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Operations Management Operations Strategy in a Global Environment Chapter 2 PowerPoint presentation to accompany Heizer/Render – Principles of Operations.

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Presentation on theme: "Operations Management Operations Strategy in a Global Environment Chapter 2 PowerPoint presentation to accompany Heizer/Render – Principles of Operations."— Presentation transcript:

1 Operations Management Operations Strategy in a Global Environment Chapter 2
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

2 Outline GLOBAL COMPANY PROFILE: BOEING
DEVELOPING MISSIONS AND STRATEGIES Mission Strategy ACHIEVING COMPETITIVE ADVANTAGE THROUGH OPERATIONS Competing on Differentiation Competing on Cost Competing on Response TEN STRATEGIC OM DECISIONS You might begin the the thread of a discussion about mission and strategies forming the context for decision making within the company. This discussion can be continued throughout the chapter. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

3 Outline - Continued ISSUES IN OPERATIONS STRATEGY
Research Preconditions Dynamics STRATEGY DEVELOPMENT AND IMPLEMENTATION Identify Critical Success Factors A Global view of Operations Cultural and Ethical Issues Build and Staff the Organization Integrate OM with Other Activities PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

4 Outline - Continued GLOBAL OPERATIONS STRATEGY OPTIONS
International Strategy Multidomestic Strategy Global Strategy Transnational Strategy PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

5 Learning Objectives When you complete this chapter, you should be able to : Identify or Define: Mission Strategy Ten Decisions of OM Multinational Corporations PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

6 Learning Objectives - Continued
Describe or Explain: Specific approaches used by OM to achieve strategies Differentiation Low Cost Response Four Global Operations Strategies Why Global Issues are Important PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

7 Examples of Global Strategies
Boeing – both sales and production are worldwide. Benetton – moves inventory to stores around the world faster than its competitor by building flexibility into design, production, and distribution Sony – purchases components from suppliers in Thailand, Malaysia, and around the world GM is building four similar plants in Argentina, Poland, China, and Thailand PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

8 Boeing Suppliers (777) Firm Country Parts Alenia Italy Wing flaps
AeroSpace Technologies Australia Rudder CASA Spain Ailerons doors, wing section Fuji Japan Landing gear GEC Avionics United Kingdom Flight computers Korean Air Korea Flap supports Menasco Aerospace Canada Landing gears Short Brothers Ireland Landing gear doors Singapore This slide can be used to begin a discussion of the benefits and risks of “going global.” Students should be asked how risk is affected when there is a localized economic downturn such as that in Asia (particularly Japan) in early 1998. Students should also be asked to discuss the role of “paperless” design in such a global arrangement. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

9 The Role of Maquiladoras World Trade Organization (WTC)
North American Free Trade Agreement (NAFTA) European Union (EU) PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

10 Management Issues in Global Operations
Global Strategic Context Differentiation Cost leadership Response Supply Chain Management Location Decisions Logistics Management This slide frames the discussion of management issues in global operations. Subsequent slides expand on the issues in Supply-Chain Management, Location Decisions, and Logistics Management. Students should not only understand these issues, but should also have some concept as to why there are significant differences between global and domestic (or national) operations. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

11 Supply-Chain Management
Sourcing Vertical integration Make-or-buy decisions Partnering PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

12 Location Decisions Country-related issues Product-related issues
Government policy/political risk Organizational issues PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

13 Materials Management Flow of materials
Transportation options and speed Inventory levels Packaging Storage PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

14 Defining Global Operations
International business - engages in cross-border transactions Multinational Corporation - has extensive involvement in international business, owning or controlling facilities in more than one country Global company - integrates operations from different countries, and views world as a single marketplace Transnational company - seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness One way to get at the differences between these definitions is to have students visit the web sites of a number of companies and gather information about them, then use these companies as examples. The list of companies could be give out in a prior class, or at the beginning of the semester (we suggest that the list be given at the beginning of the semester - and the information gathered used throughout the semester). Ask the students to identify their company and place it in one of the categories. Seek their justification for its placement. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

15 Some Multinational Corporations
Workforce Company Home Country % Sales Outside % Assets % Foreign Colgate- Palmolive USA 72 63 NA Dow Chemical 60 50 Gillette 62 53 Honda Japan 36 IBM 57 47 51 Citicorp 34 46 This slide can be used to further explore the characteristics of multinational companies PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

