B7801 Operations Management Class Ia: Introduction to course: Overview and objectives 7 August 1999 p. 1 Agenda • Course requirements and administration • What is this course about? • Why is it important? p. 2 Course requirements • Readings – Casebook – The Goal • Class participation • Case assignments – 5 assignments – groups of 3 maximum – executive summary format (1 page + exhibits) • Midterm examination • Project p. 3 Grading Class Participation 15% Case Assignments 35% McDonald's/Burger King [8/20] National Cranberry Cooperative [8/21] Manzana Insurance [9/13] HP Desk Jet Supply Chain [9/25] Ritz-Carlton [10/9] Midterm Examination 25% Project 25% p. 4 Course administration • Web syllabus – http://www.gsb.columbia.edu/faculty/nfraiman – “One-stop shopping” for ... • schedule of assignments • case questions • data sets • announcements • useful links – Bookmark it and check it often! • Office hours: Tuesdays 3:00 - 5:00 pm and by appointment – [email protected] – 854-2076 – 405A Uris Hall p. 5 Course administration • Teaching Assistant Elena Katz • [email protected] • Administrative Assistant Wendy Himmelsbach • 5W Uris Hall • 854-8609 p. 6 What exactly are a firm’s operations ? What are they? Why are we(you) studying it? How will we study it? p. 7 Ex: Can of Coke • Where did you buy it? How did it get there? • Where was it made? • What is it made of? Where did the materials come from? • When was it made? • Why did you buy it? • How did someone know you were going to buy it? • Is the quality OK? How do “they” know the quality is okay? • How many other units where made at the same time? • Does the plant produce other products? How many? • Do different plants produce different products? Why? • Why is this can of Coke produced and distributed this way? • Are there alternatives? • What decisions had to be made to make all this possible? p. 8 Operations at “Coke” is the entire range of activities and processes involved in producing and distributing this can of Coke to us the end consumer. p. 9 Coca-Cola Enterprises (CCE) (images and figures from www.cokecce.com) • World’s largest bottler of nonalcoholic beverages, $12B 1997 revenue • Markets, produces and distributes Coke and other soft drinks, waters and teas • What do operations at CCE entail? p. 10 Geographical market CCE serves 3.4 Billion cases distributed ‘97 67% of North America All of Belgium, Great Britain, Luxembourg and The Netherlands 90% of France p. 11 CCE Infrastructure • 56,000 employees • 400 production/distribution facilities • 41,680 vehicles • 1.6M vending machines/dispensers p. 12 Typical facility distributes over 300 product/package combinations North America: Products of The Coca-Cola Company: Coca-Cola classic, caffeine free Coca-Cola classic, diet Coke, caffeine free diet Coke, Sprite, diet Sprite, Cherry Coke, diet Cherry Coke, Barq's, Citra, Fanta, Fresca, Fruitopia, Hi-C fruit drinks, Mello Yello, Minute Maid and diet Minute Maid soft drinks, Minute Maid juices, Mr. PiBB, POWERaDE, SURGE, and TAB Products of Other Companies: Canada Dry, Dr Pepper, Diet Dr Pepper, Evian, Mendota Springs, NAYA, Nestea, Cool from Nestea, diet Nestea, Schweppes, Seagrams, and Squirt International markets: Aquarius, Buxton Mineral Water, caffeine free Coca-Cola, caffeine free Coca-Cola light, Canada Dry, Capri Sun, Cherry Coke, Coca-Cola, Coca-Cola light, caffeine free diet Coke, diet Coke, Dr Pepper, Fanta, Five Alive, Kia-Ora, Lilt, Malvern Waters, Minute Maid juices, Nestea, Oasis, Perrier Mineral Water, Schweppes, Sprite, Sprite light, and Vittel Water p. 13 Process p. 14 (cont.) p. 15 A day in the life of CCE’s operations ... In the early morning hours, U.S. warehouse employees finish filling sales orders from the day before, then place the products on delivery trucks for distribution to our customers by our employees. In Europe, where delivery systems to our customers vary, warehouse employees load trucks for bulk delivery to customer warehouses, or for local delivery. We deliver most of our products in Europe to customer warehouses rather than directly to stores. Still early in the morning, sales managers, account representatives, merchandisers, and drivers across the Company convene at our sales centers to plan the day's efforts and discuss sales opportunities. Local delivery drivers then check their already-loaded trucks, make sure loads are correct, and head to market using routes created the day before by dispatchers at each sales center. Each day, local delivery drivers routinely deliver and help merchandise 400 or more cases of product. Sales personnel assemble marketing materials, organize their call lists, handle paperwork, then begin their work assisting customers. Account representatives will call on 15 or more customers each day, working