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Ryerson University
Global Management Studies
GMS 401
Robert Meiklejohn

GMS 401 Midterm Exam: Chapter 1, 2, 4, 4S, 6 CHAPTER 1: INTRODUCTION TO OPERATIONS MANAGEMENT Operations Management - Management of processes and the systems that create goods and/or provide services - Used to improve efficiency (minimize cost and time) and effectiveness (achieving goals) - It is a system of interrelated parts that must work together, a process of series of linked actions, changes or functions bringing about a result o core: directly create the good support: support core managerial: govern the system - For Example; airline includes: o core reservations, boarding flying, performance maintenance o support forecasting, scheduling, managing inventories, assuring quality, and buying material o managerial capacity planning, locating facilities, and employee motivation - large percentage of expenses go towards OM, large number of jobs are to do with OM, finance and marketing are interrelate to OM Three Basic Functions - Operations: create goods and services o Core function responsible for the creating of the goods and services o Inputs are used to obtain finished goods or services (outputs) using transformation processes (storing, transporting, cutting etc.) o Feedback is important , quality measures are taken at various points of the process, if something is wrong, they decide the corrective action before continuing (control) o Point is to add value, his means that there is a difference between the cost of inputs and value of outputs - Finance: financial support and economic analysis for investments o Provision of funds: careful planning to avoid cash flow problems o Economic Analysis of Investment Proposals evaluation of investments to help growth - Marketing: what customers want and need and communicating back to operations and design o Directing information to proper sectors in order to implement design changes o Lead time is needed for the marketing function in order to know the time between the customer putting in the order and receiving o Supply and demand are critical observations - Others Include: accounting, logistic, design, manufacturing, HR, purchasing, maintenance, MIS The Scope of Operations Management - Primary function is to guide the system by decision making, which come in two aspects o System Design  Good or service design, capacity, location of facilities, departments, equipment placement and acquisition o Operational Activities  Management of people, inventory planning, control, production, project management, scheduling, quality assurance  System designs is vital for operations because it determines the parameters of operations (costs, space, capacities and quality) Goods vs. Services GMS 401 Midterm Exam: Chapter 1, 2, 4, 4S, 6 - Goods: tangible output (manufacturing, construction, agriculture, forestry, fisheries) o Manufacturing is the largest sector and includes food and beverage, clothing, furniture, paper, machinery, transportation, primary metals etc. - Services: implies an act (doctor, auto repair, law care, projecting a film) o Falls into several categories that include government, finance, health, personal,, professional, education, hotels, information, utilities etc. - Similar in terms of what is done, but different in how it is done - Differences include: o Customer contact, use of inventories, and demand variability o Uniformity of input: for services there has to be an analysis of what needs to be done, for goods there is a set regime that is happening o Labour content of jobs: services have higher labour o Uniformity of output: mechanism allows for low variability in goods, but services appear to be slow and awkward with a more variable output o Measurement of productivity: goods are designed by a schedule of production whereas services are significantly based on time and demand of when the service is needed o Quality assurance: more difficult in services because consumption and service happens at once, whereas errors can be corrected in production of goods.  Services accounts for more than 75% of jobs in Canada. Operations Managers Job - Key figure in the system: he or she has the ultimate responsibility for the creation of goods or performance of services. - Must coordinate the use of resources through the management activities of planning (capacity/location), organizing (suppliers/staffing), directing (inventory/quality), and controlling (scheduling/logistics/purchasing) Operations Managers and Decision Making - Exerts considerable influence over the degree to which the goals and objectives of the organization are realized. Decision making approaches: o Model: they must ignore the unimportant details so that attention can be concentrated on the most important aspects, increase opportunity to understand the problem and present a solution o Quantitative Approaches: Linear Programming (allocation of scarce resources), Queuing Technique (analyzing situations where waiting lines form), Inventory techniques (control), Project Scheduling (planning and coordinating large scale projects) o Trade Offs: Factor Rating Approach (pros vs. cons) o Systems Approach: the output and the objective of the organization as a whole takes precedence over those of any one subsystem o Establishing priorities: Pareto Phenomenon (few factors account for a high