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Ms.Pooja Patnaik Session 5-15 Slide 2 Operation Strategy: Operation strategy is concerned with setting broad policies and plans for using the resources of a firm to best support its long term competitive strategy. Slide 3 Elements of Production/Operations Strategy Operations strategy comprises six components : 1. Positioning the production system, 2. Focus of factories and service facilities, 3. Product/Service design and development, 4. Technology selection and process development, 5. Allocation of resources to strategic alternatives, and 6. Facility planning. Slide 4 Operations Strategy Example Strategy Process Customer Needs Corporate Strategy Operations Strategy Decisions on Processes and Infrastructure More Product Increase Org. Size Increase Production Capacity Build New Factory Slide 5 Competitive Dimensions Cost or Price Make the Product or Deliver the Service Cheap Quality Make a Great Product or Deliver a Great Service Delivery Speed Make the Product or Deliver the Service Quickly Delivery Reliability Deliver It When Promised Coping with Changes in Demand Change Its Volume Flexibility and New Product Introduction Speed Change It Other Product-Specific Criteria Support It Slide 6 Order Qualifiers and Winners Order qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customers Example: A brand name car can be an order qualifier. Order winners are the criteria that differentiates the products and services of one firm from another Repair services can be order winners Examples: Warranty, Roadside Assistance, Leases, etc Slide 7 Session-6 Slide 8 Strategy Design Process Strategy Map Financial Perspective Customer Perspective Internal Perspective Learning and Growth Perspective Improve Shareholder Value Customer Value Proposition Build-Increase-Achieve A Motivated and Prepared Workforce What it is about! Slide 9 Kaplan and Nortons Generic Strategy Map In the Kaplan and Nortons Generic Strategy Map, under the Financial Perspective, the Productivity Strategy is generally made up from two components : 1. Improve cost structure: Lower direct and indirect costs 2. Increase asset utilization: Reduce working and fixed capital In the Kaplan and Nortons Generic Strategy Map, under the Financial Perspective, the Revenue Growth Strategy is generally made up from two components: 1. Build the franchise: Develop new sources of revenue 2. Increase customer value: Work with existing customers to expand relationships with company Slide 10 Kaplan and Nortons Generic Strategy Map (Cont.) In the Kaplan and Nortons Generic Strategy Map, under the Customer Perspective, there are three ways suggested as means of differentiating a company from others in a marketplace: 1. Product leadership 2. Customer intimacy 3. Operational excellence In the Kaplan and Nortons Generic Strategy Map, under the Learning and Growth Perspective, there are three principle categories of intangible assets needed for learning: 1. Strategic competencies 2. Strategic technologies 3. Climate for action Slide 11 Strategic Management Involves Five Steps Step1 : Select the corporate mission and major corporate goals. Step2: Analyze the opportunities and threats or constraints that exist in the external environment. Also analyze the strengths and weaknesses that exist in internal environment. Step3: Formulate strategies that will match the organization's strengths & weaknesses with the environment's threats and opportunities. Step 4: Implement the strategies. Step5: Evaluate and control activities to ensure that the organization's objectives are achieved. Slide 12 Developing a manufacturing strategy- Main objectives are- To translate required competitive dimension (obtained from marketing) into specific performance requirements for operation To make the plans necessary to ensure that operation capabilities are sufficient to accomplish them Steps in Developing a Manufacturing Strategy- 1. Segment the market according to the product group 2. Identify product requirements, demand patterns, and profit margins of each group 3. Determine order qualifiers and winners for each group 4. Convert order winners into specific performance requirements Slide 13 Service Strategy Capacity Capabilities Process-based Capacities that transforms material or information and provide advantages on dimensions of cost and quality Systems-based Capacities that are broad-based involving the entire operating system and provide advantages of short lead times and customize on demand Organization-based Capacities that are difficult to replicate and provide abilities to master new technologies Slide 14 Productivity: Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio: Outputs Inputs Slide 15 Session-7 Slide 16 Why a product life cycle? A companys positioning and differentiation strategy must change as the product, market, and competitors change over the product life cycle(PLC) When we say that a product has a life cycle we assert four things: i. Products have a limited life. ii. Products sales pass through distinct stages, each posing different challenges, opportunities and problems to the seller. iii. Profits rise and fall at different stages of the product life cycle. iv. Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stages. Slide 17 Product Life Cycle Product life cycle is the course of a products sales and profits over time. Product life cycle(PLC) deals with the life of a product in the market with respect to business or commercial costs and sales measures. The five stages of each product lifecycle are product development, introduction, growth, maturity and decline. Slide 18 Time Product Develop- ment Introduction Profits Sales GrowthMaturityDecline Sales and Profits Sales and Profits Over the Products Lifetime Product Life Cycle Slide 19 Sales Costs Profits Marketing Objectives Product Price Low High cost per customer Negative Create product awareness and trial Offer a basic product Use cost-plus formula Distribution Build selective distribution Promotion Heavy to entice product trial Summary of Characteristics, Objectives, & Strategies Introduction Stage of the PLC Slide 20 Sales Costs Profits Marketing Objectives Product Price Rapidly rising Average cost per customer Rising Maximize market share Offer extension, service, warranty Penetration strategy Distribution Build intensive distribution Promotion Reduce to take advantage of demand Summary of Characteristics, Objectives, & Strategies Growth Stage of the PLC Slide 21 Sales Costs Profits Marketing Objectives Product Price Peak Low cost per customer High Maximize profits while defending market share Diversify brand and models Match or best competitors Distribution Build more intensive distribution Promotion Increase to encourage brand switching Summary of Characteristics, Objectives, & Strategies Maturity Stage of the PLC Slide 22 Sales Costs Profits Marketing Objectives Product Price Declining Low cost per customer Declining Reduce expenditures and milk the brand Phase out weak items Cut price Distribution Selective: phase out unprofitable outlets Promotion Reduce to minimum level Summary of Characteristics, Objectives, & Strategies Decline Stage of the PLC Slide 23 Product Design and Production Design Product Design: Concerned with form and function of a product. It refers to the arrangement of elements or parts that collectively form a product. Production Design: Concept of designing products from the point of view of producibility. Objectives of Product Design: The overall objective is profit generation in the long run. To achieve the desired product quality. To reduce the development time and cost to the minimum. To reduce the cost of the product. To ensure producibility or manufacturability (design for manufacturing and assembly). Slide 24 Factors Influencing Product Design i. Customer requirements ii. Convenience of the operator or user iii. Trade off between function and form iv. Types of materials used v. Work methods and equipments vi. Cost/Price ratio vii. Product quality viii. Process capability ix. Effect on existing products x. Packaging Slide 25 Characteristics of Good Product Design i. Function or performance ii. Appearance or aesthetics iii. Reliability iv. Maintainability v. Availability vi. Producibility vii. Simplification viii. Standardisation ix. Specification x. Safety Slide 26 6 stages of product development Planning Concept Development System-Level design Design Detail Testing and Refinement Production Ramp-up Slide 27 Process, Process Planning, Process design? Process: A process is a sequence of activities that is intended to achieve some result, for example, to create added value for the customers Process Planning: Concerned with planning the conversion processes needed to convert the raw material into finished products. Process Design: Concerned with the overall sequences of operations required to achieve the product specifications Slide 28 Types of Processes Slide 29 Process Performance Metrics Process performance metrics defined: Measurement of different process characteristics that tell us how a process is performing Slide 30 Process Selection, Process Strategy Process selection: refers to the way production of goods or services is organized. Process strategy: An organization's approach to selection of the process for the conversion of resource inputs into outputs. Key aspects in process strategy include: i. Make or buy decisions ii. Capital intensity and iii. Resource flexibility Slide 31 Process Strategy Make or Buy is the 1 st step of process planning. Factors considered in make or buy decisions: Available capacity Expertise Quality consideration Nature of demand Cost Capital Intensity: is the mix of equipment and human skills in a production process. Resource Flexibility: it is the ease with which equipment and works can handle a wide variety of products, levels of output, duties and function. Slide 32 Vertical Integration: It is the amount of production and distribution chain, from suppliers of the components to the delivery of products and services to customers, which is brought under the ownership of the firm. The degree to which a firm needs to be vertically integrated determines how many production process needs to be planned and designed to be carried out in-house or by outsourcing. Vertical integration is based on make or buy decisions. Where make is more integration and buy means