Why is Operations Management important?

1. Why is Operations Management important?

2. Operations Management concerns all types of organisation

3. Operations management concerns all types of organisation Manufacturing added value as a percentage of GDP 30% 26% 22% 22% 16% 13% 11% 11% China Brazil USA Malaysia Romania Germany UK France Source: World Bank

4. Non-operations processes Process management Production manage -ment Operations management Operations processes Manufacturing organizations Service organizations From ‘production’ to ‘operations’ to ‘process’ to process management and management?

5. Marketing/sales 2 Financial 6 Organizational design 11 Operations and process management 31 Benefits/Actuarial 16 Corporate management 17 IT management 17 Operations management is fashionable! The consultancy services market - % of world revenues of 40 largest consultancy firms

6. What we should expect from operations Lower environmental impact Capabilities for future innovation Learning? CSR? Less waste Process learning Cost effectiveness? Service? Lower costs Process efficiency Secure revenue Betterservice Why operations excellence? Higher capacity utilisation Reduced errors, better resilience Capital? Risk? Lower capital requirements Lower ‘operational’ risk

7. Principles versus solutions As far as operations excellence is concerned............ Principles are generic Solutions are not ...... ....they depend on circumstances The task is to build the principles on which operations and processes can be developed

8. Principles versus solutions Eg. Lean, Supply networks, BPR, Project mgt. etc Overarching concepts Principles Solutions + Tools = (Used in context) What’s specific about the circumstances? From examples, theory, research, etc. Practitioner-based methods and others ‘Over to you!’

9. How is the idea of Operations Management developing? Operations management has strategic impact Operations management has an environmental impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management is the driver of improvement Operations management has to exploit new technologies

10. The four perspectives on any Operations strategy Top - down Operations management should interpret higher level management Resources Operations management should manage resourcesappropriately Customer requirements Operations management should satisfy its internal and external customers Operations management should learn from day-to-day experiences Bottom - up Operations strategy

11. Operations management as an ‘operating model’ Business management The business model Functional strategies …which defines how the business model will be achieved ….sets the overall purpose and objectives for…… Operations strategy Finance strategy Marketing strategy Technology strategy The operating model Operational Operations Operational Technology Operational Marketing Operational Finance

12. Giordano Relatively easy to imitate……….. Short-term operations capability

13. The Flextronics Industrial park Guadalajara Mexico More difficult to imitate………….. Medium-term operations capability

14. South America’s second biggest Brewery South African base… spreads north Expands through Europe and Asia How will it cope in developed markets? Almost impossible to imitate………….. Long-term operations capability

15. How is the idea of Operations Management developing? Operations management has strategic impact Operations management has an environmental impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management is the driver of improvement Operations management has to exploit new technologies

16. To what extent do ethical and financial performance trade-off? Societal pressure + reputational risk defining minimum ethical standards The efficient frontier between ethical and financial performance Stockholder expectations defining minimum financial standards Repositioning between ethical and financial performance Financial performance Financial performance Ethical performance Ethical performance Changing the balance (trade-off) between ethical and financial performance Simultaneously improving both ethical and financial performance , partly because extreme positions on either are becoming less acceptable

17. The ‘triple bottom line’ – Holcim cement • The triple bottom line....... • Profit • Planet • People • Holcim one of the world’s leading manufacturers and distributors of cement • Production sites in over 70 countries. • Cement manufacture has a significant impact on almost every aspect of sustainability and social responsibility. • We place sustainable development at the core of our business strategy which aims to enhance value, and safeguards our reputation • Holcim’s strategy and their approach to value creation attempts to integrate economic, environmental and social impacts. • Holcim have established a set of Group-wide CSR performance targets. • But CSR related performance measurement should not be separate from the more conventional business systems.

