Category: Operations Management

The notion of focus naturally, almost inevitably from the concept of fit. Just as a company must choose, train, and manage a sales force differently if its primary task is to sell expensive capital equipment to engineers, as opposed to selling inexpensive disposables to unsophisticated consumers a single operations organization is unlikely to be equally effective for businesses that compete in markedly different   ways. Different operations structures and infrastructures are required for different missions. Therefore, a single facility even if equipped with the most modern equipment and systems, will tend to experience both irreconcilable conflicts and low overall effectiveness if

At its heart a capacity strategy suggests how the amount and timing of capacity changes should relate to long term changes in demand. Three options illustrate the range of possibilities available when demand is expected to grow steadily. Alternative Types of capacity Cushion One obvious way that companies can meet demand that is temporarily greater than their operating rate is by carrying inventories, either of finished goods or of parts and components that can be converted quickly into finished goods. As with the airline seat referred to earlier, most services cannot be inventoried unfortunately although some back room services (usually

However, as with most strategic decisions, the issue is more complex than it first appears. There are also costs and risks associated with outsourcing and many counter examples to the outsourcing success stories. Drawing general conclusions about the relative success or failure of vertical integration, based on what is working or not working in a particular industry at a particular time; is dangerous. There are many examples of industries where the relative merits of vertical integration versus outsourcing have changed over time. The disk drive industry provides a good example. Until the late 1970s vertically integrated firms dominated that industry.

A company’s operations infrastructure is composed of its policies and systems governing a number of activities, from capital budgeting and equipment selection to organizational structure.  Each of these systems often has repercussions and implications for other infrastructural and structural elements. Capital budgeting and performance measurement systems in particular seem to affect everything else. In addition, human resources policies interact with location and process choices, and sourcing policies, interact with facility decisions. Organizational design also is highly dependent on vertical integration decisions, as well as on decisions regarding how various facilities are located, specialized and interconnected. Therefore many managers, like most

Since the on-going task for an operations organization is to structure and manage itself so as to enhance its company’s competitive strategy as its environment and evolve it usually becomes necessary to make changes in a number of the operations decisions.  Again and again we have found that the root cause of an operations crisis is that a company’s operations, policies and people – both workers and managers – over time  have become  incompatible with its facilities, technology , sourcing and system choices. Even more subtly even though its structure may be consistent with its infrastructure the operations organization may

A useful framework for thinking about the diversity of operations design decisions is provided. The collective impact of these decisions   establishes limits on an operations organization’s strategic capabilities. Operations strategy decision categories: Structural decisions Capacity –amount , type, timing Sourcing and vertical integration –direction extent, balance Facilities  — size, location, specialization Information and process technology – degree of automation, interconnectedness lead versus follow. Infrastructural policies and systems: Resources allocation and capital budgeting systems Human resource systems – selection, skills, compensation, employment security. Work planning and control systems – purchasing aggregate planning scheduling, control or inventories and /or waiting time backlog.

In the information intensive industries, almost all these assumptions come into question. To begin, the production and distribution of information is very different from that of physical products. Operations managers typically have focused their attention on the cost of producing a specified volume of a product or service during a given time period, where the average cost per unit is composed of a relatively small depreciation / amortization cost and a large variable component   (particularly if the cost of materials is included). In addition, they typically assume that economies of scale operate to reduce costs only up to some point,

Most of the people employed by most organizations – whether private or public, whether engaged in making products or delivering services are engaged in its operations function, and most of its physical  assets reside there. Within operations we include all those activities required to create and deliver a product or service, from procurement through conversion to distribution. In today’s fierce global competition, there is a growing recognition that the operations function can be a formidable competitive weapon if designed and managed properly. An operations strategy, is a set  of goals, policies, and self-imposed restrictions that together  describe how the organization

Process Reengineering – At the heart of the lean manufacturing paradigm is the concept of continuous improvement. Even though the operating system that it results in may be vastly different from that embodying the older mass production paradigm the process of getting from the latter to the former generally requires a myriad of incremental improvements each resulting in less waste, greater speed /responsiveness, and fewer potential problems to deal with in the future. In direct contrast to this approach, the idea of business process reengineering (BPR) swept through US industry during the early 1990s. Hundreds of companies that had been