more outsourcing Slide 33 cond: Types: Backward integration: moving towards the sources of raw material. Forward integration: the firm acquires the channel of distribution Advantage and Disadvantage of Vertical Integration: AdvantagesDisadvantages Sometimes increases market share and allow the firm to enter foreign market easily Not attractive for low volume Can achieve saving in production cost and produce higher quality goods High capital investment and operating cost Can achieve more delivery timeLess ability to react more quickly to changes in customer demands, competitive actions and new technologies Better utilization of all types of resources Slide 34 Session-8 Slide 35 Process flowcharting is the use of a diagram to present the major elements of a process The basic elements can include tasks or operations, flows of materials or customers, decision points, and storage areas or queues It is an ideal methodology by which to begin analyzing a process Process Flowcharting Defined Slide 36 Flowchart Symbols Tasks or operations Examples: Giving an admission ticket to a customer, installing a engine in a car, etc. Decision Points Examples: How much change should be given to a customer, which wrench should be used, etc. Purpose and Examples Slide 37 Examples: Sheds, lines of people waiting for a service, etc. Examples: Customers moving to a seat, mechanic getting a tool, etc. Storage areas or queues Flows of materials or customers Purpose and Examples Flowchart Symbols Slide 38 Types of Processes Single-stage Process Stage 1 Stage 2Stage 3 Multi-stage Process Slide 39 A buffer refers to a storage area between stages where the output of a stage is placed prior to being used in a downstream stage Types of Processes (Continued) Stage 1Stage 2 Buffer Multi-stage Process with Buffer Slide 40 Blocking Occurs when the activities in a stage must stop because there is no place to deposit the item just completed If there is no room for an employee to place a unit of work down, the employee will hold on to it not able to continue working on the next unit Starving Occurs when the activities in a stage must stop because there is no work If an employee is waiting at a work station and no work is coming to the employee to process, the employee will remain idle until the next unit of work comes Other Process Terminology Slide 41 Bottleneck Occurs when the limited capacity of a process causes work to pile up or become unevenly distributed in the flow of a process If an employee works too slow in a multi-stage process, work will begin to pile up in front of that employee. In this is case the employee represents the limited capacity causing the bottleneck. Pacing Refers to the fixed timing of the movement of items through the process Other Process Terminology (Continued) Slide 42 Make-to-order Only activated in response to an actual order Both work-in-process and finished goods inventory kept to a minimum Make-to-stock Process activated to meet expected or forecast demand Customer orders are served from target stocking level Other Types of Processes Slide 43 Operation time = Setup time + Run time Throughput time = Average time for a unit to move through the system Cycle time = Average time between completion of units Throughput rate = 1. Cycle time Efficiency = Actual output Standard Output Velocity = Throughput time Value-added time Process Performance Metrics Slide 44 Perform activities in parallel Change the sequence of activities Reduce interruptions Process Throughput Time Reduction Slide 45 Session-9 Slide 46 Design of Services Service design is unique in that the service and entire service concept are being designed must define both the service and concept - Physical elements, aesthetic & psychological benefits e.g. promptness, friendliness, ambiance Product and service design must match the needs and preferences of the targeted customer group Slide 47 The Nature of Services 1. Everyone is an expert on services 2. Services are idiosyncratic 3. Quality of work is not quality of service 4. Most services contain a mix of tangible and intangible attributes 5. High-contact services are experienced, whereas goods are consumed 6. Effective management of services requires an understanding of marketing and personnel, as well as operations 7. Services often take the form of cycles of encounters involving face-to-face, phone, Internet, electromechanical, and/or mail interactions Slide 48 2010 Wiley Service Design Matrix Service Characteristics Pure services Quasi-Manufacturing Mixed services Service Package The physical goods The sensual benefits The psychological benefits Differing designs Substitute technology for people Get customer involved High customer attention Slide 49 Service Strategy: Focus and Advantage Performance Priorities Treatment of the customer Speed and convenience of service delivery Price Variety Quality of the tangible goods Unique skills that constitute the service offering Slide 50 Characteristics of a Well-Designed Service System Each element of the service system is consistent with the operating focus of the firm It is robust It is structured so that consistent performance by its people and systems is easily maintained It provides