Ucebnice_en

the first half of the 1990s, by 1996 the
three countries had virtually identical rates of productivity growth. Upon further examination of the
input and output data provided in Figure 1.8, however, we can see that the manner in which each
country increased productivity differed significantly. Japan increased productivity solely by using
its existing inputs more efficiently to produce greater output. The United States achieved the same
effect by producing more output with a slight decrease in input. Germany did not increase output or
input--rather, a slight decrease in output was offset by a dramatic decrease in input. Figure 1.8 also
shows changes in input and output for France, Italy, Sweden, the United Kingdom, and Canada.
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1.8. Competitive Industries
Competition within industries is more intense when the firms are relatively equal in size and
resources, products and services are standardized, and industry growth is either slow (so that one
company gains at the expense of another) or exponential (so that gaining a foothold in the market is
a strategic imperative). Industry competitiveness can be measured by the number of major players
in the industry, average market share, and average profit margin. Probably the most competitive
industry worldwide is pharmaceuticals, in which the largest manufacturer holds a mere 4.7 percent
market share. Price wars, relentless advertising (such as nightly phone calls from long-distance
carriers), frequency of new product or service introductions, and purchasing incentives (extended
warranties, financial packages, switching bonuses, and so on) provide additional evidence of
competition within industries.
In some industries, competition is limited because it is difficult for new firms to enter the industry.
Many of the barriers to entry4--economies of scale, capital requirements, access to supply and
distribution channels, and learning curves--are operations oriented. Let's explore them in more
detail.
1. Economies of scale. In many industries, as the number of units produced increases, the cost
of producing each individual unit decreases, which is known as economies of scale. New
companies entering such an industry may not have the demand to support large volumes of
production, and thus, their unit cost would be higher.
2. Capital investment. Large initial investments in facilities, equipment, and training may be
required to become a "player" in some industries. For example, opening a new hospital
requires an enormous investment in facilities, equipment, and professional personnel; in
contrast, a day-care center may operate out of an existing home with only minimal
equipment, training, and licensing requirements.
3. Access to supply and distribution channels. Existing firms within an industry have
established supply and distribution channels that may be difficult for new firms to replicate.
Examples: Toys 'R Us dominates its suppliers. Wal-Mart's information and distribution
systems provide a strong competitive advantage. VISA will not allow its member banks to
do business with American Express.
4. Learning curves. Lack of experience can be a barrier to entry in an industry with significant
learning curves. For example, U.S. firms dominate the aerospace industry because of their
experience and expertise in airplane design and construction. However, this may not always
be the case, as component manufacturers in Korea and Japan are gaining valuable
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experience as suppliers to aerospace firms. Shipbuilders claim a 10 percent learning curve
(and corresponding cost advantage) for each similar vessel built. Hospitals performing heart
transplants exhibit an amazing 79 percent learning curve.
1.9. Competitive Firms
Measures of a firm's competitiveness include market share, earnings per share, revenue growth, and
profit margins. A firm is competitive if it performs at least as well as its rivals. However, being as
good (or as bad) as the competition is not an inspiring goal. It puts the firm in a defensive stance
and ensures second-rate status.
1.10. Issues and Trends in Operations
Operations is a field that is rapidly changing and growing in importance. Current issues and future
trends in operations include:
1. Intense competition. The intensity of worldwide competition continues to increase. Global
restructuring, the emergence of newly industrialized economies, and the Internet have
opened new markets worldwide. As world markets grow, so do potential customers, as well
as the number and quality of competitors.
2. Global markets, global sourcing, and global financing. Few companies are able to survive
by competing in the domestic market alone. Companies need to learn about foreign
societies, understand foreign customers, build networks, and forge partnerships. Production
takes place wherever in the world it can be done the cheapest, access to capital markets is
worldwide, and the global supply chain reaches around the world.
3. Importance of strategy. Companies need long-term global strategies to survive in the
marketplace. Vertically integrated partnerships, partnerships with other companies in the
same industry, partnerships with educational institutions, and partnerships with government
are needed to strengthen competitive positions. A new type of capitalism based on strategic
alliances and cooperative specialization within industries may become a necessity.
