Daily PlanDay 2

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Daily Plan-Day 2
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Module Overview

• Aligning operations strategy with business
  strategies
• Process choices for operations / Competitive
  Dimensions
• Competing on Capabilities /Using inventory
  strategically
• The operations strategy process and roles

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Aligning operations strategy with business
strategies
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Operations Strategy

• A coordinated series of plans and actions that
  act upon the formulation and deployment of
  operational resources to provide a competitive
  advantage in support of the firms strategic
  initiatives

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Operations Strategy

• The content and process of activities, directed
  toward distinctive operations competence, that
  evaluate potential impacts of situations and
  alternatives in structured time dimensions and
  integrate a pattern of decisions to balance the
  resource commitments, output requirements, and
  risk in various focused transformation efforts

Source Stonebraker, Peter W. and G.Keong Leong ,
Operations Strategy, (Prentice-Hall, 1994).
Reprinted with permission of Prentice-Hall..
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Supply Chain Operations Reference Model - SCOR
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(No Transcript)
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Business Strategy
SC Management Processes (Strategic)
SCS
SC Management Processes (operational)
SCD
SS
SRM
DM
Orders
APln
MRP
RP
PSR
Signal
CA
PT
AP
Core SC Processes
PM
CM
MDM
CI
RM
EN
QM
SC Supporting Processes
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Business Model Aligned with Change Conditions
Dynamic
Mass Customization
Invention
Product Change
Mass Production
Continuous Improvement
Stable
Stable
Dynamic
Process Change
Source Lufttman Ch. 4
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Business Model Aligned with Change Conditions
Invention
Mass Customization
Dynamic
Creation through intellect and skill High
differentiation Decentralized Broad Jobs, few
rules Small firms
Customers demand driven Flexibility Responsiveness
Dynamic Networks
Product Change
Continuous Improvement
Mass Production
Standardized, Centralize Routines Work Rules and
Procedure Driven Economies of Scale Cost
advantage Mechanistic Organization
Advantages in Process Q, C and S Process
Improvement Customer Satisfaction Through
PI Process Innovation Teams Horizontal Org
Stable
Stable
Dynamic
Process Change
Source Lufttman Ch. 4
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Business Model Aligned with Change Conditions
Dynamic
Mass Customization
Invention
Product Change
Mass Production
Continuous Improvement
Stable
Stable
Dynamic
Process Change
Source Lufttman Ch. 4
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IT Aligned with Business Model And Change
Conditions
Relationships
Dynamic
Mass Customization
Invention
Augment
Product Change
Automate
Mass Production
Continuous Improvement
Stable
Tasks
Stable
Dynamic
Process Change
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Strategy Shifts as the Product MaturesThe
Lifecycle
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Product Life Cycle
The life cycle defines development of a product
or service in four phases.
Higher volumes
Lots of newfeatures andoptions,leading
tolowervolumesper producttype
Source Adapted from CPIM Systems Technologies
Review Course (APICS, 1998).
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Questions at Introduction Phase

• What product or service will be offered?
• What is the design of the product or service?
• What is the expected market for the product or
  service?
• What volume and process capacities are required?
• What level of process technology is appropriate?
• What types of equipment and labor force should be
  selected?
• How should the production or service delivery
  system be organized?
• What information system should be chosen?

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Questions at Growth Phase

• What facility and process upgrades are required?
• How will production or service delivery be
  scheduled?
• How will performance be evaluated?
• How will the distribution system be organized?

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Questions at Maturity Phase

• What process efficiencies are necessary?
• What product or service features are required?
• What market repositioning is appropriate?
• What follow-on product or service should be
  considered?

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Questions in the Decline Phase

• What is the salvage value of the facility?
• How much repair parts stock should be produced?
• How can the effects on employees be minimized?
• What are the long-range responsibilities for the
  product or service, process technology, and
  production system residues?

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Life Cycle and Manufacturing Deployment
Decline and renewal
Start-up of operations
Growth of volume
Stable state
Product Service
Volume
Low
Increasing
High volume
Declining
Uniqueproducts orservices
Variety
Increasing standardization
Emergence ofa dominant design
High standardization
Process Technology
Organization
Fixed-project job shop
Small batch
Line flow assembly process
Line flow assembly process
High
Innovation
Medium
Medium
Low
Integration
Medium
Low
Medium
High
Industry Factors
Consolidation and fallout
Structure
Small competitors
Few large companies
Survivors
Competitive Priority
Quality and flexibility
Price/cost and delivery
Flexibility
Price/cost
Source Stonebraker, Peter W. and Keong Leong,
G., Operations Strategy, (Prentice-Hall, 1994).
Reprinted with permission.
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Process choices for operations / Competitive
Dimensions
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Supply Chain Configuration

• Order Insertion Point

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Definitions

• Push Make to stock
• Make to stock products are intended to be shipped
  from finished goods or off the shelf, are
  completed prior to receipt of a customer order,
  and are generally produced in accordance with a
  sales forecast. (SCOR 5.0)
• Pull Make to order
• A make to order environment is one in which
  products are completed after receipt of a
  customer order and are built or configured only
  in response to a customer order. (SCOR 5.0)
• Really Pull Engineer to order
• A engineer to order environment is one in which
  products are designed, developed, and
  manufactured in response to a specific customer
  request.(SCOR 5.0)

