Chapter 1.docx

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Ryerson University
Information Technology Management
ITM 410
Margaret Plaza

Chapter 1 – Using Operations to Compete  Operations management refers to the systematic design, direction and control of processes that transform inputs into services and products for internal and external customers Operations and Supply Chain Management across the Organization  Operations managers are responsible for key decisions that affect the success of the organization (ex. chief operations officer, VP of manufacturing etc)  Refer to figure 1.1 which shows integration between different functional areas of a business o The Finance function within the graph generates resources, capital and funds from investors and sales of its goods and services in the market o Then Finance and Operations functions decides how to invest these resources and convert them into physical assets and material inputs o Operations function transforms these physical assets and material inputs into product and service outputs o Marketing function decides which product will go in which market and is responsible for producing sales revenue of the outputs which is also profitable for the investors and more capital for operations o The entire relationship provides direction or the business as a whole and are aligned to the same strategic intent  Functions should be integrated and should pursue a common strategy Historical Evolution of Operations and Supply Chain Management  3 landmark events from 20 century that defined the history of operations and SCM (more on pg 4) A Process View  A process can have its own set of objectives, involve a work flow that cuts across departmental boundaries and require resources from several departments How Processes Work  Figure 1.2 shows how processes work in an organization  Any process has inputs and outputs o Inputs can include HR (workers and managers), capital (equipment & facilities), purchased materials and services, land & energy o Outputs are provided to customers and are often services or tangible products o External customers are end users or intermediaries buying the companies finished services or products (outputs) o Internal customers are employees who receives the input from other employees within the same organization to perform their work o External suppliers are other businesses or individuals who provide the resources, services, products and materials to the company to process their work o Internal suppliers are employees or processes that supply important information to the company’s processes  Inputs and outputs vary depending on the service or product provided (ex. on pg 5) Nested Processes  Nested process is the concept of a process within a process Service and Manufacturing Processes  2 major types of processes are o Service o Manufacturing  Differences o 2 key differences between service and manufacturing processes are  The nature of their output  The degree of customer contact o Manufacturing processes are different because  Have longer response times  More capital intensive  Lower degree of customer contact (ex. on pg 6)  Quality can be measured more easily than service processes  Refer to Figure 1.3 for more differences o Service processes produce  Intangible and perishable outputs (ex. on pg 5)  Higher degree of customer contact  Similarities o Examples on pg 6 o Service processes inventory their inputs (ex. on pg 6) but manufacturing process do not inventory their outputs because it is too costly (ex. on pg 6) The Supply Chain View  2 main types of processes in the supply chain o Core processes o Support processes  Figure 1.4 shows the links between the core and support processes Core Processes  Core process is a set of activities that delivers value to external customers o Managers of these processes interact with external customers and build relationships with them, develop new services & products etc (ex. a hotel’s reservation handling, a new car design for an auto manufacturer etc.)  4 core processes o Supplier relationship process is a process that selects the suppliers of services, materials and information and facilitates the timely and efficient flow of these items into the firm  Working effectively with suppliers can add significant value to the services or products of the firm (ex. on pg 7) o New service/product development process is a process that designs and develops new services or products  The services or products may be developed to external customer specifications or considered from inputs received from the market in general o Order fulfillment process is a process that includes the activities required to produce and deliver the service or product to the external customer o Customer relationship process is a process that identifies, attracts and builds relationships with external customers and facilitates the placement of orders by customers (aka CRM) Support Processes  Support process provides vital resources and inputs to the core processes and is essential to the management of the business (ex. budgeting, recruiting and scheduling) o Support processes provide key resources, capabilities or other inputs that allow the core processes to function (examples on pg 7) Operations Strategy  Operations strategy specifies the means by which operations implements corporate strategy and helps to build a customer-driven firm o Links long-term and short-term operations decisions to corporate strategy & develops the capabilities the firm needs to be competitive o Operations strategy is the key player that brings processes together in a firm to form supply chains which includes suppliers as well as customers  A customer-driven operations strategy begins with corporate strategy (shown in Fig 1.5) o Corporate strategy coordinates the firm’s overall goals with its core processes, it also determines the markets the firm will serve and the responses the firm will make to changes in the environment  It provides the resources to develop the firm’s core competencies and core processes and identifies the strategy the firm will employ in global markets o Market analysis categorizes the firm’s customers, identifies their needs and assesses competitor’s strengths and this information is used to develop competitive priorities Corporate Strategy  Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization’s functions o Specifies businesses the company will pursue o Isolates new opportunities and threats within the environment o Identifies growth objectives  Corporate strategy requires 4 considerations o Monitoring and adjusting to changes in the business environment  Environmental scanning is done by managers to monitor trends in the environment for potential opportunities or threats and to stay ahead of the competition (more on pg 8) o Identifying and developing the firm’s core competencies  Core competencies are the unique resources and strengths that an organization’s management considers when formulating strategy  There are several competencies which managers focus on:  Workforce – well-trained & flexible workforce allow organizations to respond to market needs in a timely manner  Facilities – having well-located & flexible facilities is an advantage because it can handle a variety of services/products at different levels of volume  Market and Financial Know-How – organizations that can easily attract capital from stock sales, market & distribute its services/products & differentiate from other organizations on the
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