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© Nigel Slack and Michael Lewis 2003 Operations Resources Market Requirements OPERATIONS STRATEGY Strategic Reconciliation Level 1 - Fit Level 3 - Risk Align resources with requirements Include impact of uncertainty Level 2 - Sustainability Develop sustainable competitive advantage Resource Usage Performance objectives Market competitiveness Decision areas Operations strategy processOperations strategy content Topics in operations strategy treated in this chapter
© Nigel Slack and Michael Lewis 2003 ‘Installed’ product/service fully operational End of core processing Start of core processing Request for product/service Receipt of information Request for information Awareness of need MilestoneHospitalSoftware producer Presentation of symptoms Visit to doctor for advice and tests Test information confirms diagnosis Decide on surgery Enter hospital for surgery Procedure successfully completed Patient fully recovered Installation time Waiting time Enquiry time Core processing time Customer decision time Enquiry decision time Asks for specification and estimates Receives proposal Places order Start of design and coding Software ‘completed’ Software fully debugged and working Customer decides new software is needed Significant ‘milestone’ times for the delivery of two products/services
© Nigel Slack and Michael Lewis 2003 First/Business-class cabin, airport lounges, pick-up service Economy cabin Wealthy people, business people, VIPs Travellers (friends and family), vacation takers, cost- sensitive business travel Wide range, may need to be customised Standardized cabin Relatively high Relatively low Relatively low volumeRelatively high volume Medium to high Low to medium First/Business class Economy class Customization, extra service, comfort features, convenience Quality (specification and conformance), Flexibility, Speed Price, acceptable service Cost, Quality (conformance) Services Customers Service range Rate of service innovation Volume of activity Profit margins Main competitive factors Performance objectives Different product groups require different performance objectives
© Nigel Slack and Michael Lewis 2003 Market Competitiveness Speed Flexibility Cost Dependability Quality The operations function can provide a competitive advantage through its performance at the five competitive objectives Being RIGHT Being FAST Being ON TIME Being ABLE TO CHANGE Being PRODUCTIVE
© Nigel Slack and Michael Lewis 2003 LowHigh Negative Positive Competitive benefit Neutral Achieved performance Order-winners and qualifiers Order-winners Less important Qualifiers
© Nigel Slack and Michael Lewis 2003 Priority of performance objectives Customer Needs Competitors’ Actions The priority of performance objectives is influenced by what is regarded as important by customers and how the operation performs against competitors Performance against competitors Importance to customers
© Nigel Slack and Michael Lewis 2003 Output Total assets Profit Output Profit Total assets = x Profit Output Revenue Output Cost Output Average revenue Average cost Output Total assets Output Capacity Fixed assets Total assets Capacity Fixed assets = x x UtilizationWorking capital Productivity of fixed assets = x Operations strategy decision areas Development and organization Process technology Supply network Capacity Decomposing the ratio profit/total assets
© Nigel Slack and Michael Lewis 2003 Operations Decisions are shaped by COMPETENCIES and CONSTRAINTS Resource Deployment Do it yourself or buy-in? Customer and supplier relationships Supply chain dynamics and integration Supply Network ISSUES - Capacity Structure ISSUES - Capacity Location Focus & segmentation L/T forecasts Process Technology ISSUES - Development rate Automation Size Integration In our out-house development Development and Organization New product/service development Organization structure Performance measurement Improvement strategy ISSUES - The Elements of an International Operations Strategy
© Nigel Slack and Michael Lewis 2003 Issues include: Total capacity Number, size of sites Allocation of tasks to sites Location Issues include: Vertical integration Network behaviour Supplier relationships Supplier development Issues include: Rate of development Automation Integration Implementation Subcontracted development Issues include: Responsibility relationships Performance and control Process development Product and service development CapacitySupply Network Process Technology Development and Organization The four categories of operations strategy decision areas Resource Usage
© Nigel Slack and Michael Lewis 2003 Structural issues Infrastructural issues Operations strategy decision areas are partly structural and partly infrastructural Process Technology Development and Organization Supply NetworkCapacity
© Nigel Slack and Michael Lewis 2003 Quality Market Competitiveness Speed Dependability Flexibility Cost Competitive Objectives are prioritized by CUSTOMERS and COMPETITORS Capacity Supply Network Process Technology Development and Organization Resource Usage Operations Decisions shape COMPETENCIES and CONSTRAINTS Operations strategy is defined by the intersections of performance objectives and Operations decisions