4. Product variety and mass customization. An increasing variety of products and services will
be offered, in many cases, customized for individuals. This means the expected life of
products will continue to decrease, and product and service innovations will hit the market
at an increasing rate.
5. More services. Eighty percent of jobs in the United States are provided by the service sector.
Many corporations we think of as successful manufacturing firms, such as GM, GE, IBM,
and Westinghouse, actually generate more than half of their income from services. For both
manufacturing and service firms, customer service is a competitive battleground that will
continue to intensify.
6. Emphasis on quality. The quality of products and services continues to improve as customer
expectations of quality grow. Zero defects will be the norm. Quality that delights the
customer and provides a competitive advantage will be the goal.
7. Flexibility. The most successful production systems are the most flexible, measured by the
ability to adjust to changes in product design, changes in product mix, changes in the
volume of demand, and changes in process technology.
8. Advances in technology. Information technology, electronic commerce, and
telecommunications will continue to advance at a rapid rate. Advanced materials (metal-
based composites, polymer-based composites, and high-tech ceramics), smart materials,
advanced machining (EDM, lasers, electron beams, plasma flame cutting, flexible tooling
and fixturing), intelligent sensors, smart robots, biotechnology, digital imaging, artificial
intelligence, superconductors and supercomputing will dramatically change how products
and services are designed and how firms compete.
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9. Worker involvement. The empowerment of the workforce has had a significant impact on
operations in the 1990s. This trend will continue in the future as the ability to create, absorb,
and utilize knowledge holds the key to success. Countries that perform the best in the world
market will have the best research and development (R&D), the best education system, the
brightest people, and the savvy to use those assets to their fullest.
10. Environment and ethical concerns. Companies and industries increasingly consider the
environmental impact of the design, manufacture, distribution, use, and disposal of their
products and services. The impetus for environmental responsibility may shift from
government regulations to customer requirements. As companies compete and produce
across national borders, corporate ethics and social responsibility will be dictated more by
customer expectations and corporate culture than by legalities in the host country.
1.11. Primary Topics in Operations Management
There are many issues, concepts, and techniques associated with the field of operations
management (OM). This text is designed as an introductory survey course in OM that covers many
different topics. In the following sections, we provide a brief overview of the primary topics in
operations management. They are presented in the order in which operational decisions are made
within a firm. It is not a coincidence that the chapters in this text are organized in a similar fashion.
1.11.1. Deploying Strategy
Strategy is only as good as the results it produces. Good results require that the corporation vision
and strategic plan be converted into a series of consistent, achievable action plans to be deployed
throughout the organization. Operations strategy must be consistent with corporate strategy and
may provide the distinctive competence on which a firm competes. This topic appears in the text as
operations strategy.
1.11.2. Assuring Quality
Quality drives operational decisions. The level of quality a company seeks to achieve is a strategic
decision that eventually determines how a product is made or a service is delivered. Designing
products and services, designing and planning the production process, locating and developing the
production facility, designing jobs and work activities, and planning and scheduling the flow of
products throughout the system are all areas of operations management that are increasingly
dominated by quality. For this reason, the first two topics presented after the initial discussion of
strategy are quality management and statistical quality control.
1.11.3. Designing Products and Services
The traditional starting point in the production process is designing the product or service.
Decisions related to design include converting customer requirements to product or service
characteristics, determining the desired level of quality, selecting materials, and evaluating the
resulting production costs. This topic is covered in the text as product and service design.
1.11.4. Planning the Production Process
Once the product or service has been designed, the physical process that will produce the product or
deliver the service must be constructed. Plans are developed for acquiring materials, determining
the types of job skills, equipment, and technology required, and managing the process. This topic is
referred to as process planning, analysis, and reengineering.
