POCM Study Material On Readings

Competitive Priorities
the critical dimensions that a process or supply chain must possess to satisfy its internal or external customers, both now and in the future

Critical that a process or supply chain must possess to satisfy its internal or external customers, both now and in the future
Planned for processes and the supply chain created for them
Must be present to maintain or build market share
Sometimes are clustered together
Delivery Speed + Development speed = Time-based competition strategy

What are the four critical dimensions of competitive priorities? diag.
What are the four critical dimensions of competitive priorities? diag.
Example of how strategy, design, and operations are defined by competitive priorities. Diag
Example of how strategy, design, and operations are defined by competitive priorities. Diag
Flexibility is one dimension of a competitive priority, what is it, and what other three dimensions are missing?
Flexibility is one dimension of a competitive priority, what is it, and what other three dimensions are missing?
Flexibility: An operation’s ability to respond efficiently to changes in products, processes, and competitive environments.
An ability to adapt to new situations and to see their possibilities; willingness to find innovative relationships.
A firms ability to offer a wide variety of products. The missing three are quality, time, and cost.
Competitive Capabilities
The cost, quality, time and flexibility dimensions that a process or supple chain actually posseses and is able to deliver.

When capability falls short of priority attached to it, management must find ways to close the gap or revise the priority (remember the priority is what actually satisfies the customer now and in the future)

Once an organization has defined its competitive priorities, its processes and products must be desinged to follow; using the time, cost, and quality dimensions explain how each the processes of an organization would designed under each of them. Which dimension is missing?
Time: you have different possibilities of this dimension in terms of a competitive priority, you could strive for quick delivery time where, in this case, you would focus on logistics and efficiency. You could have on time delivery time, where you would focus on planning processes and accurracy, you could have quick development speed where you would tailor your development process towards efficiency like cross-functional teams. Quality also has two options, top quality or consistent quality.
If an airline has two market segments, first class and coach, what are the core services, processes, and competitive priorities?
Core Services
Ticketing, Seat Selection, baggage handling, transportation
Competitive Priorities
Top Quality
On-time Delivery
Low-cost operations
Consistent quality On-time delivery
Four Core Processes
Customer Relationship
New service/product development
Order Fulfillment
Supplier Relationship
Capital Intensity
The mix of equipment and labor that will be used by the organization.

The greater the cost of equipment, the greater is the capital intensity

System, process, or piece of equipment that is self-acting and self-regulating
If investment costs are high, automation works best when volumes are high (because more customization usually mean reduced volume)

Fixed Automation
Produces one type of part or product in fixed sequence or simple operations
Appropriate for line and continuous-flow processes
Favored when demand is high, product designs are stable, and products life cycles are long
Large initial investment costs and relatively inflexible

Flexible Automation
Can be changed easily to handle various products

A volume production process involving machines controlled by computers
Fixed Automation
a manufacturing process that produces one type of part or product in a fixed sequence of simple operations

Produces one type of part or product in a fixed sequence—requires large investments and is relatively inflexible

uses high cost specialized equiptment for a fixed sequence of operations that it can perform without the use of workers

Flexible Automation
a manufacturing process that can be changed easily to handle various products

Can be changed to handle various products (e.g., industrial robots)

An extension of programmable automation in which the system is capable of changing over from one job to the next with no lost time between jobs

Economies of Scope

Reflect the ability to produce multiple products more cheaply in combination than separately
Can make conflicting competitive priorities more compatible

High customer contact at a front-office service process means….
Process Structure: Customer is present, actively involved, receives personal attention. High divergence and flexible process flows
Customer Involvement: Service created for each customer is unique
Resource Flexibility: more flexibility from the process’ resources – workforce, facilities, equipment
Capital Intensity: When volume is high, automation and capital intensity is as well
High volumes per part type at a manufacturing process
High volumes per part type at a manufacturing process
Process Structure: High volumes and standard product make a line flow possible
Customer Involvement: Not a factor. Less discretion allowed to avoid unpredictable demands required by customized orders
Resource Flexibility: Not needed to utilize resources effectively, and specialization can lead to more efficient processes
Capital Intensity: High volumes justify large fixed costs

Low Volume, Make-to-order process High volume, make-to-stock process
Job Process Small/Large Batch Process Line Process Continuous-flow

Product-Process Matrix diag.
Product-Process Matrix diag.
Plants within Plants
different operations within a facility with individualized competitive priorities, processes, and workforces under the same roof

have separate suborganizations, equipment and process policies, workforce management policies, production control methods, and so forth, for different products- finds the best operating level for each department

Fewer layers of management
Greater ability to rely on team problem solving
Shorter lines of communication between departments