percentage of results achieved) o Ethics: worker safety, product safety, clean environment, impact on the community Major Trends - The Internet and e-commerce: changing the way organizations interact with their customers and their suppliers. E-commerce is receiving increased attention from managers in developing strategies, planning, and decision making. GMS 401 Midterm Exam: Chapter 1, 2, 4, 4S, 6 - Technology: includes product design, processing technology, information processing, and communication. Also puts a burden upon organizations because of quick changes, older versions being discontinued and mandatory upgrades. - Globalization: growing impact on the strategies and operations, this includes trading in global markets - Supply Chains: sequence of organizations—their facilities and activities—that are involved in producing and delivering a good or service. Growing aspect is outsourcing thus making the supply chains longer, includes more functions such as accounting, MIS, marketing etc. Additional Key Terms - Craft production: sequence of organizations—their facilities and activities—that are involved in producing and delivering a good or service. - Division of labour: Breaking up a production process into small tasks so that each worker performs a small portion of the overall job - Interchangeable parts: Parts of a product made to such precision that they do not have to be custom fitted. - Lean production: System that uses minimal amounts of resources to produce a high volume of high-quality goods with some variety. CHAPTER 2: COMPETITIVENESS, STRATEGIC PLANNING AND PRODUCTIVITY Competitiveness - Depends on the capabilities and performance of the company in its marketplace. - Should use past experience and expertise in design, operations and manufacturing and leverage them in order to create new items and get ahead of the competition. - Performance is dependent on customer expectations and feedback that includes: o Price: amount customer pays for good, all other things equal, customer will purchase the lower priced good o Quality: customers want high quality goods but are willing to settle down for a good that meets their specifications o Variety: the more variety the more range of customers o Timeliness: availability to consumers, the faster the better o Customer service and location also play a big role - Customers tend to choose the best buy or value, this is calculated by value = quality, timeliness etc./ price - Customers have two categories for purchasing: order qualifiers (minimum standards for the good) and order winners (those goods that are better than competition) - Companies compete by emphasizing one or more purchasing criteria (competitive priorities) o Cost: compete based on costs try to lower operating costs (low cost –> Wal-Mart) o Quality: determining customers' quality requirements, translating these into specifications for goods or services, and consistently producing goods or performing services to these specifications. (consistent quality coke, high performance  apple) o Flexibility: being able to produce more than one good in one facility includes customization for individual consumers and easy changeover in production. (variety  dell, quantity and flexibility  air Canada) o Delivery: to be able to meet promised due dates, it is achieved by using communication networks, planning and control (rapid  UPS, on time  west jet) Strategic Planning - Process of determining a strategy, long-term plans that will set a new direction for an organization, and implementing it through allocation of resources and action plans. GMS 401 Midterm Exam: Chapter 1, 2, 4, 4S, 6 - Companies perform strategic planning only when they face a crisis, e.g., when they face a significant drop in their sales, progressive organizations perform strategic planning on a regular basis, usually annually - Process: top management figuring out the current strategy based on information from department managers and starting a market research study (where is the company headed?). Then the management forms or adjusts missions and visions of the company based on values and strategies. When the strategy is chosen it is implemented and set of action plans are determined. - SWOT (strengths, weaknesses, opportunities and threats) analysis allows for the company to grow and to take advantage of market opportunities by seeing both sides of their operations.  Review questions to ask in the process (pg. 31) Mission, Vision and Values - Organizations determine and use a mission, vision, and values statement during their strategic planning process. - Mission: where the organization is going now, Vision: where the organization wants to be, Values: shared beliefs of the stakeholder’s, owners, customers, employees. Goals and Objectives - Goals provide substance to the overall mission/vision. It is an objective of a company that contains numerical values (e.g. 20% reduction in costs) Strategies, Tactics and Action Plans (hierarchical relationship) - Strategy is long-term plans that will determine the direction an organization will take to become (or remain) competitive, determined during the strategic planning process o Functional strategies: long term plans (financial, marketing, operations) - Tactics are medium-term plans sometimes used as components of a strategy, specific in nature - Action plan is a medium- or short-term project to