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How do we decide

Slide for Chapter 2 of - L.J. Krajewski, L.P. Ritzman, Operation Management - Strategy and Analysis, Fifth Edition (1999). Addison Wesley Operations Strategy. How do we decide. What, How, and When we produce ?. Example from HP multinational production of printers. Environment.

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How do we decide

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  1. Slide for Chapter 2 of - L.J. Krajewski, L.P. Ritzman, Operation Management - Strategy and Analysis, Fifth Edition (1999). Addison WesleyOperations Strategy

  2. How do we decide What, How, and When we produce ?

  3. Example from HP multinational production of printers

  4. Environment Corporate Strategy Competitive Priorities Functional Strategies The Big Picture Capabilities

  5. Why is this essential in SW? 1993: Web browsers 1994: Java 1.0, OO Patterns 1995: Windows 95 and Windows NT4 1996: Java 1.1 1997: UML 1.0, C++ 3.0 1998: Java 1.2, DHTML, ... ….. Not to mention JavaCC, Visual composers, CORBA, OO Frameworks, Analysis and Architectural Patterns, ...

  6. Market analysis • segmentation • needs assessment Socioeconomic and business environment Study what is around!

  7. Market analysis • segmentation • needs assessment Socioeconomic and business environment • Corporate strategy • missions • goals • distinctive competencies Corporate Strategy Mission Goals DistinctiveCompetences

  8. Mission • What business are we in now? • Who are our customers ? • What are our basic beliefs? • What are the key performance objectives (profit, growth, market share, ...) by which we measure success ? < For the Project you have to determine “the Mission” by Sept. 25>

  9. Goals • For each key performance objectives that you have listed, set the level that you want to achieve • It is IMPERATIVE that you quantify your goals right upfront, so you will be able to assess objectively whether or not you are meeting your goals.

  10. Distinctive Competencies • Workforce • Facilities • Market and financial know-how • Systems and technology The study by Potter: “Do what you know how to do”

  11. Market analysis • segmentation • needs assessment Socioeconomic and business environment • Corporate strategy • missions • goals • distinctive competencies • Future directions • global strategy • new products/ services • Competitive priorities • Operations Marketing • cost • quality Finance • time • flexibility Others Competitive Priorities

  12. Market analysis • segmentation • needs assessment Socioeconomic and business environment • Corporate strategy • missions • goals • distinctive competencies • Future directions • global strategy • new products/ services • Competitive priorities • Operations Marketing • cost • quality Finance • time • flexibility Others Competitive Priorities Cost 1. Low cost Quality 2. High-performance design 3. Consistent quality Time 4. Fast delivery 5. On-time delivery 6. Development speed Flexibility 7. Customization 8. Volume flexibility

  13. The Concept of Order Qualifier • The minimum level for a given competitive priority to enter a given market • When deciding about competitive priorities we have: • to satisfy the Order Qualifier in each Competitive Priority • to select the Competitive Priorities to excel

  14. Market analysis • segmentation • needs assessment Socioeconomic and business environment • Corporate strategy • missions • goals • distinctive competencies • Future directions • global strategy • new products/ services • Competitive priorities • Operations Marketing • cost • quality Finance • time • flexibility Others • Functional area strategies • finance • operations • others Functional Area Strategies

  15. Market analysis • segmentation • needs assessment Socioeconomic and business environment • Corporate strategy • missions • goals • distinctive competencies • Future directions • global strategy • new products/ services • Competitive priorities • Operations Marketing • cost • quality Finance • time • flexibility Others • Capabilities • current • needed • plans • Functional area strategies • finance • operations • others Capabilities

  16. Flow Strategy • Flow strategies deal with how the operations of a firm are structured to develop a product or provide a service • In the software industry, they are often called “Process Strategies” • There are two extreme in flow strategies: • Flexible flow strategy • Line flow strategy

  17. Corporate strategy Future directions Competitive priorities Operations strategy • Flow strategy • Flexible flows • Intermediate flows • Line flows • Process decisions • Quality decisions • Capacity, location, and layout decisions • Operating decisions The Role of Flow Strategy Capabilities

  18. D T R B P Operations of a Health Center D: Doctor (examination rooms) R: Radiology (X-ray) T: Triage (assess severity of illness) B: Blood (lab test) P: Pharmacy (fill prescriptions)

  19. D T R B P Health Center - Physical Exam Physical exam Physical exam D: Doctor (examination rooms) R: Radiology (X-ray) T: Triage (assess severity of illness) B: Blood (lab test) P: Pharmacy (fill prescriptions)

  20. D T R B P Health Center - Broken Arm Physical exam Physical exam Broken arm Broken arm D: Doctor (examination rooms) R: Radiology (X-ray) T: Triage (assess severity of illness) B: Blood (lab test) P: Pharmacy (fill prescriptions)