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1.11.5. Laying Out the Facility
The production process that has been designed must be physically housed in a facility and laid out
in an effective manner so that the product can be produced or service delivered as efficiently as
possible. Decision making focuses on how to arrange different parts of the production or delivery
process in the facility in order to ensure a smooth flow and minimal cycle time. The title of this area
of operations management is facility layout.
1.11.6. Designing Jobs and Work
A primary component of the production process is the work performed by people, alone, together,
or with machines and equipment. Human resources management is the area of OM concerned with
making sure that jobs meet the requirements of the production process in the most efficient and
effective manner possible.
1.11.7. Managing the Supply Chain
Once the production process and facility have been designed, decisions must be made regarding
where to locate the facility in relation to customers and suppliers and how to manage the supply
chain. A supply chain encompasses all the facilities, functions, and activities involved in producing
and delivering a product or service, from the suppliers (and their suppliers) to the customer (and
their customers).
1.11.8. Forecasting Demand for Products and Services
Once the physical facility and production process are in place to produce a product or deliver a
service, a host of planning decisions are required to determine how much to produce and when to
produce it. These decisions are based on customer demand. Forecasting involves using a number of
different methods and quantitative techniques to provide accurate estimates of demand, which are
subsequently used to make production decisions.
1.11.9. Production Planning and Scheduling
Once management has determined how much product or service is needed to meet the demand,
production schedules that involve a myriad of decisions are developed. These decisions include how
much material or how many parts to order, when material or parts should be ordered, how many
workers to hire, and how these workers should be scheduled on jobs and machines. Decisions must
also be made to ensure the amount of inventory available at each stage of the production process is
sufficient to avoid unnecessary delays, and the amount of final inventory is sufficient to meet
customer demand. For service operations, the number of servers required to serve customers in a
timely manner must be established. Production planning represents a major area of decision making
in operations management and includes the topics of capacity and aggregate production planning,
inventory management, material requirements planning, scheduling, just-in-time systems, service
improvement, and project planning.
1.12. Organization and Purpose of This Book
In organizing this text, we envisioned three phases to the learning process: understanding the
strategic importance of productive systems, designing productive systems, and operating productive
systems. The chapters included in each phase are outlined in Table 1.4.
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Chapters 1 through 4 introduce the concepts and skills needed throughout the course and relate
them to the competitive strategy of the firm. Chapters 5 through 9 relate to the design of productive
systems, and Chapters 10 through 17 relate primarily to the operation of productive systems.
The purpose of this text is threefold:
1. To gain an appreciation of the strategic importance of operations and how operations can
provide a competitive advantage in the marketplace. Regardless of your major or career
aspiration, as a business student, you will need to understand the basic issues, capabilities,
and limitations of the operations function. Especially relevant are issues related to quality,
strategy, and competitiveness.
2. To understand the relationship between operations and other business functions, such as
marketing, finance, accounting, and human resources. By the conclusion of this course, you
should be able to describe the impact of operations on other functions within a firm as well
as on the competitive position of the firm.
3. To develop a working knowledge of the concepts and methods related to designing and
managing operations. From this course, you will gain the ability to conceptualize how
systems are interrelated, to organize activities effectively, to analyze processes critically, to
make decisions based on data, and to push for continual improvement.
1.13. Summary
Operations can be viewed as a transformation process that converts inputs into outputs of greater
value. Operations is also a basic function of a firm and the technical core of an organization.
Operations management involves deploying strategy, assuring quality, designing products and
services, planning the production process, laying out the facility, designing jobs and work,
managing the supply chain, forecasting demand for products and services, and production planning
and scheduling.
From the Industrial Revolution through the 1960s, the United States was the world's greatest
producer of goods and services as well as the major source of managerial and technical expertise. In
the 1970s and 1980s, America experienced competitive problems due to strategic weaknesses and
inattentiveness to operations. Today, while no single country dominates the global marketplace, the
United States does compete successfully, and operations plays a major role in maintaining
competitiveness.
Current issues and trends in operations include intense competition in global markets; an emphasis
on strategy, quality, and flexibility; advances in technology and worker involvement; more services
and product variety; and environmental and ethical concerns.
