BA 320 Operations Management Chapter 2 Operations Strategy

BA 320 Operations Management

Chapter 2Chapter 2

Operations Operations StrategyStrategy


Strategy FormulationStrategy Formulation

1.1. Define a primary taskDefine a primary task2.2. Assess core Assess core

competenciescompetencies3.3. Determine order Determine order

winners & order qualifierswinners & order qualifiers4.4. Positioning the firmPositioning the firm


Competing on CostCompeting on CostEliminate all wasteEliminate all wasteInvest inInvest in

Updated facilities & equipmentUpdated facilities & equipment Streamlining operationsStreamlining operations Training & developmentTraining & development


Competing on QualityCompeting on Quality

Please the customerPlease the customerUnderstand customer Understand customer

attitudes toward and attitudes toward and expectations of expectations of quality quality


Competing on Competing on FlexibilityFlexibility

Produce wide variety of Produce wide variety of productsproducts

Introduce new productsIntroduce new productsModify existing Modify existing

products quicklyproducts quicklyRespond to customer Respond to customer

needsneeds


Competing on SpeedCompeting on Speed

Fast movesFast movesFast adaptationsFast adaptationsTight linkagesTight linkages


Operations Role in Operations Role in Corporate StrategyCorporate Strategy

Provide support for overall Provide support for overall strategy of a firmstrategy of a firm

Serve as firm’s distinctive Serve as firm’s distinctive competencecompetence

Must be consistentMust be consistentMust be consistent with overall Must be consistent with overall

strategystrategy


OperationsOperationsStrategy at Strategy at Wal-MartWal-Mart


OperationsOperationsStrategy at Strategy at Wal-MartWal-Mart Provide value for our customersProvide value for our customers

Low prices, everydayLow prices, everyday

Low inventory levelsLow inventory levels

Linked communications between stores

Linked communications between stores

Short flow timesShort flow times

Fast transportation system

Fast transportation system

Cross-dockingCross-docking Focused locationsFocused locations

EDI/satellitesEDI/satellites

Wal-MartWal-Mart

MissionMission

Competitive Competitive PriorityPriority

Operations Operations StrategyStrategy

Operations Operations StructureStructure

Enabling Process Enabling Process and Technologiesand Technologies

Figure 2.1Figure 2.1


Strategy and the Strategy and the InternetInternet

Create a distinctive Create a distinctive business strategybusiness strategy

Strengthen existing Strengthen existing competitive advantagescompetitive advantages

Integrate new and Integrate new and traditional activitiestraditional activities

Must provide a unique Must provide a unique value to the customervalue to the customer


Strategic Decisions in Strategic Decisions in OperationsOperations


Strategic Decisions in Strategic Decisions in OperationsOperations

Products Processes and

Technology

Capacity

Human Resources Quality

Facilities Sourcing

Services

Operating Systems



Products & ServicesProducts & ServicesMake-to-orderMake-to-order

Made to customer specifications Made to customer specifications after order receivedafter order received

Make-to-stockMake-to-stockMade in anticipation of demandMade in anticipation of demand

Assemble-to-orderAssemble-to-orderAdd options according to Add options according to

customer specificationcustomer specification


Processes & TechnologyProcesses & Technology ProjectProject

One-time production of product to One-time production of product to customer ordercustomer order

Batch productionBatch production Process many jobs at same time in batchProcess many jobs at same time in batch

Mass productionMass production Produce large volumes of standard Produce large volumes of standard

product for mass marketproduct for mass market Continuous productionContinuous production

Very high volume commodity productVery high volume commodity product


Product-Process MatrixProduct-Process Matrix


Product-Process MatrixProduct-Process MatrixV

olu

me

Vo

lum

e

LowLow

LowLow HighHigh

HighHigh

Projects

BatchProduction

MassProduction

ContinuousProduction

StandardizationStandardizationFigure 2.3Figure 2.3


Service-Process MatrixService-Process Matrix


Service-Process MatrixService-Process MatrixV

olu

me

Vo

lum

e

LowLow

LowLow HighHigh

HighHigh

Professional Service

Service Shop

MassService

Service Factory

StandardizationStandardizationFigure 2.4Figure 2.4


Capacity & FacilitiesCapacity & FacilitiesHow much capacity to provideHow much capacity to provideSize of capacity changesSize of capacity changesHandling excess demandHandling excess demandHiring/firing Hiring/firing

workersworkersNeed for new Need for new

facilitiesfacilities


FacilitiesFacilities

Best size for facility?Best size for facility?Large or small facilitiesLarge or small facilitiesFacility focusFacility focusFacility locationFacility locationGlobal facilityGlobal facility


Human ResourcesHuman Resources Skill levels requiredSkill levels required Degree of autonomyDegree of autonomy PoliciesPolicies Profit sharingProfit sharing Individual or team Individual or team

workwork Supervision methodsSupervision methods Levels of Levels of

managementmanagement TrainingTraining


QualityQuality Target levelTarget level MeasurementMeasurement Employee involvementEmployee involvement TrainingTraining Systems needed to ensure qualitySystems needed to ensure quality Maintaining quality awarenessMaintaining quality awareness Evaluating quality effortsEvaluating quality efforts Determining customer perceptionsDetermining customer perceptions


