1. Chapter 2 Operations Strategy and Competitiveness
A Framework for Operations Strategy in Manufacturing
Operations Strategy in Services
Meeting the Competitive Challenge
Productivity Measurement 2

2. Operations Strategy - Definition
Operations Strategy - involves setting broad policies and plans on how to use “available” resources of a firm to support its long-term competitive strategy.
Corporate strategy leads to Operations strategy

3. Corporate Strategy Formulation
COLLBORATORS
& COOPERATORS

4. Vision and Mission Statements
Vision statements used to express organization’s values and aspirations.
Mission statements express organization’s purpose or reason for existence.

5. Operations Strategy - Operations Priorities
Cost
Quality - product quality and process quality
Delivery Flexibility
Delivery Speed
Delivery Reliability
Coping with Changes in Demand
Flexibility and New Product Introduction Speed
Other Product-Specific Criteria ...
Irwin/McGraw-Hill 4

6. Dealing with Trade-offs
Cost
Quality
Delivery
Flexibility
Traditional
Approach
Advanced Approaches
World Class Manufacturing
Trade-offs
Plant within a Plant (PWP)
FOCUS 5
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 1998 5

7. 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? 9

8. Operations Strategy Customer Needs Corporate Strategy Alignment Core
Competencies
Operations Strategy
Decisions
Processes, Infrastructure, and Capabilities 3

9. Core Competencies
Collective knowledge and skills an organization has that distinguish (or differentiate) it from the competition.
Typically center on an organization’s ability to integrate a variety of specific technologies and skills in the development of new products and services.
Building blocks of core capabilities.

10. Core Competencies continued
Are basis on which new outputs are developed.
Better to think of organization in terms of its portfolio of core competencies than as a portfolio of products.
Identifying and developing core competencies is one of top management’s most important roles.

11. Examples of Core Competencies
Sony - miniaturization
3M- knowledge of substrates, coatings and adhesives; Knowledge management
Black and Decker - small electrical motors and industrial design
Honda - engines and power trains
Daimei-Benz - safety systems, quality and luxury.

12. Core Competencies Used to Gain Access to Variety of Markets
Cannon
core competencies in optics, imaging, and electronic controls
Products include copiers, laser printers, cameras, and image scanners.
Boeing
integrating large scale systems
commercial jetliners, space stations, missiles

13. Core Capabilities Organization practices and business processes
Collection of competencies lead to “capabilities”

14. Key Characteristics of Core Competencies/Capabilities
Should be used to gain access to a variety of markets
Should be strongly related to key benefits provided by products or services
Should be difficult to imitate (what about benchmarking?)

15. 4. How do we convert order winners into specific performance requirements?
Competition
(Them) Us
(Core competencies)
Differentiation 10

16. A Framework for Manufacturing Strategy
Customer Needs
New and Current
Products
Performance Priorities
and Requirements
Quality, Dependability,
Speed, Flexibility, and Price
Operations & Supplier Capabilities
Technology
People
Systems
R&D
CIM
JIT
TQM
Distribution
Support Platforms
Financial Management
Human Resource Management
Information Management
Enterprise Capabilities
Strategic Vision 8

17. World-Class Manufacturing
World-class manufacturers no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs.
They have become order qualifiers.
What are the order winners in today’s market? 6

18. Service Breakthroughs
Service can be an “order winner”
Travel
Planning
Warranty
Leases
Roadside
Assistance
Loaner
Vehicles 7

19. MIT Commission on Industrial Productivity 1985 Recommendations
Place less emphasis on short-term financial payoffs and invest more in R&D.
Revise corporate strategies to include responses to foreign competition.
greater investment in people and equipment
Knock down communication barriers within organizations and recognize mutuality of interests with other companies and suppliers. 14

20. MIT Commission on Industrial Productivity 1985 Recommendations
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.
Build in quality at the design stage.
Place more emphasis on process innovations rather than focusing sole attention on product innovations. 15

21. U. S. Competitiveness Drivers
Product Development
Teams speed development and enhance manufacturability
Waste Reduction (JIT Philosophy)
WIP, space, tool costs, and human effort
Improved Customer-Supplier Relationships
Borrowed from Japanese Keiretsu
Improved Leadership
Strong, independent boards of directors
Irwin/McGraw-Hill
The McGraw-Hill Companies, Inc., 1998 16

22. Productivity Partial measures Multi-factor measures Total measure
output/(single input)
Multi-factor measures
output/(multiple inputs)
Total measure
output/(total inputs) 17

23. Example 10,000 Units Produced Sold for $10/unit 500 labor hours
Labor rate: $9/hr
Cost of raw material: $5,000
Cost of purchased material: $25,000
What is the
labor productivity? 18

24. Example--Labor Productivity
10,000 units/500hrs = 20 units/hour ...
... or we can arrive at a “unit less” figure
(10,000 unit*$10/unit)/(500hrs*$9/hr) = Can you think of any advantages or disadvantages of each approach? 19

25. Applying Productivity Figures
You’ve just told your boss that the plant labor productivity at your facility is better than that of a plant in a related business.
Why might he not be pleased with you? 20