Legal, Ethical, and Environmental Issues
• Organizations have numerous government agencies that regulate them
o FDA, OHSA, EPA, etc.
• Banned materials and safety features must be incorporated into design plans
• Product liability
o Manufacturer is liable for any injuries or damages caused by a faulty product because of poor workmanship or design
• Uniform Commercial Code
o Products carry an implication of merchantability and fitness; that is, a product must be usable for its intended purposes
• Organizations generally want designers to adhere to guidelines such as
o Produce designs that are consistent with the goals of the organizations
o Give customers the value they expect
o Make health and safety a primary concern
o Consider potential harm to the environment
Uniform Commercial Code
A general and inclusive group of laws adopted, at least partially, by all the states to further uniformity and fair dealing in business and commercial transactions.
warranty by a merchant that goods are reasonably fit for the ordinary purpose for which they are manufactured or sold, pass without objection in the trade under the contract description, and are of fair, average quality
Reasonably “fit” for the ordinary purposes for which they are manufactured or sold – fair and average quality, performance in average conditions
Organizations generally want designers to adhere to guidelines such as
o Produce designs that are consistent with the goals of the organizations
o Give customers the value they expect
o Make health and safety a primary concern
o Consider potential harm to the environment
Life Cycle
Intro, Growth, Maturity, Decline

Many new products and services go through life cycles – incubation, growth, maturity, and decline

In concurrent engineering, a view toward optimizing all elements involved in the life cycle of the product. Consists of four stages

When an item is introduced, it may be treated as a curiosity – Demand is generally low because potential buyers are not yet familiar with the item
(Incubation) Intro stage of life cycle
With design improvements, a more reliable and less costly output is created – Demand then grows for these reasons and because of increasing awareness of the product or service
(Growth) stage of life cycle
Few changes in design and demand levels off
Maturity Stage of Life Cycle

Forward-thinking firms begin searching for a replacement product during the maturity stage

The market then becomes saturated – leads to decline in demand for the product or service
Decline Stage of Engineering Life Cycle
Benefits of Standardization
Enables mass production, Enables, customization, Improves supplier coordination, improves quality, enables simplification, enables delayed differentiation, lowers inventories.

same quality, consistent product, utilization of cost control, better inventory control

Mass Customization
A production process in which every process is done repeatedly (as in a process shop) but output is customized (as in a job shop) by altering which processes are included in a particular product or service.
Delayed Differentiation
The process of producing, but not quite completing, a product or service until customer preferences are known

One tactic of Mass Customization

Production of standard components and subassemblies, which are held until late in the process to add differentiating features

Modular Design
A form of standardization in which component parts are grouped into modules that are easily replaced or interchanged

The creation of an item that can be combined or inter-changed to form different products

-Combines standardized building blocks, or modules, to create unique finished product

Ability of a test to yield very similar scores for the same individual over repeated testings

• Measure of the ability of a product, a part, a service, or an entire system to perform its intended function under a prescribed set of conditions (Normal operating conditions)
• Failure
o When a product does not perform an intended
• Improvement in component reliability increases overall system reliability
• Simplifying the system may also increase the reliability of the system
o This reduces the number of components that could cause the system to fail

Robust Design
Design that results in products or services that can function over a broad range of conditions

• The more robust a design, the less likely it is to fail due to a change in the environment in which it is used or in which it is performed
• Taguchi’s Approach
o Often easier to design a product that is insensitive to environmental factors, either in manufacturing or in use, than to control the environmental factors
o Parameter Design
• Involves determining the specification settings for both the product and the process that will result in robust design in terms of manufacturing variations, product deterioration, and conditions during use

Concurrent Engineering
bringing engineering design and manufacturing personnel together early in the design phase

Emphasizes cross-functional integration and concurrent development of a product and its associated processes.

Also called simultaneous engineering. Cross functional teamwork in new product development projects that provides product design, quality engineering, and manufacturing process engineering all at the same time

o The emphasis can be on problem resolution instead of conflict resolution
• Disadvantages
o Longstanding existing boundaries between design and manufacturing can be difficult to overcome
• Simply bringing a group of people together and thinking that they will be able to work together effectively is naïve
o There must be extra communication and flexibility if the process is to work, and these can be difficult to achieve

