Chapter 2

1. Chapter 2 Operations Strategy To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.

2. Relevant web sites • http://myphliputil.pearsoncmg.com/student/bp_russell_opsmgmt_4/02web.html

3. Strategy Formulation • Define a primary task • Assess core competencies • Determine order winners & order qualifiers • Positioning the firm

4. Primary Task • What business the firm sees itself in • How the firm adds value to its customer • THE FIRM’S VALUE PROPOSITION

5. Core Competencies • What a firm does better than anyone else • Based on experience and knowledge • NOT products and services, equipment and technologies or customers and markets • Core competencies need to align with the firm’s value proposition

6. Order Winner • The characteristic of a product or service that wins orders in the marketplace

7. Order Winners and Core Competencies • Ideally, the marketplace order winner should align with a firm’s core competency

8. Positioning • Making strategic choices • No firm can be all things to all people • Choosing one or two important dimensions and doing them extremely well • An effective positioning strategy considers the needs of the marketplace, strengths/weaknesses of the organization, and position of competitors.

9. Dimensions of Competition • Cost C Y • Quality Y C • Flexibility Y C • Speed C Y

10. Competing on Cost • Eliminate all waste • Invest in • Updated facilities & equipment • Streamlining operations • Training & development

11. Competing on Quality • Please the customer • Understand customer attitudes toward and expectations of quality

12. Competing on Flexibility • Produce wide variety of products • Introduce new products • Modify existing products quickly • Respond to customer needs

13. Competing on Speed • Fast moves • Fast adaptations • Tight linkages

14. Operations Role in Corporate Strategy • Provide support for overall strategy of a firm • Serve as firm’s distinctive competence • Must be consistent with overall strategy

15. OperationsStrategy at Wal-Mart

16. Wal-Mart Provide value for our customers Mission Low prices, everyday Competitive Priority Operations Strategy Low inventory levels Short flow times Operations Structure Linked communications between stores Fast transportation system Enabling Process and Technologies EDI/satellites Cross-docking Focused locations OperationsStrategy at Wal-Mart Figure 2.1

17. Strategy and the Internet • Create a distinctive business strategy • Strengthen existing competitive advantages • Integrate new and traditional activities • Must provide a unique value to the customer

18. Strategic Decisions in Operations

19. Processes and Technology Services Products Human Resources Quality Capacity Operating Systems Sourcing Facilities Strategic Decisions in Operations Figure 2.2

20. Products & Services • Make-to-order • Made to customer specifications after order received • Make-to-stock • Made in anticipation of demand • Assemble-to-order • Add options according to customer specification

21. Processes & Technology • Project • One-time production of product to customer order • Batch production • Process many jobs at same time in batch • Mass production • Produce large volumes of standard product for mass market • Continuous production • Very high volume commodity product

22. Product-Process Matrix

23. High Continuous Production Mass Production Volume Batch Production Projects Low Low High Standardization Product-Process Matrix Figure 2.3

24. Service-Process Matrix

25. Low Service Factory Mass Service Labor Intensity Service Shop Professional Service High High Low Customization Service-Process Matrix Figure 2.4

26. Capacity & Facilities • How much capacity to provide • Size of capacity changes • Handling excess demand • Hiring/firing workers • Need for new facilities

27. Facilities • Best size for facility? • Large or small facilities • Facility focus • Facility location • Global facility

28. Leadership Human Resources • Skill levels required • Degree of autonomy • Policies • Profit sharing • Individual or team work • Supervision methods • Levels of management • Training

29. Quality • Target level • Measurement • Employee involvement • Training • Systems needed to ensure quality • Maintaining quality awareness • Evaluating quality efforts • Determining customer perceptions

30. Sourcing • Degree of vertical integration • Supplier selection • Supplier relationship • Supplier quality • Supplier cooperation

31. Operating Systems • Execute strategy daily • Information technology support • Effective planning & control systems • Alignment of inventory levels, scheduling priorities, & reward systems

32. Strategic Planning

33. Mission and Vision Voice of the Business Corporate Strategy Voice of the Customer Marketing Strategy Operations Strategy Financial Strategy Strategic Planning Figure 2.5

34. Policy Deployment • Hoshin planning • Focuses employees on common goals & priorities • Translates strategy into measurable objectives • Aligns day-to-day decisions with strategic plan

35. Derivation of an Action Plan

36. What Who When Measure Resource Improve Billy 9-1-03 Average $5,000 work Wray queue flow time per job . . . Reduce queue time by 50% Reduce production cycle time by 30% Reduce setup time by 50% . . . Cut lot sizes in half . . . Increase electronic transactions by 30% Reduce business cycle time by 50% . . . Redesign supplier quality reporting process . . . Set up supplier education groups . . . Reduce purchasing cycle time by 30% Reduce supplier base by 50% . . . Derivation of an Action Plan Figure 2.6

37. Balanced Scorecard • Finance — How should we look to our shareholders? • Customer — How should we look to our customers? • Processes — At which business processes must we excel? • Learning and Growing — How will we sustain our ability to change and improve?

38. Mobil’s Strategy Map

39. Revenue Growth Strategy Finances Volume growth Net margin Nongasoline products & services More premium brands Win-win dealer relations Delight the customer Customers Clean/safe/fast Develop business skills Create new products & services Build best-in-class franchise Deliver products on spec, on time Processes Convenience store Teamwork, quality Inventory management Learning and Growth Personal growth Functional excellence Process improvement Align goals Strategic & job skills New technology Mobil’s Strategy Map Figure 2.7

40. Global markets, sourcing, operations Virtual companies Greater choice Emphasis on service Speed and flexibility Supply chains C-commerce Technological advances Knowledge Environment and social responsibilities Issues and Trends

41. The Changing Corporation

42. 20TH CENTURY 21ST CENTURY CHARACTERISTIC CORPORATION CORPORATION Organization The Pyramid The Web Focus Internal External Style Structures Flexible Source of strength Stability Change Structure Self-sufficient Interdependencies Resources Physical assets Information Operations Vertical integration Virtual integration Products Mass production Mass customization Reach Domestic Global Financials Quarterly Real-time Inventories Months Hours Strategy Top-down Bottom-up Leadership Dogmatic Inspirational Workers Employees Employees, free agents Job expectations Security Personal growth Motivation To compete To build Improvements Incremental Revolutionary Quality Affordable best No compromise The Changing Corporation Table 2.1