18. Eliminating waste can also save costs Example – Marmite (a popular spread in the UK)

19. How is the idea of Operations Management developing? Operations management has strategic impact Operations management has an environmental impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management is the driver of improvement Operations management has to exploit new technologies

20. Operations management as functional leadership – The ‘C-suite agenda’ Technical expertise Leadership expertise Being the trusted advisor to the business and representing your function’s perspective Contributing to the leadership team and aligning business and functional visions Process expertise Delivering your expertise through your service processes

21. The four perspectives on any Functional strategy Top - down Functional management should interpret higher level management Resources Functional management should manage resourcesappropriately Customer requirements Functional management should satisfy its internal and external customers Functional management should learn from day-to-day experiences Bottom - up Functional management

22. How is the idea of Operations Management developing? Operations management has strategic impact Operations management has an environmental impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management is the driver of improvement Operations management has to exploit new technologies

23. The Zara Supply Chain ZARA

24. ZARA Located at La Coruna An unlikely place for the fastest growing apparel company in the world!

25. Zara keeps less inventory than its peers Inventory as % of Annual Sales Zara is the largest division of Inditex (78% of sales)

26. ZARA Retail Shops Retail Shops Retail Shops Retail Shops Almost No Advertising, Little Markdowns 10,000 New Items/Year (~300,000 SKUs) Zara La Caruna, Spain Replenishes >1800 Shops in > 54 Countries Twice Per Week Makes half of its clothes, 40% of its fabrics, Designs new collections in 4-5 weeks Produces in one week “Catwalk to rack in as little as 2 weeks”

27. All shipments from a Central Distribution Centre A fancy, huge, expensive warehouse! Why expand it when it is currently at 50% capacity utilization?

28. Zara’s “Closed Loop” Retail Produce Design Distribute Zara closely controls the entire supply cycle much better than its peers

29. The Operations Management triangle X High High utilization but long throughput times Process throughput time (or inventory) Average length of queue X Low utilization but short throughput times X Reduce process variability X Low X X X 0 20% 40% 60% 80% 100% Capacity Utilization

30. How is the idea of Operations Management developing? Operations management has strategic impact Operations management has an environmental impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management is the driver of improvement Operations management has to exploit new technologies

31. Some of the elements that go to make up improvement approaches Emphasis on rapid change Integrate data Radical rethinking Visibility across data End-to-end processes Bring doers and controllers together Process based analysis Evidence-based decisions Emphasis on methods - how to do it Emphasis on solutions - what to do Customer centric Synchronised flow Reduce variation Emphasis on education Systems and procedures Waste identification Business-wide Include all people Customer relationships Improvement cycles Perfection is the goal Emphasis on gradual change

32. Some of the elements that go to make up improvement approaches TQM Emphasis on rapid change Integrate data Radical rethinking Visibility across data BPR End-to-end processes Six Sigma Bring doers and controllers together Process based analysis Evidence-based decisions Emphasis on methods - how to do it Emphasis on solutions - what to do Customer centric Synchronised flow Reduce variation Emphasis on education Systems and procedures Waste identification Business-wide Include all people Customer relationships Improvement cycles Lean Perfection is the goal Emphasis on gradual change

33. Notwithstanding some common elements improvement approaches do differ Emphasis on rapid change BPR Six Sigma Emphasis on solutions - what to do Emphasis on methods - how to do it Lean CI Emphasis on gradual change

34. How is the idea of Operations Management developing? Operations management has strategic impact Operations management has an environmental impact Operations management can be applied to the resources and processes in any function Operations management applies to the whole supply network Operations management is the driver of improvement Operations management has to exploit new technologies

35. Technology– Impacts on OM development 3D Printing Technology makes everything uncertain…. ..new operations issues emerge almost overnight

36. Technology– Impacts on OM development Supply networks are changing faster …… and its changing the context of operations

37. Arranger Producer Engineer Retailer Songwriter Recording studio Disk/tape manufacturer Physical distribution Singer Consumer Instrumentalists The Recorded Music Business Supply Network from the Classic 1940s-1950s Period eg. Frank Sinatra Strong vertical integration

38. Consumer Music production now largely in the control of the artists. Music distribution mixed. Artist’s download Arranger Producer Engineer Conventional CDs Recording studio Singer Songwriter On-line retailers Instrumentalists