Operations Planning and

Control

Business strategy and operating strategy

Definition

A business, also known as an enterprise, or a firm, is an entity involved

in the provision of goods and/or services to consumers. Businesses are
prevalent in capitalist economies, where most of them are privately
owned and provide goods and services to customers in exchange for
other goods, services, or money.

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 THE FOUR FUNCTIONS OF MANAGEMENT
Planning
 Setting organizational goals.
 Developing strategies to reach
those goals.
 Determining resources need.
 Setting precise standards.
Organizing
 Allocations resources, assigning tasks,
and establishing procedures for
accomplishing goals.
 Preparing a structure (organizations
chart) showing lines of authority and
responsibility.
 Recruiting, selecting, training, and
developing employees.
 Placing employees where they’ll be
most effective.
WHAT MANAGERS DO
Some moderns managers perform all of these tasks with the full cooperation and
participation of workers. Empowering employees means allowing them to
participate more fully in decision making.
Management
Leading The process used to accomplish organizational
 Gilding and motivating employees to goals through planning, organizing, leading, and
work effectively to accomplish controlling people and other organizational
organizations goals and objectives. resources.
 Giving assignments.
 Explaining routines. Planning
 Clarifying polices. A management functions that includes
 Providing feedback on performance. anticipating trends and determining the best
strategies and tactics to achieve organizational
Controlling
goals and objectives.
 Measuring results against
corporate objectives. Organizing
 Monitoring performance relative A management function that include designing
to standards. the structure of the organization and creating
 Rewarding outstanding
conditions and systems in which everyone and
performance.
everything work together to achieve the
 Taking corrective action when organization’s goals and objectives.
necessary.
Leading
Creating a vision for the organizations and
guiding, training, coaching, and motiving others
to work effectively to achieve the organization’s
goals and objectives. 3
 PLANNING AND DECISION MAKING
Potential Internal STRENGHT Potential internal WEAKNESSES
 Core competencies in key areas  No clear strategic direction
 An acknowledged market leader  Obsolete facilities
 Well-conceived functional areas strategies  Subpar profitability
 Proven management  Lack of managerial depth and talent
 Cost advantages  Weak market image
 Better advertising campaigns  Too narrow a product line

Potential external OPPORTUNITIES Potential External THREATS

 Ability to serve additional customer groups
 Expand product lines
 Ability to transfer skill/technology to new
products
 Falling trade barriers in attractive foreign markets
 Complacency among rival firms
 Ability to grow due to increases in market demand
 Entry of lower-cost foreign competitors
 Rising sales of substitute products
 Slower market growth
 Costly regulatory requirements
 Vulnerability to recession and business cycles
 Changing buyer needs and tastes

Figure 2: SWOT MATRIX

This matrix identifies potential sthrengs, weakness, opportunities, and threats organizations may consider in a SWOT analysis.
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 FORMS OF PLANNING Strategic Planning
The process of determining the major goals of
the organization and the policies and
TACTICAL PLANNING strategies for obtaining and using resources to
STRATEGIC PLANNING achieve those goals.
The identification of
The setting of broad,
specific, short-rage Tactical Planning
long-rate goals by top
objectives by lower The process of developing detailed, short-
managers term statements about what is to be done,
level managers who is to do it, and how it is to be done.

Operational Planning
OPERATIONAL The process of setting work standards and
CONTINGENCY schedules necessary to implement the
PLANNING company’s tactical objectives.
PLANNING
The setting of work
Backup plans in case
standards and Contingency Planning
primary plans fail The process of preparing alternative courses
schedules of action that may be used if the primary
plans don’t achieve the organization’s
Figure 3: PLANNING FUNCTIONS
objectives.
Very few firms bother to make contingency plans. If something changes the market,
such companies may be slow to respond. Most organizations do strategic, tactical, and operational planning. 5
Decision Making: Finding the Best Alternative
Decision making
Chose among two or more alternatives.

Problem solving
The process of solving the everyday
problems that occur. Problem solving is
less formal than decision making and
usually calls for quicker action.

Brainstorming
Coming up with as many solutions to a
problem as possible in a short period of
time with no censoring of ideas.

PMI
Listing all the Pluses for a solution in
one column, all the Misuses in another,
and the implications in a third column.
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 ORGANIZING: CREATING A UNIFIED SYSTEM
LEVELS OF MANAGEMENT Organization Chart
This figure shows the three A visual device that shows relationship
levels of management. In among people and divides the
organization’s work; it shows who report to
many firms, there are several
whom.
levels of middle management. TOP
Recently, however, firms have MANAGEMENT Top management
been eleiminating middle- President Highest level of management, consisting
level managers because fewer Vice presidents of the president and other key company
are needed to oversee self- executives who develop strategic plans.
MIDDLE MANAGEMENT
management teams of Plan managers
employees. Division heads
Middle management
The level of management that includes
Branch managers general managers, division managers, and
SUPERVISORY (FRIST- branch and plant managers who are
LINE) MANAGEMENT responsible for tactical planning and
controlling.
Supervisors, Foremen
Department heads
Supervisory management
Section leaders Managers who are directly responsible
NONSUPERVISORY for supervising workers and evaluating
their daily performance..
Employees 7
Tasks and Skills at Different Levels of Management
Technical skills
Top Technical Human relations Skills that involve the ability to
Conceptual skills perform tasks in a specific discipline or
Managers skills skills department.