Production Requirements
• Forecasts of future demand
o Supplying information on the timing and volume of demand, and information on demands for new products and services
• Manufacturability is a key concern for manufactured goods
o Ease of fabrication and/or assembly is important for cost, productivity, and quality
o With services, ease of providing the service, cost, productivity, and quality are of great concern
• Design for Manufacturing (DFM)
o Used to indicate the designing of products that are compatible with an organization’s capabilities
• Design for Assembly (DFA)
o Design focuses on reducing the number of parts in a product and on assembly methods and sequence
• Recovering material for future use
• Companies recycle for different reasons
o Cost Savings
o Environment Concerns
o Environmental regulations
Defining Quality: The Dimensions of Quality
o Performance
• Main characteristics of the product or service
o Aesthetics
• Appearance, feel, smell, taste
o Special features
• Extra characteristics
o Conformance
• How well a product or service corresponds to design specs
o Reliability
• Consistency of performance
o Durability
• The useful life of the product or service
o Perceived quality
• Indirect evaluation of quality
o Serviceability
• Handling of complaints or repairs
Defining Quality
• Degree to which performance of a product or service meets or exceeds customer expectations
• Customer expectations can be broken down into a number of categories, or dimensions, that customers use to judge the quality of product or service
Service Quality
o Tangibles
• Physical appearance of facilities, equipment, personnel, and communication materials
o Convenience
• The availability and accessibility of the service
o Reliability
• The ability to perform a service dependably, consistently, and accurately
o Responsiveness
• Willingness of service providers to help customers in unusual situations and to deal with problems
o Time
• Speed with which the service is delivered
o Assurance
• Knowledge exhibited by personnel who come into contact with a customer and their ability to convey trust and confidence
o Courtesy
• Way customers are treated by employees who come into contact with them
• They must be stated in terms of specific, measurable characteristics
• Important to identify customer priorities, especially when it is likely that trade-off decisions will be made at various points in design and production
The Determinants of Quality
o Design
o How well it conforms to the design
o Ease of use
o Service after delivery
Design (determines quality)
o Involves decisions about the specific characteristics of a product or service such as size, shape, and location
o Quality of design
• Intention of designers to include or exclude features in a product or service
o Design decisions must take into account customer wants, production or service capabilities, safety and liability, costs, and other similar considerations
o Designers must closely work with operations to ascertain that designs can be produced
Conformance (determines quality)
o Quality of Conformance
• Degree to which goods and services conform to the intent of designers
o Affected by factors such as the capability of equipment used; the skills, training, and motivation of workers; the extent to which the design lends itself to production; the monitoring process to assess conformance; and the taking of corrective action when necessary
o One important key to quality is to reduce the variability in process outputs
Ease of Use (determines quality)
o User instructions
o Increase chances that product will be used for its intended purposes and in such a way that it will continue to function properly and safely
Total Quality Management (TQM)
• Quest for quality in an organization
• 3 key philosophies in this approach
o Never-ending push to improve
• Continuous improvement
o Involvement of everyone in the organization
o Customer satisfaction
• Meeting or exceeding customer expectations
TQM expands traditional view of quality
Now looks at the quality of every aspect of the process that produces the product or service (think lean production quality)
The approach of TQM, takes the marketing approach steps further
o Find out what customers want
• Surveys, focus groups, interviews
• Use internal and external customers
o Design a product that will meet or exceed what customers want
• Make it easy to use and produce
o Design processes that facilitate doing the job right the first time
• Determine where mistakes are likely to occur and prevent them
• When they do occur, find out why so they are less likely to occur again
• Fail-safing
• Incorporating design elements to make it virtually impossible for an employee to do something incorrectly
o Keep track of results and use them to guide improvement in the system
o Extend these concepts to suppliers and distributors
• Top management must be involved or TQM will fail
Six Sigma
• Business process for improving quality, reducing costs, and increasing customer satisfaction
• Programs can be employed in design, production, service, inventory management, and delivery
• Management component
o Provide strong leadership
o Define performance metrics
o Select projects likely to achieve business results
o Select and train appropriate people
• Technical Component
o Improve process performance
o Reduce variation
o Utilize statistical methods
o Design structured improvement strategy, which involves definition, measurement, analysis, improvement, and control
• Process is to define, measure, analyze, improve, and control
Obstacles of Implementing TQM
• Lack of companywide definition of quality
• Lack of strategic plan for change
• Lack of customer focus
• Poor intraorganizational communication
• Lack of employee empowerment
• View of quality as a quick fix
• Emphasis on short-term financial results
• Inordinate presence of internal politics and “turf” issues
• Lack of time to promote quality initiatives
• Lack of leadership
Customer Serving Principles
• 16 Principles that serve as guides for planning, implementing, and improving operations
• 3 Broad Groups
o Formulation
• Accounts for customers, the company, and competitors (Strategic triangle)
o Implementation
• Design and organization, capacity, processing, and problem solving and control
o Improvement
• Each is customer focuses, employee driven, and data based
Know and Team Up with Next and Final Customer (Formulation: Customers)
a. Can mean moving associates out of functional departments and into teams and cells (Organizing associates on how the work flows)
b. These teams meet periodically to solve problems
