Operation Resources

STRATEGIC OBJECTIVES OF OPERATIONS (performances)

COST CONTROL is linked to productivity (how efficiently do you use materials?)

Productivity is measured as output/input .

An inappropriate setup may be the cause for reduction in productivity, another cause may be labor inefficiency, in other words when standard time is not respected.

Productivity is closely linked to utilization (time you are actually using for production compared to total time available for production.) Another dimension is efficiency (output you get from the operations compared to inputs in the timeframe for the operation.

Efficiency is measured as (real output)/█( @expected output)

QUALITY (internal that can be corrected during quality control), and also conformity to environment and safety.

DEPENDABILITY (can you deliver the order on time?)

SPEED

3 and 4 are a measure of TIME. For big companies most of the time the only concern is related to dependability, since the order is placed in advance. The problem of speed is very important to smaller activities that do not have stocks, receive the order with a maximum advance of 8 days and need to be quick in fullfill the order.

FLEXIBILITY (mix, product, volume).

The importance of the performance objectives depends on how the business competes in its market. If for example a business competes primarly on "value for money" it should emphasize cost (efficiency, productivity), while a business that competes on high degree of customization should place emphasis on flexibility.

Strategic decisions must meet objectives.

We identify two strategies:

Top down operations strategy should reflect the needs of the whole business. We identify 3 levels: corporate, business, functional. Corporate objectives (what type of business the group wants to be in, cash allocation btwn businesses) impact on business objectives, which in turn influence operations strategy.

Bottom up op. strategy should reflect operational reality. Day to day experience of providing products and services to the market reveals problems and potential solutions which become formalized into operation strategy.

DESIGN OPERATIONS: TOOLS

HARDWARE TOOLS

Operations/tools Make or buy Capacity (central warehouse and plants vs decentralized) Automation

Cost Make at home may be more expensive than buying especially if you buy from abroad If transportation cost is very low (lipsticks for L'oreal)than central warehouse is affordable. Vs Pirelli tiers whose cables have a value density too low, so it's not convenient to transport, better having decentralized warehouse Cheaper to produce with machines. Only investment in equipment and mantainance. Also depends on the tasks: certain tasks may be executed more efficiently and effectively buy machines others by labor.

Quality make may imply easier internal quality control Not affected Quality is harder to achieve if plant is too automized (cassino plant of Fiat)

Dependability Unless you don't have a strong relationship with supplier you may experience dependability problems due to suppliers' delay Since all the materials are located in the same place (central like France for L'oreal) improve dependability. Higher control, easier coordination. Not