ATENEO DE MANILA UNIVERSITY GRADUATE SCHOOL OF BUSINESS Clark Field Pampanga OPEMAN Submitted to Prof. Lauro Guevara Submitted by April Ocampo Instructions:1)Answer as comprehensively as you can. 2) A hard copy and a diskette copy of your report must be submitted. E-mail submissions shall not count. ———————————————————————————————————— CRITICAL THINKING 1. Key Aspects: a) What are the advantages of bringing customers into the transformation process or technical core?
I will first define what transformation process is. A transformation process is any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides outputs for customers or clients. Where the inputs are raw materials, it is relatively easy to identify the transformation involved, as when milk is transformed into cheese and butter. Where the inputs are information or people, the nature of the transformation may be less obvious.
For example, a hospital transforms ill patients (the input) into healthy patients (the output). Transformation processes include: ¦ changes in the physical characteristics of materials or customers ¦ changes in the location of materials, information or customers ¦ changes in the ownership of materials or information ¦ storage or accommodation of materials, information or customers ¦ changes in the purpose or form of information ¦ changes in the physiological or psychological state of customers.
Often all three types of input – materials, information and customers – are transformed by the same organization. For example, withdrawing money from a bank account involves information about the customer’s account, materials such as cheques and currency, and the customer. Treating a patient in hospital involves not only the ‘customer’s’ state of health, but also any materials used in treatment and information about the patient. One useful way of categorizing different types of transformation is into: manufacture –transport – the movement of materials or customers (for example a taxi service) ¦ supply – change in ownership of goods (for example in retailing) ¦ service – the treatment of customers or the storage of materials (for example hospital wards, warehouses). Thus, transformation process plays an integral part of operations. Customers are the lifeblood of every business. To support these vital resources, businesses spend a significant amount of time and effort maintaining customer satisfaction. In operation not only in marketing , there should be externally directed to meet customer requirements.
This focus is not only in marketing but is now being integrated to operations as well. A key factor is that efficiency should never be sacrificed in the pursuit of meeting the needs of the customers. But also the customer could be a powerful driver for reducing waste and improving efficiency of all processes. This can be further develop on quality, product design, process design, service operations, scheduling and inventory control. Then brining in customers in the technical core will give better product and quality service, more product design thus giving variety of choices to customers and giving more convenience to onsumers. Through which satisfying the needs of the customers is what every business’ main goal is. It will also be useful for customers feedback so we will know what customers want and we can serve their need with product and service, and promotion campaign. Obtaining information will help the companies learn more about the customer and their needs. The company can then use the customers feedback to modify its service and product and necessary changes and strategies needed. b) Speculate on the future role of the OM function within an organization and the future role of the operations manager.
Operations Management Operations Management is concerned with the productive management of resources used in creating and delivering a product or a service. The operations function of an organization is a transformation process that converts inputs into outputs. The inputs usually consist of raw materials, labor, energy, etc. , and the outputs are the products and services that are sold to customers. As a result of this transformation, value is created. The operations function comprises many tasks including selecting processes, designing jobs, locating facilities, arranging layouts, managing inventory, and scheduling production.
It is about the transformation of production and operational inputs into “outputs” that, when distributed, meet the needs of customers. It is the business function responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services. Operations management is an area of business concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient in terms of using as little resource as needed, and effective in terms of meeting customer requirements.
It is concerned with managing the process that converts inputs (in the forms of materials, labour and energy) into outputs (in the form of goods and services). Operations traditionally refers to the production of goods and services separately, although the distinction between these two main types of operations is increasingly difficult to make as manufacturers tend to merge product and service offerings. More generally, Operations Management aims to increase the content of value-added activities in any given process.
Fundamentally, these value-adding creative activities should be aligned with market opportunity for optimal enterprise performance. Operations management is a value-adding area of an organization concerned with innovation, production and distribution of goods and services to customers while ensuring that the use of organizational resources remains efficient and effective. It is therefore a discipline that is critical to the sustainability of all organizations, industrial, service and public sector alike.
Operations is only one functional area of an organization, along with Marketing, Finance, Engineering. To be successful, operations managers must interface with their peers in these other functional areas. Therefore, in addition to the knowledge of mathematical tools, operations managers must also understand human relations, business strategy concepts, accounting principles, managerial finance, marketing concepts, and the use of information technology. OM typically view operating systems as processes categorized as job shop, batch flow, or assembly line.
The performance of these processes can be analyzed by comparing factors such as cost, capacity, lead time, quality, flexibility, and productivity. Since the operations function does not have any control over the pricing of products and services, its contribution to the overall profitability of an organization comes from an emphasis on minimizing costs. In addition, the control of quality, the ability to handle a wide variety of product options, and filling orders on-time are important objectives of the operations function.
