Operations Resources

1. Strategic Reconciliation Market Requirements OPERATIONS STRATEGY Operations Resources Align resources with requirements Level 1 - Fit Develop sustainable competitive advantage Level 2 - Sustainability Include impact of uncertainty Level 3 - Risk Operations strategy content Operations strategy process Resource Usage Market competitiveness Performance objectives Decision areas Topics in operations strategy treated in this chapter

2. Hospital Milestone Software producer Awareness of need Request for information Receipt of information Request for product/service Start of core processing End of core processing ‘Installed’ product/service fully operational Presentation of symptoms Customer decides new software is needed Enquiry decision time Visit to doctor for advice and tests Asks for specification and estimates Enquiry time Test information confirms diagnosis Receives proposal Customer decision time Decide on surgery Places order Waiting time Start of design and coding Enter hospital for surgery Core processing time Procedure successfully completed Software ‘completed’ Installation time Software fully debugged and working Patient fully recovered Significant ‘milestone’ times for the delivery of two products/services

3. Economy class First/Business class Economy cabin Services First/Business-class cabin, airport lounges, pick-up service Customers Travellers (friends and family), vacation takers, cost-sensitive business travel Wealthy people, business people, VIPs Service range Wide range, may need to be customised Standardized cabin Rate of service innovation Relatively low Relatively high Relatively low volume Relatively high volume Volume of activity Low to medium Profit margins Medium to high Customization, extra service, comfort features, convenience Main competitive factors Price, acceptable service Performance objectives Quality (specification and conformance), Flexibility, Speed Cost, Quality (conformance) Different product groups require different performance objectives

4. Quality Being RIGHT Being FAST Speed Market Competitiveness Dependability Being ON TIME Being ABLE TO CHANGE Flexibility Cost Being PRODUCTIVE The operations function can provide a competitive advantage through its performance at the five competitive objectives

5. Positive Order-winners Less important Competitive benefit Neutral Qualifiers Negative Low High Achieved performance Order-winners and qualifiers

6. Customer Needs Importance to customers Priority of performance objectives Performance against competitors Competitors’ Actions The priority of performance objectives is influenced by what is regarded as important by customers and how the operation performs against competitors

7. Output Output Profit Output Profit Profit Cost Total assets Total assets Capacity Total assets Output Output Output Revenue Output Fixed assets Capacity Total assets Fixed assets x = x = Average revenue Average cost x x = Productivity of fixed assets Utilization Working capital Capacity Development and organization Supply network Process technology Operations strategy decision areas Decomposing the ratio profit/total assets

8. Resource Deployment Capacity Structure Supply Network Process Technology Development and Organization ISSUES- ISSUES - • New product/service development • Organization structure • Performance measurement • Improvement strategy • Do it yourself or buy-in? • Customer and supplier relationships • Supply chain dynamics and integration ISSUES - • Development rate • Automation • Size • Integration • In our out-house development ISSUES - • Capacity • Location • Focus & segmentation • L/T forecasts Operations Decisions are shaped by COMPETENCIES and CONSTRAINTS The Elements of an International Operations Strategy

9. Resource Usage • Issues include: • Total capacity • Number, size of sites • Allocation of tasks to sites • Location • Issues include: • Vertical integration • Network behaviour • Supplier relationships • Supplier development • Issues include: • Rate of development • Automation • Integration • Implementation • Subcontracted development • Issues include: • Responsibility relationships • Performance and control • Process development • Product and service development Process Technology Development and Organization Capacity Supply Network The four categories of operations strategy decision areas

10. Process Technology Development and Organization Capacity Supply Network Structural issues Infrastructural issues Operations strategy decision areas are partly structural and partly infrastructural

11. Resource Usage Quality Speed Competitive Objectives are prioritized by CUSTOMERS and COMPETITORS Market Competitiveness Dependability Flexibility Cost Development and Organization Process Technology Supply Network Capacity Operations Decisions shape COMPETENCIES and CONSTRAINTS Operations strategy is defined by the intersections of performance objectives and Operations decisions

