Operations Management Strategy Introduction to Operations Management Strategy

1. Operations Management StrategyIntroduction to Operations Management Strategy Dr. Tai-Yue Wang Department of Industrial and Information Management National Cheng Kung University

2. Outline • Introduction • Operations strategy • What is strategy? • What is operation strategy? • The contents of operation strategy • Operation strategy matrix • The process of operations strategy

3. Introduction • What is operations? • What are the stakeholders related to an operation? • Examples for manufacturing operations • Examples for service operations • Difference between them • Spectrum for Service-Manufacturing

4. Introduction • “Operations” vs “Operational” • Establish a marketing channel vs take care of daily businesses • Manufacturing vs Services • TSMC vs 7-eleven

5. Introduction The operations function is fashionable! The consultancy services market % of world revenues of 40 largest firms Financial 6 Marketing/sales 2 Organizational design 11 Operations and process management 31 Benefits/Actuarial 16 IT strategy 17 Corporate strategy 17

6. Introduction • What is Operations Management? 指的是將投入資源轉換成製成品和服務的過程。

7. Introduction • Issues on: • Efficiency • Effectiveness • Capacity • Quality • …… • Examples: inventory turnover rate, serve more customers, speed up m/c, …..

8. Introduction • What is strategy? • Setting broad objective • Planning the path • Stressing long term • Dealing with total picture • Detached from day to day operations • Example: turn your company from manufacturing into a trading one.

9. Strategic analysis Flow between operations Analysis at the level of the supply network Flow between processes Analysis at the level of the operation Flow between resources Analysis at the level of the process Operational analysis Three Levels Analysis for Operations Analysis

10. Operations Strategy Operations strategy is ….. ‘…. the total pattern of decisions …. …. that shape the long-term capabilities …. …. of any type of operation .... …. and their contribution to overall strategy…. …. through the on-going reconciliation of market requirements and operations resources …. …. so as to achieve a sustainable fit between the two …. …. whilst managing the risks of misalignment ’ .

11. Micro level of the process Differences between Operations Management and Operations Strategy Operations management Operations strategy Short-term Long-term for example, capacity decisions for example, capacity decisions Time scale Demand Demand 1-12 months 1-10 years Macro level of the total operation Level of analysis Detailed Aggregated For example Level of aggregation For example “Can we give tax services to the small business market in Antwerp?” “What is our overall business advice capability compared with other capabilities?” Philosophical Concrete Level of abstraction For example For example “How do we improve our purchasing procedures?” “Should we develop strategic alliances with suppliers?”

12. Operations Strategy The sectorial scope of Operations Strategy: Products or services? Manufacturing or non-manufacturing? For profit or not-for-profit?

13. Operations Strategy Business strategy The business model Functional strategies sets the overall purpose and objectives for defines how the business model will be achieved Finance strategy Operations strategy Marketing strategy Technology strategy Operational Finance Operational Operations Operational Marketing Operational Technology The operating model

14. Operations Strategy Contributing to the leadership team and aligning business and functional visions Technical expertise Being the trusted advisor to the business and representing your function’s perspective Leadership expertise Process expertise Functional ‘Operations strategy’ Delivering your expertise through your service processes

15. Top-down Operations strategy should interpret higher- level strategy Market requirements Operations strategy should satisfy the organisation’s markets Operations strategy should learn from day-to-day experiences Bottom-up Operations Operations resources Operations strategy should build operations capabilities Operations strategy

16. Operations Strategy Corporate strategy Business strategy Top-down Capacity Quality Supply networks Speed Operations resources Market requirements Dependability Operations strategy Process technology Development and organisation Flexibility Cost Bottom-up Emergent sense of what the strategy should be Operational experience

17. Corporate strategy Corporate objectives impact on business objectives that, in turn, influence Operations Strategy Top-Down Business strategy Operations strategy Emergent sense of what the strategy should be Day-to-day experience of providing products and services to the market reveals problems and potential solutions that become formalised into Operations Strategy Bottom-Up Operational experience Operations Strategy(Top-Down, Bottom-Up)

18. Operations Strategy(Top-Down, Bottom-Up, Example) Group building corporate capability in high technology products and services Corporate objectives impact on business objectives that, in turn, influence Operations Strategy Top-Down Metrology division competes on ‘fast-to-market’ innovations Operations must have fast and flexible technology, supply relationships, process and staff Modular strategy provides flexibility and innovation at relatively low cost Experiment with ‘modular’ design of key products and components Day-to-day experience of providing products and services to the market reveals problems and potential solutions that become formalised into Operations Strategy Bottom-Up Customers confused by continual product innovation and costs are increasing

19. Strategic Reconciliation Operations Strategy Operations Resources Market Requirements Operations Strategy(Strategic Reconciliation)

20. Tangible and intangible resources Customer needs Operations strategy decision areas Operations capabilities Performance objectives Market positioning Operations processes Competitors’ Actions Strategic decisions Capacity Supply networks Process Technology Development and organisation Understanding resources and processes Required performance Quality Speed Dependability Flexibility Cost Understanding markets Operations Strategy(Strategic Reconciliation, detailed items)

21. Resources Equipment Staff Reputation Relationships (internal and external) Experience Customers Professional theatres (static, low margins) Exhibitions (slow growth, low margins) Conferences, etc. (fast growth, higher margins Operations strategy decisions Performance objectives Location Virtual reality technology Supplier development Equipment tracking system Organisational structure Staff meetings Aesthetically innovative designs Presentation advice High customisation of lighting solutions Fast and dependable supply Market position Traditionally differentiated on high service level in theatre and exhibition markets, innovation and service in conference market Capabilities Application of leading-edge lighting and sound technology Articulation of client requirements Competitors Big groups dominating professional theatres In-house operations growing in exhibitions market Conference market still fragmented Processes Integration of equipment supply and client requirements Design process Supplier liaison process Operations Strategy(Strategic Reconciliation, Example)