Today’s OM Environment : ¦ Customers demand better quality, faster deliveries, and lower costs ¦ Increased cross-functional decision making ¦ Recognized need to better manage information using ERP and CRM systems OM’s function: ¦ OM is function that manages the resources that add value ¦ Its role is to transform inputs into products or services ¦ Decisions are many and vary from daily tactical to strategic ¦ Key differences between mfg. nd service companies are tangibility of product and degree of customer contact ¦ OM must understand and implement major process changes like JIT, TQM, supply chain management, and environmental changes ¦ OM works closely with all other business functions. Role of the Operations Manager: The reporting, planning, and control functions can help the operations manager to do the following: ¦ Improve the efficiency of the operation Improve control of service levels and quality ¦ Set service level agreements for end-user applications and for services provided ¦ Improve relationships with end-user departments ¦ Increase the return on your IT investment ¦ Develop staff potential. ¦ To leverage the time of the Managing Director so that he is released for his prime activity. the development and growth of the business and to stand in for him in his absence. ¦ To set in place processes and systems for quality control and improved efficiency in all the production activity/delivery. Ultimately ensure in all our production activities that we deliver on time, efficiently and profitably and that the client experience of this is second to none. ¦ To have a complete picture and understanding of all the operational/production and support activities of the business. ¦ Effective overall co-ordination and direction of the Production & Support teams. ¦ To provide day-to-day strong management input and motivation to those individuals whom this role manages. ¦ To foster excellent communication between the technical, administrative and client-facing teams. To review regularly, in conjunction with the Managing Director and the management team as a whole, the structure of the business and management processes and make recommendations for general improvements and improved leverage. ¦ To keep abreast of the application of IT for the improved leverage of staff on the production and client services sides of the business (through such systems to release staff time to focus on their individual primary job focus) and the application of IT within the corporate communications and investor relations sectors as a whole.
Operations Management today is a critical functional area within every organization. No longer is Operations Management considered to be subservient to the marketing and finance area, instead it is now treated as an equal. Firms that fail to recognize the significant contribution of operations management functions will lose profits and market share to those firms that do. The once reactive role of operations management which concentrated solely on minimizing costs, has been replaced on more proactive position on maximizing the value added of the goods and services that the organization provides.
Some of the major issues facing operations managers today in this constantly changing business environment include: ¦ Reducing the development and manufacturing time for new goods and services ¦ Achieving and sustaining high quality while controlling costs ¦ Integrating new technologies and control system into existing processes ¦ Obtaining training and keeping qualified workers and managers ¦ Working effectively with other functions of business (marketing, engineering, finance, human resources) to accomplish the goals of the firm. Integrating production & services activities at multiple sites in decentralized organization ¦ Working effectively with suppliers and being user friendly for customers ¦ Working effectively to new partners formed by strategic alliances All these issues are interrelated the key success is for Operations Management to do all this at a level that is competitive in both global and domestic markets. Today’s Factors Affecting OM ¦ Global Competition ¦ Quality, Customer Service, and Cost Challenges ¦ Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector ¦ Scarcity of Operations Resources ¦ Social-Responsibility Issues Decision Making in OM 1. Strategic Decisions These decisions are of strategic importance and have long-term significance for the organization. Examples include deciding: a. the design for a new product’s production process b. where to locate a new factory c. whether to launch a new-product development plan 2. Operating Decisions These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits.
Examples include deciding: a. how much finished-goods inventory to carry b. the amount of overtime to use next week c. the details for purchasing raw material next month 3. Control Decisions These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. Examples include deciding: a. labor cost standards for a new product b. frequency of preventive maintenance c. ew quality control acceptance criteria c) Why are customers more likely to buy products with services even if they are more expensive than just the physical product themselves? Customers are concerned with the added service a company can provide. It takes into consideration all the benefits it can derived from a product compared it to the costs of the product. The extra service benefits it can provide that meet the customers needs exceeds the costs. Excellent service is one of the most important part in doing business.
High quality customer service helps to create customer loyalty. Customers today are not only interested in the product they are being offered but all the additional elements of service that they receive from the greeting they receive when they enter a retail outlet, to the refund and help that they receive when they have a complaint about a faulty product that they have paid for. An example would be, when a customer visits a local retailer to buy furniture. They are able to benefit in some cases from the additional service of having the furniture installed for them.
At the same time hopefully they will get a good ‘service’ from the retailer, who will be happy to help them with advice about the properties of different types of furniture, repayment terms, delivery etc. If an oil company assumed that the function of its retail network was simply to sell petrol and lubricants it would quickly lose business to competitors. Its real function is to supply a ‘customer service’ in its case the service of enjoyable, trouble-free motoring. 2. On Operations Strategy: a) What is meant by competitiveness?
Identify the different types of competitive priorities. How has their relationship to each other changed over the years? Competitiveness- degree to which a nation can produce goods and services that meet the test of international markets. Competitiveness can be defined: For the company, competitiveness is the ability to provide products and services as or more effectively and efficiently than the relevant competitors. In the traded sector, this means sustained success in international markets without protection or subsidies.
Although transportation costs might allow firms from a nation to compete successfully in their home market or in adjacent markets, competitiveness usually refers to advantage obtained through superior productivity. Measures of competitiveness in the traded sector include firm profitability, the firm’s export quotient (exports or foreign sales divided by output), and regional or global market share. In the traded sector, performance in the international marketplace provides a direct measure of the firm’s competitiveness.
In the non-traded sector, competitiveness is the ability to match or beat the world’s best firms in cost and quality of goods or services. Measuring competitiveness in the non-traded sector is often difficult, since there is no direct market performance test. Measures of competitiveness in this part of the economy include firm profitability and measures of cost and quality. In industries characterized by foreign direct investment, the firm’s percentage of foreign sales (foreign sales divided by total sales) and its share of regional or global markets provide measures of firm competitiveness.
At the industry level, competitiveness is the ability of the nation’s firms to achieve sustained success against (or compared to) foreign competitors, again without protection or subsidies. Measures of competitiveness at the industry level include overall profitability of the nation’s firms in the industry, the nation’s trade balance in the industry, the balance of outbound and inbound foreign direct investment, and direct measures of cost and quality at the industry level. Competitiveness at the industry level is often a better indicator of the economic health of the nation than competitiveness at the firm level.