16 Some Multinational Corporations
Workforce Company Home Country % Sales Outside % Assets % Foreign ICI Britain 78 50 NA Nestlé Switzerland 98 95 97 Philips Netherlands 94 85 82 Siemens Germany 51 38 Electronics Unilever Britain & Netherlands 70 64 This slide can be used to further explore the characteristics of multinational companies PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

17 Pontiac - the LeMans Included the Following
About $6,000 heads to South Korea for auto’s assembly $3,500 goes to Japan for engines, axles, and electronics $1,500 goes to Germany for design $800 goes to Taiwan, Singapore, and Japan for smaller parts $500 heads to England for marketing $100 goes to Ireland for information technology the rest  $7,600, goes to GM and its US bankers, insurance agents, and attorneys. This slide uses a familiar example to demonstrate the degree of globalization in the production of a common product. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

18 Reasons to Globalize Operations
Tangible Intangible Reduce costs (labor, taxes, tariffs, etc.) Improve the supply chain Provide better goods and services Attract new markets Learn to improve operations Attract and retain global talent This slide can be used to frame a discussion of the benefits of globalization. You should be certain to ask students if they can see any pitfalls. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

19 Trade and Tariff Maquiladoras - Mexican factories located along the U.S.-Mexico border that receive preferential tariff treatment GATT - an international treaty that helps promote world trade by lowering barriers to the free flow of goods across borders NAFTA - a free trade agreement between Canada, Mexico, and the United States You can use this slide to frame a discussion as to the role and impact of trade and tariffs. If time permits, you might ask students to, as preparation for this class, use the World-Wide Web to research the differing opinions of U.S. business and labor regarding the GATT and NAFTA agreements. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

20 Trade Pays GDP (PPP*) per Person 1990 Growth Rates, %
*PPP – Purchasing Power Parity PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

21 Free trade may take us into the era of the floating factory - a six person crew will take a factory from port to port in order to obtain the best market, material, labor and tax advantages This may sound like a strange proposition to students - but is it an extreme example of what may occur if trade is complete unregulated? Ask students what other alternatives to (or extensions of) today’s practices they can think of. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

22 Achieving Global Operations -Four Considerations-
Global product design Global process design and technology Global factory location analysis Impact of Culture and Ethics This slide introduces four considerations required for global operations. Ask students which consideration they believe to present the most difficult problems. The following several slides elaborate on the four considerations. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

23 Global Product Design Remember social and cultural differences
packaging and marketing can help make product seem “domestic” but - “liter” versus “quart” “sweetness” and “taste” In June 1998, a company began marketing caskets (that’s right, caskets) directly to the consumer over the Internet. Ask your students to consider how the design of this product might be impacted if the company begins to offer this product globally. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

24 Global Process Design and Technology
Information technology enables management of integrated, globally dispersed operation Texas Instruments: 50 plants in 19 countries Hewlett-Packard - product development teams in U.S., Japan, Great Britain, and Germany Reduces time-to-market This slide looks at some of the process design benefits of going global. Are there some pitfalls? PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

25 Global Facility Location Analysis
Using CSFs for Country Selection Select CSFs based on parent organization;’s strategic or operations objectives Obtain country-specific information on the CSFs Evaluate each country’s CSFs using a 1 (bad) to 5 (good) rating scale Sum the ratings This slide introduces the use of Critical Success Factors in Global Location Analysis. One might ask students to consider the problem of obtaining the information required for such an analysis. How does information technology contribute? What are its limitations? PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

26 You May Wish To Consider
national literacy rate rate of innovation rate of technology change number of skilled workers stability of government product liability laws export restrictions similarity in language work ethic tax rates inflation availability of raw materials interest rates population number of miles of highway This slide presents a list of national characteristics one may wish to consider. Ask students to add to this list. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

27 Global Impact of Culture and Ethics
Cultures differ! Some accept/expect: variations in punctuality long lunch hours expectation of thievery bribery little protection of intellectual property This slide introduces the impact of culture and ethics on management of the global enterprise. Students should be asked “How does a manager of a U.S. firm deal with differing cultural expectations?” One example would be the use of bribery as an element in contract negotiations. U.S law prohibits the use of bribery. What problems or ethical dilemmas does this create for the manager? PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

28 Ranking Corruption 1. Finland 9.7 Denmark & New Zealand (Tie) 9.5 …
Canada 10. United Kingdom United States 18. Germany & Israel (Tie) Japan Italy China Egypt India & Russia (Tie) Nigeria Bangladesh PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

