1. -Operations Strategy -ERP – The Power of Information
COB 300C
Dr. Mike Busing
Summer 2001

2. Operations Strategy Dr. Busing Spring 2001
COB 300C
Operations Strategy
Dr. Busing
Spring 2001

3. Strategy
Definition:

4. Strategy
Definition: the science or art of military command as applied to the overall planning and conduct of large-scale combat operations. (The American Heritage Dictionary)

5. Elements of Strategy from a Business Unit Perspective
Corporate Mission
Business Strategy
Competitive Priorities
Operations Strategy

6. Corporate Mission
is a set of long-range goals unique to each organization.
Includes statements about:
kind of business the company wants to be in
who its customers are
its beliefs about business
its goals of survival, growth, and profitability

7. Business Strategy long-range game plan for the the organization.
provides road-map of how to achieve the corporate mission given:
global business conditions
distinctive competencies/weaknesses (anything that helps the firm to capture market share)

8. Competitive Priorities
Low production costs
High quality products and services
Fast/on-time delivery
Customer service and flexibility
Speed

9. Operations Strategy
long-range game plan for the production of a company’s products and services. It provides a road map for what operations must do if business strategies are to be achieved.

10. Operations Strategy (cont’d)
Answers such questions as:
What new products must be developed?
When should new products be introduced into production?
What new production facilities are needed?
When should the new production facilities be completed?

11. Elements of Operations Strategy I. Positioning the Operations System
Type of product design
custom products
standardized products

12. Elements of Operations Strategy I. Positioning the Operations System
Type of product design
custom products
standardized products
Type of production processing system
product focused or line flow (good for low variety high volume)
process focused (good for high variety (custom), low volume)

13. Elements of Operations Strategy I. Positioning the Operations System
Type of finished-goods inventory policy
produce to stock (aka: make to stock)
produce to order (aka: make to order)

14. Elements of Operations Strategy I. Positioning the Operations System
C.L.T.
M.L.T.
C.L.T.
M.L.T.

15. Elements of Operations Strategy II. Focus of Production
Without economies of scale, it may be beneficial to focus on a narrow product mix for a particular niche. Otherwise the factory/service facility may become vulnerable to smaller and more specialized competitors who can provide better cost, delivery, quality, and/or service.

16. Elements of Operations Strategy III. Product/Service Plans
Introduction: production and marketing developing and profit is negative.
Growth: sales grow dramatically, marketing efforts intensify, production concentrates on expanding capacity fast enough to keep up with demand and profits begin.

17. Elements of Operations Strategy III. Product/Service Plans
Maturity: production concentrates on high volume, efficiency, and low costs; marketing uses competitive sales promotion aimed at increasing or maintaining market share. Profits at peak
Decline: product may be dropped by the firm or replaced by improved products due to declining profits and sales.

18. Elements of Operations Strategy IV
Elements of Operations Strategy IV. Production Process and Technology Plans
Matching high volume/low variety product line with product focused production technology
Matching low volume/high variety product line with process focused production technology
Intermediate case??

19. Elements of Operations Strategy V
Elements of Operations Strategy V. Allocation of Resources to Strategic Alternatives
Resources are scarce
e.g., product mix problem and other optimization problems

20. Elements of Operations Strategy VI. Facility Plans
Capacity, location, and layout decisions
The internal arrangement of workers, production processes, and departments within the facilities can affect the ability to provide desired volume, quality, and cost of products.
Walker manufacturing example.

21. Positioning Strategies for Services
Type of Service Design: (i.e., standard or custom product, amount of customer contact, mix of physical goods and intangible services)
Type of Production Process: (i.e., quasi manufacturing, customer as participant, customer as product)

23. Marketing
HRM
Finance
Operations

24. ERP
Enterprise
Resource
Planning

25. ERP – Key Point
Common Database
benefits?

26. ERP Benefits Integration of Financial Data
Standardization of Manufacturing Process
Standardization of HR Information

27. Issues to Consider
ERP package will most likely not match current business process.
Cost is significant (average TCO = $15MM).
Implementation Time can be long (1-3 years is typical).
No payback is typical until 8 months after installation is complete.
Average payback is $1.6MM/yr.

28. Problems and Budget Overruns
Training (including business process)
Integration/Testing (add-on packages)
Data Conversion
Data Analysis (data warehousing)
Consultants (staff training)
Replacing your best and brightest
Implementation teams never stop
Waiting for ROI
Post ERP Depression (productivity drop)

29. Lux Capital Corp. Business Plan Competition
Business Concepts will be judged partly on the following criteria: · Does the business opportunity serve an attractive market? · How large is this market? · Is the business opportunity realistic? · How does your product/service serve this market? · How will you make money from this opportunity (what is your business model)? · Who are your competitors? · What is your competitive advantage and how will you protect your business from competitors? · How well does the team understand the industry and market? · Who are the customers you will target? Who will be the first customers? · How will you develop and market your product/service and how long will it take to break-even? · What is the required capital investment to start the business? · Are financial projections realistic and based on solid analysis? · Who will manage the business and why will they be successful? · Who do you need to bring in to the business and how will you attract them? · Who are the investors? · How will the investment money be spent? · How and when will the investors be paid-back for their investment? · How will this business become a market leader and how will a leadership position be maintained?

30. UVA Competition (Spring 2000)