The success of a single firm from the nation might be due to company-specific factors that are difficult or impossible to reproduce. The success of several firms from the nation in an industry, on the other hand, is often evidence of nation-specific factors that might be extended and improved. Assessing the competitiveness of an industry in which there is only one important firm requires an assessment of whether its success is due to monopoly rents, government support, or true efficiency. It is also important to note that the competitiveness of a single firm does not necessarily imply the competitiveness of an industry.
Why is Competitiveness Important? A nation’s standard of living is increasingly dependent on the competitiveness of its firms. Competitiveness is vital if the nation’s firms are to take advantage of the opportunities presented by the international economy. World trade and foreign investment have grown faster in the last several decades than world output. Competitiveness in industries subject to international trade and foreign direct investment can therefore provide substantial leverage for economic growth.
This is especially true for small nations, where competitiveness can allow firms to overcome the limitations of their small home markets in order to achieve their maximum potential. Competitiveness is also vital if a nation’s firms are to guard against the threats posed by the international economy. International competition has become fiercer than ever before. Lower costs for transportation and communication, reduced trade barriers, and the spread of technology have combined to sharpen international competition. This competition has put unprecedented pressure on all a nation’s economic actors, including management, labor, and government.
In an environment in which the nation’s firms must continually improve in order to meet the threat from an ever wider array of competitors, the failure of management, labor, or government to meet the challenge can spell disaster for the nation’s firms. Competitive priorities: these are the key in developing an effective operations strategy through creating value for customers. This value added through competitive priorities. Cost Low-cost operations Quality Top quality Consistent quality Time Delivery speed On-time delivery Development speed FlexibilityCustomization
Variety Volume flexibility The Competitive Capabilities are the cost, quality, time and flexibility dimensions of competitive priorities that a process or value chain actually possesses and is able to deliver. 1. COST Low Cost means delivering a service or product at the lowest possible cost to the satisfaction of the customer. Lowering prices can increase the demand for services or products but it also reduces profit. Customers use cost as a primary determinant for purchasing product. Products that are based on cost are mostly commodity- like. Ex.
Of commodities include flour, petroleum, and sugar. Consumers cannot distinguish easily products made from one to another. Usually the low cost provider establish the selling price in the market. 2. QUALITY is the dimension of service or product that is defined by external and internal customers Top Quality: Delivering an outstanding service or product. Considerable interaction with the customers may be required to determine what that means. Consistent Quality: Producing services or products that meet design specifications on a consistent basis. Categories based on Quality: . Product quality – focuses on the requirements of a customer. Companies who offers high quality products usually can command higher prices in the market. Product design varies depending on the market segment it conquers. Overly designed quality products usually is connoted as being expensive and the under designed products will lose its customers to a products that costs a little more but offers a greater value added benefit. 2. Process quality- customer looks for a defect free products and this must be produce in a quality process that is very critical in a company. 3.
TIME Delivery Speed is quickly filling a customer’s order. On-Time Delivery means meeting the delivery time promises. Development Speed is quickly introducing a new service or product. Time-Based Competition is a strategy that focuses on development speed and delivery speed. Time is as important consideration. Some firm can charge a premium price for its products by providing consistent & fast delivery for the convenience of the customers required time. 4. FLEXIBILITY Customization means satisfying the unique needs of each customer by changing the service or product designs.
Variety involves handling a wide assortment of services or products efficiently. Volume Flexibility requires accelerating or decelerating the rate of production quickly to handle large fluctuations in demand. 5. Service value added service it can provide that meets a primary need of the customer. This can be a good competitive edge to the firms. Today’ s times the market power is in the services because of the value it provides b) Describe the difference of order-qualifiers and order winners. For each of the following, what, in your opinion, are the order-qualifiers and order-winners?
Order-qualifiers and order winners are criteria used by customers in service or product selection. Order Winners are criteria for differentiating services or products of one firm from those of another. These are Price, quality, time, flexibility, after sales support, reputation, etc. A useful way to examine a firm’s ability to be successful in the market is to identify the order winners. An order winner is a criterion that customers use to differentiate the services or products of one firm from those of another. Order Qualifiers are demonstrated levels of performance required to do business in a particular market segment.
These are the basic criteria that permit the firms products to be considered as candidates for purchase by customers. These are Performance dimensions on which customers expect a minimum level of performance. Superior performance on an order qualifier will not, by itself, give a company a competitive advantage. For example, a brand name car can be an “order qualifier”. Repair services can be “order winners” because of the Warranty, Roadside Assistance, Leases, etc which gives a competitive edge. 3. In what ways can technology affect operations? Use examples in both manufacturing and service operations. [pic] Automation and its impact
Automation is the use of control systems (such as numerical control, programmable logic control, and other industrial control systems), in concert with other applications of information technology (such as computer-aided technologies [CAD, CAM, CAx]), to control industrial machinery and processes, reducing the need for human intervention.  In the scope of industrialization, automation is a step beyond mechanization. Whereas mechanization provided human operators with machinery to assist them with the muscular requirements of work, automation greatly reduces the need for human sensory and mental requirements as well.
Processes and systems can also be automated. Automation plays an increasingly important role in the global economy and in daily experience. Engineers strive to combine automated devices with mathematical and organizational tools to create complex systems for a rapidly expanding range of applications and human activities. Many roles for humans in industrial processes presently lie beyond the scope of automation. Human-level pattern recognition, language recognition, and language production ability are well beyond the capabilities of modern mechanical and computer systems.
