1. OM&PM/Class 1b1 1.Operations Strategy –Class 1a: Introduction to Operations –Class 1b: Strategic Operational Audits »Strategic Operational Audit »Shouldice Hospital »Michigan Manufacturing »Strategy vs. Process Choice: focus 2.Process Analysis 3.Lean Operations 4.Supply Chain Management 5.Capacity Management in Services 6.Total Quality Management 7.Business Process Reengineering Operations Management & Performance Modeling

2. OM&PM/Class 1b2 Firms compete on product attributes. This requires process capabilities.  Cost  Quality –Customer service –Product quality  Time –Rapid, reliable delivery –New product development  Variety/Flexibility –Variety or volume flexibility requires “capabilities”

3. OM&PM/Class 1b3 Process Capabilities are affected by Process Structure and Management  Process structure or architecture: –(1) inputs and outputs –(2) flow unit (“jobs”) –(3) network of activities & buffers »quantity & location »precedence relationships –(4) resource allocation »capacity & throughput  Operations Planning & Control  Organization

4. OM&PM/Class 1b4 Linking the strategic role & process view: Strategic Operational Audit Business Strategy Operations Strategy Desired Capabilities Marketing StrategyFinancial Strategy... p, Q, t, flexibility compatible ? Operations Structure: Processes & Resources

5. OM&PM/Class 1b5 A Strategic Framework for Operations  Corporate Strategy –businesses in which the corporation will participate –acquisition & allocation of key corporate resources to each business  Business Unit Strategy –scope of the business (product/market/service segments) –basis on which BU will achieve and maintain competitive advantage  Operations Strategy (and mkt strat, fin strat...) –What must operations do particularly well? Which capabilities must ops develop?  Operations Structure –How should operations processes be structured to develop capabilities that support strategy?

6. OM&PM/Class 1b6 Wal-Mart 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

7. OM&PM/Class 1b7 Wal-Mart (Resulting Benefits)  Inventory at retail stores turned over twice a week (Industry averages once every two weeks)  Improved targeting of products to markets  Sales per square foot increased from $102 in 1985 to $140 in 1991 (Industry average increased from $102 to $110)

8. OM&PM/Class 1b8 Shouldice Hospital

9. OM&PM/Class 1b9 Michigan Manufacturing

10. OM&PM/Class 1b10 Michigan Manufacturing

11. OM&PM/Class 1b11 Michigan Manufacturing Corp: OH Burden rates: Economies of Scale? Total Mfg OH burden rate = Mfg OH / DL

12. OM&PM/Class 1b12 Economies of Scale versus Diseconomies of Flexibility/Complexity

13. OM&PM/Class 1b13 Class 1b Learning Objectives  How to do a strategic operational audit  Relationship between process choice and strategy –operational focus  Price vs. Variety Competition –trade off scale economies with variety diseconomies