MBA 8452 Systems and Operations Management MBA 8452 Systems and Operations Management Operations Strategy.

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Presentation transcript:

MBA 8452 Systems and Operations Management MBA 8452 Systems and Operations Management Operations Strategy

2 Objectives Be able to explain how operations strategy fits into corporate strategy Be able to describe the tradeoffs between the competitive dimensions of operations Be able to explain and calculate the productivity measures

3 Development of Strategy Marketplace/ Environment Corporate Strategy Operations Strategy Competitive Priorities Marketing StrategyFinance Strategy People FacilitiesMaterialsProcesses Planning and Control Production System Materials & Customers Input Products & Services Output

4 Mission and Strategy Mission - where are we going? Goals/ Objectives Distinctive competencies Strategy - how are we going to get there?

5 Operations Strategy Support corporate strategy A set of policies and plans for using the operations resources to best support the firm’s long term competitive strategy Three levels of planning

6 Operations Strategy Framework Customer Needs New product : Old product Competitive dimensions and requirements Quality, Dependability, Speed, Flexibility, and Price Operations & Supplier capabilities TechnologyPeopleSystemsR&DCIMJITTQMDistribution Support Platforms Financial management Human resource management Information management Enterprise capabilities

7 Scan the environment What are the market needs? What competitors are doing? What are the threats and opportunities? Identify core capabilities/competencies What are our competitive strengths? Operations Strategy Formulation

8 Operations Strategy Formulation Core Capabilities Process-based: low cost, high quality Systems-based: short lead times, more choices (mass customization) Organization-based: new technology, unique products or processes

9 Operations Strategy Formulation Example Strategy Process Customer NeedsCorporate StrategyOperations Strategy Decisions on Processes and Infrastructure Example More ProductIncrease Org. Size Build New Factory Increase Production Capacity

10 Segment market by product groups Identify product requirements, demand patterns, and profit margins Determine order winners and order qualifiers Convert order winners into specific requirements Developing Operations Strategy

11 Choices of Operations Competitive Priorities Cost Quality Delivery Speed Reliability Flexibility Responses to changing demand Variety of choice New product introduction

12 Trade-off Model of Operations Priorities Basic logic: companies can only concentrate one priority at a time (“focused factory” or “PWP”--Skinner) Cost Quality DeliveryFlexibility

13 World-Class Operations Questioning the Trade-offs cost, quality, speed of delivery, and flexibility are not viewed as tradeoffs. Rather they become Order Qualifiers What are the order winners in the marketplace?

14 Order Qualifiers Minimum qualifications for consideration Order Winners Competitive advantage in marketplace Winners become qualifiers over time Order Qualifiers vs. Order Winners Cost+qualitycost Order winner: Order qualifier: costqualitydeliveryflexibility Cost+quality+delivery Time

15 Partial measure output/(single input) Multi-factor measure output/(multiple inputs) Total measure output/(total inputs) Productivity for Competitiveness

16 Productivity Example 10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr Cost of raw material: $5,000 Cost of purchased material: $25,000 What is the labor productivity?

17 Labor Productivity (1) 10,000 units/500hrs = 20 units/hour... or we can arrive at a unitless figure (2) (10,000 unit*$10/unit)/(500hrs*$9/hr) = Can you think of any advantages or disadvantages of each approach?

18 Multifactor Productivity