Tasks requiring subjective assessment or synthesis of complex sensory data, such as scents and sounds, as well as high-level tasks such as strategic planning, currently require human expertise. In many cases, the use of humans is more cost-effective than mechanical approaches even where automation of industrial tasks is possible. Specialised hardened computers, referred to as programmable logic controllers (PLCs), are frequently used to synchronize the flow of inputs from (physical) sensors and events with the flow of outputs to actuators and events. This leads to precisely controlled actions that permit tight control of almost any industrial process. Human-machine interfaces (HMI) or computer human interfaces (CHI), formerly known as man-machine interfaces, are usually employed to communicate with PLCs and other computers, such as entering and monitoring temperatures or pressures for further automated control or emergency response. Service personnel who monitor and control these interfaces are often referred to as stationary engineers. Impact of automation in manufacturing Automation has had a notable impact in a wide range of highly visible industries beyond manufacturing.
Once-ubiquitous telephone operators have been replaced largely by automated telephone switchboards and answering machines. Medical processes such as primary screening in electrocardiography or radiography and laboratory analysis of human genes, sera, cells, and tissues are carried out at much greater speed and accuracy by automated systems. Automated teller machines have reduced the need for bank visits to obtain cash and carry out transactions. In general, automation has been responsible for the shift in the world economy from agrarian to industrial in the 19th century and from industrial to services in the 20th century.
The widespread impact of industrial automation raises social issues, among them its impact on employment. Historical concerns about the effects of automation date back to the beginning of the industrial revolution, when a social movement of English textile machine operators in the early 1800s known as the Luddites protested against Jacquard’s automated weaving looms— often by destroying such textile machines— that they felt threatened their jobs. One author made the following case. When automation was first introduced, it caused widespread fear.
It was thought that the displacement of human operators by computerized systems would lead to severe unemployment. Critics of automation contend that increased industrial automation causes increased unemployment; this was a pressing concern during the 1980s. One argument claims that this has happened invisibly in recent years, as the fact that many manufacturing jobs left the United States during the early 1990s was offset by a one-time massive increase in IT jobs at the same time. Some authors argue that the opposite has often been true, and that automation has led to higher employment.
Under this point of view, the freeing up of the labour force has allowed more people to enter higher skilled managerial as well as specialised consultant/contractor jobs (like cryptographers), which are typically higher paying. One odd side effect of this shift is that “unskilled labour” is in higher demand in many first-world nations, because fewer people are available to fill such jobs. At first glance, automation might appear to devalue labor through its replacement with less-expensive machines; however, the overall effect of this on the workforce as a whole remains unclear.
Today automation of the workforce is quite advanced, and continues to advance increasingly more rapidly throughout the world and is encroaching on ever more skilled jobs, yet during the same period the general well-being and quality of life of most people in the world (where political factors have not muddied the picture) have improved dramatically. What role automation has played in these changes has not been well studied. Information Technology There are enormous role that information technology (IT) is having on operations.
Examples include smart catalogues and databases for simpler customer/vendor coordination, transponder-equipped vehicles that can be re-routed in real time, voice-recognition systems for greater warehouse inventory accuracy, collaborative editing of graphics documents by geographically-remote individuals, and even electronic storage/retrieval of documents to reduce volume (US Navy ships once carried 25 tons of manuals). I then review Japanese approaches to management and discuss how their Western counterparts have adopted these methods.
Specifically, the role that IT is having in allowing Western manufacturers to implement JIT, time-based-competition, set-up time reduction, quality control, and vendor relations 4. Within the food service industry (restaurants that serve meals to customers, but not just fast food), find examples of firms that have sustained competitive advantage by competing on the basis of (1) cost leadership, (2) response, and (3) differentiation. Cite one example in each category and support your choice by citing reasons for selection. 1. Cost Leadership This strategy emphasizes efficiency.
By producing high volumes of standardized products, the firm hopes to take advantage of economies of scale and experience curve effects. The product is often a basic no-frills product that is produced at a relatively low cost and made available to a very large customer base. Maintaining this strategy requires a continuous search for cost reductions in all aspects of the business. The associated distribution strategy is to obtain the most extensive distribution possible. Promotional strategy often involves trying to make a virtue out of low cost product features.
To be successful, this strategy usually requires a considerable market share advantage or preferential access to raw materials, components, labour, or some other important input. Without one or more of these advantages, the strategy can easily be mimicked by competitors. Successful implementation also benefits from: ¦ process engineering skills ¦ products designed for ease of manufacture ¦ sustained access to inexpensive capital ¦ close supervision of labour ¦ tight cost control ¦ incentives based on quantitative targets. ¦ always ensure that the costs are kept at the minimum possible level.
Example in a food service industry is Mang Inasal restaurant among Filipino grill restaurant. 2. Differentiation is aimed at the broad market that involves the creation of a product or services that is perceived throughout its industry as unique. The company or business unit may then charge a premium for its product. This specialty can be associated with design, brand image, technology, features, dealers, network, or customers service. Differentiation is a viable strategy for earning above average returns in a specific business because the resulting brand loyalty lowers customers’ sensitivity to price.
Increased costs can usually be passed on to the buyers. Buyers loyalty can also serve as an entry barrier-new firms must develop their own distinctive competence to differentiate their products in some way in order to compete successfully. Research does suggest that a differentiation strategy is more likely to generate higher profits than is a low cost strategy because differentiation creates a better entry barrier. A low-cost strategy is more likely, however, to generate increases in market share. Examples of the successful use of a differentiation strategy are Cyma restaurant that serves Greek food.