29 To Establish Global Services
Determine if sufficient people or facilities exist to support the service Identify foreign markets that are open - not controlled by governments Determine what services are of most interest to foreign customers Determine how to reach global customers The best approach to this slide may be to present examples to illustrate the points listed. Two examples might be: a lack of infra-structure within many second and third world countries limits the nature or degree of many services; and countries may place special restrictions on the import of particular products (Brazil, at least until recently, required that all computers sold in the country be assembled there). PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

30 Managing Global Service Operations
Must take a different perspective on Capacity planning Location Planning Facilities design and layout Scheduling Here, it is important to at least note why one must take a different perspective on these issues. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

31 Some Definitions International business
A firm that engages in cross-border transactions. Multinational Corporation (MNC) A firm that has extensive involvement in international business, owning or controlling facilities in more than one country PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

32 Some Global Strategies
International Strategy: uses exports and licenses to penetrate the global area Multidomestic Strategy: uses decentralized authority with substantial autonomy at each business Global Strategy: Uses a high degree of centralization, with headquarters coordinating to seek standardization and learning between plants Transnational Strategy: Exploits economies of scale and learning, as well as pressure for responsiveness, by recognizing that core competencies reside everywhere in the organization You might either suggest or ask the students to suggest the names of one or more companies which use one or another of these strategies. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

33 Match Product & Parent Arrow shirts Braun Household Appliances
Burger King Firestone Tires Godiva Chocolate Haagen_dazs Ice Cream Jaguar Autos MGM Movies Lamborghini Autos Goodrich Tires Alpo Petfoods 1. Volkswagen 2. Bidermann International 3. Bridgestone 4. Campbell Soup 5. Credit Lyonnais 6. Ford Motor Company 7. Gillette 8. Grand Metropolitan 9. Michelin 10. Nestlé This and the subsequent slide simply prompt students to think about some of the unexpected relationships. You might ask students to suggest some of the reasons such relationships developed. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

34 Match Product & Country
Arrow shirts Braun Household Appliances Burger King Firestone Tires Godiva Chocolate Haagen_Dazs Ice Cream Jaguar Autos MGM Movies Lamborghini Autos Goodrich Tires Alpo Petfoods 1. France 2. Great Britain 3. Germany 4. Japan 5. United States 6. Switzerland PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

35 Developing Missions and Strategies
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

36 Mission Mission - where are you going?
Organization’s purpose for being Provides boundaries & focus Answers ‘What do we provide society?’ © 1995 Corel Corp. You might ask students to prepare for class by visiting several company web sites, and, for each company: locating the company mission, and printing a copy of the mission to bring to class. The students should also be asked to, if possible, determine the strategy used by the company to achieve its avowed mission. You might even ask that a student finding a mission statement that they believe of special interest, bring a copy of the statement on a transparency. You might begin the class by asking students why a company’s mission is so important. Does it really convey important information, or is it, as some cynics might claim, simply an expression of wishful thinking? Among other benefits, the mission provides an “umbrella” under which decisions should be made. This may be especially useful for a global enterprise. If the students have obtained the mission statements of companies with which they are familiar, you might ask if their perception of the company suggests that it is fulfilling it published mission. If the answer is “No,” ask what suggests otherwise. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

37 Mission of FedEx FedEx is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing total reliable, competitively superior, global air-ground transportation of high priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained using real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional to each other and the public. We will strive to have a completely satisfied customer at the end of each transaction. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

38 Sample Mission - Merck The mission of Merck is to provide society with superior products and services - innovations and solutions that improve the quality of life and satisfy customer needs - to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return Ask the students to compare the mission of Circle K with this of Merck (and with those they have located). What does the recognition of employees and investors signify? Is it reasonable to suggest that employees and investors should be recognized in all mission statements? Does such recognition have any significance with regard to employee working conditions, corporate decision making, or corporate attitude toward risk? PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

39 Mission of the Hard Rock Café
To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

40 Factors Affecting Mission
Philosophy & Values Profitability Environment & Growth Mission Customers Public Image One can obviously discuss the impact of each of these factors on a company mission. An alternative is to have each student take a company mission and identify the connection to each of the factors. In particular, ask students if the connection is uni- or bi-directional, i.e., “The environment within which a company operates may impact its mission, can the mission also impact the environment?” Benefit to Society PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

41 Mission/Strategy Mission - where you are going
Strategy - how you are going to get there; an action plan The distinction between mission and strategy probably requires some discussion. The best approach might be to ask students, who have obtained the mission statements of companies with which they are familiar, to discuss their perception of the company strategy. There may also be companies which publish a statement of strategy as well their mission on their web site. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