  21. Physical exam Flu Physical exam Broken arm Broken arm D T R B P Flu D: Doctor (examination rooms) R: Radiology (X-ray) T: Triage (assess severity of illness) B: Blood (lab test) P: Pharmacy (fill prescriptions) Health Center - Flu

  22. Features of Flexible Flow • The system is organized around processes • Processes move customers / goods around competence centers / machine shops • Best use: wide range of low volume products / services

  23. A S H F A: Front-end body-to-chassis assembly H: Hood attachment F: Fluid filling S: Start-up testing Operations of an Automobile Assembly Plant

  24. Mid-sized 6 cylinder Mid-sized 6 cylinder A S H F A: Front-end body-to-chassis assembly H: Hood attachment F: Fluid filling S: Start-up testing AAP - Mid-sized 6 cylinder

  25. Mid-sized 6 cylinder Mid-sized 6 cylinder A S H F Compact 4 cylinder A: Front-end body-to-chassis assembly H: Hood attachment F: Fluid filling S: Start-up testing Compact 4 cylinder AAP - Compact 4 cylinder

  26. Features of Line Flow • Equipment and employees are organized around products and services • Can be automated • Best Use: High volume production of few products or services

  27. None Flexible flows • Tool shop • Health center • General medical practice Jumbled flows Jumbled, but with some dominant flows Linear flows Intermediate flows • Branch offices • Print shop • Health clinic Flow pattern Line flows • Oil refinery • Cafeteria • Assembly plant None Low volumes Moderate High volumes or one-of-a-kind volumes products or services Volume Flow Strategies

  28. Typical Flow Strategies • Make-to-Stock Strategy • Standardized Services Strategy • Assemble-to-Order Strategy • Make-to-Order Strategy • Customized Services Strategy

  29. Flow Strategy Flexible Flows Line Flows Tendency for customized products Tendency for standardized products and services, with low volumes and services, with high volumes High-performance design quality Consistent quality More emphasis on customization More emphasis on low cost and volume flexibility Long delivery times Short delivery times Linking Flow Strategy with Competitive Priorities

  30. Flow Strategies at LFKHS and Chaparral Read pages 45 - 58 before Lab, we will discuss the matter during the lab

  31. Flow Strategies at LFKHS and Chaparral Decision Area Flexible Flows Line Flows at LFKHS at Chaparral

  32. Flow Strategies at LFKHS and Chaparral Decision Area Flexible Flows Line Flows at LFKHS at Chaparral Business Low-volume, High-volume strategy customized services standardized products make to stock

  33. Flow Strategies at LFKHS and Chaparral Decision Area Flexible Flows Line Flows at LFKHS at Chaparral Business Low-volume, High-volume strategy customized services standardized products make to stock Competitive Customized services, Low-cost, fast delivery, priorities consistent quality, and consistent quality and volume flexibility

  34. Flow Strategies at LFKHS and Chaparral Decision Area Flexible Flows Line Flows at LFKHS at Chaparral Business Low-volume, High-volume strategy customized services standardized products make to stock Competitive Customized services, Low-cost, fast delivery, priorities consistent quality, and consistent quality and volume flexibility Process design Labor intensive Capital intensive

  35. Flow Strategies at LFKHS and Chaparral Decision Area Flexible Flows Line Flows at LFKHS at Chaparral Business Low-volume, High-volume strategy customized services standardized products make to stock Competitive Customized services, Low-cost, fast delivery, priorities consistent quality, and consistent quality and volume flexibility Process design Labor intensive Capital intensive Capacity Relatively low utilization Relatively high utilization

  36. Flow Strategies at LFKHS and Chaparral Decision Area Flexible Flows Line Flows at LFKHS at Chaparral Business Low-volume, High-volume strategy customized services standardized products make to stock Competitive Customized services, Low-cost, fast delivery, priorities consistent quality, and consistent quality and volume flexibility Process design Labor intensive Capital intensive Capacity Relatively low utilization Relatively high utilization Supplier Informal Long term relationship

  37. Flow Strategies at LFKHS and Chaparral Decision Area Flexible Flows Line Flows at LFKHS at Chaparral Business Low-volume, High-volume strategy customized services standardized products make to stock Competitive Customized services, Low-cost, fast delivery, priorities consistent quality, and consistent quality and volume flexibility Process design Labor intensive Capital intensive Capacity Relatively low utilization Relatively high utilization Supplier Informal Long term relationship Scheduling Fluid Planned far ahead

  38. Exercise (time permitting) The case of BSB, Inc.: The Pizza Wars Come to Campus

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