They are the only restaurant in the Philippines which serves authentic Greek cuisine. 3. Response In this strategy the firm concentrates on a select few target market. It is also called a segmentation strategy or niche strategy. It is hoped that by focusing your marketing efforts on one or two narrow market segments and tailoring your marketing mix to these specialized markets, you can better meet the needs of that target market. The firm typically looks to gain a competitive advantage through product innovation and/or brand marketing rather than efficiency.
It is most suitable for relatively small firms but can be used by any company. A focus strategy should target market segments that are less vulnerable to substitutes or where a competition is weakest to earn above-average return on investment. They can give reliability, flexibility or timeliness. It requires institutionalization within the firm of the ability to respond. Example of firm using are the Healthy Plate, frozen yoghurt which caters to health conscious people. 5. Explain how having more work-in-process inventory can improve the efficiency of a process.
How can this be bad? Manufacturing systems are complex. Many types of machines, workers, and parts are often involved. The variety of random events makes the scheduling of manufacturing systems difficult. For example, in a semiconductor fabrication factory, dozens of part types are produced simultaneously by hundreds of workers on dozens of machines. Each part type follows a predefined process that consists of hundreds of operations. Machines are subject to random failures, and need setup changes for different part types.
Maintenance and rework must be considered. Workers are absent at random. These factors can result in long throughput time (also called cycle time or lead time), large work-in-process (WIP) inventory, and significant tardiness. The WIP inventory in a manufacturing system affects significantly the throughput time and the tardiness. To improve the efficiency of production, we would like to reduce inventory, throughput time, and tardiness simultaneously. 6. On Product Design: a) What factors must be traded-off by product development before introducing new products?
The trade offs by product development would be the design, quality and performance of the product and the product cost that managers must consider in making a new product development process. Competitors of the firm would influence them to develop similar products. The cost of these tradeoffs is important. Delaying to introduce a new product will create a loss of profit. b) What impact does the concept and design stage have on the product’s overall cost? In business, new product development is the term used to describe the complete process of bringing a new product or service to market.
In concept Development stage they develop the marketing and engineering details and test the concept by asking a sample of prospective customers what they think of the idea. Concept Development and design: ¦ Develop the marketing and engineering details ¦ Who is the target market and who is the decision maker in the purchasing process? ¦ What product features must the product incorporate? ¦ What benefits will the product provide? ¦ How will consumers react to the product? ¦ How will the product be produced most cost effectively? Prove feasibility through virtual computer aided rendering, and rapid prototyping ¦ What will it cost to produce it? ¦ Testing the Concept by asking a sample of prospective customers what they think of the idea. In these stage the manufacturing cost is being estimated. Product design activities studies tells that it accounts to 5% of a product cost. The cost of the product is determined by materials used, labor and production resources needed, and design effort expended. Design determines also packaging as well as shipping requirements which have an impact on transportation and insurance costs.
Design stage also has a cost which a company considers even if it is already with the customer depending on the product like related to warranties, disassembly, disposal and recycling. c) Why is it important for managers to understand the relationship between the stages of a product’s life cycle and the types of processes that are available to manufacture that product? Products and processes are closely related and are both go through life cycle stages. The stages determines its process. Product life cycle management is the succession of strategies used by management as a product goes through its product life cycle.
The conditions in which a product is sold changes over time and must be managed as it moves through its succession of stages. This will be very useful for managers in decision making. The product life cycle goes through many phases, involves many professional disciplines, and requires many skills, tools and processes. Product life cycle has to do with the life of a product in the market with respect to business/commercial costs and sales measures; whereas product life cycle management has more to do with managing descriptions and properties of a product through its development and useful life, mainly from business point of view. To say that a product has a life cycle is to assert four things: 1) that products have a limited life, 2) product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, 3) profits rise and fall at different stages of product life cycle, and 4) products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage. It is claimed that every product has a life cycle. It is launched, it grows, and at some point, may die.
A fair comment is that – at least in the short term – not all products or services die. Jeans may die, but clothes probably will not. Legal services or medical services may die, but depending on the social and political climate, probably will not. Even though its validity is questionable, it can offer a useful ‘model’ for managers to keep at the back of their mind. Indeed, if their products are in the introductory or growth phases, or in that of decline, it perhaps should be at the front of their mind; for the predominant features of these phases may be those revolving around such life and death.
Between these two extremes, it is salutary for them to have that vision of mortality in front of them. However, the most important aspect of product life-cycles is that, even under normal conditions, to all practical intents and purposes they often do not exist (hence, there needs to be more emphasis on model/reality mappings). In most markets the majority of the major brands have held their position for at least two decades. The dominant product life-cycle, that of the brand leaders which almost monopolize many markets, is therefore one of continuity.
Thus, the life cycle may be useful as a description, but not as a predictor; and usually should be firmly under the control of the marketer. The important point is that in many markets the product or brand life cycle is significantly longer than the planning cycle of the organizations involved. Thus, it offers little practical value for most marketers. Even if the Product Life cycle exists for them, their plans will be based just upon that piece of the curve where they currently reside (most probably in the ‘mature’ stage); and their view of that part of it will lmost certainly be ‘linear’ (and limited), and will not encompass the whole range from growth to decline. Product Lifecycle Management (PLM) is more to do with managing descriptions and properties of a product through its development and useful life, mainly from a business/engineering point of view; whereas Product life cycle management (PLCM) is to do with the life of a product in the market with respect to business/commercial costs and sales measures.