accomplish a specific objective, assigned to an individual, with a deadline and the resources needed. Operations Strategy - deals with guiding the operations function of the organization, but should answer organizational goals - comprises a set of well-coordinated policies, objectives, and action plans, directly affecting the operations function, which is aimed at securing a long-term sustainable advantage over the competition - In order for an operations strategy to be useful it must cooperate with all other functions, finance, marketing etc. - operations' objectives/performance measures are determined in terms of competitive priorities such as cost, quality, delivery, flexibility Nine Strategic Decision Categories (classify operations policies, objectives and action plans) - Facility: how to focus different facilities (by product, market etc.) - Capacity: size of plants, and equipment - Vertical Integration: ownership of a large supply chain - Vendor Relations: relationship with vendors (arm’s length or cooperative), allows for quality - Product Mix and New Products: accommodation for new products - Process Types and Technology: job shop, batch, assembly line, and continuous flow. (degree of automation and using technology in manufacturing) - Human Resources: incentives, compensation for workers/staff - Quality: determined during design and production stage, big question is whether to leave quality control to workers - Operations Infrastructure and Systems: choosing a computerized planning and control system (including forecasting, material requirements planning, and scheduling), whether to use just-in- time production, operations policies, and the type of production/delivery system Formulation of Operations Strategy 1. Link goals to the operations strategy: determine operations requirements of organization goals GMS 401 Midterm Exam: Chapter 1, 2, 4, 4S, 6 2. Categorize customers into types(major  desirable relationship, other) and for each category determine four competitive priorities (cost, quality, delivery, flexibility) 3. Group product lines into types: low volume and high volume 4. Conduct an operations audit to determine the strengths/weaknesses of the current operations strategy in each of the nine strategic decision categories. At this step, take the customer types and asses relative standing of products vs. those of competitors 5. Assess the degree of focus at each plant: a focused plant is more efficient. 6. Develop an operations strategy and re-allocate product lines to plants if necessary. For each of the nine strategic decision categories, state the objectives, policies, and action plans. Deploy these policies and action plans Generic Operations Strategies - Theme-based operations improvement programs and plans such as just-in-time production and total quality management/continuous improvement, frequently used o Time based competition: focuses on reducing the amount of time that is taken to produce, allows for improvement of service and higher productivity and efficiency o Outsourcing: reduce costs, gain flexibility, and take advantage of suppliers' expertise, buying a part of a good/service or a segment of production/service process from another company, a supplier. Productivity - Measures output (goods and services) per unit input (machine, labour, materials, energy) used to produce them. Productivity = output /input - Productivity growth is the increase in productivity from previous period to the current period relative to the productivity in the previous period. Productivity growth= current – previous/previous period Measuring Productivity - Made up of a single input or several, inputs that give you the answer to specified question o Per hour of labour (input is labour), output per machine hour (input is machine hour) - Multifactor productivity o Measured on a per dollar basis Multifactor productivity = quantity of production / labour cost($) + material cost ($) + overhead ($)  Efficiency vs. productivity: Efficiency is a narrower concept that pertains to getting the most out of a fixed set of resources; productivity is a broader concept that pertains to better use of overall resources.  Revenue vs. productivity: directly related: total productivity is revenue/total cost, whereas profit is revenue – total cost  Competitiveness vs. productivity: if two companies both have the same level of output, but one requires less input because of higher productivity that one will be able to charge a lower price and consequently increase its share of the market, or it might elect to charge the same price, thereby reaping a greater profit. Factors that Affect Productivity - Methods and management, equipment and technology - Management and methods result in better design, planning, and operating decisions, standardizing and improving processes, improving quality, reducing waste (as in just-in-time production), providing better layout, and using technology, equipment, and labour more effectively and efficiently. Additional Key Terms - Time based competition: Strategy that focuses on reduction of time needed to accomplish tasks. - Key purchasing criteria: The major elements influencing a purchase: price, quality, variety, and timeliness. - Competitive Priorities: The major elements influencing a purchase: price, quality, variety, and timeliness. GMS
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