How Operations As a Competitive Weapon fits the Operations Management Philosophy

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How Operations As a Competitive Weapon fits the
Operations Management Philosophy
Operations As a Competitive Weapon Operations
Strategy Project Management
Process Strategy Process Analysis Process
Performance and Quality Constraint
Management Process Layout Lean Systems
Supply Chain Strategy Location Inventory
Management Forecasting Sales and Operations
Planning Resource Planning Scheduling
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Operations Management is

• The systematic design, direction and control of
  processes that transform inputs into services and
  products for internal, as well as external,
  customers.

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Operations Management as a Function
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Processes

• Processes should add value.
• Processes can be broken down into
  sub-processes, which in turn can be broken down
  further.
• Any process that is part of a larger process is
  considered a nested process.
• Each process and each nested process has inputs
  and outputs.

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Process View of an Ad Agency
Accounting process

• Advertisement design and planning process
• Create the ad to the needs of the client and
  prepare a plan for media exposure

• Output interface process
• Communicate with client, get needs, and
  coordinate progress

Inputs
Outputs

• Production process
• Prepare ad for publication and deliver to media
  outlets

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External vs. Internal Customers

• External Customers are those who purchase the
  goods and services.
• Internal Customers are those who receive the
  output of others within the firm. They are part
  of the transformation process.

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Manufacturing and Service

• Goods Production
• Tangible
• Can be inventoried
• Low customer contact
• Capital Intensive
• Quality easily measured

• Service Production
• Intangible
• Cant be inventoried
• High customer contact
• Labor Intensive
• Quality hard to measure

Most firms provide both goods and services.
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Operations as a Set of Decisions
Tactical Decisions
Strategic Decisions

• Process improvement and performance measures
• Management and planning of projects
• Generation of production and staffing plans
• Inventory management
• Resource scheduling

• Development of new capabilities
• Maintenance of existing capabilities
• Design of new processes
• Development and organization of value chains
• Key performance measures

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Productivity

• Productivity is the value of outputs (services
  and products) produced, divided by the value of
  input resources(wages, costs of equipment, etc.)

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Global Competition

• Businesses accept the fact that, to prosper,
  they must view customers, suppliers, facility
  locations, and competitors in global terms.
• Most products today are composites of materials
  and services from all over the world.
• Forces that created increased global competition
• Improved Transportation and Information
  Technologies
• Loosened regulations on Financial Institutions
• Increased Demand for Imported Services and Goods
• Reduced Import Quotas and other Trade Barriers
• Comparative Cost Advantages

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Global Competition Disadvantages

• May have to relinquish proprietary technology.
• Political risks.
• Alienate U.S. customers by sending jobs overseas.
• Lower skill levels in some areas.
• Difficulty with cross-functional coordination.
• Harder to produce products and services that can
  compete.

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Other Challenges in Operations Management

• Rapid technological change
• Ethical issues across cultures
• Increasing diversity of the workforce
• Environmental impact issues

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Addressing the Challenges in Operations Management
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Decision Making
Supplement A
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Decision-Making Steps
Basic Decision-making Steps

• Recognize and clearly define the problem.
• Collect the information needed to analyze
  possible alternatives.
• Choose the most attractive alternative.
• Implement the chosen alternative.

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Four procedures

• Break-even analysis when volume changes
• Preference matrix when multiple criteria
• Decision theory when outcomes are uncertain
• Decision tree when sequentially decision are
  made

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Break-Even Analysis
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Sensitivity Analysis
400 300 200 100 0
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Preference Matrix
Example A.4
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Decision theory, the process

• List a reasonable number of feasible
  alternatives.
• List the events.
• Calculate the payoff table showing the payoff for
  each alternative in each event.
• Estimate the probability of occurrence for each
  event.
• Select a decision rule to evaluate the
  alternatives

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Four decision rules

• Maximin
• Maximax
• Laplace
• Minimax Regret

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Under Uncertainty
Example A.6
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Under Uncertainty
Example A.6
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Under Uncertainty
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Under Uncertainty
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Under Risk
Example A.7
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Under Risk
Highest Expected Value
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Decision Trees
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Decision Trees
Figure A.6
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Operations Strategy
Chapter 2
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How Operations Strategy fits the Operations
Management Philosophy
Operations As a Competitive Weapon Operations
Strategy Project Management
Process Strategy Process Analysis Process
Performance and Quality Constraint
Management Process Layout Lean Systems
Supply Chain Strategy Location Inventory
Management Forecasting Sales and Operations
Planning Resource Planning Scheduling
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Operations Strategy

• Operations strategy is the means by which
  operations implements the firms corporate
  strategy and helps to build a customer-driven
  firm.
• It links long-term and short-term operations
  decisions to corporate strategy.
• It is the core of managing processes and value
  chains.

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Corporate Strategy and Key Operations Management
Decisions
Corporate strategy
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Developing a Corporate Strategy

• Developing a corporate strategy involves three
  considerations
• Monitoring and adapting to the environment
• Identifying and developing core competencies
• Developing the firms core processes
• Adapting requires environmental scanning to
  monitor trends for opportunities and threats.
• Core Competencies are the unique resources and
  strengths an organization possesses.

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Core Competencies

• Core competencies include
• A well-trained and flexible Workforce
• Having well-located flexible Facilities
• Having Market and Financial Know-How.
• Expertise in Systems and Technology.
• The core competencies should determine the firms
  core processes.
• These can include customer relations, new
  service/product development, order fulfillment,
  and supplier relationships.
• A firm may have all of these or focus on a subset
  of them, as determined by its core competencies.

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Global Strategies

• A global strategy may include buying foreign
  services or parts and entering or expanding
  foreign markets.
• Two effective global strategies are
• Strategic Alliances
• Collaborative efforts
• Joint ventures
• Technology licensing
• Locating abroad

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Market Analysis

• A Market Analysis is one key to developing a
  customer-driven strategy, and is accomplished in
  two parts.
• Market Segmentation, which identifies groups of
  customers with enough in common to warrant
  developing services and/or products for them.
• Needs Assessment identifies the needs of each
  market segment. Needs include such things as
• Service or product needs
• Delivery system needs
• Volume needs

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Arriving at the Competitive Priorities

• Corporate Strategy
• environmental scanning
• core competencies
• core processes
• global strategies

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Competitive Priorities
Cost 1. Low-cost operations Quality 2. Top
quality 3. Consistent quality Time 4. Delivery
speed 5. On-time delivery 6. Development
speed Flexibility 7. Customization 8. Variety
9. Volume flexibility
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Order Winners and Order Qualifiers

• These 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.
• Price, quality, time, flexibility, after sales
  support, reputation, etc.
• Order Qualifiers are demonstrated levels of
  performance required to do business in a
  particular market segment.

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Service or Product Development Strategies

• Product Variety Offering a wide assortment.
• Design Ease of use and desirable features.
• Innovation Translate new technology into new
  products.
• Service Products with services added.
• Leader Being first to introduce new services
  and/or products.
• Middle of the Road Wait for the leaders to
  introduce new services and/or products.
• Laggard Wait to see if the leaders new services
  and/or products catch on in the market.

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Development Process
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Corporate Strategy and Key Operations Management
Decisions
Corporate strategy
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Matching Capabilities to Priorities

• The table below shows how a credit card division
  matched their capabilities to their priorities
  and uncovered gaps in their operating strategy.