Issue 5-BSchool- Operations and Supply chain Management - 1
Photo by Eiliv-Sonas Aceron on Unsplash
What do a car manufacturer, a fashion retailer, a food delivery company, and an airline have in common?
Operations.
The focus of this issue is on Operations and Operations Strategy.
Unlike previous issues, I am starting with an example before going into definitions.
High Output Management is a classic management manual by Andrew S Grove, the former chairman and CEO of Intel. It starts off with a succinct example of the production process and this is the emphasis of our example.
The Basics of Production: Delivering a Breakfast
You run a café that sells a single breakfast dish: a three-minute soft-boiled egg, buttered toast, and coffee. You must serve each item simultaneously, fresh and hot, and the café must make a profit.
Customers prefer to have their meal when they sit down, but this would require an infinite production capacity or ready-to-serve inventory. Both option would eat into your margins, making it difficult to sell at a price that is competitive, while making a profit.
You need a system that enables you deliver breakfast at a scheduled time, acceptable quality level, and the lowest cost. These are the basic requirements for production.
Customers expect to receive their breakfast within five to ten minutes of placing their order.
How do you get this done?
You begin by first identifying -the limiting step – The breakfast component that takes the longest to prepare and hence determines the entire sequence of production.
The answer is the egg. Boiling the egg takes the longest time to prepare and is the key feature of the breakfast, for most customers.
Using the egg’s cooking time as your base, give yourself enough time to toast the bread.
Then, use the toasting time to determine when to pour the coffee.
Finally, add the time it takes to assemble the items on a tray, and ‘offset’ (leave a gap) each step from the previous one. The total time it takes to start and finish this process is the total throughput time.
These principles of a limiting step and time offset have a broad base of applications.
This is an example of an Operation. Every operation has an input, an output, and a process that transforms the input into the output.
What is Operations Strategy?
Every business has a strategy or a goal of its existence and how to stay competitive. Operations is about managing the resources required to produce the company’s goods and services.
Operations Strategy is simply a long-term plan (and processes) to fully leverage the resources of a company to achieve its business strategy.
Conclusion
Operations Strategy is important as it enables a company to provide their products/services and hence meet the needs of their customers, at the time and quality required, and at a low price.
By implementing a system that achieves this again and again, would enable you outcompete your competitors.
Next week we would deep dive into the how on developing an Operations Strategy.
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Reference
High Output Management by Andrew S. Grove