POM - J. Galván 1 PRODUCTION AND OPERATIONS MANAGEMENT Ch. 2: Operations Strategy for Competitive Advantage

POM - J. Galván 2 Operations Strategy Customer NeedsCorporate Strategy Operations Strategy Alignment Core Competencies Decisions Processes, Infrastructure, and Capabilities

POM - J. Galván 3 Operations Priorities Cost Cost Quality Quality Delivery Flexibility Delivery Flexibility Delivery Speed Delivery Speed Delivery Reliability Delivery Reliability Coping with Changes in Demand Coping with Changes in Demand Flexibility and New Product Introduction Speed Flexibility and New Product Introduction Speed Other Product-Specific Criteria Other Product-Specific Criteria

POM - J. Galván 4 Dealing with Trade-offs Cost Quality DeliveryFlexibility FOCUS Plant within a Plant (PWP) Traditional Approach Advanced Approaches World Class Manufacturing Trade-offs

POM - J. Galván 5 World-Class Manufacturing World-class manufacturers no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs. World-class manufacturers no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs. They have become order qualifiers. They have become order qualifiers. What are the order winners in today’s market? What are the order winners in today’s market?

POM - J. Galván 6 Service Breakthroughs Service can be an “order winner” Service can be an “order winner” Warranty Roadside Assistance Travel Planning Loaner Vehicles Leases

POM - J. Galván 7 8 A Framework for Manufacturing Strategy Customer Needs New and Current Products Performance Priorities and Requirements Quality, Dependability, Speed, Flexibility, and Price Operations & Supplier Capabilities TechnologyPeopleSystemsR&DCIMJITTQMDistribution Support Platforms Financial Management Human Resource ManagementInformation Management Enterprise Capabilities Strategic Vision

POM - J. Galván 8 Strategy Begins with Priorities Consider the case of a personal computer manufacturer. 1.How would we segment the market according to product group? 2.How would we identify product requirements, demand patterns, and profit margins for each group? 3.How do we identify order winner and order qualifiers for each group? 4.How do we convert order winners into specific performance requirements? Us (Core competencies) Competition (Them) Differentiation

POM - J. Galván 9 Manufacturing’s Role in Corporate Strategy Stage 1--Internally Neutral Stage 1--Internally Neutral Minimize manufacturing’s negative potential Minimize manufacturing’s negative potential Management control systems Management control systems Stage II--Externally Neutral Stage II--Externally Neutral Achieve parity with competitors Achieve parity with competitors Follow industry practice Follow industry practice Stage III--Internally Supportive Stage III--Internally Supportive Support the business strategy Support the business strategy Stage IV-- Externally Supportive Stage IV-- Externally Supportive Manufacturing-based competitive advantage Manufacturing-based competitive advantage

POM - J. Galván 10 Four Stages of Service Firm Competitiveness Stage I. Available for Service Stage I. Available for Service Reactive, non-performance-based survival Reactive, non-performance-based survival Stage II. Journeyman Stage II. Journeyman Firm neither sought nor avoided Firm neither sought nor avoided Reliable but uninspired operation Reliable but uninspired operation Stage III. Distinctive Competence Achieved Stage III. Distinctive Competence Achieved Reputation for meeting customers’ expectations Reputation for meeting customers’ expectations Customer-focused operations--management support Customer-focused operations--management support Stage IV. World Class Service Delivery Stage IV. World Class Service Delivery Firm name synonymous with service excellence-- focus on delighting rather than satisfying customers Firm name synonymous with service excellence-- focus on delighting rather than satisfying customers Continuous learning and improvement of operations Continuous learning and improvement of operations

POM - J. Galván 11 MIT Commission on Industrial Productivity 1985 Recommendations Place less emphasis on short-term financial payoffs and invest more in R&D. Place less emphasis on short-term financial payoffs and invest more in R&D. Revise corporate strategies to include responses to foreign competition. Revise corporate strategies to include responses to foreign competition. greater investment in people and equipment greater investment in people and equipment Knock down communication barriers within organizations and recognize mutuality of interests with other companies and suppliers. Knock down communication barriers within organizations and recognize mutuality of interests with other companies and suppliers. Recognize that the labor force is a resource to be nurtured, not just a cost to be avoided. Recognize that the labor force is a resource to be nurtured, not just a cost to be avoided. Get back to basics in managing production operations. Get back to basics in managing production operations. Build in quality at the design stage. Build in quality at the design stage. Place more emphasis on process innovations rather than focusing sole attention on product innovations. Place more emphasis on process innovations rather than focusing sole attention on product innovations.

POM - J. Galván 12 U. S. Competitiveness Drivers Product Development Product Development Teams speed development and enhance manufacturability Teams speed development and enhance manufacturability Waste Reduction (JIT Philosophy) Waste Reduction (JIT Philosophy) WIP, space, tool costs, and human effort WIP, space, tool costs, and human effort Improved Customer-Supplier Relationships Improved Customer-Supplier Relationships Borrowed from Japanese Keiretsu Borrowed from Japanese Keiretsu Improved Leadership Improved Leadership Strong, independent boards of directors Strong, independent boards of directors