Chapter 2 – Operations Strategy

Chapter 1 Review The role of operations is to: What are three types of transformation processes? TorF: Scientific management used motivation theory. What are three ways that E-business impacts operations? Productivity is defined as what? What is one reason a firm may find it difficult to enter a new industry? 2000 by Prentice-Hall, Inc

Strategy A common vision that unites an organization, provides consistency in decisions, and keeps the organization moving in the right direction. 2000 by Prentice-Hall, Inc

Strategy Formulation Define a primary task Assess core competencies Determine order winners & order qualifiers Positioning the firm 2000 by Prentice-Hall, Inc

Competitive Priorities Cost Quality Flexibility The ability to adjust to changes in product mix, production volume, or design Speed 2000 by Prentice-Hall, Inc

Competing on Cost Eliminate all waste Invest in Updated facilities & equipment Streamlining operations Training & development 2000 by Prentice-Hall, Inc

Competing on Quality Please the customer Understand customer attitudes toward and expectations of quality 2000 by Prentice-Hall, Inc

Competing on Flexibility Produce wide variety of products Introduce new products Modify existing products quickly Respond to customer needs 2000 by Prentice-Hall, Inc

Competing on Speed Fast moves Fast adaptations Tight linkages 2000 by Prentice-Hall, Inc

Operations Role in Corporate Strategy Provide support for overall strategy of a firm Serve as firm’s distinctive competence Must be consistent Must be consistent with overall strategy 2000 by Prentice-Hall, Inc

Strategy and the Internet Create a distinctive business strategy Strengthen existing competitive advantages Integrate new and traditional activities Must provide a unique value to the customer 2000 by Prentice-Hall, Inc

Strategic Decisions in Operations Products Processes and Technology Capacity Human Resources Quality Facilities Sourcing Services Operating Systems Figure 2.2 2000 by Prentice-Hall, Inc

Products & Services Make-to-order Make-to-stock Assemble-to-order Made to customer specifications after order received Make-to-stock Made in anticipation of demand Assemble-to-order Add options according to customer specification 2000 by Prentice-Hall, Inc

Processes & Technology Project One-time production of product to customer order Batch production Process many jobs at same time in batches Mass production Produce large volumes of standard product for mass market Continuous production Very high volume commodity product 2000 by Prentice-Hall, Inc

Product-Process Matrix Volume Low High Projects Batch Production Mass Continuous Standardization Figure 2.3 2000 by Prentice-Hall, Inc

Service-Process Matrix Volume Low High Professional Service Service Shop Mass Service Service Factory Standardization Figure 2.4 2000 by Prentice-Hall, Inc

Capacity & Facilities How much capacity to provide Size of capacity changes Handling excess demand Hiring/firing workers Need for new facilities 2000 by Prentice-Hall, Inc

Human Resources Skill levels required Degree of autonomy Leadership Policies Profit sharing Individual or team work Supervision methods Levels of management Training Leadership 2000 by Prentice-Hall, Inc

Quality Target level Measurement Employee involvement Training Systems needed to ensure quality Maintaining quality awareness Evaluating quality efforts Determining customer perceptions 2000 by Prentice-Hall, Inc

Sourcing Degree of vertical integration Supplier selection Supplier relationship Supplier quality Supplier cooperation 2000 by Prentice-Hall, Inc

Operating Systems Execute strategy daily Information technology support Effective planning & control systems Alignment of inventory levels, scheduling priorities, & reward systems 2000 by Prentice-Hall, Inc

Strategic Planning Mission and Vision Corporate Strategy Voice of the Business Customer Marketing Strategy Operations Strategy Financial Strategy Figure 2.5 2000 by Prentice-Hall, Inc

Policy Deployment – Hoshin planning Focuses employees on common goals & priorities Translates strategy into measurable objectives Aligns day-to-day decisions with strategic plan 2000 by Prentice-Hall, Inc

Derivation of an Action Plan Reduce business cycle time by 50% Reduce production cycle time by 30% Reduce queue time by 50% Reduce setup time by 50% Cut lot sizes in half Reduce purchasing cycle time by 30% Increase electronic transactions by 30% Redesign supplier quality reporting process Set up supplier education groups Reduce supplier base by 50% What Who When Measure Resource Improve Billy 9-1-03 Average $5,000 work Wray queue flow time per job . . . Figure 2.6 2000 by Prentice-Hall, Inc

Balanced Scorecard Finance — How should we look to our shareholders? Customer — How should we look to our customers? Processes — At which business processes must we excel? Learning and Growing — How will we sustain our ability to change and improve? 2000 by Prentice-Hall, Inc

Mobil’s Strategy Map Figure 2.7 Finances Customers Processes Volume growth Delight the customer Create new products & services Personal growth Net margin Win-win dealer relations Deliver products on spec, on time Process improvement Build best-in-class franchise Functional excellence Revenue Growth Strategy Finances Customers Processes Learning and Growth Clean/safe/fast Convenience store Align goals Teamwork, quality Strategic & job skills Develop business skills Inventory management New technology Nongasoline products & services More premium brands Figure 2.7 2000 by Prentice-Hall, Inc

Issues and Trends Global markets, sourcing, operations Virtual companies Greater choice Emphasis on service Speed and flexibility Supply chains C-commerce Technological advances Knowledge Environment and social responsibilities 2000 by Prentice-Hall, Inc

The Changing Corporation 20TH CENTURY 21ST CENTURY CHARACTERISTIC CORPORATION CORPORATION Organization The Pyramid The Web Focus Internal External Style Structures Flexible Source of strength Stability Change Structure Self-sufficient Interdependencies Resources Physical assets Information Operations Vertical integration Virtual integration Products Mass production Mass customization Reach Domestic Global Financials Quarterly Real-time Inventories Months Hours Strategy Top-down Bottom-up Leadership Dogmatic Inspirational Workers Employees Employees, free agents Job expectations Security Personal growth Motivation To compete To build Improvements Incremental Revolutionary Quality Affordable best No compromise 2000 by Prentice-Hall, Inc Table 2.1