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Chapter 2 – Operations Strategy

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1 Chapter 2 – Operations Strategy

2 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

3 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

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

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

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

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

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

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

10 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

11 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

12 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

13 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

14 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

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

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

17 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

18 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

19 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

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

21 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

22 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

23 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

24 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 Average $5,000 work Wray queue flow time per job . . . Figure 2.6 2000 by Prentice-Hall, Inc

25 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

26 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

27 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

28 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


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