SourcingSourcingDegree of vertical Degree of vertical

integrationintegrationSupplier selectionSupplier selectionSupplier Supplier

relationshiprelationshipSupplier qualitySupplier qualitySupplier Supplier

cooperationcooperation


Operating SystemsOperating Systems Execute strategy dailyExecute strategy daily Information technology Information technology

supportsupport Effective planning & control Effective planning & control

systemssystems Alignment of inventory Alignment of inventory

levels, scheduling priorities, levels, scheduling priorities, & reward systems& reward systems


Strategic PlanningStrategic Planning


Strategic PlanningStrategic PlanningMission and

Vision

Corporate Strategy

Voice of the Business

Voice of the Customer

Marketing Strategy

Operations Strategy

Financial Strategy



Policy DeploymentPolicy DeploymentHoshin planningHoshin planningFocuses employees on common Focuses employees on common

goals & prioritiesgoals & prioritiesTranslates strategy into Translates strategy into

measurable objectivesmeasurable objectivesAligns day-to-day decisions with Aligns day-to-day decisions with

strategic planstrategic plan


Derivation of an Action PlanDerivation of an Action Plan


Derivation of an Action PlanDerivation of an Action Plan

Reduce business Reduce business cycle time by 50%cycle time by 50%

Reduce production Reduce production cycle time by cycle time by 30%30%

Reduce queue Reduce queue time by 50%time by 50%

Reduce setup Reduce setup time by 50%time by 50%

Cut lot sizes in Cut lot sizes in halfhalf

Reduce Reduce purchasing purchasing cycle time by cycle time by 30%30%

Increase electronic Increase electronic transactions by 30%transactions by 30%

Redesign supplier Redesign supplier quality reporting processquality reporting process

Set up supplier Set up supplier education groupseducation groups

Reduce supplier Reduce supplier base by 50%base by 50%

What Who When Measure Resource

Improve Billy 9-1-03 Average $5,000work Wray queueflow time per

job

. . .. . .

. . .. . .

. . .. . .

. . .. . .

. . .. . .

. . .. . .

. . .. . .



Balanced ScorecardBalanced Scorecard Finance — Finance — How should we look to our How should we look to our

shareholders?shareholders? Customer — Customer — How should we look to our How should we look to our

customers?customers? Processes — Processes — At which business At which business

processes must we excel?processes must we excel? Learning and Growing — Learning and Growing — How will we How will we

sustain our ability to change and sustain our ability to change and improve?improve?


Mobil’s Strategy MapMobil’s Strategy Map


Mobil’s Strategy MapMobil’s Strategy Map

Nongasoline products & Nongasoline products & servicesservices

More premium brandsMore premium brands

Volume growth

Delight the customer

Create new products & services

Personal growth

Net margin

Win-win dealer relations

Deliver products on spec, on time

Process improvement

Build best-in-class franchise

Functional excellence

Revenue Growth Strategy

FinancesFinances

CustomersCustomers

ProcessesProcesses

Learning and Learning and GrowthGrowth

Clean/safe/fastClean/safe/fast

Convenience storeConvenience store

Align goalsAlign goals

Teamwork, qualityTeamwork, quality

Strategic & job skillsStrategic & job skills

Develop business skillsDevelop business skills

Inventory managementInventory management

New technologyNew technology



Issues and TrendsIssues and Trends

Global markets, Global markets, sourcing, sourcing, operationsoperations

Virtual companiesVirtual companies Greater choiceGreater choice Emphasis on Emphasis on

serviceservice Speed and Speed and

flexibilityflexibility

Supply chainsSupply chains C-commerceC-commerce Technological Technological

advancesadvances KnowledgeKnowledge Environment Environment

and social and social responsibilitiesresponsibilities


The Changing CorporationThe Changing Corporation


The Changing CorporationThe Changing Corporation20TH CENTURY20TH CENTURY 21ST CENTURY21ST CENTURY

CHARACTERISTICCHARACTERISTIC CORPORATIONCORPORATION CORPORATIONCORPORATION

OrganizationOrganization The PyramidThe Pyramid The WebThe WebFocusFocus InternalInternal ExternalExternalStyleStyle StructuresStructures FlexibleFlexibleSource of strengthSource of strength StabilityStability ChangeChangeStructureStructure Self-sufficientSelf-sufficient InterdependenciesInterdependenciesResourcesResources Physical assetsPhysical assets InformationInformationOperationsOperations Vertical integrationVertical integration Virtual integrationVirtual integrationProductsProducts Mass productionMass production Mass customizationMass customizationReachReach DomesticDomestic GlobalGlobalFinancialsFinancials QuarterlyQuarterly Real-timeReal-timeInventoriesInventories MonthsMonths HoursHoursStrategyStrategy Top-downTop-down Bottom-upBottom-upLeadershipLeadership DogmaticDogmatic InspirationalInspirationalWorkersWorkers EmployeesEmployees Employees, free agentsEmployees, free agentsJob expectationsJob expectations SecuritySecurity Personal growthPersonal growthMotivationMotivation To competeTo compete To buildTo buildImprovementsImprovements IncrementalIncremental RevolutionaryRevolutionaryQualityQuality Affordable bestAffordable best No compromiseNo compromise

Table 2.1Table 2.1

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BA 320 Operations Management Chapter 2 Operations Strategy