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Information Technology Management
ITM 410
Margaret Plaza

Chapter 1: Using Operations to Compete  Operations management: the systematic design, direction, and control of processes that transform inputs into services and products for internal, as well as external customers  Process: any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers  Operation: group of resources performing all or part of one or more processes  Supply Chain: an interrelated series of processes within and across firms that produces a service or product to the satisfaction of customers  Supply chain management: synchronization of a firm’s processes with those of its suppliers and customers to match the flow of materials, services and information with customer demand Operations and Supply Chain Management across the Organization  Importance of coordination among the three mainline functions o Operations o Marketing o Finance  Finance o Generates resources, capital and funds from investors and sales of its goods and services in the market place  Finance and operations decide how to invest resources and convert them into physical assets and material inputs  Operations o Transforms material and service inputs into product and service outputs  Outputs must match the characteristics that can be sold in selected markets by adersiing  Marketing o Responsible for producing sales revenue of the outputs which become returns to investors and capital for supporting operations  Support functions o Accounting o Information Systems o Human resources o Engineering  A firm competes not only on new services and products, creative marketing and skillful finance, but also through unique competencies in operations and sound management or core processes Historical Evolution of Operations and Supply Chain Management  Railway facilitated movement of goods  Steam engine, industrial revolution  Invention of Model T car by Henry Ford (1909) o Mass production  1980s, computer aided design (CAD), computer aided manufacturing (CAM), automation A Process View  Process can have its own set of objectives, involve work flow that cuts across departmental boundaries, require resources from several departments  Organization is only as effective as its processes How Processes Work  Any process has inputs and outputs  Inputs eg o Human resources (workers, managers) o Capital (equipment and facilities) o Purchased materials and services o Land o Energy  Processes provide outputs to customers  Output eg o Services (can take form of information) o Tangible products  External customers: a customer who is either an end user or an intermediary (eg. Manufacturers, financial institutions, or retailers) buying the firm’s finished services or products  Internal customers: employees in the firm whose process inputs are actually the outpus of earlier processes managed with the firm  Processes much be managed with customers in mind  Every process and every person in an organization uses a supplier  External supplier: other businesses or individuals who provide the resources, services products and materials for the firm’s short term and long term needs.  Internal suppliers: employees or processes that supply important information or materials  Inputs and outputs vary depending on service or product provided  Eg, Jewelry store vs jean factory  Picture can represent whole firm, department or single person  Dashed lines present two special types of inputs o Participation by customers  When they receive outputs  When take an active part in the processes (eg students participate in class) o Information on performance from both internal and external sources  Internal reprts  Market research, gov’t reports Nested Processes  Nested process: process within a process  Good to separate b/c one person or one dept may be unable to perform all parts of the process, or diff parts of the process may require diff skills Service and Manufacturing Processes  Two major types of processes o Service o Manufacturing Differences  Two key diff between the two o Nature of the output o Degree of customer contact  Manufacturing has longer response times, more capital intensive, quality can be measured more easily  Manufacturing converting materials to physical form we call products  Materials have to go through changes in one or more of following dimensions o Physical properties o Shape o Size o Surface finish o Joining parts and materials  If process does not change any of the above, considered service (nonmanufacturing) process  Service has intangible perishable outputs o Eg, output of auto loan process of a bank would be a car loan  Output of service processes cannot be held in a finished goods inventory  Service has higher degree of customer contact  Customers could have active role in the process itself  Manufacturing process requires little info from the ultimate consumers except indirectly through market surveys and market focus groups Similarities  Even though service processes do not keep finished goods inventories, they do inventory their inputs o Eg, hospitals keep inventories of medical supplies and materials needed  Some manufacturing processes do not keep inventory because too costly o Eg, things with lots of customization or short shelf lives (newspapers)  When looking at a process level, much easier to see if the process is providing a service or manufacturing process o When looking at the whole firm, hard to see because usually the firm does both o Eg, McDonalds, producing a hamburger is manufacturing (changes material’s physical properties), some The Supply Chain View  Most services or products are produced through series of interrelated business activities  Each activity in a process should add value to the preceding activities  Two main processes in the supply chain o Core processes o Support processes Core Processes  Core process: set of activities that delivers value to external customers o Interact with external customers o Interact with external suppliers  Eg, hotel reservation handling, web based purchasing for an online retailer  Four core processes: o Supplier Relationship Process  Supplier relationship process: suppliers of services, materials, and information and facilitate the timely and efficient flow of these times into the firm  Eg, negotiating fair prices, scheduling on time deliveries, gaining ideas and insights from critical suppliers o New Service/ Product development process  New service / product development process: design and develop new services or products o Order Fulfillment Process  Order fulfillment process: includes the activities required to produce and deliver the service or product to the external customer o Customer relationship process  CRM  Customer relationship process: identify, attract and build relationships with externa customers, facilitate placement of orders by customers  Marketing and sales could be apart of this process Support Processes  Support process: provides vital resources and inputs to the core processes and is essential to the management of the business  Provide key resources, capabilities or other inputs that allow that core processes to function  Human resource function o Support processes such as recruiting and hiring, training the workers  Legal dept o Firm in compliance with rules  Accounting o Track how firm’s financial resources are being created and allocated  Information Systems o Movement and processing of data Operations Strategy  Operations strategy: the means by which operations implements corporate strategy and helps to build a customer-driven firm  Links long term and short term operations decisions to corporate strategy and develops the capabilities the firm needs to be competitive  Internal processes are only building blocks, need to be organized to ultimately be effective in a competitive environment  Operations strategy must be driven by the needs of its customers  Corporate strategy: coordinates the firm’s overall goals with its core processes  Market analysis: categorizes the firm’s customers , identifies their needs, and assesses competitors strengths  Competitive priorities: help managers develop the services or products and processes needed to be competitive in the market
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