Post on 01-Jan-2016
Chapter 2
Operations Strategy and Competitiveness
Operations Strategy
A Framework for Operations Strategy in Manufacturing
Operations Strategy in Services
Meeting the Competitive Challenge
Productivity Measurement
Operations Strategy - Definition
Operations Strategy - involves setting broad policies and plans on how to use “available” resources of a firm to support its long-term competitive strategy.
Corporate strategy leads to Operations strategy
Corporate Strategy Formulation
COLLBORATORS& COOPERATORS
Vision and Mission Statements
Vision statements used to express organization’s values and aspirations.
Mission statements express organization’s purpose or reason for existence.
Operations Strategy - Operations Priorities
Cost Quality - product quality and process quality Delivery Flexibility Delivery Speed Delivery Reliability Coping with Changes in Demand Flexibility and New Product Introduction Speed Other Product-Specific Criteria ...
Irwin/McGraw-Hill
5
Dealing with Trade-offs
Cost
Quality
DeliveryFlexibility
FOCUS FOCUS
FOCUSFOCUS
Plant within a Plant (PWP)
TraditionalApproach
Advanced Approaches
World Class Manufacturing
Trade-offs
©The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Strategy Begins with Priorities
Consider the case of a personal computer manufacturer.
1. How would we segment the market according to product group?
2. How would we identify product requirements, demand patterns, and profit margins for each group?
3. How do we identify order winner and order qualifiers for each group?
Operations Strategy
Customer Needs Corporate Strategy
Operations Strategy
Alignment
CoreCompetencies
Decisions
Processes, Infrastructure, and Capabilities
Core Competencies
Collective knowledge and skills an organization has that distinguish (or differentiate) it from the competition.
Typically center on an organization’s ability to integrate a variety of specific technologies and skills in the development of new products and services.
Building blocks of core capabilities.
Core Competencies continued
Are basis on which new outputs are developed. Better to think of organization in terms of its
portfolio of core competencies than as a portfolio of products.
Identifying and developing core competencies is one of top management’s most important roles.
Examples of Core Competencies
Sony - miniaturization 3M- knowledge of substrates, coatings and
adhesives; Knowledge management Black and Decker - small electrical motors and
industrial design Honda - engines and power trains Daimei-Benz - safety systems, quality and
luxury.
Core Competencies Used to Gain Access to Variety of Markets
Cannon– core competencies in optics, imaging, and electronic
controls– Products include copiers, laser printers, cameras, and
image scanners. Boeing
– integrating large scale systems– commercial jetliners, space stations, missiles
Core Capabilities
Organization practices and business processes Collection of competencies lead to “capabilities”
Key Characteristics of Core Competencies/Capabilities
Should be used to gain access to a variety of markets
Should be strongly related to key benefits provided by products or services
Should be difficult to imitate (what about benchmarking?)
4. How do we convert order winners into specific performance requirements?
Us(Core competencies)
Competition(Them) Differentiation
A Framework for Manufacturing Strategy
Customer Needs
New and CurrentProducts
Performance Prioritiesand Requirements
Quality, Dependability,Speed, Flexibility, and Price
Operations & Supplier Capabilities
Technology PeopleSystems R&D CIM JIT TQM Distribution
Support Platforms
Financial Management Human Resource Management Information Management
Enterprise Capabilities
Strategic Vision
World-Class Manufacturing
World-class manufacturers no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs.
They have become order qualifiers.
What are the order winners in today’s market?
Service Breakthroughs
Service can be an “order winner”
Warranty
RoadsideAssistance
TravelPlanning
LoanerVehicles
Leases
MIT Commission on Industrial Productivity1985 Recommendations
Place less emphasis on short-term financial payoffs and invest more in R&D.
Revise corporate strategies to include responses to foreign competition.
– greater investment in people and equipment
Knock down communication barriers within organizations and recognize mutuality of interests with other companies and suppliers.
MIT Commission on Industrial Productivity1985 Recommendations
Recognize that the labor force is a resource to be nurtured, not just a cost to be avoided.
Get back to basics in managing production operations. – Build in quality at the design stage. – Place more emphasis on process innovations rather
than focusing sole attention on product innovations.
U. S. Competitiveness Drivers
Product Development– Teams speed development and enhance
manufacturability Waste Reduction (JIT Philosophy)
– WIP, space, tool costs, and human effort Improved Customer-Supplier Relationships
– Borrowed from Japanese Keiretsu Improved Leadership
– Strong, independent boards of directors©The McGraw-Hill Companies, Inc., 1998
Irwin/McGraw-Hill
Productivity
Partial measures– output/(single input)
Multi-factor measures– output/(multiple inputs)
Total measure– output/(total inputs)
Inputs
Outputs =ty Productivi
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?
10,000 units/500hrs = 20 units/hour ...
... or we can arrive at a “unit less” figure
(10,000 unit*$10/unit)/(500hrs*$9/hr) = 22.22
Can you think of any advantages or disadvantages of each approach?
Example--Labor Productivity
Applying Productivity Figures
You’ve just told your boss that the plant labor productivity at your facility is better than that of a plant in a related business.
Why might he not be pleased with you?