Operation Strategy NBM

Introduction to
Operation
Management
Dr. Eng. Nur Budi Mulyono
What is Operations and Supply Chain
Management?
• Operations and supply management (OSM): the design, operation,
and improvement of the systems that create and deliver the firm’s
primary products and services
• Functional field of business
• Clear line management responsibilities
• Concerned with the management of the entire system that produces
a good or delivers a service
Understanding the Global Supply Chain
• Success in today’s global markets requires a business strategy that matches
the preferences of customers with the realities of supply networks
• A sustainable strategy is critical
• Meets the needs of shareholders and employees
• Preserves the environment
• Supply refers to processes that move information and material to and from
the manufacturing and service processes of the firm
Supply Chain Processes
Work Involved in Each Type of Process
• Planning: the processes needed to operate an existing supply chain
strategically
• Sourcing: the selection of suppliers that will deliver the goods and services
needed to create the firm’s product
• Making: Where the major product is produced or the service provided
• Delivering: carriers are picked to move products to warehouses and
customers
• Returning: the processes for receiving worn-out, defective, and excess
products back from customers
Differences Between Services and Goods
1. Services are intangible
2. Services requires some interaction with the customer
3. Services are inherently heterogeneous
4. Services are perishable and time dependent
5. Services are defined and evaluated as a package of features
The Goods-Services Continuum
Product Service System
Product Service System
Servitization Strategies
• Servitization refers to a company building service activities into its
product offerings for its current users
• Maintenance, spare parts, training, and so on
• Success starts by drawing together the service aspects of the business
under one roof
• Servitization may not be the best approach for all companies
Efficiency, Effectiveness, and Value
• Efficiency: Doing something at the lowest possible cost
• Effectiveness: Doing the right things to create the most value for the
company
• Value: quality divided by price
Efficiency,
Effectiveness,
and Value
Historical Development of Operations and Supply Management
• Lean manufacturing, JIT, and TQC

• Manufacturing strategy paradigm
• Service quality and productivity
• Total quality management (TQM) and quality certifications
• Business process reengineering
• Six-sigma quality
• Supply chain management
• Electronic commerce
• Service science
Current Issues in Operations and Supply
Management
1. Coordinating the relationship between mutually supportive but separate
organizations
2. Optimizing global suppliers, production, and distribution networks
3. Managing customer touch points
4. Raising senior management awareness of operations as a significant
competitive weapon
5. Sustainability and the triple bottom line
Operation Strategy
Operation Strategy
A Sustainable Strategy
• Shareholders: Those individuals or companies that legally own one or
more shares of stock in the company
• Stakeholders: Those individuals or organizations who are influenced,
either directly or indirectly, by the actions of the firm
Triple Bottom Line
Triple Bottom Line Continued
• Social: pertains to fair and beneficial business practices toward labor,

the community, and the region in which a firm conducts is business
• Economic: the firm’s obligation to compensate shareholders who
provide capital via competitive returns on investment
• Environmental: the firm’s impact on the environment
What is Operations and Supply Strategy?
• Operations and supply strategy: setting broad policies and plans for
using the recourses of a firm to best support its long-term
competitive strategy
• Part of a planning process that coordinates operational goals with those of
the larger organization
• Operations effectiveness relates to the core business processes
needed to run the business
Closed-Loop Strategy Process
Closed-Loop Strategy Process Continued
• Activity 1 is performed at least yearly and is where the overall

strategy is developed
• Activity 2 is where the overall strategy is refined and updated as often
as four times a year
• Activity 3 is where operational plans that relate to functional areas
such as marketing, manufacturing, and so on, are coordinated
Competitive Dimensions
• Price: make the product or deliver the service cheap
• Quality: make a great product or deliver a great service
• Delivery speed: make the product or deliver the service quickly
• Delivery reliability: deliver it when promised
• Coping with changes in demand: change its volume
• Flexibility and new product introduction speed: change it
Dealing with Trade-offs
• For example, if we reduce costs by reducing product quality
inspections, we might reduce product quality
• For example, if we improve customer service problem solving by
cross-training personnel to deal with a wider-range of problems, they
may become less efficient at dealing with commonly occurring
problems
Order Qualifiers and Winners
Defined
• Order qualifiers: the basic criteria that permit the firms products to
be considered as candidates for purchase by customers
• Order winners: the criteria that differentiates the products and
services of one firm from another
Strategic Fit: Fitting Operational Activities to
Strategy
• All the activities that make up a firm’s operation relate to one another
• To be efficient, must minimize total cost without compromising on
customer needs
• Activity-system maps show how a company’s strategy is delivered
through a set of tailored activities
Mapping Activity Systems at IKEA
Productivity Measurement
• Productivity is a common measure of how well an organization is
using its resources
• Fundamental to understanding operations-related performance
• In its broadest sense productivity is outputs divided by inputs
• To increase productivity, we want to make this ratio as large as practical
Productivity Measurement Continued
• Productivity is a relative measure

• Can be compared with similar operations within its industry
• Can be compared over time
• Productivity may be expressed as:
1. Partial measures: output to one input
2. Multifactor measures: output to a group of inputs
3. Total measures: output to all inputs
Examples of Productivity Measures
Partial Measures of Productivity

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Introduction to

• Lean manufacturing, JIT, and TQC

• Social: pertains to fair and beneficial business practices toward labor,

• Activity 1 is performed at least yearly and is where the overall

• Productivity is a relative measure

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