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Operations Operations ManagementManagement
Productivity & Productivity & Competitive AdvantageCompetitive Advantage
Stages in the Product Stages in the Product Life CycleLife Cycle
Introduction
Growth
Maturity
Decline
Gro
wth
rate
mp3 playersmp4 players CD players
iphone
Floppy Disks
cassette players
DVD’s
Fax Machine
Best period to increase market share R&D engineering are critical
Introduction
Strategy & Issues During Strategy & Issues During Product LifeProduct Life
Company Strategy & Issues
Product design and development are critical Frequent product and process design changes Short production runs High production costs Utmost attention to quality Quick elimination of market-revealed design
defects
OM Strategy & Issues
Strategy & Issues During Strategy & Issues During Product LifeProduct Life
Sensitive to Changes in price or quality Marketing is critical Strengthen niche
Growth
Company Strategy & Issues
OM Strategy & Issues
Forecasting is critical Product and process reliability Competitive product improvements and
options Enhance distribution
Strategy & Issues During Strategy & Issues During Product LifeProduct Life
Poor time to increase market share Competitive costs become critical Usually poor time to change quality or price Defend position via fresh promotional and
distribution approaches
Maturity
Company Strategy & Issues
OM Strategy & Issues
Standardization - Increasing stability of manufacturing process
Less rapid product changes and more minor annual model changes
Optimum capacity Long production runs Re-examination of necessity of design changes
Strategy & Issues During Strategy & Issues During Product LifeProduct Life
Cost control critical to market share
Decline
Company Strategy & Issues
OM Strategy & Issues
Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not
returning a good margin Reduce capacity
Strategy Development and Strategy Development and ImplementationImplementation
Understand issues – research,
preconditions, dynamics
Research High return on investment
High product quality (relative to competition)
High capacity utilization
High operating efficiency
High capital turnover
Strategy Development and Strategy Development and ImplementationImplementation
Understand issues – Preconditions Strengths and Weaknesses of competitors as well as
new entrants into the market, substitutes
Current and prospective environmental,
technological, legal and economic issues.
Product life cycle
Resources available within the firm and within the
OM functions
Integration of OM strategy with the company’s
strategy and other functional areas.
Strategy Development and Strategy Development and ImplementationImplementation
Understand issues – Dynamics
Strategic changes due to two
reasons: Changes within the org.
Personnel, finance, product life
Changes in the environment
Strategy Development and Strategy Development and ImplementationImplementation
Form a strategy for competitive
advantage
Identify critical success factors Critical
success factors are the factors that
are key to achieving competitive
advantage.
Build and staff the organization
Integrate OM with other activities.
Identifying Identifying Critical Success FactorsCritical Success Factors
Decisions Sample Option Product Customized, or standardized Quality Define customer expectations and how to achieve them Process Facility size, technology, capacity Location Near supplier or customer Layout Work cells or assembly line Human resource Specialized or enriched jobs Supply chain Single or multiple source suppliers Inventory When to reorder, how much to keep on hand Schedule Stable or fluctuating productions rate Maintenance Repair as required or preventive maintenance
MarketingServiceDistributionPromotionChannels of distributionProduct positioning (image, functions)
Finance/AccountingLeverageCost of capitalWorking capitalReceivablesPayablesFinancial controlLines of credit
Production/Operations
CSF’s of MicrosoftCSF’s of Microsoft
It focuses on one business – software
It thinks globally – operates and sells
Senior management involved in
product development process
It recruits and retains top people in
its field
Emphasizes on speed to market
Southwest Airline’s Low Cost Southwest Airline’s Low Cost Competitive Advantage CSF’sCompetitive Advantage CSF’s
Courteous, but limited passenger service
Lean, productive employees
Short haul, point-to-point routes, often to secondary
airports
High aircraft utilization
Standardized fleet of Boeing 737 aircraft
Frequent, reliable schedules
Competitive Advantage:Low Cost
