To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Chapter 2 Operations Strategy To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.

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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Competing on Speed Fast moves Fast moves Fast adaptations Fast adaptations Tight linkages Tight linkages

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Operations Strategy at Wal-Mart

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Strategic Decisions in Operations

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Strategic Decisions in Operations Products Processes and Technology Capacity Human Resources Quality Facilities Sourcing Services Operating Systems Figure 2.2

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Product-Process Matrix

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Product-Process Matrix Volume Low LowHighHigh Projects Batch Production Mass Production Continuous Production Standardization Figure 2.3

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Service-Process Matrix

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Service-Process Matrix Labor Intensity High HighHighLow Professional Service Service Shop Mass Service Service Factory Customization Figure 2.4

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Strategic Planning

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Strategic Planning Mission and Vision Corporate Strategy Voice of the Business Voice of the Customer Marketing Strategy Operations Strategy Financial Strategy Figure 2.5

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Derivation of an Action Plan

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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?

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Mobil’s Strategy Map

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. The Changing Corporation

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. 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