Chap02

© Nigel Slack and Michael Lewis 2003

Operations Resources

Market Requirements

OPERATIONS STRATEGY

Strategic Reconciliation

Level 1 - Fit

Level 3 - Risk

Align resources with requirements

Include impact of uncertainty

Level 2 - Sustainability Develop sustainable

competitive advantage

Resource Usage

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Decision areas

Operations strategy processOperations strategy content

Topics in operations strategy treated in this chapter


‘Installed’ product/service fully operational

End of core processing

Start of core processing

Request for product/service

Receipt of information

Request for information

Awareness of need

MilestoneHospital Software producer

Presentation of symptoms

Visit to doctor for advice and tests

Test information confirms diagnosis

Decide on surgery

Enter hospital for surgery

Procedure successfully completed

Patient fully recovered

Installation time

Waiting time

Enquiry time

Core processing time

Customer decision time

Enquiry decision time

Asks for specification and estimates

Receives proposal

Places order

Start of design and coding

Software ‘completed’

Software fully debugged and working

Customer decides new software is needed

Significant ‘milestone’ times for the delivery of two products/services


First/Business-class cabin, airport lounges, pick-up service

Economy cabin

Wealthy people, business people, VIPs

Travellers (friends and family), vacation takers, cost-sensitive business travel

Wide range, may need to be customised

Standardized cabin

Relatively high Relatively low

Relatively low volume Relatively high volume

Medium to high Low to medium

First/Business class Economy class

Customization, extra service, comfort features, convenience

Quality (specification and conformance), Flexibility, Speed

Price, acceptable service

Cost, Quality (conformance)

Services

Customers

Service range

Rate of service innovation

Volume of activity

Profit margins

Main competitive factors

Performance objectives

Different product groups require different performance objectives


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Speed

Flexibility

Cost

Dependability

Quality

The operations function can provide a competitive advantage through its performance at the five competitive objectives

Being RIGHT

Being FAST

Being ON TIME

Being ABLE TO CHANGE

Being PRODUCTIVE


Low HighNegative

PositiveC

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Neutral

Achieved performance

Order-winners and qualifiers

Order-winners

Less important

Qualifiers


Priority of performance

objectives

Customer Needs

Competitors’ Actions

The priority of performance objectives is influenced by what is regarded as important by customers and how

the operation performs against competitors

Performance against competitors

Importance to customers


OutputTotal assets

ProfitOutput

ProfitTotal assets = x

ProfitOutput

RevenueOutput

CostOutput

Average revenue

Average cost

OutputTotal assets

OutputCapacity

Fixed assetsTotal assets

CapacityFixed assets = x x

Utilization Working capital Productivity of fixed assets

= x

Operations strategy decision areas

Development and organization

Process technology

Supply network

Capacity

Decomposing the ratio profit/total assets


Operations Decisions are shaped by

COMPETENCIES and CONSTRAINTS

Resource Deployment

• Do it yourself or buy-in?

• Customer and supplier relationships

• Supply chain dynamics and integration

Supply Network

ISSUES -

Capacity Structure

ISSUES -

• Capacity

• Location

• Focus & segmentation

• L/T forecasts

Process Technology

ISSUES -

• Development rate

• Automation

• Size

• Integration

• In our out-house development

Development and Organization

• New product/service

development

• Organization structure

• Performance measurement

• Improvement strategy

ISSUES -

The Elements of an International Operations Strategy


Issues include:

•Total capacity

•Number, size of sites

•Allocation of tasks to sites

•Location

Issues include:

•Vertical integration

•Network behaviour

•Supplier relationships

•Supplier development

Issues include:

•Rate of development

•Automation

•Integration

•Implementation

•Subcontracted development

Issues include:

•Responsibility relationships

•Performance and control

•Process development

•Product and service development

Capacity Supply NetworkProcess

TechnologyDevelopment and

Organization

The four categories of operations strategy decision areas

Resource Usage


Structural issues

Infrastructural issues

Operations strategy decision areas are partly structural and partly infrastructural

Process Technology

Development and Organization

Supply NetworkCapacity


Quality

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Speed

Dependability

Flexibility

CostCo

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by

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Capacity Supply Network

Process Technology

Development and

Organization

Resource Usage

Operations Decisions shape

COMPETENCIES and CONSTRAINTS

Operations strategy is defined by the intersections of performance objectives and Operations decisions