effective links between the back office and the front office so that nothing falls between the cracks It manages the evidence of service quality in such a way that customers see the value of the service provided It is cost-effective Slide 51 Session-10 Slide 52 Design: Form design: how a product looks Functional design: how a product performs Concurrent Design Improves quality of early design decisions Decentralized -suppliers complete detailed design Incorporates production process Often uses a price-minus system Scheduling and management can be complex as tasks are done in parallel Slide 53 Technology in design: CAD -Computer Aided Design Assists in creating and modifying designs CAE -Computer Aided Engineering Tests & analyzes designs on computer screen CAD/CAM -Design & Manufacturing Automatically converts CAD data into processing instructions for computer Slide 54 Design for Manufacturability Traditional Approach We design it, you build it or Over the wall Concurrent Engineering Lets work together simultaneously Slide 55 Design for Manufacturing and Assembly Greatest improvements related to DFMA arise from simplification of the product by reducing the number of separate parts: 1. During the operation of the product, does the part move relative to all other parts already assembled? 2. Must the part be of a different material or be isolated from other parts already assembled? 3. Must the part be separate from all other parts to allow the disassembly of the product for adjustment or maintenance? Slide 56 Designing for the Customer Quality Function Deployment Value Analysis/ Value Engineering Ideal Customer Product House of Quality Slide 57 Definition: 1. QFD- a process that helps a company determine the products characteristics important to the customer and to evaluate its own products in relation to others. 2. HOUSE OF QUALITY- a matrix that helps a product design team translate customer requirement into operating and engineering goals. 3. VALUE ANALYSIS- analysis with the purpose of simplifying products and process by achieving a equivalent or better performance at a lower cost. Slide 58 Measuring Product Development Performance Measures Freq. Of new products introduced Time to market introduction Number stated and number completed Actual versus plan Freq. Of new products introduced Time to market introduction Number stated and number completed Actual versus plan Time-to-market Productivity Quality Engineering hours per project Cost of materials and tooling per project Actual versus plan Engineering hours per project Cost of materials and tooling per project Actual versus plan Conformance-reliability in use Design-performance and customer satisfaction Conformance-reliability in use Design-performance and customer satisfaction Performance Dimension Slide 59 Session-11 Slide 60 Key Term PLANT WITHIN A PLANT- a concept in which different locations within a facility are dedicated to different product lines. each location is operated according to its own strategy to minimize the confusion associated with shifting from one type of strategy to another. STRADDLING- occurs when a company seeks to match what a competitor is doing by adding new features, services, or technologies to existing activities CORE- CAPABILITIES- skills that differentiate a manufacturing of a service firm from its competitors Slide 61 Job shop- a process structure suited for low volume production of a great variety of non-standard products. Eg- airplane manufacturers, plants that make custom designed printed circuit boards etc. Batch shop-a process structure that produces a variety of standard products at relatively low volume. Helps in reducing the impact of set up time on equipment. Eg- heavy equipment, electronic devices etc Assembly Line- a process structure designed to make discrete parts. Parts are moved through a set of specially designed workstation at a controlled rate Eg- manual assembly of toy and appliances Continuous Flow-an often automated process structure that converts the raw material into finished goods in one continuous process. Eg.- petroleum, chemicals Key Terms- Slide 62 Key terms to remember- 1.CONTRACT MANUFACTURERS- Companies that specialize in manufacturing products for other companies and have become successful. These companies are called contract manufacturers. Thus simply we can put that as a contract manufacturer is an organization capable of manufacturing or purchasing all the components needed to produce a finished product or services. 1. CORE COMPETENCY- a companys core competency is the one thing that it can do better than its competitors. Core competency gives a long term competitive Advantage to the company 1.Concurrent engineering- emphasizes cross functional integration and concurrent development of a product and its associated processes Slide 63 Project Assignment Visit a nearby branch of a bank and observe the various inputs and outputs in the transformation process. Make a schematic diagram to represent the transformation process including the random disturbances and the feedback mechanism. Find out the quality monitors for monitoring the quality of inputs to the process. What type of process design is followed by the bank.