1. Chapter 2 - Operations Strategy and Competitiveness
Operations Management by
R. Dan Reid & Nada R. Sanders
2nd Edition © Wiley 2005
PowerPoint Presentation by R.B. Clough - UNH
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2. Learning Objectives Define the role of Business Strategy
Explain how a Business strategy is developed
Explain the role of Operations Strategy
Explain the relationship between Business and Operations strategy
Describe how an Operations strategy is developed
Identify competitive priorities for Operations function
Explain the strategic role of technology
Define and compute productivity measures
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3. The Role of Business Strategy
Defines the long-range plan to compete in the marketplace
Helps to differentiate the firm from competitors
Game plan upon which functional strategies are developed
Focuses on doing the “right tasks”
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4. Business/Functional Strategy
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5. Three Inputs to a Business Strategy
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6. Examples from Strategies
Mission: Dell Computer- “to be the most successful computer company in the world”
Environmental Scanning: political trends, social trends, economic trends, market place trends, global trends
Core Competencies: strength of workers, modern facilities, market understanding, best technologies, financial know-how, logistics
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7. Operations Strategy – Designing the Operations Function
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8. Competitive Priorities- The Edge
Four Important Operations Questions: Will you compete on –
Cost?
Quality?
Time?
Flexibility?
All of the above? Some? Tradeoffs?
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9. Competing on Cost? Typically high volume products
Often limit product range & offer little customization
May invest in automation to reduce unit costs
Can use lower skill labor
Probably use product focused layouts
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10. Competing on Quality? High performance design:
Superior features, high durability, & excellent customer service
Product & service consistency:
Meets design specifications
Close tolerances
Error free delivery
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11. Competing on Time? Fast delivery: On-time delivery:
Focused on shorter time between order placement and delivery
On-time delivery:
Deliver product exactly when needed every time
Rapid development speed
Using concurrent processes to shorten product development time
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12. Competing on Flexibility?
Product flexibility:
Easily switch production from one item to another
Easily customize product/service to meet specific requirements of a customer
Volume flexibility:
Ability to ramp production up and down to match market demands
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13. Are There Priority Tradeoffs?
Which priorities are “Order Qualifiers”?
e.g. Must have excellent quality since everyone expects it
Which priorities are “Order Winners”?
e.g. Dell competes on all four priorities
Southwest Airlines competes on cost
McDonald’s competes on consistency
FedEx competes on speed
Custom tailors compete on flexibility
Can you have both high quality and low cost?
e.g. Yes, Coke and Pepsi are good examples
Can you offer design flexibility and short delivery?
e.g. Yes, modular housing manufacturers do it
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14. Translating to Production Requirements
Dell Computer example – structure & infrastructure
They focus on customer service, cost, and speed
ERP system developed to allow customers to order directly from Dell
Product design and assembly line allow a “make to order” strategy – lowers costs, increases turns
Suppliers ship components to a warehouse within 15 minutes of the assembly plant - VMI
Dell set up a shipping arrangement with UPS
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15. Strategic Role of Technology
Technology should support competitive priorities
Three Applications: New product technology, process technology, and information technology
Products - Teflon, CD’s, fiber optic cable
Processes – flexible automation, CAD
Information Technology – POS, EDI, ERP, B2B
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16. Measuring Productivity
Productivity is a measure of how efficiently inputs are converted to outputs
Productivity = output/input
Total Productivity Measure
Total Productivity = $sales/inputs $
Partial Productivity Measure
Partial Productivity = cars/employee
Multifactor Productivity Measure
Multi-factor Productivity = sales/total $costs
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17. Productivity, Competitiveness, and the Service Sector
A nation’s Productivity effects its standard of living
Productivity is a measure of how effectively resources are used
US productivity growth averaged 2.8% from
Productivity growth slowed for the next 25 years to 1.1%
Productivity growth in service industries has been less than in manufacturing
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18. Chapter 2 Highlights
Business Strategy is a long range plan. Functions develop supporting plans
Strategy must address mission, environment, and core competencies
Business strategy provides a guide for designing operations strategy
Operations strategy must consider which competitive priorities are essential to meet business objectives
Competitive priorities are cost, quality, time, and flexibility
Companies must consider which product, process, and information technologies to use
Productivity measures how effectively a firm is using resources
Productivity is computed as a ratio of outputs divided by inputs
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19. The End
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