12. Resource Usage Quality Speed Operations strategy Market Competitiveness Dependability Performance objectives Flexibility Cost Development and Organization Process Technology Supply Network Capacity Decision areas The operations strategy matrix

13. 7-Eleven Japan Largest retailer in Japan Sells 1.5X as much per store as nearest rival History of cautious expansion and technical and service innovation “Field Counsellors” spread operations knowledge (also do distance training) Expansion by territory to reduce disn costs Early use of TIS (total information system) TIS controls stock replenishment twice a day delivery (sales analysed twice a day) New system not internet-based New services include, Banking terminals Downloading games Downloading music to MD Internet ordering and collection

14. Information sharing and parenting system spreads service ideas Distribution center grouping by temperature  Distribution centers and inventory management systems give fast stock replenishment  TIS gives comprehensive and sophisticated analysis of sales & supply patterns daily  TIS allows trends to be forecast and supply adjustments made  Area dominance reduces distribution and advertising costs  Common distribution centers give small frequent deliveries from fewer sources  Field counselors with sales data help stores to minimize waste and increase sales  • Number and type of distribution centers • Order and stock replenishment • Franchisee relationships • New product/service development • Approach to operations improvement • The Total Information System (TIS) • Location of stores • Size of stores DEVELOPMENT AND ORGANIZATION PROCESS TECHNOLOGY SUPPLY NETWORKS CAPACITY Resource Deployment QUALITY of products and services Speed and dependability combined to indicate AVAILABILITY Market Competitiveness FLEXIBILITY of response to sales and customer trends • COST in terms of minimizing… • operating cost • capital cost • working capital 7-11 JAPAN pivotal  critical  secondary

15. Align resources with requirements Level 1 - Fit Develop sustainable competitive advantage Increasing complexity Level 2 - Sustainability Include impact of uncertainty Level 3 - Risk The practice of operations strategy involves considering fit, sustainability and risk

16. Market requirements Line of fit Alignment between market and operations capability X Y Level of operations resource capability In operations strategy ‘fit’ is the alignment between market and operations capability

17. Market requirements Extension of market requirements Sustainable improvement Improvements in operations capabilities Level of operations resource capability Sustainable improvement implies simultaneous extension/improvement of market requirements and operations capabilities

18. Virgin Trains Market requirements Line of fit Nissan Level of operations resource capability Virgin Trains and Nissan positioned in relation to market requirements and operations capabilities

19. Quality (specification) Quality (conformance) Cost X X X Delivery flexibility X X Speed X X X Volume flexibility Dependability Customization Current products New products Dresding Medical - Polar diagram illustrating the relative importance of the performance objectives for the current and new products

20. Resource Usage * * * * Quality (spec) * * * * * * Quality (conform) * * * * * Speed * * Dependability * * * Performance objectives Market Competitiveness * * Delivery flex * Volume flex * * * * * * Customization * * * * * Cost * Capacity Supply Network Process Technology Development and Organization * * * very important R&D, Mfg. and Sales all share common knowledge base. Incremental new product development Lab style manufacture easy to change capacity incrementally 50% of activities in-house Low process technology (but high product technology) * * medium importance * some importance Decision areas Dresding Medical - Current product range Slide 2.17

21. Resource Usage * * * * Quality (spec) * * * * * * * * Quality (conform) * * * * * * Speed * * * * Dependability * * Performance objectives Market Competitiveness * Delivery flex * * * * * Volume flex * * Customization * * * * * Cost * * * * Capacity Supply Network Process Technology Development and Organization * * * very important R&D, Mfg. and Sales less interdependent. Faster time-to-market needed May need to adjust quickly depending on demand New supplies will be needed / developed Needs investment in volume processes * * medium importance * some importance Decision areas Dresding Medical - New product range Slide 2.18

22. Critical Critical Critical Critical Coherence Correspondence Critical Comprehensive? ‘Fit’ is concerned with ensuring comprehensiveness, correspondence, coherence and criticality Resource Usage Quality Speed Market Competitiveness Dependability Performance objectives Flexibility Cost Development and Organization Process Technology Supply Network Capacity Decision areas