BA 320 Operations Management Chapter 2 Operations Strategy

BA 320 Operations Management Strategy Formulation 1.Define a primary task 2.Assess core competencies 3.Determine order winners & order qualifiers 4.Positioning the firm

BA 320 Operations Management Competing on Cost Eliminate all waste Eliminate all waste Invest in Invest in Updated facilities & equipment Updated facilities & equipment Streamlining operations Streamlining operations Training & development Training & development

BA 320 Operations Management Competing on Quality Please the customer Please the customer Understand customer attitudes toward and expectations of quality Understand customer attitudes toward and expectations of quality

BA 320 Operations Management Competing on Flexibility Produce wide variety of products Produce wide variety of products Introduce new products Introduce new products Modify existing products quickly Modify existing products quickly Respond to customer needs Respond to customer needs

BA 320 Operations Management Competing on Speed Fast moves Fast moves Fast adaptations Fast adaptations Tight linkages Tight linkages

BA 320 Operations Management Operations Role in Corporate Strategy Provide support for overall strategy of a firm Provide support for overall strategy of a firm Serve as firm’s distinctive competence Serve as firm’s distinctive competence Must be consistent Must be consistent Must be consistent with overall strategy Must be consistent with overall strategy

BA 320 Operations Management Operations Strategy at Wal-Mart

BA 320 Operations Management Operations Strategy at Wal-Mart Provide value for our customers Low prices, everyday Low inventory levels Linked communications between stores Short flow times Fast transportation system Cross-docking Focused locations EDI/satellites Wal-MartMission Competitive Priority Operations Strategy Operations Structure Enabling Process and Technologies Figure 2.1

BA 320 Operations Management Strategy and the Internet Create a distinctive business strategy Create a distinctive business strategy Strengthen existing competitive advantages Strengthen existing competitive advantages Integrate new and traditional activities Integrate new and traditional activities Must provide a unique value to the customer Must provide a unique value to the customer

BA 320 Operations Management Strategic Decisions in Operations

BA 320 Operations Management Strategic Decisions in Operations Products Processes and Technology Capacity Human Resources Quality Facilities Sourcing Services Operating Systems Figure 2.2

BA 320 Operations Management Products & Services Make-to-order Make-to-order Made to customer specifications after order received Made to customer specifications after order received Make-to-stock Make-to-stock Made in anticipation of demand Made in anticipation of demand Assemble-to-order Assemble-to-order Add options according to customer specification Add options according to customer specification

BA 320 Operations Management Processes & Technology Project Project One-time production of product to customer order One-time production of product to customer order Batch production Batch production Process many jobs at same time in batch Process many jobs at same time in batch Mass production Mass production Produce large volumes of standard product for mass market Produce large volumes of standard product for mass market Continuous production Continuous production Very high volume commodity product Very high volume commodity product

BA 320 Operations Management Product-Process Matrix

BA 320 Operations Management Product-Process Matrix Volume Low LowHighHigh Projects Batch Production Mass Production Continuous Production Standardization Figure 2.3

BA 320 Operations Management Service-Process Matrix

BA 320 Operations Management Service-Process Matrix Volume Low LowHighHigh Professional Service Service Shop Mass Service Service Factory Standardization Figure 2.4

BA 320 Operations Management Capacity & Facilities How much capacity to provide How much capacity to provide Size of capacity changes Size of capacity changes Handling excess demand Handling excess demand Hiring/firing workers Hiring/firing workers Need for new facilities Need for new facilities

BA 320 Operations Management Facilities Best size for facility? Best size for facility? Large or small facilities Large or small facilities Facility focus Facility focus Facility location Facility location Global facility Global facility

BA 320 Operations Management Human Resources Skill levels required Skill levels required Degree of autonomy Degree of autonomy Policies Policies Profit sharing Profit sharing Individual or team work Individual or team work Supervision methods Supervision methods Levels of management Levels of management Training Training

