1. Operations Strategy
Chapter 2

2. How Operations Strategy fits the Operations Management Philosophy
Operations As a Competitive
Weapon
Operations Strategy
Project Management
Process Strategy
Process Analysis
Process Performance and Quality
Constraint Management
Process Layout
Lean Systems
Supply Chain Strategy
Location
Inventory Management
Forecasting
Sales and Operations Planning
Resource Planning
Scheduling

3. Starbucks
If someone says, “Lets go out for coffee,” Starbucks often comes to mind.
Entrepreneur Howard Schultz had an operations strategy in mind in 1990 when he bought the 17-store Seattle chain and turned it into a global success.
Service strategy was key.
Offering a variety of specialized products and services, such as Internet access, phone ahead ordering, and CD burning, all in a socially interactive atmosphere.

4. Operations Strategy
Operations strategy is the means by which operations implements the firm’s corporate strategy and helps to build a customer-driven firm.
It links long-term and short-term operations decisions to corporate strategy.
It is the core of managing processes and value chains.

5. Customer-Driven Operations Strategy
Corporate strategy views the organization as a system of interconnected parts, each working with the others to achieve desired goals.
Operations Strategy supports the corporate strategy and requires continuous cross-functional interaction.
The operations strategy should be customer driven.

6. Developing a Corporate Strategy
Developing a corporate strategy involves three considerations:
Monitoring and adapting to the environment
Identifying and developing core competencies
Developing the firm’s core processes
Adapting requires environmental scanning to monitor trends for opportunities and threats.
Core Competencies are the unique resources and strengths an organization possesses.

7. Core Competencies Core competencies include…
A well-trained and flexible Workforce
Having well-located & flexible Facilities
Having Market and Financial Know-How.
Expertise in Systems and Technology.
The core competencies should determine the firm’s core processes.
These can include customer relations, new service/product development, order fulfillment, and supplier relationships.
A firm may have all of these or focus on a subset of them, as determined by its core competencies.

8. Global Strategies
A global strategy may include buying foreign services or parts and entering or expanding foreign markets.
Two effective global strategies are:
Strategic Alliances
Collaborative efforts
Joint ventures
Technology licensing
Locating abroad

9. Market Analysis
A Market Analysis is one key to developing a customer-driven strategy, and is accomplished in two parts.
Market Segmentation, which identifies groups of customers with enough in common to warrant developing services and/or products for them.
Needs Assessment identifies the needs of each market segment. Needs include such things as:
Service or product needs
Delivery system needs
Volume needs

10. Arriving at the Competitive Priorities
Corporate Strategy
environmental scanning
core competencies
core processes
global strategies
Market analysis
segmentation
needs analysis
Competitive priorities
cost
quality
time
flexibility

11. Competitive Priorities
Cost 1. Low-cost operations
Quality 2. Top quality
3. Consistent quality
Time 4. Delivery speed
5. On-time delivery
6. Development speed
Flexibility 7. Customization
8. Variety
9. Volume flexibility

12. Competitive Capabilities
The Competitive Capabilities are the cost, quality, time and flexibility dimensions of competitive priorities that a process or value chain actually possesses and is able to deliver.
Low Cost means delivering a service or product at the lowest possible cost to the satisfaction of the customer.

13. Quality as a Competitive Capability
Top Quality: Delivering an outstanding service or product.
Considerable interaction with the customers may be required to determine what that means.
Consistent Quality: Producing services or products that meet design specifications on a consistent basis.

14. Time as a Competitive Capability
Delivery Speed is quickly filling a customer’s order.
Lead Time is the time between receipt of an order and filling the order.
On-Time Delivery means meeting the delivery time promises.
Development Speed is quickly introducing a new service or product.
Time-Based Competition is a strategy that focuses on development speed and delivery speed.

15. Flexibility as a Competitive Capability
Customization means satisfying the unique needs of each customer by changing the service or product designs.
Variety involves handling a wide assortment of services or products efficiently.
Volume Flexibility requires accelerating or decelerating the rate of production quickly to handle large fluctuations in demand.

16. Order Winners and Order Qualifiers
These are criteria used by customers in service or product selection.
Order Winners are criteria for differentiating services or products of one firm from those of another.
Price, quality, time, flexibility, after sales support, reputation, etc.
Order Qualifiers are demonstrated levels of performance required to do business in a particular market segment.

17. Service or Product Development Strategies
Product Variety: Offering a wide assortment.
Design: Ease of use and desirable features.
Innovation: Translate new technology into new products.
Service: Products with services added.
Leader: Being first to introduce new services and/or products.
Middle of the Road: Wait for the leaders to introduce new services and/or products.
Laggard: Wait to see if the leader’s new services and/or products catch on in the market.

18. Service Package
A Service Package is a collection of goods and services provided by a service process to its customers. It consists of four features:
Supporting Facility: The physical resources that must be in place before a service can be offered.
Facilitating Goods: The materials purchased or consumed by the customer or the items provided by the customer to receive a service.
Explicit Services: The readily observable benefits.
Implicit Services: Psychological benefits.

19. Quality Function Deployment (QDF)
Quality Function Deployment (QDF) is a means of translating customer requirements into the appropriate technical requirements for service or product development. Questions it seeks to answer are…
What do our customers want?
How well are we doing relative to our competition?
What technical measures relate to our customers’ needs?
What are the relationships between what our customers want and the technical measures?
How does our service or product performance compare to the competition?
What are the potential technical trade-offs?

20. Quality Function Deployment
© 2007 Pearson Education
Quality Function Deployment
“House of Quality”
Voice of the Engineer
Competitive Analysis
Voice of the Customer
Correlations
Technical Comparison 1

21. Development Process Design Analysis Development Full Launch
Service or product not profitable
Need to rethink the idea.
Post-launch review
Design
Specifications are developed for new services or products
Analysis
A critical review of how it will be produced, resource requirements and capabilities.
Development
Cross-functional coordination, process design.
Full Launch
Sales & promotion

22. Concurrent Engineering
Concurrent Engineering brings product engineers, process engineers, marketers, buyers, information specialists, quality specialists, and suppliers together to design a product and the processes that will meet customer expectations.
This is an essential cross-functional effort during the service and/or product development phase to insure a timely and well-coordinated process that brings value to the customer.

23. Corporate Strategy and Key Operations Management Decisions
Operations strategy
Decisions
Managing Processes
Managing Value Chains
Market analysis
Competitive priorities
New Service/
Product Development
Capabilities
Performance
Gap? No
Yes