© Nigel Slack and Michael Lewis 2003 Quality Performance objectives Resource Usage Market Competitiveness Decision areas Speed Dependability Flexibility Cost The operations strategy matrix Capacity Supply Network Process Technology Development and Organization Operations strategy
© Nigel Slack and Michael Lewis 2003 Largest retailer in Japan Sells 1.5X as much per store as nearest rival History of cautious expansion and technical and service innovation “Field Counsellors” spread operations knowledge (also do distance training) Expansion by territory to reduce disn costs Early use of TIS (total information system) TIS controls stock replenishment twice a day delivery (sales analysed twice a day) New system not internet-based New services include, Banking terminals Downloading games Downloading music to MD Internet ordering and collection 7-Eleven Japan
© Nigel Slack and Michael Lewis 2003 COST in terms of minimizing… operating cost capital cost working capital QUALITY of products and services Speed and dependability combined to indicate AVAILABILITY FLEXIBILITY of response to sales and customer trends Area dominance reduces distribution and advertising costs Location of stores Size of stores Distribution center grouping by temperature Distribution centers and inventory management systems give fast stock replenishment TIS allows trends to be forecast and supply adjustments made Common distribution centers give small frequent deliveries from fewer sources Number and type of distribution centers Order and stock replenishment TIS gives comprehensive and sophisticated analysis of sales & supply patterns daily The Total Information System (TIS) Information sharing and parenting system spreads service ideas Field counselors with sales data help stores to minimize waste and increase sales Franchisee relationships New product/service development Approach to operations improvement DEVELOPMENT AND ORGANIZATION PROCESS TECHNOLOGY SUPPLY NETWORKS CAPACITY Resource Deployment Market Competitiveness pivotal critical secondary 7-11 JAPAN
© Nigel Slack and Michael Lewis 2003 Level 1 - Fit The practice of operations strategy involves considering fit, sustainability and risk Level 2 - Sustainability Level 3 - Risk Align resources with requirements Develop sustainable competitive advantage Include impact of uncertainty Increasing complexity
© Nigel Slack and Michael Lewis 2003 Market requirements Level of operations resource capability In operations strategy ‘fit’ is the alignment between market and operations capability Line of fit Alignment between market and operations capability X Y
© Nigel Slack and Michael Lewis 2003 Market requirements Sustainable improvement implies simultaneous extension/improvement of market requirements and operations capabilities Level of operations resource capability Extension of market requirements Sustainable improvement Improvements in operations capabilities
© Nigel Slack and Michael Lewis 2003 Market requirements Virgin Trains and Nissan positioned in relation to market requirements and operations capabilities Level of operations resource capability Line of fit Nissan Virgin Trains
© Nigel Slack and Michael Lewis 2003 Dresding Medical - Polar diagram illustrating the relative importance of the performance objectives for the current and new products X X X Quality (specification) Quality (conformance) Speed Dependability Volume flexibility Delivery flexibility Customization Cost Current products New products X X X X X
© Nigel Slack and Michael Lewis 2003 Quality (spec) Quality (conform) Speed Dependability Delivery flex Volume flex Customization Cost Performance objectives Lab style manufacture easy to change capacity incrementally 50% of activities in- house Low process technology (but high product technology) R&D, Mfg. and Sales all share common knowledge base. Incremental new product development CapacitySupply Network Process Technology Development and Organization Resource Usage Market Competitiveness Dresding Medical - Current product range * * * * * * * * * * * * * * * * * **** * * * * * * very important medium importance some importance * * * * * * * * Decision areas * * * * * * Slide 2.17
© Nigel Slack and Michael Lewis 2003 Quality (spec) Quality (conform) Speed Dependability Delivery flex Volume flex Customization Cost Performance objectives May need to adjust quickly depending on demand New supplies will be needed / developed Needs investment in volume processes R&D, Mfg. and Sales less interdependent. Faster time-to- market needed CapacitySupply Network Process Technology Development and Organization Resource Usage Market Competitiveness Dresding Medical - New product range * * * * * * * * * * * * * * * * * * very important medium importance some importance * * * * * * * Decision areas * * * * * * * * ** ** *** * *** *** Slide 2.18
© Nigel Slack and Michael Lewis 2003 Quality Performance objectives Capacity Supply Network Process Technology Development and Organization Resource Usage Market Competitiveness Decision areas ‘Fit’ is concerned with ensuring comprehensiveness, correspondence, coherence and criticality Speed Dependability Flexibility Cost Critical Coherence Correspondence Comprehensive?
Chapter-01 Operations Strategy An Introduction to Operations Strategy.
© Nigel Slack and Michael Lewis 2003 The three levels of operations strategy process Level 1 - Fit Align resources with requirements Level 2 - Sustainability.
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