encouraging innovation and creativity
- Gaining employee commitment
- Operations focusses on providing quality products and services
- It also connects to R&D which encourages innovation so you can provide that quality
- It is important to have employee commitment because they provide the quality
- And you also have to consider that your quality must be relevant to the consumer.
3 Decisions at 3 Stages
- Planning: Starts with product design. Think about the needs of the consumer and how you can
create a product to meet them. The voice of the customer and the voice of the engineer.
o Think about the type of production you will be involved in and what the process you will
use as a result is.
Mass Production vs. Mass customization
o Important to choosing your location in the context of the business as well as the facility
layout which is the link between the type of production, layout, and the process used.
The facility will need to enable the type of production (i.e. Assembly line)
o Resources need to come from somewhere and certain pieces are critical
Supply Chain Management – starts with the raw materials, which is taken with
the other pieces to build the product, which is then turned into a finished good
which will follow a channel to get to the end consumer.
Make or buy? – outsourcing
What role do you play in the supply chain and how will this impact you
Ex. Wal-Mart is the poster. Mastered the supply chain so they could squeeze out
inefficiencies and drop prices.
Companies in the supply chain used to operate as completely
disconnected separate companies.
With technology and the internet we can connect all the elements of
the supply chain can be connected and act as one company.
All aspects of the chain know what’s going on.
o Inventory management is important to gage liquidity
o Routing and scheduling: think it through as to when you will get the order and what you
need to do prior to that in order to pay it forward and stay solvent
o Quality and Cost Control: customers expect quality and the companies you work with
expect a certain level of quality.
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Harley Davidson: they offered poor quality
o Application of technology
Service vs. Manufacturing Businesses:
- Transforming a raw material into a finished good
- For a service:
o For a service the raw material is a person with an unsatisfied need and it is transformed
by performing the service. If they require care for a possession (i.e. Car) then this is the
raw material and the service fixes it.
o Service is performed not produced
o Focus on process as well as the outcome
Judged on the quality of the work and the service
Ex. McDonald’s: the quality reflects the burger itself but the service reflects the
cleanliness and the politeness
o Service is intangible which changes the way you look at it, it is an experience and how
do you build this experience.
o Services are always customized
o There is no inventory as it can’t be stored
o Consumer is part of the process (they are there experiencing the service).
Extent of contact affects the operations that you need to consider.
o Impacts Capacity: look at it differently for service and manufacturing,
Integration of marketing and operations – there is a trade-off of demand and
capacity. The capacity that you have will limit the demand you can
Manufacturing: look at demand and set your capacity slightly ahead of it. If you
don’t have enough it is expensive to add more (and you may lose customers
when turning people away) but if you have too much it is expensive to sit idle.
Seasonality: means that you will have items sitting idle during times of
the year. Sometimes to accommodate capacity requirements you use
pricing to shift buying behaviour or can you shift your demand by
changing the product offered.
Service: have enough for when they want it
if it is low contact set capacity at average demand
If it is a high contact set capacity at peak demand
Mass Production vs. Mass Customization
- Mass production needs stable environmental conditions, but today, markets are always
- Mass production technology:
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o Stable market conditions
o Efficiency vs. effectiveness
- New economic reality:
o Constant change
o Customization and innovation
- Mass Customization: Mass produced but in a customizable way
- Machinery must be computerized
- Information must be digitized (tell machinery to do something differently, machinery is able to
- The connection between marketing and operations have to be very tight (marketing must tell
operations exactly what the customer wants, so the machines can be tweaked in the right way)
- “Development that meets the needs of the present without compromising the ability of future
generations to meet their needs” UN World Commission on Environment and Development
- Not about a tradeoff, it means changing the way we do things so future generations needs will
not be compromised in the future
- Measured by the Triple Bottom Line by Andy Savitz
- Your bottom line is affected by a variety of factor:
o Profit/Environment/Society – People/Planet/Profit
- “Sustainability sweet spot” – place where corporate and societal interests intersect
o A new way to measure the bottom line (gives you the strongest profitable bottom line;
where you’ve met all of those things)
- Dow Jones Sustainability Index (measures performance of companies)
- Global 100 Most Sustainable Corporations in the World: http://www.global100.org/
- Global Reporting Initiative – guidelines
o 1,000 companies, 80% of Global Fortune 150
o More holistic image of company (gives you the whole picture of the triple bottom line)
- The first Industrial Revolution brought about mass production, assembly lines, etc. but this kind
of growth is not sustainable
- The next Industrial Revolution
o Ways to weave sustainability into operations:
o Product design
“Cradle to Cradle” design
o Product Stewardship
o Sustainability through servicing
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o Sustainability of the supply chain (don’t ignore what your partners are doing; should be
- Take-make-waste model – Cradle to Grave design (linear model: beginning and end)
o Eco-efficient – “less bad” – 3Rs design (reduce, reuse, recycle) – doesn’t fix the problem,
not good enough (focus on both efficiency and effectiveness, focus on the design right
from the beginning)
- Eco-effective design based on nature’s design principles
o “Waste equals food” - Cradle to Cradle design (waste could go back to the earth in some
o Products developed for closed-loop systems
Every output is safe and beneficial – how could it be a nutrient for the earth?
Biological nutrients (literally goes back to the earth into the soil) or technical
nutrients (takes the output and makes something of equal or greater value out
Ex. Biological nutrient – Sun chips compostable bags 2010
Ex. Technical nutrient – Nike shoes are broken down and recycled for different
athletic surfaces (rubber for running tracks, etc.) – products are reused for
something that is worth just as much as the original product
o Eliminate the concept of waste
- C2C developed by William McDonough and Michael Braungart – MBDC – firm started in 1995
consults and certifies C2C production
- Design the 4Ps for the 3Ps – people, planet, profit
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- People aren’t buying green products because there aren’t enough variety (people still want to
buy green products, there just aren’t enough of them)
Biomimicry (mimicking what is out there in nature)
- Sustainable innovation inspired by nature – “biologically inspired engineering”
- Based NOT on what we can extract from organisms and ecosystems (harvesting or
domestication), but what we can learn from them