22. Operations Strategy (Strategic Reconciliation, Example) CUSTOMERS Segmentation on: Age – youth Purpose – general MARKET POSITION PERFORMANCE OBJECTIVES Differentiation on: Dependability Innovative products Speed of delivery Time to market Product mix flexibility Product range Speed to market Coordinated launches COMPETITORS Traditionally weak in: Promotion Design innovation

23. Operations Strategy (Strategic Reconciliation, Example) • Tangible: Equipment Staff Resources Reputation • Intangible: Relationships (internal and external) Experience • Operations strategy decisions • Location • Virtual reality technology • Supplier development • Equipment tracking system • Organisational structures • Staff meetings Capabilities • Application of leading-edge lighting and sound technology • Articulation of client requirements Processes • Integration of equipment supply and client requirements • Design process • Supplier liaison process

24. Market Requirements Operations Resources What you HAVE What you DO What you WANT What you NEED to maintain your capabilities and satisfy markets from your operations to help you ‘compete’ in terms of operations capabilities to ‘compete’ in the market Strategic Reconciliation Operations Strategy (Conclusion)

25. The Content of Operations Strategy ‘… the decisions which shape the long-term capabilities of the company’s operations and their contribution to overall strategy through the on-going reconciliation of market requirements and operations resources …’

26. The Content of Operations Strategy • Decisions on • Quality • Cost • Speed(Time) • Dependability • Flexibility

27.  × = Profit Profit Output Output Total assets Total assets Revenue = Output Profit Cost Output Output Average cost Average revenue Output Output Fixed assets Capacity = × × Total assets Capacity Total assets Fixed assets Utilisation Working capital Productivity of fixed assets Capacity Supply network Process technology Development and organisation Operations strategy decision areas The Content of Operations Strategy –

28. The Content of Operations Strategy (Strategy matrix) Resource usage Quality Speed Dependability Market competitiveness Operations strategy Performance objectives Flexibility Cost Development and Organisation Supply network Process technology Capacity Decision areas

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

30. The Process of Operations Strategy Operations strategy Control Operations strategy Monitoring Operations strategy Implementation Operations strategy Formulation

31. Emphasis on flexibility Mentor Innovator Broker Facilitator Emphasis on external players Emphasis on internal processes Producer Monitor Coordinator Director Emphasis on stability The Process of Operations Strategy Competing Values Framework

32. Operations Performance

33. 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 Introduction Operations strategy content Operations strategy process Resource Usage Market competitiveness Performance objectives Decision areas

34. Relative importance of the Operations Resource perspective Relative importance of the Market Requirements perspective Introduction The relative importance of the market requirements and operations resource perspectives change over time ? Performance objective B TRADE-OFFS Performance objective A Performance objectives trade-offs between each other and operations focus can lead to exceptional performance

35. How Can Operation Strategy Make or Break Organization? • Operation strategy make or break organization because: • Operations function is large • Operations represent the majority of peopleand asset • Operations give the ability to compete

36. How Can Operation Strategy Make or Break Organization? • Stakeholder’s(利害關係人) perspective on operations performance • Customers • Shareholders • Suppliers • Society • Employees

37. Society Increase employment Enhance community well-being Produce sustainable products Ensure clean environment Customers Appropriate product or service specification Consistent quality Fast delivery Dependable delivery Acceptable price Suppliers Continue business Develop supplier capability Provide transparent information Employees Continuous employment Fair pay Good working conditions Personal development How Can Operation Strategy Make or Break Organization? --Example Parcel delivery Shareholders Economic value from investment Ethical value from investment

38. How Can Operation Strategy Make or Break Organization?—Typical Objectives

39. How Can Operation Strategy Make or Break Organization?—Typical Objectives

40. How Can Operation Strategy Make or Break Organization?—Corporate Social Responsibility • How a business takes account of its economic, social and environment impacts in the way it operates • Voluntary actions • Compliance with minimum legal requirements • Address bot its own competitive interest and the interests of wider society

41. Corporate Social Responsibility-- Where to spend resources

42. Corporate Social Responsibility-- Examples • Apple鴻海  童工 • ASE -- 後勁溪 • GE – Hudson river • Exxon – Alaska Spill • BP –Deepwater Horizon oil spill

43. The Five Generic Performance Objectives • Quality • Speed • Dependability • Flexibility • Cost

44. Quality Being RIGHT Being FAST Speed Competitiveness Being ON TIME Dependability Being ABLE TO CHANGE Flexibility Cost Being PRODUCTIVE The Five Generic Performance Objectives

45. The Five Generic Performance Objectives –Quality from Garwin • Performance • Feature • Reliability • Conformance • Durability • Serviceability • Aesthetics • Perceived Quality

46. The Five Generic Performance Objectives –Quality from Garwin • Hard Dimensions • Features • Performance • Reliability • Aesthetics • Security/Safety • Integrity

47. The Five Generic Performance Objectives –Quality from Garwin • Soft Dimensions • Helpfulness • Attentiveness • Communication • Friendliness • Courtesy Please check 2-A power point about Quality Management

48. The Five Generic Performance Objectives – Speed • The time between customer’s request and the time it is received • The time between material enter a process and it is produced • Production speed • Process time • Queuing time • Idle time

49. The Five Generic Performance Objectives – Speed • Quote generation • Delivery speed • Delivery frequency • New product development

50. The Five Generic Performance Objectives – Speed 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 Software producer Milestone Hospital 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 Places order Decide on surgery Waiting time Enter hospital for surgery Start of design and coding Core processing time Procedure successfully completed Software ‘completed’ Installation time Software fully debugged and working Patient fully recovered