Operations Management Operations Strategy for Competitive Advantage in a Global Environment

Reasons to Globalize  Reduce costs (labor, taxes, tariffs)  Improve supply chain  Provide better goods and services  HLL’s Wheel in response to Nirma  Understand markets  Learn to improve operations  Attract and retain global talent

Vision and Mission  Mission – What an org. does, its action.  Provides boundaries & focus  More functional in nature dealing with pricing, quality, market place and other items of the value chain  Vision – The ultimate result of action  What an org. would like to happen as a result of the action that it does.

Vision and Mission of a hospital  To make the denizens of kathmandu healthier  To provide a healing environment with family-cantered care with compassion, comfort and respect with best possible medical facilities available.

Mission/Strategy  Strategy - how you are going to get there; the action plan to achieve the mission  The answer to the third intrinsic question:  Where are we?  Where do we want to be?  How to achieve?

Mission of OM Departments  Product Design: To Design products with superb quality and inherent customer value.  Quality: To be consistent with quality in every single aspect of production, right from design, procurement, production etc.  Process Design: To determine and design production process compatible with low cost, high quality product.

Continued  Location selection: To locate, design, efficient and economical facilities that will yield high values to the company.  Layout: To achieve production effectiveness and efficiency while supporting a high quality of work.  Human Resources: To provide a good quality of work atmosphere, well designed, safe rewarding jobs, stable employment, equitable pay in exchange for outstanding individual contribution from employees at all levels.

Continued  Supply Chain: To collaborate with suppliers to develop innovative products from stable, efficient and effective sources of supply.  Inventory: To achieve low investments in inventory consistent with high facility utilizations.  Maintenance: To achieve high utilization of facilities and equipment by effective preventive maintenance and prompt repair of facilities and equipment

Strategies & Competitive Advantage  Ability of the firm to outperform its industry i.e. to earn a high rate of profit than the industry norm  Competitive advantage: The creation of a unique advantage over others  To achieve a competitive advantage, a firm must create more value than its competitors  Differentiation  Cost leadership  Quick response

Competing on Differentiation  Create unique bundles of products/services that will be highly valued by customers  Differentiation should be thought of going beyond the physical characteristics and service attributes to encompass everything about the product or service that will influence the potential customer.  Experience Differentiation: selling experience Eg.; Disney does this where people get immersed surrounded by a dynamic visual and sound experience

 Can encompass everything related to product or service that influences value  Broad Product Line  Product features  Product Services  Status Symbol  Technical Innovation

Competing on Cost  Maximize value as defined by customers  Does not mean low quality  Establishing a low cost position relative to competitors through  Optimum utilization of resources  Economies of scale  Coverage of variable costs and a lesser proportion of fixed costs (Dumping by the Chinese)

Competing on Response  Including the values related to timely product development and delivery, as well as reliable scheduling and flexible performance.  Flexibility – ability to match changes in marketplace. Volumes and Designs changes  Reliability – scheduling. Communicated to the customer so that he/she can rely on.  Timeliness – design, production, delivery

OM’s Contribution to Strategy Response (Faster) Quality Product Process Location Layout Human Resource Supply Chain Inventory Scheduling Maintenance HP’s ability to follow the laptop 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 Spice Nepal’s network 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