BA 320 Operations Management Quality Target level Target level Measurement Measurement Employee involvement Employee involvement Training Training Systems needed to ensure quality Systems needed to ensure quality Maintaining quality awareness Maintaining quality awareness Evaluating quality efforts Evaluating quality efforts Determining customer perceptions Determining customer perceptions

BA 320 Operations Management Sourcing Degree of vertical integration Degree of vertical integration Supplier selection Supplier selection Supplier relationship Supplier relationship Supplier quality Supplier quality Supplier cooperation Supplier cooperation

BA 320 Operations Management Operating Systems Execute strategy daily Execute strategy daily Information technology support Information technology support Effective planning & control systems Effective planning & control systems Alignment of inventory levels, scheduling priorities, & reward systems Alignment of inventory levels, scheduling priorities, & reward systems

BA 320 Operations Management Strategic Planning

BA 320 Operations Management Strategic Planning Mission and Vision Corporate Strategy Voice of the Business Voice of the Customer Marketing Strategy Operations Strategy Financial Strategy Figure 2.5

BA 320 Operations Management Policy Deployment Hoshin planning Hoshin planning Focuses employees on common goals & priorities Focuses employees on common goals & priorities Translates strategy into measurable objectives Translates strategy into measurable objectives Aligns day-to-day decisions with strategic plan Aligns day-to-day decisions with strategic plan

BA 320 Operations Management Derivation of an Action Plan

BA 320 Operations Management Derivation of an Action Plan Reduce business cycle time by 50% Reduce production cycle time by 30% Reduce queue time by 50% Reduce setup time by 50% Cut lot sizes in half Reduce purchasing cycle time by 30% Increase electronic transactions by 30% Redesign supplier quality reporting process Set up supplier education groups Reduce supplier base by 50% WhatWhoWhenMeasureResource ImproveBilly9-1-03Average$5,000 workWrayqueue flowtime per job... Figure 2.6

BA 320 Operations Management Balanced Scorecard Finance — How should we look to our shareholders? Finance — How should we look to our shareholders? Customer — How should we look to our customers? Customer — How should we look to our customers? Processes — At which business processes must we excel? Processes — At which business processes must we excel? Learning and Growing — How will we sustain our ability to change and improve? Learning and Growing — How will we sustain our ability to change and improve?

BA 320 Operations Management Mobil’s Strategy Map

BA 320 Operations Management Mobil’s Strategy Map Nongasoline products & services More premium brands Volume growth Delight the customer Create new products & services Personal growth Net margin Win-win dealer relations Deliver products on spec, on time Process improvement Build best-in-class franchise Functional excellence Revenue Growth Strategy Finances Customers Processes Learning and Growth Clean/safe/fast Convenience store Align goals Teamwork, quality Strategic & job skills Develop business skills Inventory management New technology Figure 2.7

BA 320 Operations Management Issues and Trends Global markets, sourcing, operations Global markets, sourcing, operations Virtual companies Virtual companies Greater choice Greater choice Emphasis on service Emphasis on service Speed and flexibility Speed and flexibility Supply chains Supply chains C-commerce C-commerce Technological advances Technological advances Knowledge Knowledge Environment and social responsibilities Environment and social responsibilities

BA 320 Operations Management The Changing Corporation

BA 320 Operations Management The Changing Corporation 20TH CENTURY21ST CENTURY CHARACTERISTICCORPORATIONCORPORATION Organization The PyramidThe Web Focus InternalExternal Style StructuresFlexible Source of strength StabilityChange Structure Self-sufficientInterdependencies Resources Physical assetsInformation Operations Vertical integrationVirtual integration Products Mass productionMass customization Reach DomesticGlobal Financials QuarterlyReal-time Inventories MonthsHours Strategy Top-downBottom-up Leadership DogmaticInspirational Workers EmployeesEmployees, free agents Job expectations SecurityPersonal growth Motivation To competeTo build Improvements IncrementalRevolutionary Quality Affordable bestNo compromise Table 2.1