Operations Management Productivity & Competitive Advantage

Stages in the Product Life Cycle Introduction Growth Maturity Decline Growth rate mp3 players mp4 playersCD players iphone Floppy Disks cassette players DVD’s Fax Machine

 Best period to increase market share  R&D engineering are critical Introduction Strategy & Issues During Product Life  Company Strategy & Issues  Product design and development are critical  Frequent product and process design changes  Short production runs  High production costs  Utmost attention to quality  Quick elimination of market-revealed design defects  OM Strategy & Issues

Strategy & Issues During Product Life  Sensitive to Changes in price or quality  Marketing is critical  Strengthen niche Growth  Company Strategy & Issues  OM Strategy & Issues  Forecasting is critical  Product and process reliability  Competitive product improvements and options  Enhance distribution

Strategy & Issues During Product Life  Poor time to increase market share  Competitive costs become critical  Usually poor time to change quality or price  Defend position via fresh promotional and distribution approaches Maturity  Company Strategy & Issues  OM Strategy & Issues  Standardization - Increasing stability of manufacturing process  Less rapid product changes and more minor annual model changes  Optimum capacity  Long production runs  Re-examination of necessity of design changes

Strategy & Issues During Product Life  Cost control critical to market share Decline  Company Strategy & Issues  OM Strategy & Issues  Little product differentiation  Cost minimization  Overcapacity in the industry  Prune line to eliminate items not returning a good margin  Reduce capacity

Strategy Development and Implementation  Understand issues – research, preconditions, dynamics  Research  High return on investment  High product quality (relative to competition)  High capacity utilization  High operating efficiency  High capital turnover

Strategy Development and Implementation  Understand issues – Preconditions  Strengths and Weaknesses of competitors as well as new entrants into the market, substitutes  Current and prospective environmental, technological, legal and economic issues.  Product life cycle  Resources available within the firm and within the OM functions  Integration of OM strategy with the company’s strategy and other functional areas.

Strategy Development and Implementation  Understand issues – Dynamics  Strategic changes due to two reasons:  Changes within the org.  Personnel, finance, product life  Changes in the environment

Strategy Development and Implementation  Form a strategy for competitive advantage  Identify critical success factors Critical success factors are the factors that are key to achieving competitive advantage.  Build and staff the organization  Integrate OM with other activities.

Identifying Critical Success Factors DecisionsSample Option ProductCustomized, or standardized QualityDefine customer expectations and how to achieve them ProcessFacility size, technology, capacity LocationNear supplier or customer LayoutWork cells or assembly line Human resourceSpecialized or enriched jobs Supply chain Single or multiple source suppliers InventoryWhen to reorder, how much to keep on hand ScheduleStable or fluctuating productions rate Maintenance Repair as required or preventive maintenance Marketing Service Distribution Promotion Channels of distribution Product positioning (image, functions) Finance/Accounting Leverage Cost of capital Working capital Receivables Payables Financial control Lines of credit Production/Operations

CSF’s of Microsoft  It focuses on one business – software  It thinks globally – operates and sells  Senior management involved in product development process  It recruits and retains top people in its field  Emphasizes on speed to market

Southwest Airline’s Low Cost Competitive Advantage CSF’s Courteous, but limited passenger service Lean, productive employees Short haul, point-to-point routes, often to secondary airports High aircraft utilization Standardized fleet of Boeing 737 aircraft Frequent, reliable schedules Competitive Advantage: Low Cost