Production & Operation Strategy.ppt
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Transcript of Production & Operation Strategy.ppt
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Session 2 : Operations StrategySession 2 : Operations Strategy
Learning Objectives
By the end of this Unit, you should be able to:Understand the concept of business strategy.Explain the strategic planning process and the differences between strategic, tactical and operations planning.Appreciate operations from a systems perspective.Recognize the importance of operations strategy.Describe the key criteria of distinctive competencies.Distinguish between order qualifiers and order winners.Appreciate the concept of the balanced scorecard when formulating strategies.
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ETHICS
YourYourorganizationorganization
CustomersSuppliers
OIL Price
Global-
izatio
n
KYOTOKYOTO
Unions
Competitors
ITC - MLS
Training Business
Cycles
Share-holders
TransportModesBanks
Taxe
s
World
World
Trade
Trade
ExchangeRates
CSR
GlobalW
arming
Technolo
gy
What is a System?A set of interconnected elements that
must function together in unison within a certain environment
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InputInputss
TransformatiTransformationon
OutpuOutputsts
Customers
Suppliers
Competitors
Crud
e Oil
Shor
tage
sEnvironme
nt
Kyoto Protocol
Tech
nolo
g
y
Demand for new
products
Ethics & Governance
Globalization
World
Economies
Shareholders
Trade Unions
Wor
ld
Trad
e
Competing Supply Chains
Government Regulations
Exchan
ge
ratesBanks Taxes
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Your Organization from a Systems PerspectiveUsing the template below, illustrate your organization from a systems perspective i.e. your organization interacting with its environment:
Action Point
InputsInputs TransformationTransformation OutputsOutputs CustomersSuppliers
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Corporate / business strategies are...
…how an organization plans to accomplish its mission and goals
…needed to survive in a changing world
…implemented through the process of strategic planning
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OperationsStrategy
FinancialStrategy
MarketingStrategy
Corporate / BusinessStrategy
Vision/Mission
StrategicPlanning
TacticalPlanning
OperationalPlanning
StrategicPlanning
TacticalPlanning
OperationalPlanning
StrategicPlanning
TacticalPlanning
OperationalPlanning
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Strategic planning is the preparation of long-term plans by top management aimed at achieving organizational goals and objectives.Tactical planning is the preparation of medium- term plans by middle management aimed at supporting the strategic plan by achieving functional goals and tactical objectives.
Operational planning is the preparation of short-term plans by first-line management aimed at supporting tactical plans and achieving operational goals and objectives.
Planning levels:
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TopManage-
ment
Senioror Middle
Management
First Line Management
Types of Planning Examples of Decisions
Strategic Planning:long-range decisions (typically 1 to 5 years)
Tactical Planning:medium-term decisions (Typically one month and less than 1 year)
Operational Planning& Control (OPC):short-term decisions (daily, weekly, monthly)
Where do we locate a new factory? What new products do we introduce? How do we increase market share? Should we implement ISO 9001? Do we need additional capacity? When?
What orders have priority? When can we schedule maintenance? How do we increase productivity?
What layout do we need for the new product? When ? What new quality checks are required? What equipment do we replace? Do we need an extra shifts?
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Developing a winning strategy:
Order Qualifiers vs. Order WinnersOrder Qualifiers: the six competencies needed for a business to be considered as a potential supplier: quality, delivery, flexibility, time, cost and service. Order Winners: the criteria that differentiate the goods and/or services of one business from those of another, and which result in it being awarded the order.
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Order Qualifiers and Order WinnersTo achieve a winning strategy, it is important for organizations to convert from being order qualifiers to become order winners. Using your organization, how would you develop your package of key competencies/criteria to be distinctive competencies in order to win repeat orders?
Action Point
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What is the Balanced Scorecard ?A holistic strategic planning system that aligns the various business activities of an organization with its overall vision and mission using balanced performance measures in four
areas: financial, customers, internal processes and learning & growth.
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Financial Perspective
How do we add value for our customers but also reduce our operating and material costs?
Customer PerspectiveHow do we create value for our customers?
Learning & Growth Perspective
How do we change to meet our customers’ present and future demands? What are our training needs?
Internal Process Perspective
How do we improve our processes to meet the present and future demands of our customers?
From an operations management strategic viewpoint,
these four performance measures could include the following:
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Strategic Operations Objectives - The BIG SIX Key Competencies
COST
QUALITY
DELIVERYFLEXI-BILITY
SERVICE
TIME14
High and consistent quality is essential to prosper in a competitive environment
It is the easiest of the key criteria for a customer to judge
Continuously improving quality results in higher productivity and lower costs
High quality attracts customers; improving quality retains customers
The BIG SIX Key Competencies:
QUALITYQUALITY1
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Relates to the delivery of the product or the performance of the service
Sometimes called the “Reliability / Dependability” competency
Late delivery can have serious consequences
The BIG SIX Key Competencies:
DELIVERYDELIVERY2
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Higher productivity leads to lower costs
Lower costs allow a business to offer lower prices
This helps to increase its market share
The BIG SIX Key Competencies:
COSTCOST3
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In recent decades, competition has changed: from price… …to price & quality …to price & quality & delivery …to price & quality & delivery & TIME
Time (& speed) provide a sustainable competitive advantage
Reducing time serves to gain an advantage
The BIG SIX Key Competencies:
TIMETIME4
12
3
6
9
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It means being able to… …adapt rapidly to changing business
conditions …respond quickly to evolving customer
needs
Three types of flexibility: Volume flexibility – responding to
changes in demand Variety (or mix) flexibility – providing
the range of products that customers ask for
Product flexibility – developing new products when needed
The BIG SIX Key Competencies:
FLEXIBILITY FLEXIBILITY5
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It is the fusion of the other five competencies – a blend of quality, delivery, cost, time & flexibility
It also means agility – how quickly a business responds to both market and customer needs
Agility is increasingly important with the growing focus on supply chains
The BIG SIX Key Competencies:
SERVICESERVICE6
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Trade-offs between Key Competencies
Often, one key competency may conflict with another
An organization may thus take a strategic decision to excel in one or more key competencies at the expense of others
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Productivity Agility in servicing customers enables organizations along a supply chain to obtain a competitive advantage
One way of achieving this is to improve productivity
Productivity is probably the performance measure most used in operations management
It measures the amount of output (goods and / or services) achieved per unit of input (labour, materials, capital & energy)
It measures how efficiently resources have been used
Productivity = Output
Input
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