Operations Strategy Kusdhianto Setiawan, SE, Siv.Øk Department of Management Faculty of Economics Gadjah Mada University

Strategy Formulation   Defining a primary task: the purpose of the firm – what the firm is in the business of doing  PT. KAI... Perusahaan jasa transportasi, bukan perusahaan jasa kereta api  Paramount Picture … perusahaan komunikasi, bukan perusahaan pembuatan film  Disney … perusahaan yang membuat orang happy, bukan perusahaan hiburan (entertainment)   Assesing Core Competencies. Core competency: what a firm does better than anyone else … distinctive competence … competitive advantage   Exceptional service, higher quality, faster delivery, lower cost   Determining order winner and order qualifier   Order qualifier: characteristic of a product or service that qualify it to be considered for purchase by customer   Order winner: characteristic of a product or service that wins order in the market   Order winner and order qualifier evolve over time   Positioning the firm, choosing one or two important things to concentrate on and doing them extremely well

Positioning Strategy Competing on cost Competing on cost Standardized products for large markets Standardized products for large markets Stabilizing the production process, tightening productivity standards, and investing in automatization Stabilizing the production process, tightening productivity standards, and investing in automatization Competing on quality Competing on quality Defensive or Reactive mode: minimizing defect rates or conforming to design specifications. Defensive or Reactive mode: minimizing defect rates or conforming to design specifications. Proactive mode: viewing quality as opportunity to please customers Proactive mode: viewing quality as opportunity to please customers Competing on flexibility Competing on flexibility The ability to produce a wide variety of products, to introduce new products and modify existing ones quickly, and to respond to customers need The ability to produce a wide variety of products, to introduce new products and modify existing ones quickly, and to respond to customers need Competing on Speed Competing on Speed McDonalds, FedEx, Citicorp, etc. McDonalds, FedEx, Citicorp, etc.

Process-Centered Strategy Core competencies are more likely to be processes Core competencies are more likely to be processes Processes cut accross functional lines and department Processes cut accross functional lines and department AccountingPurchasingManufacturingSales Product Dev. Order Fulfillment Supply Chain Mngt Customer Service Function Process Developing & Exploiting Core Competencies: Enhancing the value a competency provides to customersEnhancing the value a competency provides to customers Transforming an internal competence into a salable itemTransforming an internal competence into a salable item Applying competencies in a creative way to new products and servicesApplying competencies in a creative way to new products and services Creating new competencies and finding new marketsCreating new competencies and finding new markets

Policy Deployment Translate corporate strategy into measurable objectives Translate corporate strategy into measurable objectives Corporate Strategy Corporate Strategy Mission & Vision Mission & Vision Marketing Strategy Marketing Strategy Operations Strategy Operations Strategy Financial Strategy Financial Strategy Voice of the Business Voice of the Business Voice of The Customer Voice of The Customer Strategic Planning

Derivation of an Action Plan Using Policy Deployment Reduce Business Cycle time by 50% Reduce production Cycle by 10% Reduce Purchasing cycle by 30% Reduce queue time by 50% Reduce setup time by 50% Cut lot sizes in half Increase electronic transaction by 30% Redesign supplier quality reporting process Set up supplier education groups Reduce supplier base by 50%WhatWhoWhenMeasureResourceImprove Work flow BillyWray9-1-01AverageQueue Time per job $5000 ………

Operation Strategy Products and Services Products and Services Make-to-order: products are designed, produced, and delivered to customer specification in response to customer order Make-to-order: products are designed, produced, and delivered to customer specification in response to customer order Medical, legal, financial services Medical, legal, financial services Make-to-stock: products are desgined, produced for ”standard” customers in anticipation of demand Make-to-stock: products are desgined, produced for ”standard” customers in anticipation of demand Ready to wear apparel, books, tv, airline flights, spec homes, standard vacation package Ready to wear apparel, books, tv, airline flights, spec homes, standard vacation package Assemble-to-order: products are produced in standard modules to which options are added according to customer specification Assemble-to-order: products are produced in standard modules to which options are added according to customer specification Computer system, corporate training, industrial equipment Computer system, corporate training, industrial equipment

Operation Strategy: Processes and Technology The Product-Process Matrix The Product-Process Matrix Projects Batch Production Batch Production Mass Production Mass Production Continuous Production Continuous Production Standardization Volume Low High Low High

Operation Strategy: Processes and Technology The Service-Process Matrix The Service-Process Matrix Proffesional Services Proffesional Services Service Shop Service Shop Mass Service Service Factory Service Factory Customization Labor intencity High Low High Low

Operation Strategy Capacity and Facilities Capacity and Facilities How much capacity? Type of warehouse? Inventory handling? How many workers to handle materials or products? How much capacity? Type of warehouse? Inventory handling? How many workers to handle materials or products? Human Resources Human Resources determining skill level, degree, outlining training requirements, selection criteria, setting up policies on evaluation, compensation, and incentives determining skill level, degree, outlining training requirements, selection criteria, setting up policies on evaluation, compensation, and incentives Quality Quality Measures? Target level? Employees involvement? Types of training? Measures? Target level? Employees involvement? Types of training? Sourcing Sourcing Vertical integration, outsourcing, alliances Vertical integration, outsourcing, alliances Operating System Operating System Information technology for planning and controll systems Information technology for planning and controll systems