Chapter 1: Operations Flashcards
Twelve standard forms of value
product
service
shared resource
subscription
resale
lease
agency
audience aggregation
loan
option
insurance
capital
Return on Assets
reflects effectiveness of operations
= profit/ total assets
a way to communicate from operations to finance
Major decision areas of operations
capacity
supply networks
process technology
process managment
ROA breakdown
Profit / total assets = (output/total assets * profit / output)
Profit / output = (revenue/ output) - (cost/output)
Output/total assets = (output/capacity)* (fixed assets/total assets) *(capacity/ fixed assets)
Output/ capacity ratio
(part of output/total assets)
Shows utilization of resources
improved by strategic capacity decisions to improve balance between demand and supply
Fixed assets/ total assets ratio
(part of output/total assets)
total assets = fixed assets + working capital
if working capital is large, ratio will be small
working capital may be reduced by managing inventories (depends on supply networks)
Capacity/fixed assets ratio
part of output/total assets ratio
shows the productivity of fixed assets - or how much the operation has to spend to acquire/enhance capacity
changed by process technology decisions
How operations influences ROA
- keeping costs down
- revenue generation via volume flexibility, process design, inventory management
Positioning
deliberately focusing on product attributes (or a combination of attributes) different from competitors
Core processes
- supplier relationship
- new service/product development
- order fulfillment
- customer relationship
Supplier relationship process
selects suppliers and facilitates timely and efficient flow of supplies into company
New service/product development process
design and develop new services or products
Order fulfillment process
production and delivery of products
customer relationship process
identifies, attracts, and builds relationships with external customers
Supply chain process
businesses with external customers or suppliers
Core competencies
unique resources and strengths an organization’s management considers when formulating strategy
includes:
- workforce
- facilities
- market and financial know how
- systems and technology
these competencies drive core processes
use of market analysis
market research –> market segmentation –>
needs assessment of market segment (service/ product, delivery, volume needs) –> choice of market positioning
competitive priorities
critical dimensions a process or supply chain must possess to satisfy internal and external customers
all relate to basic performance objective/ competitive capabilities
ex:
- low cost operations
- top quality
- consistent quality
- delivery speed
- on time delivery
- development speed
- customization
- variety of product/service
- volume flexibility
volume flexibility capability
ability to accelerate or decelerate rate of production quickly to adapt to demand
Competitive capabilities
aka performance objectives
cost
quality
time (aka speed)
flexibility
(also dependability)
time based competition
competitive priorities of delivery speed and development speed
Order winner
qualities a product or service must have to WIN customer orders - what differentiates it from other products and services
order winners are derived from competitive strategies
Order qualifier
minimum qualities a product or service must meet from a set of criteria for a firm to do business in a market segment
Productivity
value of outputs produced / value of inputs used
(expressed as output per input)
Hard qualities
performance
features
reliability
safety/security
Soft qualities
helpfulness
attentiveness
communication
friendliness
Conformance
ability to reliably and consistently produce goods and services to specifications
Types of flexibility
product/ service
mix
volume
delivery
Range flexibility
how much of an operation can be changed
Response flexibility
how fast an operation can be changed
Components of cost
operating expenses
capital expenses
working capital
Working capital
= current assets - current liabilities
funds the time between inflows and outflows of cash
Activity mapping
technique of mapping out all the activities that go into operations to look for waste to remove
Value metrics
Product quality
service quality
(an increase increases value to customer)
Cost
Cycle time
(an increase decreases the value to the customer)
customer value
(quality x service)/ (cost x cycle time)
product-process matrix
connects product attributes with process attributes
effective matches occur on the diagonal - off diagonal can create high cash or opportunity cost
(one showed in class matched process flexibility and product variety)
Low product variety
creates a need for high standardization, allows for high volume
High product variety
does not allow for high standardization or high volume
low process flexibility
continuous-flow processes, all very standardized
High process flexibility
very flexible jumbled processes, usually low-volume, high-customization
