ch02 - Operations Strategy.ppt

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

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Operations Operations ManagementManagementOperations StrategyOperations Strategy

Chapter 2Chapter 2


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Business ElementsBusiness Elements

Structural buildings, equipment, technology,

computer systems Infrastructural

organization, planning & control, decision rules, quality management, purchasing, product/service development

Personnel( )


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Merck – The mission of Merck is to provide society with superior products and services - innovations and solutions that improve the quality of life and satisfy customer needs - to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return

Hard Rock Café – To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success.

MissionMissionThe organization’s purpose for being; provides boundaries and focus


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Mission / Strategy / Core CompetenciesMission / Strategy / Core Competencies Mission – The organization’s purpose for being;

provides boundaries and focus

Business strategy – Action plan for the business to achieve the mission

Functional strategies – Translate the business strategy into specific actions for the functional areas

Core competencies – Organizational abilities/strengths, developed over a long period, which customers find valuable, and competitors find difficult to copy


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Strategy Linkages / AlignmentStrategy Linkages / Alignment All functional strategies must support the business strategy

Marketing strategy based on differentiation and customization Operations strategy to build to stock

Financial strategy to minimize capital investment Operations strategy to increase investment for quality improvement

Engineering strategy to specify an entirely new part when an existing part will do

Operations strategy for low cost


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Strategy ProcessStrategy Process

Operations Strategy - Translate business strategy into operations & supply chain actions - Provide value to targeted customers - Develop supporting core competencies

Other Functional Strategies - Marketing - Finance - Human Resources - Research & Development - Engineering

Mission Statement

Business Strategy - Targeted customers / markets - Areas of sustainable competitive advantage - Role of supply chain partners - Time frames & performance objectives

Strategic Alignment


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Four Performance DimensionsFour Performance Dimensions



Mission Statement


Quality - Performance quality- Conformance quality- Reliability quality

Time - Delivery speed- Delivery reliability

Flexibility - Volume flexibility- Mix flexibility- Changeover flexibility

Cost - Low-cost operations


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Order Winners vs. Order QualifiersOrder Winners vs. Order Qualifiers

Item

Conformancequality 99.9% pure - Meets 98% pure – Does not meet

Delivery 3 days 2 days

Cost $30 / liter $20 / liter

Flexibility 100 liter minimum order 50 liter minimum order

Supplier A Supplier B

Order winners – performance dimensions that differentiate a company’s products and services from its competitors

Order Qualifiers – performance dimensions on which customers expect a minimum level of performance


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Operations StrategyOperations Strategy



Mission Statement


Operations strategy

• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions

Services Manufacturing• Customized services• Assemble-to-order• Standardized services

• Make-to-order• Assemble-to-order• Make-to-stock


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Operations StrategyOperations Strategy

Make to Order (MTO) Receive order before producing goods e.g. Machine shop

Make to Stock (MTS) Satisfy customer orders from inventory e.g. Paper

Assemble to Order (ATO) Stock standardized components/assemblies assemble finished product to customer order e.g. Dell Computer

Service Strategies Manufacturing Strategies

Customized Services Strategy Individualized services e.g. Health clinic

Assemble to Order Strategy Assemble standardized offerings for a specific customer’s needs e.g. Cellular phone service

Standardized Services Strategy High volume with little variety e.g. U.S. Postal Service


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Generic Operations StrategiesGeneric Operations Strategies



Mission Statement


Differentiation – better / unique

Cost leadership – cheaper / value

Quick response – faster


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Operations Strategies - ExamplesOperations Strategies - Examples


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Closing the LoopClosing the Loop



Mission Statement


Strategic Alignment


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OM’s Contribution to StrategyOM’s Contribution to Strategy

Response(Faster)

Quality

Product

Process

Location

Layout

Human Resource

Supply Chain

Inventory

Scheduling

Maintenance

HP’s ability to follow the printer market

Differentiation(Better)

Cost leadership(Cheaper)

Southwest Airlines No-frills service

Sony’s constant innovation of new products

Pizza Hut’s five-minute guarantee at lunchtimeFederal Express’s “absolutely, positively on time”

Motorola’s automotive products ignition systemsMotorola’s pagers

IBM’s after-sale service on mainframe computers

Fidelity Security’s broad line of mutual funds

FLEXIBILITY

DesignVolume

LOW COST

DELIVERYSpeedDependability

QUALITYConformance

Performance

AFTER-SALE SERVICE

BROAD PRODUCT LINE

Operations Decisions Examples Specific

Strategy UsedCompetitive Advantage


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Strategy and Issues During a Product’s LifeStrategy and Issues During a Product’s Life


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SummarySummary Strategy is how we accomplish our mission Functional strategies must be aligned to support

the business strategy OM goals are to be faster, better and/or cheaper Operations strategy:

Where the product or service is in its life cycle Determines our mix of faster, better, and cheaper to

satisfy our customers (trade-offs where necessary) Specifies process choice, work flow, order processing,

inventory, capacity, etc.

ch02 - Operations Strategy.ppt

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