with those customers as beverage experts to help them grow their business. p. 16 Throughout the day, the production lines keep rolling, bottling the product needed to keep the pipeline full. Some lines operate 24 hours a day; most lines operate at least 20 hours. This continuous production helps assure product freshness, keeps inventories to a minimum, and helps keep costs down by making maximum use of our facilities. Generally, warehouses in Europe and North America completely turn over their inventory in seven days. As local drivers deliver product to our customers, they record the deliveries on hand-held computers that help them reconcile their deliveries at the end of the day. In all of our territories, merchandisers then work in the stores to display our products attractively and correctly. As account managers call on customers, they send in new orders, electronically or by phone, keeping the cycle of sales, production, and delivery moving forward. Information Systems personnel make certain that important Company operating and sales data are available to managers, generally within 24 hours. Managers and administrative employees work to provide front-line employees the tools they need. For example, they create marketing programs and strategies, plan fleet requirements, develop and conduct employee training programs, and provide overall local and company-wide leadership. p. 17 Consider repeating this exercise for each product/service in the room! • Products • Services – pencils – credit cards – paper – bank accounts – laptop computers – telephone service – cell phone – cell phone service – clothes – pager – shoes – ISP – contact lenses/eyeglasses – medical care – furniture – insurance – carpet – MBA education – food & beverage . p. 18 What is involved in operating this business? Manufacturing Services/Trade • Plant Management • Center/Store Management • Product Development • Work Methods/Procedures • Purchasing • Facility Layout • Distribution • Site Selection • Quality Control • New Service Development • Process Engineering • Work force Planning • Facility Layout • • Production Planning Capacity Planning • Capacity Planning • Quality Control • Inventory Control • Order Processing • Order Processing • Vendor Relations • Service Parts / Repairs • Technology Planning • Vendor Relations This is a wide range of activities -- How should we begin thinking about them? p. 19 Operations Management Definition Operations management may be defined as the design, operation, and improvement of the production system that creates the firm’s primary products and services p. 20 Operations Management Marketplace Corporate Strategy Finance Strategy Operations Strategy Marketing Strategy Operations management Inputs: Outputs: People Systems Technology Processes Materials Products Customers Services Leadership Production System p. 21 Why should any of this matter to you? p. 22 The activities/processes involved in producing the firm’s outputs (products & services) retailers customers suppliers plants distribution center customer replenishment service orders orders/service requests How does (or could) the firm’s work get done? What is the business impact? p. 23 How are operating results achieved? investment FIRM outputs quality plant variety customer equip. convenience inventory service ? revenue costs materials labor energy value return How do we structure what goes on inside the “black box” so that the firm creates value and provides superior returns? p. 24 Some more processes.. A service process... make ticketing airport in-flight collect reservations check-in services baggage A product development process... product product process sourcing production concept engineering engineering ramp-up p. 25 OM Involves Managing Transformations Transformation Input Process Output (Value Adding) • Leadership Transformation is • People enabled by “LPPST” • Processes • Systems • Technology p. 26 A process view provides significant insight • How does work actually get done? – inputs – steps/stages – sequence – communication – linkages • What effect does each organization have? – customers – sales/marketing – order processing – distribution – manufacturing – suppliers – customer support p. 27 Transformations • Physical--manufacturing • Locational--transportation • Exchange--retailing • Storage--warehousing • Physiological--health care • Informational--telecommunications p. 28 What about McDonald’s? • Service or Manufacturing? • The company certainly manufactures tangible products • Why then would we consider McDonald’s a service business? p. 29 Historical Development of OM • Scientific Management – Frederick W. Taylor (early 1900s) – Frank and Lillien Gilbreth (1911) • Moving Assembly Line – Henry Ford (1913) • Activity Scheduling Chart – Henry L.