Become dedicated to continual, rapid improvement in quality, cost, response time, flexibility, variability, and service (Formulation: Customers)
Continual improvement with the 6 general customer wants
Achieve unified purpose via shared information and team involvement in planning and implementing of change (Formulation: Company)
a. Information must be shared if employee-driven continuous improvement is to occur
Know the competition and world-class leaders (Formulation: Competitors)
a. Operations management associates cannot be effective without competitive information
b. They need to learn about competitors’ designs, capacities, skill base, and supplier/customer linkages – as well as costs, quality, flexibility, and response times
c. Blue-chip companies conduct benchmarking studies, in which they gather data from other companies in totally different industries to find what the best practices are
d. Failure to do this leads to complacency and decline
Cut the number of product or service components or operations and number of suppliers to a few good ones (Implementation: Design and Organization)
a. Having too many components of a product or service or too many suppliers makes it difficult to do justice to any of them
Organize resources into multiple chains of customers, each focused on a product, service, or customer family; Create work-flow teams, focused cells, and Plants-in-a-plant (Implementation: Design and Organization)
a. To ensure good coordination, error prevention, and continuous improvement, the customer at the next process should be known and familiar (a real partner or team member)
b. A dependable work-flow path is also needed
Continually invest in HR through cross-training (for master of multiple skills); Education; Job and career-path rotation; Improved health, safety, and security (Implementation: Capacity)
a. Capacity is high in cost and has long-term impact
b. Each associate continually masters more job and job support skills, problem solving techniques, and self/team-management
c. Through job switching, associates learn the impact of job A on job B, discover their collective impact on the whole service or product, as well as their effect on customer satisfaction, and they understand their contribution to employee health, safety, and security
d. Managers and professionals require occasional career-path switching to gain a broader outlook, increase their value to the company, and gain career security
Maintain and improve present equipment and human work before thinking about new equipment; Automate incrementally when process variability cannot otherwise be reduced (Implementation: Capacity)
a. People are variable, and variability stands in the way of serving the customer
b. Progress requires new equipment and automation
c. Easier, cheaper way to achieve progress and for associates to tighten up their slack habits and bad practices
d. This defers the cost and complexity of automation and succumbing to the glamor of automation and automating for the wrong reasons
Look for simple, flexible, movable, low-cost equipment that can be acquired in multiple copies – each assignable to work-flow teams, focused cells, and plants-in-a-plant (Implementation: Capacity)
a. Planning in multiple-capacity units allows growth to occur at the same time as the firm is becoming product/customer focused
b. Focusing equipment and operating teams on narrow families of products/customers helps large and growing companies act like small, customer-service-minded ones
Make it easier to make/provide goods or services without error or process variation (Implementation: Processing)
a. Do it right the first time
b. Design for quality, partner up with suppliers and customers for quality, control processes for quality, and collect and analyze data for removal of the sources of poor quality
Cut flow time (wait time), distance, and inventory all along the chain of customers (Implementation: Processing)
a. Shorten cycle times and improve responsiveness to customers
Cut setup, changeover, get-ready, and start-up times (Implementation: Processing)
a. Deals with preparation-to-serve delays of all kinds
b. Machine set-up and production-line changeover times can eat up enormous amounts of costly capacity and render the company unable to change quickly from one product model to another as customer demand patterns change
13. Operate at the customer’s rate of use (or a smoothed representation of it); Decrease interval and lot size (Implementation: Processing)
a. Don’t go as fast as you can go, only to see the work pile up in front of your customer at the next process
b. Don’t invest in equipment that runs many times faster than the work can be processed downstream
c. Don’t save up large piles of work before sending it on to the next process
d. Wasteful tactics that stretch out the response time
14. Record and own quality, process, and problem data at the workplace. Ensure that frontline improvement teams get first chance at problem solving – before staff experts (Implementation: Problem solving and control)
a. Ineffective if problem solving data ends up in the wrong place
b. Send the quality, process, and problem data directly to the frontline associates
c. Associates can then do plenty, especially in teams which knowledge, skills, and ideas are readily shared
15. Cut transactions and reporting: control causes, not symptoms (Implementation: Problem solving and control)
a. Transactions and reports often deal with symptoms
b. Effective quality control and production control replace transactions and reports with process data – categorized and detailed as to causes
c. Data fuels the continuous improvement effort and need not end up in a report
16. Market each improvement: share results with employees, suppliers, and customers. Create a foundation for revision to strategy (Operations Strategy: Improvement)
a. Encourages organization to brag/boast about accomplishments
b. Several positive effects
i. Heightened awareness of improvements in outputs serves to increase customers’ perceptions of value and helps boost a company’s revenue
ii. Formal sharing of improvements in process performance throughout the organization – sometimes called institutionalization – often allows other improvement teams to glean useful ideas
iii. Knowledge of novel ideas raises the bar, opens new avenues for competition, and lays the groundwork for new strategies
c. This principle is seen as most effective when the demand for the company’s outputs far exceeds its capacity, and the company can pick and choose its customers, rather than the customers do all of the choosing
d. Need to embrace other 15 principles fully to fully utilize this principle