Chapter 8

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.