42 Strategy Action plan to achieve mission
Shows how mission will be achieved Company has a business strategy Functional areas have strategies © 1995 Corel Corp. Here, you might introduce the hierarchical nature of strategies, and, as prelude to subsequent slides, ask students whether they believe it is better to plan from the top down, or bottom up. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

43 Strategy Process Marketing Decisions Operations Fin./Acct. Company
Mission Business Strategy Functional Area Strategies This slide can be used to frame a discussion of the process of developing strategies. If so, the steps of Environmental and SWOT Analysis should be expanded. You might also ask the students “Whose responsibility is Strategy Planning?” Is participation in this process restricted to upper level management, or does it involve all levels of employees? Might one have different expectations for the answer to this question for a particular company ( Circle K as opposed to Merck)? The contrast between strategy planning for all levels of the organization at once, versus strategy planing for the organization as a whole, with subsequent “rolldown” to lower levels might be discussed. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

44 Strategies for Competitive Advantage
Differentiation Cost leadership Quick response This slide simply opens the discussion on the several modes of competing. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

45 Competing on Differentiation
Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value Ask students for examples of companies competing on the basis of differentiation. If they cannot identify any, you can fall back on a discussion of McDonalds, Burger King, and Wendys. Ask the students to identify the differences between the three franchises. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

46 Competing on Cost Provide the maximum value as perceived by customer
Does not imply low value or low quality One of the major points to be made here is that “competing on cost” does not necessarily mean “having the lowest cost: There is also the notion of value, and in particular, value defined by the customer. There are some drivers who will argue that Volvo competes on cost suggesting that Volvos are “low cost” for a vehicle with such “demonstrated” safety benefits and long life expectancy. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

47 Competing on Response Flexibility Reliability Timeliness
Requires institutionalization within the firm of the ability to respond Most students readily acknowledge that competing on the basis of response involves the notion of quickness or speed, so the discussion should probably concentrate on the other three elements. The concept of and need for “institutionalization” will likely require significant discussion. Here you might point out that “response” is seldom the prerogative of any, single, individual - appropriate response is often the outcome of the work of many. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

48 Competing, Regardless of the Basis,
Requires the institutionalization within the firm of the ability to change, and to adapt You might point out that businesses now operate in a very rapidly changing environment - and that these changes are often in fundamental characteristics of the environment, e.g., use of the world-wide web is enabling some very fundamental changes in the way in which firms do business. Competing on any basis (differentiation, cost, or response) requires the ability to adapt to these changes on a firm-wide basis, not as individuals.. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

49 OM’s Contribution to Strategy
Quality Product Process Location Layout Human Resource Supply Chain Inventory Scheduling Maintenance HP’s ability to follow the printer market Differentiation (Better) Cost leadership (Cheaper) Southwest Airlines No-frills service Sony’s constant innovation of new products Pizza Hut’s five-minute guarantee at lunchtime Federal Express’s “absolutely, positively on time” Motorola’s automotive products ignition systems Motorola’s pagers IBM’s after-sale service on mainframe computers Fidelity Security’s broad line of mutual funds FLEXIBILITY Design Volume LOW COST DELIVERY Speed Dependability QUALITY Conformance Performance AFTER-SALE SERVICE BROAD PRODUCT LINE Operations Decisions Examples Specific Strategy Used Competitive Advantage Response (Faster) Students can be asked to add to the list of examples shown in this slide. You might also ask students whether OM can contribute in similar ways in all industries. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

50 10 Strategic OM Decisions
Goods & service design Quality Process & capacity design Location selection Layout design Human resource and job design Supply-chain management Inventory Scheduling Maintenance This slide simply introduces the 10 decisions. You may not wish to do more than “define” the decision area and give one or two examples. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

51 Goods & Services and the 10 OM Decisions
Here again, you might look particularly at the impact of the difference between goods and services. You may be able to get students to consider such consequences as the level of worker skill required, the difficulty in controlling quality, etc. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

52 Goods & Services and the 10 OM Decisions – Continued
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

53 Goods & Services and the 10 OM Decisions – Continued
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

54 Goods & Services and the 10 OM Decisions – Continued
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

55 Process Design Job Shops Mass Customization Assembly line Continuous
Process-focused Job Shops (Print shop, emergency room , machine shop, fine dining Repetitive (modular) focus Assembly line (Cars, appliances, TVs, fast-food restaurants) Product-focused Continuous (steel, beer, paper, bread, institutional kitchen) Mass Customization Customization at high Volume (Dell Computer’s PC) Low Moderate High Volume High Moderate Low Variety of Products This slide can be used to introduce the process design options, and help students begin to understand the conditions of volume and variety under which they are most useful. Student should be asked to provide and discuss examples. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

