MBA 8452 Systems and Operations Management

1. MBA 8452 Systems and Operations Management Operations Strategy

2. Objectives • Be able to explain how operations strategy fits into corporate strategy • Be able to describe the tradeoffs between the competitive dimensions of operations • Be able to explain and calculate the productivity measures

3. Marketplace/ Environment Corporate Strategy Finance Strategy Operations Strategy Marketing Strategy Competitive Priorities People Facilities Materials Processes Materials & Products & Customers Services Planning and Control Input Output Production System Development of Strategy

4. Mission and Strategy • Mission - where are we going? • Goals/ Objectives • Distinctive competencies • Strategy - how are we going to get there?

5. Operations Strategy • Support corporate strategy • A set of policies and plans for using the operations resources to best support the firm’s long term competitive strategy • Three levels of planning

6. Operations Strategy Framework Customer Needs New product : Old product Competitive dimensions and requirements Quality, Dependability, Speed, Flexibility, and Price Enterprise capabilities Operations & Supplier capabilities Technology Systems People R&D CIM JIT TQM Distribution Support Platforms Financial management Human resource management Information management

7. Operations Strategy Formulation • Scan the environment • What are the market needs? What competitors are doing? What are the threats and opportunities? • Identify core capabilities/competencies • What are our competitive strengths?

8. Operations Strategy FormulationCore Capabilities • Process-based: low cost, high quality • Systems-based: short lead times, more choices (mass customization) • Organization-based: new technology, unique products or processes

9. Customer Needs More Product Corporate Strategy Increase Org. Size Operations Strategy Increase Production Capacity Decisions on Processes and Infrastructure Build New Factory Operations Strategy FormulationExample Strategy Process Example

10. Developing Operations Strategy • Segment market by product groups • Identify product requirements, demand patterns, and profit margins • Determine order winners and order qualifiers • Convert order winners into specific requirements

11. Choices of Operations Competitive Priorities • Cost • Quality • Delivery • Speed • Reliability • Flexibility • Responses to changing demand • Variety of choice • New product introduction

12. Cost Flexibility Delivery Quality Trade-off Model of Operations Priorities • Basic logic: companies can only concentrate one priority at a time (“focused factory” or “PWP”--Skinner)

13. World-Class OperationsQuestioning the Trade-offs • cost, quality, speed of delivery, and flexibility are not viewed as tradeoffs. Rather they become Order Qualifiers • What are the order winnersin the marketplace?

14. Order winner: cost quality delivery flexibility Order qualifier: cost Cost+quality Cost+quality+delivery Time Order Qualifiers vs. Order Winners • Order Qualifiers • Minimum qualifications for consideration • Order Winners • Competitive advantage in marketplace • Winners become qualifiers over time

15. Productivity for Competitiveness • Partial measure • output/(single input) • Multi-factor measure • output/(multiple inputs) • Total measure • output/(total inputs)

16. Productivity 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?

17. Labor Productivity (1) 10,000 units/500hrs = 20 units/hour ... or we can arrive at a unitless figure (2) (10,000 unit*$10/unit)/(500hrs*$9/hr) = 22.22 Can you think of any advantages or disadvantages of each approach?

18. Multifactor Productivity