Operations and StrategyDr. Ron Lembke

Mission and Vision?Vision: reason for existence, long-

termMission: how to accomplish the

VisionTo 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.

(Merck mission statement)

2015

Values & EthicsHow we’re going to behave

Behaviors, Ethics – What about suppliers?Shapes decision making

August, 2015

Mission Statement“Without a clear mission, an

organization is unlikely to achieve its true potential, because there is little direction for formulating strategies.”

Wouldn’t the same be true about people?

My Favorite GuruWhen you think of

something, put it on a list.

Check your lists regularly.

Don’t get sucked into email distractions.

Get rid of the clutter you don’t need.

Impact of OperationsEnterprise Resource Planning systemsData Mining – data warehousesData Analytics – ongoing search for

improvementE-Commerce – flawless executionGlobalization – suppliers everywhere

What about subcontractors?Sustainability – there’s gold in them thar hills

What is strategy?A Plan for achieving the MissionCore Competencies

Company’s distinct abilitiesSource of competitive advantageSkills that differentiate the firm from its

competitorsWhat you could never dare trust to anyone else

Soft drinks: the secret sauceAutomobiles: designing engines

Competitiveness:A firm’s relative position in comparison to other

firms in the marketplace

StrategyStrategy: a plan for achieving the mission

Each functional area (accounting, finance, marketing) determines its “supporting mission”

Tactics: the methods to be used to achieve the strategic goals.Must support mission, corporate values

Michael PorterThree ways to achieve corporate mission:1. Differentiation: Make your product different

and / or better2. Cost Leadership (lower prices): Wal- Mart,

Southwest Airlines3. Quick Response: Pizza Hut, FedEx

Purchasing Triangle

Price

Quality

Speed“Don’t be sad; two out of three

ain’t bad” -- Meatloaf

Competitive DimensionsCost – make it cheapQuality and Reliability – make it goodSpeed – make it fastReliability – deliver when promisedResponsive – exactly what the customer

wantsCope with Change – change volumeNew product speedCustomer supportQuality – much harder to assess than speed

or cost

Focus

CompetitivenessOrder qualifiers: screening criterion that

allows your products to be considereddeliver on-time, reliability, general quality

Order Winners: criterion that differentiates your service/product above the competitionprice, quality, reliability“nice to haves” become “must haves” over time

How will you beat the competition?

Responsiveness – Supply Chain designPrice / Quality / Speed?Decoupling Point

Make to Stock – ready on the shelf – Breyer’sAssemble to Order – parts waiting for an order – DQ Make to Order – Raw Materials waiting – Cold StoneEngineer to Order – Anything you want – Home made

Design Produce Assemble Deliver

MTS

ATO

MTO

ETO

Impact of Life Cycle

Cassettes

Records

iTunes

8-Track

CDs

DATMiniDisc

Introduction Growth Maturity Decline

Pandora

YouTubeXM

AM/FM

Sony HX

Impact of Life Cycle

RecordsDVD Audio

Introduction Growth Maturity Decline

Impact of Life CycleIntroduction: develop product, small-scale

production, customized, expensiveGrowth: ramp up production, marketing,

increasing standardization, lower pricesMaturity: standardized, volume production,

optimization, falling pricesDecline: cost minimization, eliminate

unprofitable products

ProductivityProductivity = Outputs / InputsPartial: Output/Labor or Output/Capital

320 miles driven / 8.2 gallons of gas = 39 mpg25 tons of strawberries / 50 acres = 0.5

tons/acreMultifactor:

Output / (Labor + Capital + Energy )20 tons of strawberries / ($2,250 chemicals +

$2,500 hoop house costs + $1,250 Planting + $12,000 harvesting)

= 20/18,000 = 0.00111

Total Factor Productivity IncreasesTake labor and capital

into account“percentage increase

in output that is not accounted for by changes in the volume of inputs of capital and labour.”

Source: Economist, 2009