Week 2 Flashcards
Critical Decisions in Operations Management
Key Areas:
Design of goods & services
Process & capacity design
Managing quality
Location strategy
Supply chain management
Inventory & JIT
Scheduling
Maintenance
Design of Goods & Services
Key Questions:
What processes & capacity are required?
What materials & technology are needed?
Automation vs. skilled labor (e.g., bakery example)
Process & Capacity Design
Type, size, and capacity of equipment
Defining & maintaining quality standards
Identifying responsibility for quality control
Location Strategy
Factors to Consider:
Proximity to customers & suppliers
Land costs & local taxes
Infrastructure (e.g., motorways, accessibility)
Supply Chain Management
Key Decisions:
Make vs. buy (e.g., computer parts or pizza)
Choosing suppliers that integrate with business needs
Managing supplier relationships
Inventory & JIT
Key Considerations:
How much inventory is needed?
When to reorder? (e.g., shopping/restocking frequency)
Inventory classification & prioritization
Scheduling
Key Decisions:
Staffing levels (e.g., restaurant staffing by day)
Task sequencing (e.g., food orders in a kitchen)
Adjusting labor to seasonal demand (e.g., agriculture)
Maintenance
Types:
Preventive: Scheduled, e.g., twice per year
Corrective: Done after failures occur
Responsibility: Chief Maintenance Officer (example)
Manufacturing vs. Services
Manufacturing:
Tangible products
Can be resold & inventoried
Measurable quality
Production separate from selling
Often automated & cost-efficient
Services:
Intangible
Reselling is rare, difficult to inventory
Quality harder to measure
Service & selling integrated
Often labor-intensive, customer-focused
The 4Vs of Operations
Volume – High (mass production) vs. Low (craft production)
Variety – Customization vs. standardized products
Variation – Stable vs. fluctuating demand
Visibility – Customer involvement in production
Examples of the 4V
Handmade guitars – High variety, low volume
Mass kitchen unit production – High volume, low variety
Taxi service – High variety, high visibility
Train service – Low variety, low visibility
Service Industry Variation
Hotels:
Luxury hotel – High variation, high unit costs
Budget hotel – Low variation, low unit costs
Capacity utilization varies based on demand
What are the four main ways to reduce costs in operations?
Increasing volume, reducing variety, reducing variation, reducing visibility.
What factors impact visibility in operations?
Time between production and consumption, customer perception, level of standardization, customer contact skills, unit costs.
How does increasing volume affect operations?
It reduces unit costs and increases efficiency but may require standardization.
What are key differences between low and high-volume operations?
Low-volume: Customization, skilled labor, high unit costs.
High-volume: Automation, standardized processes, low unit costs.
Name three emerging trends in operations management.
Just-in-time, supply chain partnering, mass customization.
What is “servitization” in business models?
A shift from selling products to offering services or product-service systems.
What are the four key elements of a business model?
Value proposition, value creation, value delivery, value capture.
What is the Razor-Razor Blade business model?
Selling a primary product at a low cost while profiting from consumables (e.g., razors and blades, printers and ink).
What are the three main types of PSS?
Product-oriented, use-oriented, result-oriented services.
What is an example of a use-oriented service?
Car leasing or sharing services (e.g., Volvo’s luxury car-sharing model).
What is an example of a result-oriented service?
Pay-per-print services, where companies charge per page printed rather than selling printers.
What type of PSS does Volvo’s car-sharing model represent?
Use-oriented service (product renting or sharing).
What are challenges of implementing this model?
Managing maintenance, ensuring availability, coordinating multiple stakeholders.
What are benefits of this model?
Lower costs for customers, reduced environmental impact, additional revenue streams.
What processes and capacity will products require?
It depends on the type of product, materials needed, and production methods.
What equipment and technology are necessary?
Depends on automation levels and skill requirements (e.g., bakery tools vs. automatic machinery).
What kind of equipment is needed in terms of size/capacity?
Equipment selection depends on production volume and efficiency requirements.
How do we define quality?
Quality is based on customer expectations, product consistency, and standards.
Who is responsible for quality?
Both management and employees define and maintain quality.
Where should we put the facility?
Considerations include proximity to customers, costs, accessibility, and logistics.
On what criteria should we base the location decision?
Factors include land prices, taxes, transport links, and customer base.
Should we make or buy a component?
Depends on cost, expertise, supplier reliability, and business strategy.
Who are our suppliers and who can integrate into our e-commerce program?
Suppliers should align with business needs and digital capabilities.
How much inventory of each item should we have?
Based on demand forecasting, priority classifications, and storage capacity.
When do we reorder?
When stock levels reach reorder points, considering lead times and demand trends.
Are we better off keeping people on the payroll during slowdowns?
Industry-dependent; some sectors need seasonal workers.
How many staff do we need each day?
Staffing depends on demand patterns (e.g., restaurants vary by day).
How do we sequence tasks efficiently?
Prioritize based on urgency, customer needs, and process efficiency.
Who is responsible for building and IT maintenance?
Typically, a maintenance officer or designated management team.
When do we perform maintenance?
Preventive (scheduled) or corrective (after an issue arises).
How do manufacturing and service operations differ?
Manufacturing produces tangible goods; services provide intangible value.
What are key differences in operations?
Manufacturing has inventory, measurable quality, and automation; services focus on customer interaction and flexibility.
What are the 4 Vs?
Volume, Variety, Variation in demand, and Visibility
How do high and low levels of each V impact operations?
High volume → Efficiency, specialization, low costs (e.g., mass production).
High variety → Customization, flexibility, higher costs (e.g., bespoke services).
High variation in demand → Requires adaptability, affects capacity planning.
High visibility → Customer interaction affects perception and service quality.
How does the 4V framework apply to transport services?
Taxi: High variety, high visibility, flexible schedules, higher costs.
Public Transport: Low variety, low visibility, standardized schedules, low costs.
How does it apply to hotels?
Budget Hotel: Stable demand, routine operations, high utilization, low unit costs.
Luxury Hotel: Variable demand, high flexibility, higher costs.
