Operations Strategy

OPERATİONS deals with the functions and procedures involved in to day-to-day processes of manufacturing goods and products STRATEGY deals with the direction and scope of an organisation over a long period of time on how they deliver to their clients.

Competitive Priorities Cost Cost Quality Quality Flexibility Flexibility Speed Speed

Competitive Priorities: Cost Lincoln Electric Lincoln Electric reduced costs by $10 million a year for 10 years reduced costs by $10 million a year for 10 years skilled machine operators save the company millions that would have been spent on automated equipment skilled machine operators save the company millions that would have been spent on automated equipment Southwest Airlines Southwest Airlines one type of airplane facilitates crew changes, record- keeping, maintenance, and inventory costs one type of airplane facilitates crew changes, record- keeping, maintenance, and inventory costs direct flights mean no baggage transfers direct flights mean no baggage transfers $30 million annual savings in travel agent commissions by requiring customers to contact the airline directly $30 million annual savings in travel agent commissions by requiring customers to contact the airline directly

Competitive Priorities: Quality Ritz-Carlton - one customer at a time Ritz-Carlton - one customer at a time Every employee is empowered to satisfy a guests wish Every employee is empowered to satisfy a guests wish Teams at all levels set objectives and devise quality action plans Teams at all levels set objectives and devise quality action plans Each hotel has a quality leader Each hotel has a quality leader Quality reports tracks Quality reports tracks guest room preventive maintenance cycles guest room preventive maintenance cycles percentage of check-ins with no waiting percentage of check-ins with no waiting time spent to achieve industry-best clean room appearance time spent to achieve industry-best clean room appearance Guest Preference Reports are recorded in a database Guest Preference Reports are recorded in a database

Competitive Priorities: Flexibility Andersen Windows Andersen Windows number of products offered grew from 28,000 to 86,000 number of products offered grew from 28,000 to 86,000 number of errors are down to 1 per 200 truckloads number of errors are down to 1 per 200 truckloads Custom Foot Shoe Store: Custom Foot Shoe Store: customers feet are scanned electronically to capture measurements customers feet are scanned electronically to capture measurements custom shoes are mailed to the customers home in weeks custom shoes are mailed to the customers home in weeks prices are comparable to off-the-shelf shoes prices are comparable to off-the-shelf shoes National Bicycle Industrial Company National Bicycle Industrial Company offers 11,231,862 variations offers 11,231,862 variations delivers within two weeks at costs only 10% above standard models delivers within two weeks at costs only 10% above standard models

Competitive Priorities: Speed Citicorp Citicorp advertises a 15-minute mortgage approval advertises a 15-minute mortgage approval L.L. Bean L.L. Bean ships orders the day they are received ships orders the day they are received Wal-Mart Wal-Mart replenishes its stock twice a week replenishes its stock twice a week Hewlett-Packard Hewlett-Packard produces electronic testing equipment in five days produces electronic testing equipment in five days General Electric General Electric reduces time to manufacture circuit-breaker boxes into three days and dishwashers into 18 hours reduces time to manufacture circuit-breaker boxes into three days and dishwashers into 18 hours Dell Dell ships custom-built computers in two days ships custom-built computers in two days Motorola Motorola needs less than 30 minutes to build to order pagers needs less than 30 minutes to build to order pagers

DEVELOPMENT OF OPERATİON STRATEGY

Impotance of Operations Strategy operational efficiency strategy. Operational efficiency is performing tasks well, even better than competitors. Strategy is a plan for competing in the marketplace. Companies often do not understand the differences between operational efficiency and strategy. Operational efficiency is performing tasks well, even better than competitors. Strategy is a plan for competing in the marketplace. Operations strategy is to ensure all tasks performed are the right tasks Operations strategy is to ensure all tasks performed are the right tasks

Develop an Operations Strategy What products can be produced in which facility and how much? Which products are going to be produced internally, and which ones will be purchased? How many facilities are needed?

Develop an Operations Strategy Cont. Where will the facilities be located, with how much capacity? What type of processes will be utilized to produce products? How much flexibility is required from each process and each product?