56 Operations Strategies for Two Drug Companies
Here it may be helpful to point out that although the strategies are significantly different for the two companies, both successful. If possible, you should have students consider what the missions of the two companies might be. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

57 Operations Strategies for Two Drug Companies - Continued
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

58 Operations Strategies for Two Drug Companies - Continued
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

59 Operations Strategies for Two Drug Companies - Continued
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

60 Characteristics of High ROI Firms
High quality product High capacity utilization High operating effectiveness Low investment intensity Low direct cost per unit This is the first of several slides portraying the results of some fairly recent research. You might point out that these are necessary conditions, perhaps not sufficient. From the PIMS study of the Strategic Planning Institute PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

61 Strategic Options Managers Use to Gain Competitive Advantage
28% - Operations Management 18% - Marketing/distribution 17% - Momentum/name recognition 16% - Quality/service 14% - Good management 4% - Financial resources 3% - Other If one argues that the quality/service categories really belong in OM, the total for OM reaches 44%. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

62 Strategic Options Managers Use to Gain Competitive Advantage
28% Operations Management Low- cost product Product-line breadth Technical superiority Product characteristics/differentiation Continuing product innovation Low-price/high-value offerings Efficient, flexible operations adaptable to consumers Engineering research development Location Scheduling A second study: 248 business were asked to rate thirty two categories. The more general results are given in the next slide PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

63 Preconditions - To Implement a Strategy
One must understand: Strengths & weaknesses of competitors and new entrants into the market Current and prospective environmental, legal, and economic issues The notion of product life cycle Resources available with the firm and within the OM function Integration of OM strategy with company strategy and with other functions. Make the point here that this is a minimum set of “necessary” issues which must be understood. Understanding these alone does not guarantee success. If you have not done it before, here is where you can begin to prod students into looking at the true complexity faced by the operations manager., PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

64 Impetus for Strategy Change
Changes in the organization Stages in the product life cycle Changes in the environment You might begin here to raise the notion that change in strategy is not optional - but must occur when any other factor(s) change(s). The Japanese have come to view strategy as being continually adaptive. The next slide lists the stages in the product life cycle. The several slides following that elaborate on strategic issues over the product life cycle. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

65 Stages in the Product Life Cycle
Introduction Growth Maturity Decline Growth rate The purpose of this slide is simply to introduce the stages of the product life cycle and provide time for the instructor to present brief definitions. A context for further elaboration is provided by the following four slides. The fifth enables a useful summary. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

66 Strategy & Issues During Product Life
Introduction Company Strategy & Issues OM Strategy & Issues Best period to increase market share R&D engineering are critical Product design and development are critical Frequent product and process design changes Over-capacity Short production runs High skilled-labor content High production costs Limited number of models Utmost attentions to quality Quick elimination of market-revealed design defects As you discuss the product life cycle, it may be helpful to ask students to identify products they believe to currently be in the stage under discussion. Ask them what evidence they have to support their conclusions. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

67 Strategy & Issues During Product Life
Growth Company Strategy & Issues OM Strategy Practical to change prices or quality image Marketing is critical Strengthen niche Forecasting is critical Product and process reliability Competitive product improvements and options Shift toward product oriented Enhance distribution PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

68 Strategy & Issues During Product Life
Maturity Poor time to increase market share Competitive costs become critical Poor time to change price, image, or quality Defend position via fresh promotional and distribution approaches Standardization Less rapid product changes and more minor annual model changes Optimum capacity Increasing stability of manufacturing process Lower labor skills Long production runs Attention to product improvement and cost cutting Re-examination of necessity of design compromises Company Strategy & Issues OM Strategy PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

69 Strategy & Issues During Product Life
Decline Company Strategy & Issues OM Strategy Cost control critical to market share Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning Good margin Reduce capacity PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

70 Strategy and Issues During a Product’s Life
This slide can be useful in summarizing strategy changes over the lifecycle of the product. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

71 Strategy Development and Implementation
Identify critical success factors Build and staff the organization It might be helpful here to define “critical success factors.” PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

