OPSM 301 Operations Management

1. Koç University OPSM 301 Operations Management Class 2: Operations management strategy Strategic fit Zeynep Aksin zaksin@ku.edu.tr

2. Firms compete on product attributes. This requires process capabilities. • Price (Cost) P • Quality Q • Customer service • Product quality • Time T • Rapid, reliable delivery • New product development • Variety V • Degree of customization “order winners” To deliver we need “capabilities”

3. Fit between Strategy and Processes • Processes must fit the operations strategy of the firm: Competing on -Cost (Southwest Airlines) -Quality (Toyota,Arçelik) -Flexibility (HP) -Speed (McDonalds) all require different process designs and different measures to focus on. Corporate StrategyKey Performance Indicators Operations StrategyProcess Design& Improvement

4. Strategic Fit: Desired Capabilities Processes Match processes with desired capabilities

5. Order-Winners and Qualifiers Order Winner Positive Less Important Competitive Benefit Neutral Order Qualifier Negative Low High Performance Source: Slack and Lewis

6. Order Qualifiers and WinnersDefined • Order qualifiers: the basic criteria that permit the firms products to be considered as candidates for purchase by customers • Screening criteria • Standard, expected performance • Order winners: the criteria that differentiates the products and services of one firm from another • The more, the better • Customer chooses based on this criteria

7. Mission/Strategy • Mission - where you are going • Strategy - how you are going to get there; an action plan

8. Company Mission Business Strategy Functional Area Strategies Functional Area Marketing Operations Fin./Acct. Decisions Decisions Decisions Strategy Process

9. Responsiveness A B operations frontier C High Low Cost Strategy vs. Operational Effectiveness: The Operations Frontier as the minimal curve containing all current positions in an industry

10. Increasing Customer Value Value Increasing Value High Operations Frontier A B C Low High Low Price

11. Lowering Costs Value High Operations Frontier A B Lowering Costs C Low High Low Price

12. Shouldice HospitalVideo Case

13. Medical Simple hernias Optimized process Check-ups and follow-up Social Club Med like experience Co-production at individual and cohort level A network for life Shouldice Business Model

14. Shouldice Patient Experience Low, both real and opportunity COST Low recurrence, satisfaction with experience QUALITY Fast operation and recovery SPEED The process rules; only simple hernias FLEXIBILITY

15. Shouldice: prepares for the simplest Hernia complexity Comparison to General Hospital General Hospital: prepares for the most complex

16. A product/process matrix High customization Low volume High unit margin High standardization High volume Low unit margin Product Process Flexible job Rigid line flow Industrialization

17. Shouldice as a lean enterprise Womack and Jones (2000) From Lean Production to Lean Enterprise, HBR March-April 1994

18. Focus at Shouldice: the results • Breakthrough service • High customer and employee satisfaction • Industrial approach

19. Shouldice Process Life Cycle • Birth of the Shouldice formula • Process selection, design, and improvement • Innovation at the interfaces • Process overtaken (when?)