1 GOODS, SERVICES, AND OPERATIONS MANAGEMENT 2 LO1 Explain the concept and importance of operations management. 3 “Walt Disney clearly put us on the path toward things like quality, great guest service, creativity and innovation.” Disney theme parks and resorts are designed to provide exceptional guest experiences and accomplish the mission to “create happiness by providing the finest in entertainment for people of all ages, everywhere.” How do they accomplish this? By meticulous attention to the management of operations! 4 Disney theme parks and resorts, for example, focus on: 5 What do you think? Describe one experience you had at a theme park that illustrates either good or bad customer service or operational design. What can we learn from your experience regarding how a theme park can create a positive customer experience or improve on a bad one through its design and operations? 6 Day-to-day management of those processes. 7 Three Issues at the Core of Operations Management 8 What Do Operations Managers Do? 9 10 United Performance Metals: The Life of an Operations Manager 11 United Performance Metals: The Life of an Operations Manager 12 OM in the Workplace Operations Managers have such titles as: 13 OM in the Workplace Shelly Decker, an accounting and information systems major in college, and her sister created an entrepreneurial venture to manufacture and sell natural soaps and body products. 14 OM in the Workplace Shelly uses OM skills every day: 15 OM in the Workplace Scheduling – Production schedules are created to ensure that enough product is available for both retail and wholesale customers, taking into account such factors as current inventory and soap production capacity. Quality management – Each product is inspected and must conform to the highest quality standards. If a product does not conform to standard (for example, wrong color, improper packaging, improper labeling, improper weight, size, or shape), then it is removed from inventory to determine where the process broke down and to initiate corrective action. 16 OM in the Workplace Brooke Wilson is a Process Manager for J.P. Morgan Chase in the Credit Card Division. He was an accounting major in college. Among his OM-related activities are: Planning and budgeting: Representing the plastic card production area in all meetings, developing annual budgets and staffing plans, and watching technology that might affect the production of plastic credit cards. Inventory management: Overseeing the management of inventory for items such as plastic blank cards, inserts such as advertisements, envelopes, postage, and credit card rules and disclosure inserts. 17 OM in the Workplace Scheduling and capacity: Daily to annual scheduling of all resources (equipment, people, inventory) necessary to issue new credit cards and reissue cards that are up for renewal, replace old or damaged cards, and one's that are stolen. Quality: Embossing the card with accurate customer information and quickly getting the card in the hands of the customer. 18 Understanding Goods and Services 19 Understanding Goods and Services 20 Similarities Between Goods and Services 21 Differences Between Goods and Services 22 Understanding Goods and Services 23 Understanding Goods and Services 24 Exhibit 1.1 How Goods and Services Affect Operations Management Activities 25 Customer Benefit Packages 26 Customer Benefit Packages 27 Customer Benefit Packages 28 Customer Benefit Packages 29 Exhibit 1.2 A CBP Example for Purchasing a Vehicle 30 Exhibit Extra Another Example of a Consumer Benefit Package 31 32 Customer Benefit Packages 33 Biztainment – (Huh?) Why would someone pay, for example, to crush grapes with their feet? Might it be that the process of doing this is as valuable to the customer as the outcome itself? Entertainment is the act of providing hospitality, escapism, fun, excitement, and/or relaxation to people as they go about their daily work and personal activities. The addition of entertainment to an organization’s customer benefit package provides unique opportunities for companies to increase customer satisfaction and grow revenue. Biztainment is the practice of adding entertainment content to a bundle of goods and services in order to gain a competitive advantage. 33 34 Biztainment – (Huh?) The old business model of just selling and servicing a physical vehicle is gone. For example, a BMW automobile dealership in Fort Myers, Florida recently opened a new 52,000 square foot facility that offers a putting green, private work areas, a movie theater, wireless Internet access, massage chairs, a golf simulator, and a cafe´, so that customers have multiple entertainment options during their visits. Build-A-Bear Workshop boasts an average of $600 per square foot in annual revenue, double the U.S. mall average, and Holiday Inns found that hotels with holidomes have a 20% higher occupancy rate and room rates are on average $28 higher. 34 35 Processes A process is a sequence of activities that is intended to create a certain result. Processes are the means by which goods and services—the components of a CBP—are produced and delivered. 36 Processes Key business processes: 37 Processes Nearly every major activity within an organization involves a process that crosses traditional organizational boundaries. Networks of processes are called value chains, which we focus on in Chapter 2. 38 Pal’s Sudden Service Pal’s Sudden Service is a small chain of mostly drive-through quick service restaurants located in Northeast Tennessee and Southwest Virginia. Pal’s competes against major national chains and outperforms all of them by focusing on important customer requirements such as speed, accuracy, friendly service, correct ingredients and amounts, proper food temperature, and safety. 39 Pal’s Sudden Service Pal’s uses extensive market research to fully understand customer requirements: convenience; ease of driving in and out; easy-to-read menu, simple, accurate order-system; fast service; wholesome food; and reasonable price. 40 Pal’s Sudden Service Pal’s value chain begins with raw materials and suppliers providing items such as meat, lettuce, tomatoes, buns, and packaging; uses intermediate processes for order taking, cooking, and final assembly; and ends with order delivery and—hopefully—happy customers. Every process is flowcharted and analyzed for opportunities for error, and then mistake-proofed if at all possible. 41 Pal’s Sudden Service Entry-level employees—mostly high school students in their first job—receive 120 hours of training on precise work procedures and process standards in unique self-teaching, classroom, and on-the-job settings, reinforced by a “Caught Doing Good” program that provides recognition for meeting quality standards and high performance expectations. Pal’s collects performance measures such as complaints, profitability, employee turnover, safety, and productivity. 42 Exhibit 1.4 Six Eras of Operations Management 43 Exhibit 1.5 U.S. Employment by Major Industry 44 Exhibit 1.5 U.S. Employment by Major Industry (continued) 45 Today, more than 90 percent of the jobs in the U. S 46 Sustainability Sustainability refers to an organization’s ability to strategically address current business needs and successfully develop a long-term strategy that embraces opportunities and manages risk for all products, systems, supply chains, and processes to preserve resources for future generations. 47 Sustainability Environmental sustainability is an organization’s commitment to the long-term quality of our environment. Social sustainability is an organization’s commitment to maintain healthy communities and society that improve the quality of life. Economic sustainability is an organization’s commitment to address current business needs and economic vitality, and to have the agility and strategic management to prepare successfully for future business, markets, and operating environments. Social Sustainability – Krispy Kreme 48 Exhibit 1.6 Examples of Sustainability Practices 49 Current Challenges in OM 50 Zappos Case Study Draw and describe the customer benefit package that Zappos provides. Identify and describe one primary value creation, one support, and one general management process you might encounter at Zappos. Explain the role of service encounters and service management skills at Zappos. How does Zappos create superior customer experiences? Describe how any three of the OM activities in the box “What Do Operations Managers Do?” impact the management of both the goods that Zappos sells and the services that it provides. 50 |