Operations Strategy

1
(No Transcript)
2
Chapter 2
3
OBJECTIVES

• Operations Strategy
• Competitive Dimensions
• Order Qualifiers and Winners
• Strategy Design Process
• A Framework for Manufacturing Strategy
• Service Strategy Capacity Capabilities
• Productivity Measures

4
The Role of Business Strategy

• Defines the long-range plan to compete in the
  marketplace
• Helps to differentiate the firm from competitors
• Basis for functional strategies
• Focuses on doing the right tasks

5
Three Inputs to a Business Strategy
6
Inputs into a business strategy

• Mission Dell Computer- to be the most
  successful computer company in the world
• Environmental Scanning political trends,
  economic trends, market place trends, global
  supply chain trends, technology issues, SWOT
• Core Competencies competency of workers,
  facilities, market understanding, information
  technology, financial know-how, logistics
  capabilities

7
What types of operations would be supported by
the unique assets/drawbacks of the Miami Valley ?

• Transportation access (types?)
• Technology
• Educational
• Proximity to WPAFB (close to customer?)
• Central location (for North American customers)
• Cost of living / salaries
• Politics (abatements? environmental laws?)

8

• In what sectors can these strengths be applied?
• Where should we not attempt to compete?

9
Business/Functional Strategy
10
Operations Strategy Designing the Operations
Function
11
Competitive Priorities- The Edge

• Four Important Operations Questions Will you
  compete on
• Cost?
• Quality?
• Time?
• Flexibility?
• All of the above? Some? Tradeoffs?

12
Competitive Dimensions

• Cost or Price
• Make the Product or Deliver the Service Cheap
• Quality
• Make a Great Product or Deliver a Great Service
• Delivery Speed
• Make the Product or Deliver the Service Quickly
• Delivery Reliability
• Deliver It When Promised
• Coping with Changes in Demand
• Change Its Volume
• Flexibility and New Product Introduction Speed
• Other Product-Specific Criteria
• Product support / warran
• ties

13
Competing on Cost?

• Typically high volume products
• Often limit product range offer little
  customization
• May invest in automation to reduce unit costs
• Can use lower skill labor
• Probably use product focused layouts
• Often late in product life cycle

14
Competing on Quality?

• High performance design
• Superior features, high durability, excellent
  customer service
• Product service consistency
• Meets design specifications
• Close tolerances
• Error free delivery

15
Competing on Time?

• Fast delivery
• Focused on shorter time between order placement
  and delivery
• On-time delivery
• Deliver product exactly when needed every time
  (JIT)
• Rapid development speed
• Using concurrent processes to shorten product
  development time

16
Competing on Flexibility?

• Product flexibility
• Easily switch production from one item to another
• Easily customize product/service to meet specific
  requirements of a customer
• Volume flexibility
• Ability to ramp production up and down to match
  market demands

17
Dealing with Trade-offs
For example, if we reduce costs by reducing
product quality inspections, we might reduce
product quality.
Or we could improve our process to eliminate the
need for inspections.
18
Order Qualifiers and WinnersDefined

• Qualifiers enable you to gain entry into and
  maintain a companys position within a market but
  do not win orders.
• Order qualifiers are the basic criteria that
  permit the firm's products to be considered as
  candidates for purchase by customers

19
Order Qualifiers and WinnersDefined

• Qualifiers have order-losing NOT order-winning
  characteristics.
• Need to identify qualifiers which are
  order-losing sensitive and which have potential
  to become order-winners.

20
Order Qualifiers and WinnersDefined

• Order winners are the criteria that differentiate
  the products and services of one firm from
  another.
• Frequently order winners evolve to become order
  qualifiers as competitors increase customer
  expectations.

21
Are There Priority Tradeoffs?

• Which priorities are Order Qualifiers?
• e.g. Must have excellent quality since
  everyone expects it
• Which priorities are Order Winners?
• e.g. Dell competes on its ability to
  mass customize, delivery speed, and on price
• Southwest Airlines competes on
  cost
• McDonalds competes on
  consistency
• FedEx competes on speed
• Can you have both high quality and low cost?
  (Hyundai)
• Can you offer design flexibility and short
  delivery? (Dell)

22

• What are order qualifiers for
• buying a car?
• fast food restaurant?
• Selecting a university?

23

• What are order winners for
• Buying a car?
• Fast food restaurant?
• Selecting a university?