Quality

Per

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Resource Usage

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Decision areas

Speed

Dependability

Flexibility

Cost

The operations strategy matrix


Process Technology

Development and

Organization

Operations strategy


Largest retailer in Japan

Sells 1.5X as much per store as nearest rival

History of cautious expansion and technical and service innovation

“Field Counsellors” spread operations knowledge (also do distance training)

Expansion by territory to reduce disn costs

Early use of TIS (total information system)

TIS controls stock replenishment twice a day delivery (sales analysed twice a day)

New system not internet-based

New services include,

Banking terminals

Downloading games

Downloading music to MD

Internet ordering and collection

7-Eleven Japan


COST in terms of minimizing…•operating cost•capital cost•working capital

QUALITY of products and services

Speed and dependability combined to indicate AVAILABILITY

FLEXIBILITY of response to sales and customer trends

Area dominance reduces distribution and advertising costs

•Location of stores•Size of stores

Distribution center grouping by temperature

Distribution centers and inventory management systems give fast stock replenishment

TIS allows trends to be forecast and supply adjustments made

Common distribution centers give small frequent deliveries from fewer sources

•Number and type of distribution centers

•Order and stock replenishment

TIS gives comprehensive and sophisticated analysis of sales & supply patterns daily

•The Total Information System (TIS)

Information sharing and parenting system spreads service ideas

Field counselors with sales data help stores to minimize waste and increase sales

•Franchisee relationships

•New product/service development•Approach to operations improvement

DEVELOPMENT AND

ORGANIZATION PROCESS

TECHNOLOGYSUPPLY

NETWORKS CAPACITY

Resource Deployment

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pivotal critical secondary

7-11 JAPAN


Level 1 - Fit

The practice of operations strategy involves considering fit, sustainability and risk

Level 2 - Sustainability

Level 3 - Risk

Align resources with requirements

Develop sustainable competitive advantage

Include impact of uncertainty In

crea

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xity


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Level of operations resource capability

In operations strategy ‘fit’ is the alignment between market and operations capability

Line

of fit

Alignment between market and operations capabilityX

Y


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Sustainable improvement implies simultaneous extension/improvement of market requirements and operations capabilities


Ext

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req

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Sustai

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impro

vem

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Improvements in operations capabilities


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Virgin Trains and Nissan positioned in relation to market requirements and operations capabilities


Line

of fit

Nissan

Virgin Trains


Dresding Medical - Polar diagram illustrating the relative importance of the performance objectives for the current

and new products

X

X

X

Quality (specification)

Quality (conformance)

Speed

DependabilityVolume flexibility

Delivery flexibility

Customization

Cost

Current productsNew products

X X

X

X

X


Quality (spec)

Quality (conform)

Speed

Dependability

Delivery flex

Volume flex

Customization

CostPer

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ance

ob

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Lab style manufacture easy to change capacity incrementally

50% of activities in-house

Low process technology (but high product technology)

R&D, Mfg. and Sales all share common knowledge base. Incremental new product development


Process Technology

Development and

Organization

Resource Usage

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Dresding Medical - Current product range

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very importantmedium importancesome importance

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Decision areas

******

Slide 2.17


Quality (spec)

Quality (conform)

Speed

Dependability

Delivery flex

Volume flex

Customization

CostPer

form

ance

ob

ject

ives

May need to adjust quickly depending on demand

New supplies will be needed / developed

Needs investment in volume processes

R&D, Mfg. and Sales less interdependent. Faster time-to-market needed


Process Technology

Development and

Organization

Resource Usage

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Dresding Medical - New product range

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*

* * ****

*

***

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**

*

very importantmedium importancesome importance

****

*

**

Decision areas

******

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* ** **

****

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Slide 2.18


Quality

Per

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ob

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Process Technology

Development and

Organization

Resource Usage

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Decision areas

‘Fit’ is concerned with ensuring comprehensiveness, correspondence, coherence and criticality

Speed

Dependability

Flexibility

Cost

Critical

Critical

Critical

CriticalCritical

Coherence

Co

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Comprehensive?

Chap02

Business

Transcript of Chap02