Human relations skills

Middle Skills that involve communication and
Human relations
Managers Technical skills skills
Conceptual skills motivation; they enable managers to
work through and with people.

Conceptual skills
First-Line Human relations Conceptual Skills that involve the ability to picture
Managers Technical skills the organization as a whole and the
skills skills
relationship among its various parts.

SKILLS NEEDED AT VARIOUS LEVELS MANAGEMENT

All managers need human relations skills. At the top, managers need strong conceptual skills and rely less or technical
skills. First-line managers need strong technical skills and rely less on conceptual skills. Middle managers need to have
a balance between technical and conceptual skills. 8
 CONTROLLING: MAKING SURE IT WORKS
1. 2. 3. 4. 5.

Monitor and Compare results If needed, take

Establish clear Communicate
record against corrective
standards results
performance standards actions

Are standards
realistic? FEEDBACK

THE CONTROL PROCESS

The whole control process is based on clear standards. Without such standards, the other steps are difficult, if not
impossible. With clear standards, performance measurement is restively easy and proper action can be taken.
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A key Criterion for Measurement: Customer Satisfaction
External customers
Dealers, who buy products to sell to
Example: other, and ultimate customers (or end
users), who buy products for their own
Manufacturing of laptops personal use.

Internal customers
Internal customers: Individual and units within the firm
• Operatives that receive services from other
individuals or units..
• Quality inspectors
• field sales people
External customers:
• Dealers
• Ultimate customers

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 50%
TYPES OF PROCESSES
Buffer
Stage 1 Stage 2 50%
Alternative paths
Multistage process with buffer

Buffering
Skills that involve the ability to
perform tasks in a specific discipline or
department.

Blocking
Occurs when the activities in the stage Simultaneous activities
must stop because there is no place to
deposit the item just completed.

Starving
Occurs when the activities in the stage
must stop because there is no work.

Bottleneck
It limits de capacity of the process. Different products produced 11
Make - to - Stock versus Make - to - Order

Make - to - Stock
Make - to – Order
This type of process is activated only in
Is the type of process that produces
response to an actual order. Inventory
standard products that can be delivered
(both work in process and finished
quickly to the customer.
goods) is kept to a minimum.

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 A. McDonald's - Old Process

Example:
Making Hamburgers
at McDonald's, Burger B. Burger King
King and Wendy's

C. Wendy's

D. McDonald's - Current Process

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 MEASURING PROCESS PERFORMANCE
Setup Queue Operation time = Setup time + Run time
Batch Time/
size unit time Time
Flow time = Average time for a unit to
move through the system

Run Operation 𝐹𝑙𝑜𝑤 𝑡𝑖𝑚𝑒

time time
Flow time Velocity = 𝑉𝑎𝑙𝑢𝑒−𝑎𝑑𝑑𝑒𝑑 𝑡𝑖𝑚𝑒

Cycle time = Average time between

completion of units
Standards Cycle time Velocity
1
Throughput time = 𝐶𝑦𝑐𝑙𝑒 𝑡𝑖𝑚𝑒
Throughput
Efficiency Productivity Inputs 𝐴𝑐𝑡𝑢𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡
rate Efficiency = 𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑜𝑢𝑡𝑝𝑢𝑡
𝑂𝑢𝑡𝑝𝑢𝑡
Time Time Productivity = 𝐼𝑛𝑝𝑢𝑡
Utilization
available activated
𝑇𝑖𝑚𝑒 𝑎𝑐𝑡𝑖𝑣𝑎𝑡𝑒𝑑
Utilization =
Process Performance Metrics 𝑇𝑖𝑚𝑒 𝑎𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒
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PRODUCTION PROCESS MAPPING AND LITTLE’S LAW

Buffer Buffer
Raw Finished
material goods
Source In Transit Factory In Transit Deliver

Suppliers Make Customers

Make - to – Stock Process Map

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PRODUCTION PROCESSES

Long Customer Lead Time Short

Source Make Deliver

Make-to-Stock
Assemble to order
Make-to Order
Engineer-to-order

Customer order decoupling point

Positioning Inventory in the Supply Chain

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HOW TO PRODUCTION PROCESSES ARE ORGANIZED

Low –
One - of-a-kind
Project

Workcenter
Product Manufacturing
Standardization Cell

Assembly
Line
Continuous
Process
High –
Standardized
commodity product
Low Product Volume High

Product-Process Matrix: Framework

Describing Layout Strategies
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BREAK – EVEN ANALYSIS

Buy $200/unit
Make on
Revenue at $300/unit
machine center
at $15/unit

Make on semiautomatic
lathe at $75/unit

Number of units

Break-Even Chart of Alternative Process

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