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Chapter 2. Customers, Products, and OM: Strategy

Chapter 2. Customers, Products, and OM: Strategy. Outline Product Characteristics and the Customer Corporate and Operations Strategy Hierarchy of strategies Order Winners and Qualifiers Operations Strategy: Service vs. Manufacturing Operations Strategy: Product Life Cycle

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Chapter 2. Customers, Products, and OM: Strategy

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  1. Chapter 2. Customers, Products, and OM: Strategy • Outline • Product Characteristics and the Customer • Corporate and Operations Strategy • Hierarchy of strategies • Order Winners and Qualifiers • Operations Strategy: Service vs. Manufacturing • Operations Strategy: Product Life Cycle • Product Design/Redesign Process/ QFD MAN 3504 - Chapter 2

  2. Product Characteristics and the Customer • Customer are classified by their product characteristic preferences. Done through surveys and focus groups • Product Characteristics: Aesthetics Cost Quality Variety/Customization Speed of Service/Delivery Warranties/Guarantees Bundled Services MAN 3504 - Chapter 2

  3. Corporate and Operations Strategy • One product can seldom satisfy all customer types • Companies recognize they must design products for a specific market segment, leading to strategies • Strategy is a plan of attack (including which customers will be “attacked”) • From the corporate strategy, functional strategies are derived MAN 3504 - Chapter 2

  4. Hierarchy of Strategies MARKET • Functional Strategies drive decision making at multiple levels: • Strategic DM • Tactical DM • Operational/Day-to-day DM CORPORATE STRATEGY MARKETING STRATEGY OPERATIONS STRATEGY FINANCE STRATEGY Products Operation Priorities Strategic Decision Making Training Programs Technology Facilities Procedures Quality Programs Tactical Decision Making Operational Decision Making People and equipment schedules Day-to-day inventory management MAN 3504 - Chapter 2

  5. Order Winners and Order Qualifiers • Order Qualifier: The level of a product characteristic(s) that allow a product to be considered for selection • Order Winner: The level of a product characteristic(s) that drive the customer decision to select a product • Order winners/qualifiers are dynamic • Changes as customer requirements change • Changes as competitive products change MAN 3504 - Chapter 2

  6. Order Winners and Order Qualifiers • Order winners become drivers for operations strategy • COST Operations Efficiency • QUALOITY/RELIABILITY Quality at Design/Zero Defects • VARIETY/CUSTOMIZATION Recognition of customer needs • SPEED OF SERVICE/DELIVERY Supply Chain Coordination • Focused Operations - few order winning characteristics • Operations as a driver for corporate strategy MAN 3504 - Chapter 2

  7. Operations Strategy: Services vs. Manufacturing • Operational Strategies differ in implementation • Cost Strategy: Cost may be reduced in materials or manufacturing locations versus in services is based on process standardization and the level of resources • Manufacturing: tangible product, versus Service: “it falls on your foot and it does not hurt” • Difficult to differentiate between services and products as products are bundled with services MAN 3504 - Chapter 2

  8. Operations Strategy: Product Life Cycles • The life cycle of a product has an effect on the operations strategy • Birth Stage: Product Design • Growth Stage: Capacity Management • Mature Stage: Increasing Efficiency and Quality • Decline Stage: Cost minimization and resource relocation MAN 3504 - Chapter 2

  9. Determine Customer Requirements marketing Idea Generation/Solutions engineering design Initial Design/Prototypes Design Review Complete Functional Specifications production/ manufacturing/ supply chain/ quality Initial Production and Market Test Full Production Product Design/ Redesign Process • Product Design is critical • Must match critical customer requirements • Design Steps MAN 3504 - Chapter 2

  10. Product Design/ Redesign Process • Past: “Over the wall design” vs. Today: Concurrent Engineering - multi functional teams • Value Analysis: Analyzing process and products to eliminate waste and simply products • Evaluating Designs: Quality Functional Deployment MAN 3504 - Chapter 2

  11. Strong Positive Relationship Positive Relationship Negative Relationship COMPETITIVE EVALUATION DC= Distinct Catering T= To your door Catering M = Mama’s food Catering PRODUCT ATTRIBUTES Rank by Local Customers (10=Best) CUSTOMER REQUIREMENTS 1 10 Cooking Staff Skills /Recipes Used Kitchen Space and Equipment Serving Equipment Transportation Equipment Number and Training and Serving Staff Variety in the Menu 6 M T DC On time Service 4 M DC T Aesthetic Pleasing 3 T M DC Food Taste 4 T DC M Competitive Price 5 T DC M Pleasant Service 2 DC M T Importance Weighting 35 33 28 27 24 Modified Weighting 17 33 19 27 21 Quality Functional Deployment • Used extensively at NASA (simple version) • The House of Quality MAN 3504 - Chapter 2

  12. Next Chapter • How to forecast product demand MAN 3504 - Chapter 2

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