72 SWOT Analysis Process Environmental Analysis
Determine Corporate Mission This slide can be used to frame a discussion of SWOT analysis. Students should be asked what types of questions might be appropriate at each stage. Form a Strategy PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

73 SWOT Analysis to Strategy Formulation
Mission Internal External S trengths O pportunities Strategy This slide frames the individual elements of the SWOT analysis process. The notion that SWOT must look at both internal and external issues can be raised here. It may also be worthwhile stressing that the Internal analysis must be: 1. A critical analysis with an honest, open-minded assessment, not politically driven 2. An assessment of strengths and weaknesses in light of the specific corporate mission. Internal External W eaknesses T hreats Competitive Advantage PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

74 Identifying Critical Success Factors
Marketing Service Distribution Promotion Channels of distribution Product positioning (image, functions) Finance/Accounting Leverage Cost of capital Working capital Receivables Payables Financial control Lines of credit Production/Operations Decisions Sample Option Chapter Product Customized, or standardized Quality Define customer expectations and how to achieve them , S6 Process Facility size, technology, capacity , S7 Location Near supplier or customer Layout Work cells or assembly line Human resource Specialized or enriched jobs , S10 Supply chain Single or multiple source suppliers , S11 Inventory When to reorder, how much to keep on hand , 14,16 Schedule Stable or fluctuating productions rate , 15 Maintenance Repair as required or preventive maintenance This slide introduces the notion of Critical Success Factors. Many students seem to perceive Critical Success Factor analysis as an “easy” process. It may help to ask your students to develop a list of critical success factors for a business with which they are familiar. (If all else fails, ask them to develop the critical success factors for the college or university they attend.) Once they have identified a number of factors (the number depending on the time available), make them go back and justify the importance of each factor. As they are in the process of justification, ask “What happens if the business fails to adequately address this factor?” At this point, begin to help them differentiate between factors which will result in sub-optimal performance and those which will result in outright failure. In many colleges/universities, for example, offering a top quality program may not be necessary, while ensuring that each graduate has a job offer upon graduation may be. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

75 Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage
Courteous, but limited passenger service Lean, productive employees Short haul, point-to-point routes, often to secondary airports High aircraft utilization Standardized fleet of Boeing 737 aircraft Frequent, reliable schedules Competitive Advantage: Low Cost Discuss how the individual strategies combine to achieve the overall company mission. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

76 Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage
Courteous, but limited passenger service No seat assignments No baggage transfers Automated ticketing machines No meals PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

77 Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage
Short haul, point-to-point routes, often to secondary airports Lower gate costs at secondary airports High number of flights, reduces employee idle time between flights PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

78 Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage
Frequent, reliable schedules High number of flights reduces employee idle time between flights Saturate a city with flights lowering administrative costs per passenger for that city PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

79 Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage
Standardized fleet of Boeing 737 aircraft Pilot training on only one type of aircraft Reduced maintenance inventory required because of only one type of aircraft Excellent supplier relations with Boeing has aided financing PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

80 Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage
High aircraft utilization Flexible employees and standard planes aids scheduling Flexible union contracts Maintenance personnel trained on only one type of aircraft 20 minute gate turnarounds PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

81 Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage
Lean, productive employees High level of stock ownership Hire for attitude, then train High employee compensation Empowered employees Automated ticket machines PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

82 Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage
Courteous, but limited passenger service Lean, productive employees Short haul, point-to-point routes, often to secondary airports High aircraft utilization Standardized fleet of Boeing 737 aircraft Frequent, reliable schedules Competitive Advantage: Low Cost PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

83 Southwest Airline’s Low Cost Competitive Advantage
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

84 Vanguard’s Activity System
A broad array of mutual funds excluding some fund categories Efficient investment management approach offering good consistent performance Straightforward client communication and education Strict cost control Direct distributions Very low expenses passed on to client PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

85 How It Works If competitive advantage, leads to achieving
Company Mission Business Strategy Functional Area Strategies Marketing Decisions Operations Fin./Acct. If competitive advantage, leads to achieving Distinctive competencies affect This slide can be used to tie coverage of Chapter 2 together. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

86 Four International Operations Strategies
PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

87 Multidomestic Strategy
Operating decisions are decentralized to each country to enhance local responsiveness PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

88 Global Strategy Operating decisions are centralized and headquarters coordinates the standardization and learning between facilities PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

89 Transnational Strategies
Combines the benefits of global-scale efficiencies with the benefits of local responsiveness PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J

90 International Strategy
Global markets are penetrated using exports and licenses PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J


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