24

• The problem.
• What may be an order winning feature for one
  person may only be only a qualifier for another.
  Markets are not homogeneous.
• Order qualifiers and winners change
• How do we convert order winning attributes into
  specific performance requirements? How do we
  achieve those requirements?

25

• How should GM compete?
• How should McDonald's compete?
• How should Wright State compete?
• What is the role of the operations function in
  enabling each organization to satisfy criteria
  for winning orders?

26
Translating to Production Requirements

• Dell Computer example structure
  infrastructure
• They focus on customer service, cost, and speed
• Information system allows customers to order
  directly from Dell. Eliminates retail expense.
• Product design and assembly line allow a make to
  order strategy lowers costs, increases turns
• Vendor Managed Inventory systems.
• Shipping arrangement with UPS

27
Steps in Developing a Manufacturing Strategy

• 1. Segment the market according to the product
  group
• 2. Identify product requirements, demand
  patterns, and profit margins of each group
• 3. Determine order qualifiers and winners for
  each group
• 4. Convert order winners into specific
  performance requirements

28
What is Productivity?Defined
Productivity is a common measure on how well
resources are being used. In the broadest sense,
it can be defined as the following ratio
Outputs Inputs
29
Total Measure Productivity
Total Measure Productivity Outputs
Inputs
or
Goods and services produced
All resources used
30
Partial Measure Productivity

• Partial measures of productivity
• Output or Output or Output or Output
• Labor Capital Materials
  Energy

31
Multifactor Measure Productivity

• Multifactor measures of productivity
• Output
  .
• Labor Capital
  Energy
• or
• Output
  .
• Labor Capital
  Materials

32
Example of Productivity Measurement

• You have just determined that your service
  employees have used a total of 2400 hours of
  labor this week to process 560 insurance forms.
  Last week the same crew used only 2000 hours of
  labor to process 480 forms.
• Which productivity measure should be used?
• Answer Could be classified as a Total Measure or
  Partial Measure.
• Is productivity increasing or decreasing?
• Answer Last weeks productivity 480/2000
  0.24, and this weeks productivity is 560/2400
  0.23. So, productivity is decreasing slightly.

33
Example of Productivity Measurement

• You have just determined that your service
  employees have used a total of 2400 hours of
  labor this week to process 560 insurance forms.
  Last week the same crew used only 2000 hours of
  labor to process 480 forms.
• Which productivity measure should be used?
• Answer Could be classified as a Total Measure or
  Partial Measure.
• Is productivity increasing or decreasing?
• Answer Last weeks productivity 480/2000
  0.24, and this weeks productivity is 560/2400
  0.23. So, productivity is decreasing slightly.

34
Linking Systems to Strategy Berry Hill (1992)

• Operations strategy needs to match market
  requirements to processes and to their production
  control systems
• Companies invest in production control systems
  that dont meet needs of the business.
• One information system doesnt fit all situations
• Wrong system may impair performance (A)
• Companies with distinct markets may need separate
  systems

35
Types of processing

• Line processing continuous high volume/low
  variety
• Batch production all items in the batch are
  processed at a workstation before they moving to
  the next. Lower volume greater variety.
• Job shop environment Lower volume / greater
  variety.
• Project Low volume (individual item) / high
  variety
• Each has distinct requirements for efficient
  control

36
Company A

• Medium size, high quality furniture
• Simple process technologies
• High volume standard products
• Low WIP inventory (!)
• Short lead times high inventories (!)
• System purchased controlled shop floor but didnt
  improve production scheduling to better reflect
  actual product mix.

37
Company B

• Telecommunication company
• Decides to move from in-house production to
  purchasing components for assembly
• Operations task changes from controlling internal
  manufacturing process to scheduling vendor
  deliveries and managing component inventory.
• Information system needs to meet the new
  requirements.

38
Company C

• Tractor manufacturer
• High volume make-to-stock line process
• Move to low volume, make-to-order products
  (customer-ordered options)
• Consequences of new manufacturing task
• Low volumes option components
• Information system requirements for internal
  processing and for suppliers
• Forecasting requirements

39
Company E

• Introducing new market segments
• From make-to-stock to make-to-order
• Delivery speed supported by finished inventory
  before now through scheduling
• longer lead times
• From low variety to high variety
• cant rely on inventory
• From high production volumes to low production
  volumes
• from batch production to jobbing
• cellular manufacturing

40
End of Chapter 2
41
(No Transcript)