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  • 1. Resource Usage Performance objectivesMarket competitivenessDecision areas Operations strategy process Operations strategy content Topics in operations strategy treated in this chapter Operations Resources Market Requirements OPERATIONS STRATEGY Strategic Reconciliation Level 1 - Fit Level 3 - Risk Align resources with requirements Include impact of uncertainty Level 2 - SustainabilityDevelop sustainable competitive advantage

2. Milestone Hospital 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 recoveredInstallation 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 completedSoftware fully debugged and working Customer decides new software is needed Significant milestone times for the delivery of two products/services 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 3. 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 customisedStandardized cabin Relatively highRelatively low Relatively low volume Relatively high volume Medium to highLow 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 marginsMain competitive factors Performance objectives Different product groups require different performance objectives 4. MarketCompetitiveness Speed Flexibility Cost Dependability Quality The operations function can provide a competitive advantage through its performance at the fivecompetitiveobjectives Being RIGHT Being FAST Being ON TIME Being ABLE TO CHANGE Being PRODUCTIVE 5. Low High Negative Positive Competitive benefit Neutral Achieved performance Order-winners and qualifiers Order-winners Less important Qualifiers 6. Priority of performance objectives Customer Needs Competitors Actions Thepriority 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 7. = x Average revenue Average cost = x x Utilization Working capitalProductivity of fixed assets = x Operations strategy decision areas Development and organization Process technology Supply network Capacity Decomposing the ratio profit/total assets Output Total assetsProfit OutputProfit Total assetsProfit OutputRevenue OutputCost OutputOutput Total assetsOutput CapacityFixed assets Total assetsCapacity Fixed assets 8. The Elements of an International Operations Strategy Operations Decisions are shaped by COMPETENCIES and CONSTRAINTS Resource Deployment

  • Do it yourself orbuy-in?
  • Customer andsupplierrelationships
  • Supply chaindynamics andintegration

Supply Network ISSUES - Capacity Structure ISSUES -

  • Capacity
  • Location
  • Focus &segmentation
  • L/Tforecasts

Process Technology ISSUES -

  • Development rate
  • Automation
  • Size
  • Integration
  • In our out-housedevelopment

Development and Organization

  • Newproduct/servicedevelopment
  • Organizationstructure
  • Performancemeasurement
  • Improvementstrategy


  • Issues include :
  • Total capacity
  • Number, size of sites
  • Allocation of tasks tosites
  • Location
  • Issues include :
  • Vertical integration
  • Networkbehaviour
  • Supplier relationships
  • Supplier development
  • Issues include :
  • Rate of development
  • Automation
  • Integration
  • Implementation
  • Subcontracteddevelopment
  • Issues include :
  • Responsibilityrelationships
  • Performance andcontrol
  • Process development
  • Product and servicedevelopment

Capacity Supply Network Process Technology Development and Organi z ation The four categories of operations strategy decision areas Resource Usage 10. Structural issues Infrastructural issues Operations strategy decision areas are partly structural and partly infrastructural Process Technology Development and Organi z ation Supply Network Capacity 11. Operations strategy is defined by the intersections of performance objectives and Operations decisions Quality Market Competitiveness Speed Dependability Flexibility Cost Competitive Objectives are prioritized by CUSTOMERS and COMPETITORS Capacity Supply Network Process Technology Development and OrganizationResourceUsage Operations Decisionsshape COMPETENCIES and CONSTRAINTS 12. Quality Performance objectives Resource Usage Market Competitiveness Decision areas Speed Dependability Flexibility Cost The operations strategy matrix Capacity Supply Network Process Technology Development and OrganizationOperations strategy 13. 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 14.

  • COSTin terms of minimizing
  • operating cost
  • capital cost
  • working capital

QUALITYof products and services Speed and dependability combined to indicateAVAILABILITY FLEXIBILITYof response to sales and customer trends Resource Deployment Market Competitiveness pivotal critical secondary 7-11 JAPAN 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 ofdistribution centers
  • Order and stockreplenishment

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

  • The TotalInformation System(TIS)

Information sharing and parenting system spreads service ideas Field counselors with sales data help stores to minimize waste and increase sales

  • Franchiseerelationships
  • Newproduct/servicedevelopment
  • Approach tooperationsimprovement

DEVELOPMENT AND ORGANIZATION PROCESS TECHNOLOGY SUPPLY NETWORKS CAPACITY 15. Level 1 - Fit The practice of operations strategy involves considering fit, sustainability and risk Level 2 - SustainabilityLevel 3 - Risk Align resources with requirements Develop sustainable competitive advantage Include impact of uncertainty Increasing complexity 16. Market requirementsLevel of operations resource capability In operations strategy fit is the alignment between market and operations capability Line of fit Alignment between market and operations capability X Y 17. Market requirementsSustainable improvement implies simultaneous extension/improvement of market requirements and operations capabilities Level of operations resource capability Extension of market requirements Sustainable improvement Improvements in operations capabilities 18. Market requirementsVirgin Trains and Nissan positioned in relation to market requirements and operations capabilities Level of operations resource capability Line of fit Nissan Virgin Trains 19. 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 Dependability Volume flexibility Delivery flexibilityCustomization Cost Current products New products X X X X X 20. Quality (spec) Quality (conform) Speed Dependability Delivery flex Volume flex Customization Cost Performance objectives 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 Capacity Supply Network Process Technology Development and Organization Resource Usage Market Competitiveness Dresding Medical - Current product range * * * * * * * * * * * * * * * * * * * * * * * * * * * very important medium importance some importance* * * * * * * * Decision areas * * * * * * Slide 2.17 21. Quality (spec) Quality (conform) Speed Dependability Delivery flex Volume flex Customization Cost Performance objectives May need to adjust quickly dependi