In addition managers must know this for them to use it in descision making. 1. Market introduction stages ¦ costs are high ¦ slow sales volumes to start ¦ little or no competition – competitive manufacturers watch for acceptance/segment growth losses ¦ demand has to be created ¦ customers have to be prompted to try the product ¦ makes no money at this stage 2.
Growth stage ¦ costs reduced due to economies of scale ¦ sales volume increases significantly ¦ profitability begins to rise ¦ public awareness increases ¦ competition begins to increase with a few new players in establishing market ¦ increased competition leads to price decreases 3. Mature stage Costs are lowered as a result of production volumes increasing and experience curve effects ¦ sales volume peaks and market saturation is reached ¦ increase in competitors entering the market ¦ prices tend to drop due to the proliferation of competing products ¦ brand differentiation and feature diversification is emphasized to maintain or increase market share ¦ Industrial profits go down 4. Saturation and decline stage ¦ costs become counter-optimal ¦ sales volume decline or stabilize prices, profitability diminish ¦ profit becomes more a challenge of production/distribution efficiency than increased sales 7. On Product selection: a) List specific products that you especially like. What do you like most about them. 1. Nine west shoes- comfort 2. Zara clothing- style 3. Gucci bags- design 4. Cartier watch- brand name/ brand image 5. Tiffany’s jewelries- quality What I like most about them is their excellent quality, brand name, variety of style, design and comfort. Even if they are a bit expensive I feel it gives back my money worth b)Create a list of products that you dislike or unhappy with.
What don’t you like about them. Prada tote bags- very expensive and the bags are not even leather. People pay only for the image & name. Genevive Gozum apparel- I hate their style of clothes and poor & cheap quality of materials used on their products Janilyn shoes- poor quality of leather used, shoes gets worn out easily. c)Are there some common reasons for your lists? Can you suggest general design guidelines based on your answers. 1. Quality 2. Comfort 3. Brand image 4. Service 5. Design/ style 8. On Total Quality Management: a) What is the purpose of using a Pareto Chart for a given problem?
Pareto Chart is one of the tools for Six Sigma and allows many steps and that are included in order to achieve the highest level of business efficiency. The Pareto Chart are used to determine the “Vital Few” causes that tend to be the issue with the majority of complaints that pertain the product or service. The Pareto Charts are created equally to most other charts. In fact they can be easily created in Excel. More importantly is the valuable information that is provided by using the Pareto Chart for finding and comparing data to target the defect issues, and resolving them.
Therefore eliminating the non-add work. Pareto Chart is also used in order to track the similarities in this data, informing those reading the information of the differences in the data. The overall design of the Pareto Chart is designed for quick answers, collected information and helping in making knowledgeable decisions. Using the Pareto Chart will make it easier to see that 20% of the sources on the chart are what is causing 80% of the problems. Then you will know where you need to focus changes in processes, products or training in the production and manufacturing process.
The Pareto Chart was created and designed by Vilfredo Pareto during the turn of the century. Vilfredo Pareto is an Italian Economist. He studied in Wealth Distribution in many different countries. He came to find that about 20% of all people controlled the majority of 80% of the people who followed. This is basically the societies wealth process. The Pareto Chart follows along this same theory. They believe that there is very little difference when it comes to the cost of production a product. When you are looking at the Pareto Chart and how it works with Six Sigma, you will find that looking for some specific factors ill make you more aware of what is happening. Here is what you will want to keep in mind. 1. Look for a break point that is in the line of cumulative percentages. This break point will often times occur where the slop of the line will start to flatten out. Pay special attention to the factors that are in the steepest part of the curve, these will be the most important. 2. If the bars are of similar six, then you will find that about half of the categories are needed in order to complete 60%. This will then mean that you need to look at a different breakdown of categories to get an adequate breakdown of criteria. . Also, it is important to check for a clear change in the columns and line. If there is not a clear enough line, then look at what makes up the 60% The use of the Pareto Charts will often times lead to additional use of other charts. This will able to use all of these tools through the Six Sigma program to create a lower amount of waste in the manufacturing and production of products and services. b) Name several products that do not require high quality. Mass production is the creation of many products in a short period of time using time-saving techniques such as assembly lines and specialization.
It allows a manufacturer to produce more per worker-hour, and to lower the labor cost of the end product. This in turn allows the product to be sold for a lower cost. However, mass production is inflexible because it is difficult to alter a design or production process after a production line is implemented. Also, all products produced on one production line will be identical or very similar, and introducing variety to satisfy individual tastes is not easy. However, some variety can be achieved by applying different finishes and decorations at the end of the production line if necessary.
Examples of these products are fluids and particulates handheld in bulk ( such as food, fuel, chemicals and mined minerals) to discrete solid parts (such as fasteners) to assemblies of such parts (such as household appliances and automobiles) c) An agreement is made between a supplier and a customer such that the supplier must ensure that all parts are within tolerance before shipment to the customer. What is the effect on the cost of quality to the customer. Cost of quality means the cost of delivering complete customer satisfaction through accounting for quality and measurement of business processes.
The quality cost involves: 1) Opportunity quality costs; 2) Investment quality costs; 3) Non-quality costs. 1) The opportunity quality costs are related to the avoided capital cost, opportunity cost of additional volume if supported by sales capacity and operational profit due to the increased process efficiency. 2) The investment quality costs are the cost for prevention and appraisal. These costs involve the resources needed to implement and to maintain ISO 9001 system to assure integrity of product realization and service provision.
