Operations Strategy And Innovation

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Chapter 8

• Operations Strategy And Innovation

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Introduction

• Strategy starts with how the firm chooses to
  differentiate itself from competition.
• Operations strategy is the systematic building of
  operations capabilities.
• Operations can be divided into three broad
  categories.
• Technology and facilities
• operating policies
• operations organization

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Manufacturing Strategy

• In 1974 Skinner published The Focused Factory.
• This began a focus on manufacturing.
• His argument was that a factory that focuses on
  a narrow product mix for a particular market
  niche will outperform the conventional plant,
  which attempts a broader mission

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continued

• He observed that if a firm had a manufacturing
  philosophy it was more likely to be successful.
• He developed the idea of the focused factory.
• Focused manufacturing is based on the concept
  that simplicity, repetition, experience, and
  homogeneity of tasks breeds competence.

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Five Key Characteristics of the Focused Factory

• Process technologies
• Market Demands
• Product Volumes
• Quality Levels
• Manufacturing Tasks
• Empirical tests have met with limited success.

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Hayes and Wheelwright

• Eight decision categories
• Structural Categories
• capacity, facilities, technology and vertical
  integration
• Infrastructural Categories
• workforce, quality, production planning/material
  control, and organization.
• The field has suffered from the lack of
  theoretical development especially rigorous
  empirical validation.

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Four Basic Strategic Configurations

• Niche differentiation
• Broad differentiation
• Cost leadership
• Lean competition

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Mass Customization

• Hybrid strategy that has emerged during the last
  decade.
• The use a fixed options at each stage of the
  production process, can create alternative
  products or service configurations.
• Maybe best suited to low technology industries
  with large volume requirements.

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Mass Customization

• Extends the concept of joint production to
  capture the best of both worlds manufacturing.
• Better customer response and satisfaction.
• Tailoring products and economies of scale
  savings.

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Joint Production and Economies of Scope

• Theory of contestable markets.
• When there is free entry into a market,
  exploitation of a natural monopoly is limited by
  the costs of exit not entry.
• Therefore the magnitude of some costs is critical
  in determining the need for regulatory
  protection.

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Team or joint production

• Several types of resources are used.
• The product is not a sum of separable outputs of
  each cooperating resource. An additional factor
  creates a team organization problem.
• Not all resources used in team production belong
  to one person.

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Scope

• The idea of scope is quite different.
• A few smaller plants alternating production
  between several jointly produced parts or
  products can outperform larger factories
  dedicated to one production product.
• The ideal scope varies by situation.
• Is assumed there is no penalty for changing from
  one product to another.
• the key to creating scope and making this a
  viable option to scale is the flexible technology
  offered by computer technology applied to the
  factory floor.

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The second industrial divide

• A modern-day application of the craft methods of
  production coupled with general-purpose equipment
  which affords considerably more flexibility and
  avoids the dehumanization of work.
• flexible specialization accommodation to
  ceaseless change.