1. Introduction & Strategy Module
Operations Management:
Introduction & Strategy Module
Introduction & Administrative
Key Principles of Course
Strategic role of Ops
Process view of Ops
Strategies, Capabilities and Operations
Strategic Framework
Wal-Mart
Aligning strategy and operations:
Shouldice Hospital
Focus
Wriston Manufacturing
Notes:
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy

2. Key Principle of course: 1. The Strategic Role of Ops
“A company’s operations function is
either a competitive weapon or
a corporate millstone.
It is seldom neutral.” [Skinner ‘69]
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy

3. Key Principle of Course: 2. The Process View of Ops
By rethinking the IBM Austin assembly plant and introducing cells,
distance traveled by a card was cut from 1.5 miles to 200 yards
floor space was reduced to half
production tripled with about the same number of workers.
[Chicago Tribune, July 1992]
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy

4. Operations & the Process View: What is a Process?
Inputs
Outputs
Goods
Services
Labor & Capital
Information
structure
Network of
Activities and Buffers
Flow units
(customers, data,
material, cash, etc.)
Resources
Process
Management
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy

5. What defines a “good process”? Performance: Financial Measures
Absolute measures:
revenues, costs, operating income, net income
Net Present Value (NPV) =
Relative measures:
ROI, ROE
ROA =
Survival measure:
cash flow
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy

6. Product Attribute (External) Process Competency (Internal)
Firms compete on product attributes. This requires process competencies.
Product Attribute (External)
Process Competency (Internal)
Cost
Response time
Flow time
Variety
Flexibility
Quality
S. Chopra/Operations/Strategy

7. Process Competencies 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
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy

8. What defines a good operation? Achieving alignment at FedEx
2006
2005
2004
Revenues
32,294
29,363
24,710
Income
3,014
2,471
1,440
S. Chopra/Operations/Strategy

9. A Strategic Framework for Operations
Business
Strategy
Desired
Capabilities
Notes:
Operations
Structure
Resources
Processes
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy

10. What defines a good operation? Achieving alignment at IKEA
S. Chopra/Operations/Strategy

11. Shouldice Hospital S. Chopra/Operations/Strategy

12. Wriston Manufacturing
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy

13. Wriston Manufacturing
Burden Rates (total overhead cost / direct labor cost) 7 6 5 4 3 2 1
Sanduski
Detroit
Lima
Lebanon
Saginaw
Essex
Tiffin
Freemont
Maysville
Free capacity and Throughput
160
140
120
100 80 60 40 20
S. Chopra/Operations/Strategy
Sanduski
Detroit
Lima
Lebanon
Saginaw
Essex
Tiffin
Freemont
Maysville
S. Chopra/Operations/Strategy

14. Focus and the Frontier In the health-care sector
Cost efficiency
Responsiveness
World-class
Emergency Room
(non-emergency)
Hospital
One general
facility
operations
frontier
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy

15. Learning Objectives Operations & Strategy
An operation as a transformation process
Product Attributes / Operational Capabilities
Process Drivers / Operations structure
Link between business strategy, operations strategy, and operations structure
Strategy vs. Operational Effectiveness
Operational Focus
S. Chopra/Operations/Strategy
S. Chopra/Operations/Strategy