The prevention and appraisal costs involve all processes of quality management system. 3) The non-quality costs are the costs of internal and external non-conformities. The costs of internal non-conformities are the problems detect prior delivery from administration, information system, marketing, engineering, production, purchasing, shipment and customer services. The external non-conformity costs include problems that occur after delivery to customers: product recalls, customers returns, warranties, installation and billing errors, repairs and the time for the correction of this activities.
Cost of quality analysis is a generator of improvement actions focused to improve the business performance and to reduce waste of resources and departures of best talents. The results are: impressive saving for the bottom line, increased customer satisfaction, significantly improved revenues and better operating margins. d) “You don’t inspect quality into a product; you have to build it in. ” Discuss the implications of this statement. The statements implies that it is better to prevent problems to occur by building and putting in quality in every product and process .
Allowing error in the first stage will be more costly. Therefore it must be prevented rather than fixing the damaged that has been done. Quality Assurance can play a vital role in maintaining quality. Quality assurance is the process of verifying or determining whether products or services meet or exceed customer expectations. Quality assurance is a process-driven approach with specific steps to help define and attain goals. This process considers design, development, production, and service. Quality assurance demands a degree of detail in order to be fully implemented at every step.
Planning, for example, could include investigation into the quality of the raw materials used in manufacturing, the actual assembly, or the inspection processes used. The Checking step could include customer feedback, surveys, or other marketing vehicles to determine if customer needs are being exceeded and why they are or are not. Acting could mean a total revision in the manufacturing process in order to correct a technical or cosmetic flaw. Competition to provide specialized products and services results in breakthroughs as well as long-term growth and change.
Quality assurance verifies that any customer offering, regardless if it is new or evolved, is produced and offered with the best possible materials, in the most comprehensive way, with the highest standards. The goal to exceed customer expectations in a measurable and accountable process is provided by quality assurance. 9. Suppose that you were the manager of a restaurant and you were told honestly that a couple eating dinner had just seen a mouse. What would you say to them? How would you recover from this service crisis?
As a manager of the restaurant, first reaction would definitely to apologize to the customer and to assure them that it will not happen again in the most convincing and patient way. I will assure them that our restaurant is complying to the sanitary issues, conformity and environmental sanitation procedures. I will commit to a plan for further improvement like pest control and to notify the customer for a time plan for the schedule and will inform them for these results. To appease the irate customer, I can tell the customers that his meal would be for free for the trouble it caused. 0. Eliminating waste is one of the most important parts of lean production. Identify some of the sources of waste and discuss how they may be eliminated. “Lean Manufacturing is a manufacturing philosophy which shortens the time between the customer order and the product build/shipment by eliminating sources of waste. Sources of waste: 1. Waste of overproduction 2. Waste of waiting time 3. Transportation waste 4. Inventory waste 5. Processing waste 6. Waste of motion 7. Waste from product defects These can be eliminated through: 1. Kaizen- Kaizen means “improvement”.
Kaizen strategy calls for never-ending efforts for improvement involving everyone in the organization – managers and workers alike. The objective of the maintenance function is to maintain current technological, managerial, and operating standards. The improvement function is aimed at improving current standards. Under the maintenance function, the management must first establish policies, rules, directives and standard operating procedures (SOPs) and then work towards ensuring that everybody follows SOP. The latter is achieved through a combination of discipline and human resource development measures.
Under the improvement function, management works continuously towards revising the current standards, once they have been mastered, and establishing higher ones. Improvement can be broken down between innovation and Kaizen. Innovation involves a drastic improvement in the existing process and requires large investments. Kaizen signifies small improvements as a result of coordinated continuous efforts by all employees. 2. Value chain-mapping the process steps through the supply cahin by identifying the steps that add value & striving to eliminate those that add waste 3.
Pull- eliminate overproduction by only producing what customers want, when they want it. This producing only when customers pull 4. Flow- remove other causes of waste by ensuring the goods flow continuously through supply chain and would never stop. 11. On Supply Chain: a) As a supplier, which factors about a buyer (your potential customer) would you consider to be important in setting-up a long-term relationship? Factors to consider: ¦ Paying capability ¦ Synergy in terms of business strategy ¦ Business ethics Is committed to a mission/ key objectives- for the growth & plans of their company ¦ Has good business relationship/ communication ¦ Is an effective manager of costs ¦ Maximizes use and return of resources b) Describe how outsourcing works. Why would a firm want to outsource? Outsourcing is the transfer of management and execution of process of a business to an external service provider, including technology, people, and process. In engaging in outsourcing , clients are buying access to executed business processes and business outcomes from their providers.
It is also the delegation of one or more IT-intensive business processes to an external provider that owns, administrates and manages the selected processes that are based on defined and measurable performance metrics Outsourcing is a great way of maximizing revenue and minimizing expenses. It allows a service seeker to get an access to a special expert and his services at cost-effective prices from different parts of the world. It also facilitates a buyer to concentrate more on his core areas of business by outsourcing the non-core functions to freelancers from across the globe.
As a whole it saves money, time and infrastructure expenses. Reasons why a firm wants to outsource: 1. Low cost advantage – Outsourcing a project to different countries such as India can give an access to cost-effective services. The services rendered by some specialist provide high level of quality for a much lower cost! Services such as software development, web designing, web development, call center services, medical, billing, etc can help you save considerable amount of cots when outsourced!