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2. Chapter 2 – Operations strategy
2.1. So You Have a Mission Statement . . . Now What?
Visioning is big in corporate America. Everyone from IBM to the Little League team has mission
statements, visions, philosophies, and core values. Mission statements started appearing in the
1980s when corporations faced the issues of diversity, empowerment, globalization, environmental
responsibility, total quality, teamwork, and customer focus--and they've rapidly multiplied since.
Let's look at a few examples.1
Some mission statements clarify what business a company is in--for Levi Strauss it's "branded
casual apparel"; for Intel it's supplying "building blocks to the computing industry"; for Lowe's it's
helping "customers build, improve, and enjoy their homes"; for Binney & Smith (Crayola) it's
"colorful visual expression"; and for Currency Doubleday it's "ideas that link business with life's
meaning."
Other mission statements reflect the character of the company--Southwest Airlines delivers its
service "with a sense of warmth, friendliness, individual pride, and Company Spirit"; Ben and
Jerry's creates "a new corporate concept of linked prosperity" that includes a social mission; Hanna
Andersson wants to "enhance the richly textured experience of family and community"; and Ritz
Carlton proclaims "we are ladies and gentlemen serving ladies and gentlemen."
Still others are short and focused--Motorola: "Total Customer Satisfaction," and Delta Air Lines:
"Worldwide Airline of Choice."
Finally, some mission statements signal a radical change in the way the company does business--
General Electric: "Boundaryless . . . Speed . . . Stretch."
Mission statements are the "constitution" for an organization, the corporate directive. But they aren't
any good, as Dilbert implies, unless they can be converted into action. And that's what this chapter
is all about--converting strategy into results.
2.2. Strategy Formulation
Strategy is a common vision that unites an organization, provides consistency in decisions, and
keeps the organization moving in the right direction. Strategy formulation consists of four basic
steps:
1. Defining a primary task. The primary task represents the purpose of a firm--what the firm
is in the business of doing. It also determines the competitive arena. As such, the primary
task should not be defined too narrowly. For example, Norfolk Southern Railways is in the
business of transportation, not railroads. Paramount is in the business of communication, not
making movies. Disney goes one step further--its primary task is not entertainment, it's
making people happy! The primary task is usually expressed in a firm's mission statement.
The mission may be accompanied by a vision statement that describes what the organization
sees itself becoming.
2. Assessing core competencies. Core competency is what a firm does better than anyone else,
its distinctive competence, its competitive advantage. A firm's core competence can be
exceptional service, higher quality, faster delivery, or lower cost. One company may strive
to be first to the market with innovative designs, whereas another may look for success
arriving later but with better quality.
To be successful, companies must identify and capitalize on what sets them apart from other
firms--their core competencies. But beware--competencies can become obsolete! Existing
competencies should be nurtured and enhanced and new competencies developed over time
as needed. In a later section, we will examine how to develop and fully utilize core
competencies.
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3. Determining order winners and order qualifiers. A firm is in trouble if the things it does
best are not important to the customer. That's why it's essential to look toward customers to
determine what influences their purchase decision.
Order qualifiers are characteristics of a product or service that qualify it to be considered
for purchase by a customer. An order winner is the characteristic of a product or service
that wins orders in the marketplace--the final factor in the purchasing decision. For example,
when purchasing a CD player, customers may determine a price range (order qualifier) and
then choose the product with the most features (order winner) within that price range. Or
they may have a set of features in mind (order qualifiers) and then select the least expensive
CD player (order winner) that has all the required features.
Order winners and order qualifiers can evolve over time, just as competencies can be gained
and lost. Japanese automakers initially competed on price but had to assure certain levels of
quality before the U.S. consumer would consider their product. Over time, the consumer
was willing to pay a higher price (within reason) for the assurance of a superior-quality
Japanese car. Price became a qualifier, but quality won the orders. Today, high quality, as a
standard of the automotive industry, has become an order qual