Develop an Operations Strategy Cont. What level of technology (automation, etc.) will be used? Are the resources going to be owned or bought? How will the products be distributed to the end customers?

Develop an Operations Strategy Cont. Which suppliers will provide materials, and how much? What kind of human skills are needed? And so on.

Develop an Operations Strategy Cont. Operations decisions given regarding these issues must be consistent with the firms corporate strategy. These decisions made by operations managers are going to be viewed in detail throughout this course.

ROLE OF OPERATION STRATEGY

Operations Role in Corporate Strategy Operations provides support for a differentiated strategy Operations serves as a firms distinctive competence in executing similar strategies better than competitors

Operations Strategy: Products and Services Make-to-Order Make-to-Order products and services are made to customer specifications after an order has been received products and services are made to customer specifications after an order has been received Make-to-Stock Make-to-Stock products and services are made in anticipation of demand products and services are made in anticipation of demand Assemble-to-Order Assemble-to-Order products and services add options according to customer specifications products and services add options according to customer specifications

Operations Strategy: Human Resources What are the skill levels and degree of autonomy required to operate production system? What are the skill levels and degree of autonomy required to operate production system? What are the training requirements and selection criteria? What are the training requirements and selection criteria? What are the policies on performance evaluations, compensation, and incentives? What are the policies on performance evaluations, compensation, and incentives? Will workers be salaried, paid an hourly rate, or paid a piece rate? Will workers be salaried, paid an hourly rate, or paid a piece rate? Will profit sharing be allowed, and if so, on what criteria? Will profit sharing be allowed, and if so, on what criteria?

Operations Strategy: Human Resources (cont.) Will workers perform individual tasks or work in teams? Will workers perform individual tasks or work in teams? Will they have supervisors or work in self-managed work groups? Will they have supervisors or work in self-managed work groups? How many levels of management will be required? How many levels of management will be required? Will extensive worker training be necessary? Will extensive worker training be necessary? Should workforce be cross-trained? Should workforce be cross-trained? What efforts will be made in terms of retention? What efforts will be made in terms of retention?

Operations Strategy: Quality What is the target level of quality for our products and services? What is the target level of quality for our products and services? How will it be measured? How will it be measured? How will employees be involved with quality? How will employees be involved with quality? What will the responsibilities of the quality department be? What will the responsibilities of the quality department be?

Operations Strategy: Quality (cont.) What types of systems will be set up to ensure quality? What types of systems will be set up to ensure quality? How will quality awareness be maintained? How will quality awareness be maintained? How will quality efforts be evaluated? How will quality efforts be evaluated? How will customer perceptions of quality be determined? How will customer perceptions of quality be determined? How will decisions in other functional areas affect quality? How will decisions in other functional areas affect quality?

Operations Strategy: Sourcing Vertical Integration Vertical Integration degree to which a firm produces parts that go into its products degree to which a firm produces parts that go into its products Strategic Decisions Strategic Decisions How much work should be done outside the firm? How much work should be done outside the firm? On what basis should particular items be made in- house? On what basis should particular items be made in- house? When should items be outsourced? When should items be outsourced? How should suppliers be selected? How should suppliers be selected?

Operations Strategy: Sourcing (cont.) What type of relationship should be maintained with suppliers? What type of relationship should be maintained with suppliers? What is expected from suppliers? What is expected from suppliers? How many suppliers should be used? How many suppliers should be used? How can quality and dependability of suppliers be ensured? How can quality and dependability of suppliers be ensured? How can suppliers be encouraged to collaborate? How can suppliers be encouraged to collaborate?

Operations Strategy: Operating Systems How will operating systems execute strategic decisions? How will operating systems execute strategic decisions? How does one align information technology and operations strategic goals? How does one align information technology and operations strategic goals? How does information technology support both customer and worker demands for rapid access, storage, and retrieval of information? How does information technology support both customer and worker demands for rapid access, storage, and retrieval of information? How does information technology support decisions making process related to inventory levels, scheduling priorities, and reward systems? How does information technology support decisions making process related to inventory levels, scheduling priorities, and reward systems?

THANKS ASLIHAN KURBAN VOLKAN ÖZEN SİNEM ÇETİN