Operations Strategy

Today’s competitive market Buyer’s market Buyer wants it faster, better, and cheaper/customised Competitors are global Increasing short Life- cycles

Car choices in 1980 Ambassador Premier Standard-Herald

What are the choices in 2010 ? Ford BMW RenaultNissan Toyota Audi MercedesMitsubishi VolkswagenGM Hyundai Fiat

What is the impact of this global competition? Operations must achieve simultaneous improvement of price, quality, and delivery speed.

What is a strategy? “Strategy is the determination of the basic long-term goals and the objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”

 Strategic planning exercise ◦ Enables an organization to respond to the market needs in the most effective manner ◦ By aligning various resources and activities in the organization ◦ To deliver products & services that are likely to succeed in the market  Operations Strategy ◦ Is a process by which key operations decisions are made that are consistent with the overall strategic objectives of a firm ◦ Decisions in the operations function are made on the basis of the inputs from the overall corporate strategy Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Operations Strategy Customer NeedsCorporate Strategy Operations Strategy Alignment Core Competencies Decisions Processes, Infrastructure, and Capabilities

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.(criterion for purchase by customer e.g. Brand) 4. Convert order winners into specific performance requirements.(differentiation, e.g. warranty, quick response, Lease)

Operations Strategy - Wal-Mart(USA) Corporate Strategy (Gain competitive advantage by) providing customers access to quality goods, when and where needed, at competitive prices Operations Strategy –Short flow times –Low inventory levels Operations Structure –Cross docking –EDI –Fast transportation system –Focused locations –Communication between retail stores

Wal-Mart – Operations Strategy Inventory at retail stores turned over twice a week (Industry averages once every two weeks) Improved targeting of products to markets Sourcing of Products – World-wide Sales per square foot increased from $140 in 1991 to $250 in 2004 (Industry average increased from $110 to $150). Sales revenue:$250bn

Core Competence Competitiveness core competenciesCompetitiveness derives from an ability to build, at lower cost and more speedily than competitors, the core competencies that spawn unanticipated products. collective learning –Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies. harmonizing streams of technology –Core competence is about harmonizing streams of technology. organization of work delivery of value –Core competence is about the organization of work and the delivery of value. Companies need to do a better job of leveraging technologies and offering a wider variety of products on the same technology platform..

CORE COMPETANCE…. HOW TO IDENTIFY ? WHAT IT DOES BEST WHAT IT CAN DO.. OTHERS CANNOT DO WHAT WILL PERMIT IT TO ACHIEVE THE BEST IN THE WORLD STATUS(GAP) W.R.T. WHAT IT CAN NOT DO DEVELOP PLANS TO FULLY EXPLOIT CAPABILITIES

CORE COMPETANCY…. EXAMPLES RELIANCE, AMUL, HLL, INFOSYS SONY - MINIATURISATION HONDA - MOTORS MOTOROLA - WIRELESSCOMMUNICATION MCDONALD - LOCALISATION/HYGIENE

OM Decisions Strategic Decisions Design Decisions Operating Decisions

Yamaha announces plans for a new factory, making it the worlds largest motorcycle manufacturer (1981) – Honda responds “Yamaha wo tsubusu!” –(“We will crush, squash, slaughter Yamaha”) Honda cut prices, increased advertising, flooded distribution channels Both firms started with about 60 models – Yamaha introduced 37 product line changes during next 18 months – Honda introduced 113 new products, including new styles and new technologies (4-valve engines, composite materials,...) Yamaha decimated, despite drastic price cuts, has 12 month inventory of unsold motor cycles Yamaha capitulates, Pres. Eguchi publicly apologizes Honda wins war with superior design, cycle times

 OPERATIONAL EXCELLENCE  ON-TIME DELIVERY PERFORMANCE  ZERO ERROR  INVENTORY REDUCTION

Questioning The Process ``It is always amazing how many of the things we do will never be missed. And nothing is less productive than to make more efficient what should not be done at all.” Peter Drucker

The End