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

2. Relevant web sites

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

4. Primary Task What business the firm sees itself in
How the firm adds value to its customer
THE FIRM’S VALUE PROPOSITION

5. Core Competencies What a firm does better than anyone else
Based on experience and knowledge
NOT products and services, equipment and technologies or customers and markets
Core competencies need to align with the firm’s value proposition

6. Order Winner
The characteristic of a product or service that wins orders in the marketplace

7. Order Winners and Core Competencies
Ideally, the marketplace order winner should align with a firm’s core competency

8. Positioning Making strategic choices
No firm can be all things to all people
Choosing one or two important dimensions and doing them extremely well
An effective positioning strategy considers the needs of the marketplace, strengths/weaknesses of the organization, and position of competitors.

9. Dimensions of Competition
Cost C Y
Quality Y C
Flexibility Y C
Speed C Y

10. Competing on Cost Eliminate all waste Invest in
Updated facilities & equipment
Streamlining operations
Training & development

11. Competing on Quality Please the customer
Understand customer attitudes toward and expectations of quality

12. Competing on Flexibility
Produce wide variety of products
Introduce new products
Modify existing products quickly
Respond to customer needs

13. Competing on Speed
Fast moves
Fast adaptations
Tight linkages

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

15. Operations Strategy at Wal-Mart

16. 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-Mart
Mission
Competitive Priority
Operations Strategy
Operations Structure
Enabling Process and Technologies
Figure 2.1

17. Strategy and the Internet
Create a distinctive business strategy
Strengthen existing competitive advantages
Integrate new and traditional activities
Must provide a unique value to the customer

18. Strategic Decisions in Operations

19. Strategic Decisions in Operations
Products
Processes and Technology
Capacity
Human Resources
Quality
Facilities
Sourcing
Services
Operating Systems
Figure 2.2

20. Products & Services Make-to-order Make-to-stock Assemble-to-order
Made to customer specifications after order received
Make-to-stock
Made in anticipation of demand
Assemble-to-order
Add options according to customer specification

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

22. Product-Process Matrix

23. Product-Process Matrix
Volume
Low
High
Projects
Batch
Production
Mass
Continuous
Standardization
Figure 2.3

24. Service-Process Matrix

25. Service-Process Matrix
Labor Intensity
High
Low
Professional Service
Service Shop
Mass
Service
Service Factory
Customization
Figure 2.4

26. Capacity & Facilities How much capacity to provide
Size of capacity changes
Handling excess demand
Hiring/firing workers
Need for new facilities

27. Facilities Best size for facility? Large or small facilities
Facility focus
Facility location
Global facility

28. Human Resources Skill levels required Degree of autonomy Policies
Profit sharing
Individual or team work
Supervision methods
Levels of management
Training
Leadership

29. Quality Target level Measurement Employee involvement Training
Systems needed to ensure quality
Maintaining quality awareness
Evaluating quality efforts
Determining customer perceptions

30. Sourcing Degree of vertical integration Supplier selection
Supplier relationship
Supplier quality
Supplier cooperation

31. Operating Systems Execute strategy daily
Information technology support
Effective planning & control systems
Alignment of inventory levels, scheduling priorities, & reward systems

32. Strategic Planning

33. Strategic Planning Mission and Vision Corporate Strategy Voice of the
Business
Customer
Marketing Strategy
Operations Strategy
Financial Strategy
Figure 2.5

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

35. Derivation of an Action Plan

36. 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%
What Who When Measure Resource
Improve Billy Average $5,000
work Wray queue
flow time per
job
. . .
Figure 2.6

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

38. Mobil’s Strategy Map

39. Mobil’s Strategy Map Figure 2.7 Finances Customers Processes
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
Nongasoline products & services
More premium brands
Figure 2.7

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

41. The Changing Corporation

42. The Changing Corporation
20TH CENTURY 21ST CENTURY
CHARACTERISTIC CORPORATION CORPORATION
Organization The Pyramid The Web
Focus Internal External
Style Structures Flexible
Source of strength Stability Change
Structure Self-sufficient Interdependencies
Resources Physical assets Information
Operations Vertical integration Virtual integration
Products Mass production Mass customization
Reach Domestic Global
Financials Quarterly Real-time
Inventories Months Hours
Strategy Top-down Bottom-up
Leadership Dogmatic Inspirational
Workers Employees Employees, free agents
Job expectations Security Personal growth
Motivation To compete To build
Improvements Incremental Revolutionary
Quality Affordable best No compromise
Table 2.1