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Chapter 8

Chapter 8. Operations Strategy And Innovation. Introduction. Strategy starts with how the firm chooses to differentiate itself from competition. Operations strategy is the systematic building of operations capabilities. Operations can be divided into three broad categories.

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Chapter 8

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  1. Chapter 8 Operations Strategy And Innovation

  2. Introduction • Strategy starts with how the firm chooses to differentiate itself from competition. • Operations strategy is the systematic building of operations capabilities. • Operations can be divided into three broad categories. • Technology and facilities • operating policies • operations organization

  3. Manufacturing Strategy • In 1974 Skinner published “The Focused Factory”. • This began a focus on manufacturing. • His argument was “that a factory that focuses on a narrow product mix for a particular market niche will outperform the conventional plant, which attempts a broader mission”

  4. continued • He observed that if a firm had a manufacturing philosophy it was more likely to be successful. • He developed the idea of the focused factory. • Focused manufacturing is based on the concept that simplicity, repetition, experience, and homogeneity of tasks breeds competence.

  5. Five Key Characteristics of the Focused Factory • Process technologies • Market Demands • Product Volumes • Quality Levels • Manufacturing Tasks • Empirical tests have met with limited success.

  6. Hayes and Wheelwright • Eight decision categories • Structural Categories • capacity, facilities, technology and vertical integration • Infrastructural Categories • workforce, quality, production planning/material control, and organization. • The field has suffered from the lack of theoretical development especially rigorous empirical validation.

  7. Four Basic Strategic Configurations • Niche differentiation • Broad differentiation • Cost leadership • Lean competition

  8. Mass Customization • Hybrid strategy that has emerged during the last decade. • The use a fixed options at each stage of the production process, can create alternative products or service configurations. • Maybe best suited to low technology industries with large volume requirements.

  9. Mass Customization • Extends the concept of joint production to capture the best of both worlds manufacturing. • Better customer response and satisfaction. • Tailoring products and economies of scale savings.

  10. Joint Production and Economies of Scope • Theory of contestable markets. • When there is free entry into a market, exploitation of a natural monopoly is limited by the costs of exit not entry. • Therefore the magnitude of some costs is critical in determining the need for regulatory protection.

  11. Team or joint production • Several types of resources are used. • The product is not a sum of separable outputs of each cooperating resource. An additional factor creates a team organization problem. • Not all resources used in team production belong to one person.

  12. Scope • The idea of scope is quite different. • A few smaller plants alternating production between several jointly produced parts or products can outperform larger factories dedicated to one production product. • The ideal scope varies by situation. • Is assumed there is no penalty for changing from one product to another. • the key to creating scope and making this a viable option to scale is the flexible technology offered by computer technology applied to the factory floor.

  13. The second industrial divide • A modern-day application of the craft methods of production coupled with general-purpose equipment which affords considerably more flexibility and avoids the dehumanization of work. • “flexible specialization” accommodation to ceaseless change.

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