Resource Usage

1
Operations strategy process
Operations strategy content
Resource Usage
Market competitiveness
Performance objectives
Decision areas
Topics in operations strategy treated in this
chapter
2
Milestone
Hospital
Software producer
Presentation of symptoms
Customer decides new software is needed
Enquiry decision time
Visit to doctor for advice and tests
Asks for specification and estimates
Enquiry time
Test information confirms diagnosis
Receives proposal
Customer decision time
Decide on surgery
Places order
Waiting time
Start of design and coding
Enter hospital for surgery
Core processing time
Procedure successfully completed
Software completed
Installation time
Software fully debugged and working
Patient fully recovered
Significant milestone times for the delivery of
two products/services
3
First/Business class
Economy class
Economy cabin
Services
First/Business-class cabin, airport lounges,
pick-up service
Customers
Wealthy people, business people, VIPs
Travellers (friends and family), vacation takers,
cost-sensitive business travel
Service range
Wide range, may need to be customised
Standardized cabin
Rate of service innovation
Relatively low
Relatively high
Relatively low volume
Relatively high volume
Volume of activity
Low to medium
Profit margins
Medium to high
Customization, extra service, comfort features,
convenience
Main competitive factors
Price, acceptable service
Quality (specification and conformance),
Flexibility, Speed
Performance objectives
Cost, Quality (conformance)
Different product groups require different
performance objectives
4
Quality
Being RIGHT
Being FAST
Speed
Market Competitiveness
Dependability
Being ON TIME
Being ABLE TO CHANGE
Flexibility
Cost
Being PRODUCTIVE
The operations function can provide a competitive
advantage through its performance at the five
competitive objectives
5
Positive
Order-winners
Less important
Competitive benefit
Neutral
Qualifiers
Negative
Low
High
Achieved performance
Order-winners and qualifiers
6
Customer Needs
Importance to customers
Priority of performance objectives
Competitors Actions
Performance against competitors
The priority of performance objectives is
influenced by what is regarded as important by
customers and how the operation performs against
competitors
7
x

x

Average revenue
Average cost

x
x
Productivity of fixed assets
Utilization
Working capital
Development and organization
Capacity
Operations strategy decision areas
Process technology
Supply network
Decomposing the ratio profit/total assets
8
The Elements of an International Operations
Strategy
9
Resource Usage

• Issues include
• Total capacity
• Number, size of sites
• Allocation of tasks to sites
• Location

• Issues include
• Vertical integration
• Network behaviour
• Supplier relationships
• Supplier development

• Issues include
• Rate of development
• Automation
• Integration
• Implementation
• Subcontracted development

• Issues include
• Responsibility relationships
• Performance and control
• Process development
• Product and service development

Process Technology
Development and Organization
Capacity
Supply Network
The four categories of operations strategy
decision areas
10
Process Technology
Development and Organization
Supply Network
Capacity
Structural issues
Infrastructural issues
Operations strategy decision areas are partly
structural and partly infrastructural
11
Operations strategy is defined by the
intersections of performance objectives and
Operations decisions
12
Resource Usage
Quality
Speed
Operations strategy
Market Competitiveness
Dependability
Performance objectives
Flexibility
Cost
Development and Organization
Process Technology
Supply Network
Capacity
Decision areas
The operations strategy matrix
13
7-Eleven Japan
Largest retailer in Japan Sells 1.5X as much per
store as nearest rival History of cautious
expansion and technical and service
innovation Field Counsellors spread operations
knowledge (also do distance training) Expansion
by territory to reduce disn costs Early use of
TIS (total information system) TIS controls stock
replenishment twice a day delivery (sales
analysed twice a day) New system not
internet-based New services include, Banking
terminals Downloading games Downloading
music to MD Internet ordering and collection
14
Resource Deployment
QUALITY of products and services
Speed and dependability combined to indicate
AVAILABILITY
FLEXIBILITY of response to sales and customer
trends
Market Competitiveness

• COST in terms of minimizing
• operating cost
• capital cost
• working capital

7-11 JAPAN
??? pivotal ?? critical ? secondary
15
Align resources with requirements
Level 1 - Fit
Develop sustainable competitive advantage
Increasing complexity
Level 2 - Sustainability
Include impact of uncertainty
Level 3 - Risk
The practice of operations strategy involves
considering fit, sustainability and risk
16
Market requirements
Line of fit
Alignment between market and operations capability
X
Y
Level of operations resource capability
In operations strategy fit is the alignment
between market and operations capability
17
Market requirements
Extension of market requirements
Sustainable improvement
Improvements in operations capabilities
Level of operations resource capability
Sustainable improvement implies simultaneous
extension/improvement of market requirements and
operations capabilities
18
Virgin Trains
Market requirements
Line of fit
Nissan
Level of operations resource capability
Virgin Trains and Nissan positioned in relation
to market requirements and operations capabilities
19
Quality (specification)
Quality (conformance)
Cost
X
X
X
Delivery flexibility
X
Speed
X
X
X
X
Volume flexibility
Dependability
Customization
Current products
New products
Dresding Medical - Polar diagram illustrating the
relative importance of the performance objectives
for the current and new products
20
Resource Usage



Quality (spec)







Quality (conform)





Speed

Dependability




Performance objectives
Market Competitiveness


Delivery flex

Volume flex






Customization





Cost

Capacity
Supply Network
Process Technology
Development and Organization



very important
RD, Mfg. and Sales all share common knowledge
base. Incremental new product development
Lab style manufacture easy to change capacity
incrementally
50 of activities in-house
Low process technology (but high product
technology)


medium importance
some importance

Decision areas
Dresding Medical - Current product range
Slide 2.17
21
Resource Usage



Quality (spec)






Quality (conform)






Speed







Dependability


Performance objectives
Market Competitiveness

Delivery flex





Volume flex


Customization





Cost




Capacity
Supply Network
Process Technology
Development and Organization



very important
RD, Mfg. and Sales less interdependent. Faster
time-to-market needed
May need to adjust quickly depending on demand
New supplies will be needed / developed
Needs investment in volume processes


medium importance
some importance

Decision areas
Dresding Medical - New product range
Slide 2.18
22
Fit is concerned with ensuring
comprehensiveness, correspondence, coherence and
criticality
Resource Usage
Quality
Speed
Market Competitiveness
Dependability
Performance objectives
Flexibility
Cost
Development and Organization
Process Technology
Supply Network
Capacity
Decision areas