Hiring high-quality service provider at a cost-effective price is the biggest benefit that any service seeker can get while outsourcing. 2. Enhance business & profits – Outsourcing can also enhance business, profits, productivity, quality, performance etc. The growth can be observed in almost every sector of business with outsourcing the important work assignments to service providers. A buyer can save on time, effort, infrastructure and manpower. Since, there would be no investment in infrastructure; outsourcing can reduce the burden of changing or maintaining infrastructure. . Hire specialized services – Another benefit of outsourcing is getting an access to experts providing skilled services. An important project requiring a specialized skill set can be outsourced to a competent expert with those skill sets. This way a buyer can get his project done from skilled expert and utilize his resources for other core tasks. 4. Fast delivery & Customer satisfaction – Outsourcing work assignments to skilled experts also help in providing quick deliveries to the customers. Faster deliveries save time and high-quality services you can impress the customers.
Outsourcing can help you benefit from increased customer satisfaction and your customers will remain loyal to your organization. 5. Boost efficiency – Outsourcing also increases efficiency. As non-core functions can be outsourced and will be performed efficiently by an outsourcing partner, while in house employees can concentrate only on the core functions. In that way a buyer can achieve overall efficiency and increase in growth. 6. Establish credibility – Outsourcing can help an organization in establishing credibility in the market.
With outsourcing a buyer can have an access to specialized services and provide his customer with world class services. The quality backed services help an organization get competitive edge over his competitors. c) What are the main differences between having a vendor’s employees working in your manufacturing operation and you hiring your own employees to do the same work? Every business has to determine whether they should perform a service themselves in-house or outsource that particular service to an outside vendor. At first glance, it seems counterintuitive for a company to outsource highly-visible or important services.
Once you look at all the things a company must do to handle a service in-house (and keep it running continuously), it becomes more evident why many companies choose outsourcing versus operating a service in-house. If a service is provided in-house, a company must: ¦ Locate a qualified employee ¦ Train the employee ¦ Pay employee wages and benefits ¦ Provide the employee a physical workspace ¦ Provide the required technology items (computer, phone, Internet access, copier, fax machine, etc. ¦ Pay telecommunications costs (phone line, inbound toll-free calls) Some services, for example Inbound Response Management, require continuous coverage and dedicated resource. This is required because responses are generated on a random basis by outside forces, rather than on an internal, controlled schedule. Services of this type would also require coverage during absences of the primary resource, such as: ¦ Scheduled vacations ¦ Unscheduled sick days ¦ Unscheduled Family leave ¦ Maternity leave
With outsourcing, the company must only: ¦ Locate a reliable and high-quality vendor ¦ Pay the vendor for the services provided For in house employees communication would be more direct and work motivation is high. Labor issues and trust would be high than vendor’s employees. d)Identify all of the steps in the supply chain for a hamburger that you buy either at McDonald’s or Jollibee. 12. On Location Strategy: a) What problems would a company experience in relocating its executives from a heavily populated industrialized area to a small rural town?
Location of a business is a defining feature which managers have to make. It can have an impact on many different departments of a business and, therefore, on the profitability and chances of success for the whole firm. It is also important to remember that location decisions are: ¦ Strategic, moving location is a long term decision and must be planned. ¦ Not easily reversed as the costs of relocation are high ¦ Taken at the highest management level they are not delegated to subordinates, this can cause problems with staff.
When a company relocate its executives from a heavily populated industrialized area to a small rural town, some executives might consider leaving the company if the company won’t offer attractive benefits that would convince the executives to stay. Executives would be adjusting to the new environment and they would consider relocating their families to the rural town and this adjustment might lower their productivity that would affect the company. b) What legal and ethical responsibilities does a firm have to its employees when a decision to cease operations is made?
ART. 283 of the labor code-Closure of establishment and reduction of personnel. – The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof.
In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher.
In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. The ethical way to do is to communicate to the employees why the company has to close.
Voice out the innermost reason and be honest why there is a need to close. It is proper for them to know why and it is the best and ethical way to do. PROBLEM EXERCISES 1. Given the contribution made on each of the three products in the following table and their position in the life cycle, identify a reasonable operations strategy for each. |Product |Product Contribution (% of selling |Company Contribution |Position in life cycle | | price) |(%: total annual contribution divided by annual | | | | |sales) | | |Notebook computer |35 |35 |Growth | |Palm-held computer |40 |45 |Introduction | |Hand calculator |50 |5 |Decline | NOTEBOOK COMPUTER-Growth Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilize. The Growth Stage is characterized by rapid growth in sales and profits.
Profits arise due to an increase in output (economies of scale) and possibly better prices. At this stage, it is cheaper for businesses to invest in increasing their market share as well as enjoying the overall growth of the market. Accordingly, significant promotional resources are traditionally invested in products that are firmly in the Growth Stage. PALM HELD COMPUTER-Introduction The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution. Introduction Stage At the Introduction (or development) Stage market size and growth is slight. t is possible that substantial research and development costs have been incurred in getting the product to this stage. In addition, marketing costs may be high in order to test the market, undergo launch promotion and set up distribution channels. It is highly unlikely that companies will make profits on products at the Introduction Stage. Products at this stage have to be carefully monitored to ensure that they start to grow. Otherwise, the best option may be to withdraw or end the product. HAND CALCULATOR-Decline. At this point there is a downturn in the market. For example more innovative products are introduced or consumer tastes have changed. There is intense price-cutting and many more products are withdrawn from the market.
Profits can be improved by reducing marketing spend and cost cutting. In the Decline Stage, the market is shrinking, reducing the overall amount of profit that can be shared amongst the rema