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Drivers

• Push Make to stock
• Make to stock products are intended to be shipped
  from finished goods or off the shelf, are
  completed prior to receipt of a customer order,
  and are generally produced in accordance with a
  sales forecast.
• Stable, predictable demand.
• Low risk of inventory obsolescence
• Competition on cost
• Highly efficient production process (long
  runs/few C/Os)
• Capacity set at expected sales level, reduced
  flexibility
• FG inventory used as demand dampener for
  production
• Delivery speed and reliability critical (short
  cycle time/ 99 fill)

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Drivers

• Pull Make to order
• A make to order environment is one in which
  products are completed after receipt of a
  customer order and are built or configured only
  in response to a customer order.
• Demand difficult to forecast (custom orders)
• High risk of inventory obsolescence
• Competition on speed of response and lead times
• Highly responsive production process (short runs
  / frequent C/Os)
• Capacity set at maximum sales level.high
  flexibility)
• Order backlog used as demand dampener for
  production
• Production / delivery speed and reliability
  critical
• Supplies and components stocked to allow for
  quick response
• Often modular product design leading to assembly
  / not production

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Make to Stock
Order Insertion Point
Deliver
Make
Source
Customer
Supplier
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Make to Order
Order Insertion Point
Deliver
Make
Source
Customer
Supplier
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Engineer to Order
Order Insertion Point
Design
Deliver
Make
Source
Customer
Supplier
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Factors to Consider
MTO
MTS
Strategic Variables
Product Type Product Range Product Volume /
period Delivery Speed Delivery
Reliability Process choice Managing changes in
sales and mix Meeting delivery
speed requirements
Special
Standard
Wide
Pre-determined
Low
High
Difficult
Easy
Difficult
Easy
Jobbing /Low Volume Batch
High Volume Batch /Line
Through order backlog
Through FG inventory
Through rescheduling requirements
Eliminate process lead time
Other Variables
Inventory Cost Order promising
Supplies, capacity /components
FG
Promise capacity
Promise FG
Source Adapted from Hill 1994, Manufacturing
Strategy, pg.. 213
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Competing on Capabilities /Using inventory
strategically
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Dampening Demand Variations - MTS
7 day
Omron relays
Forecast accuracy 3 months rolling, fixed one
month 100
30 days
3/7day
5
5 day
30 days
5
5days
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Dampening Demand Variations - MTO
Weibo Painting
7 days
Forecast accuracy 30 days 70
5
7 days
30
30/60 Days
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A hybrid?
Samsung Resin compounds
30 days 2/4 weeks
3 months forecast 70
Forecast
Order Insertion Point
Production Plan tuning
Deliver
Make
Source
Customer
Supplier
Back Order Filter
FG Filter
Production Flexibility Filter
Material Inventory Filter
Market Demand
2 weeks
7 days
5
100
3 weeks
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The operations strategy process and roles
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A Top-Down Model of Strategy
Goals
MissionStatement
Operations Decisions ...
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Four Elements of Operations Strategy

• Method for evaluating the impact of activities
• Definition of time dimensions
• Time horizon
• Time fences
• A mechanism for integrating decisions
• Transformation efforts

Source Hayes, Robert H., Wheelwright, Steven C.,
and Clark, Kim B., Dynamic Manufacturing, (The
Free Press, 1988). Reprinted with permission of
The Free Press.
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Team ExercisePick a supply chain for your group
and..1. Describe your operations strategy
(order insertion point)2. Locate your operation
on the product-process change matrix.3. Do they
all make sense using the factors to consider
table?
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Business Model Aligned with Change Conditions
Invention
Mass Customization
Dynamic
Creation through intellect and skill High
differentiation Decentralized Broad Jobs, few
rules Small firms
Customers demand driven Flexibility Responsiveness
Dynamic Networks
Product Change
Continuous Improvement
Mass Production
Standardized, Centralize Routines Work Rules and
Procedure Driven Economies of Scale Cost
advantage Mechanistic Organization
Advantages in Process Q, C and S Process
Improvement Customer Satisfaction Through
PI Process Innovation Teams Horizontal Org
Stable
Stable
Dynamic
Process Change
Source Lufttman Ch. 4
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Factors to Consider
MTO
MTS
Strategic Variables
Product Type Product Range Product Volume /
period Delivery Speed Delivery
Reliability Process choice Managing changes in
sales and mix Meeting delivery
speed requirements
Special
Standard
Wide
Pre-determined
Low
High
Difficult
Easy
Difficult
Easy
Jobbing /Low Volume Batch
High Volume Batch /Line
Through order backlog
Through FG inventory
Through rescheduling requirements
Eliminate process lead time
Other Variables
Inventory Cost Order promising
Supplies, capacity /components
FG
Promise capacity
Promise FG
Source Adapted from Hill 1994, Manufacturing
Strategy, pg.. 213