Operations Strategy

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Operations Strategy
Chapter 2
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How Operations Strategy fits the Operations
Management Philosophy
Operations As a Competitive Weapon Operations
Strategy Project Management
Process Strategy Process Analysis Process
Performance and Quality Constraint
Management Process Layout Lean Systems
Supply Chain Strategy Location Inventory
Management Forecasting Sales and Operations
Planning Resource Planning Scheduling
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Operations Strategy

• Operations strategy is the means by which
  operations implements the firms corporate
  strategy and helps to build a customer-driven
  firm.
• It links long-term and short-term operations
  decisions to corporate strategy.
• It is the core of managing processes and value
  chains.

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Corporate Strategy and Key Operations Management
Decisions
Corporate strategy
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Customer-DrivenOperations Strategy

• Corporate strategy views the organization as a
  system of interconnected parts, each working with
  the others to achieve desired goals.
• Operations Strategy supports the corporate
  strategy and requires continuous cross-functional
  interaction.
• The operations strategy should be customer driven.

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Developing a Corporate Strategy

• Developing a corporate strategy involves three
  considerations
• Monitoring and adapting to the environment
• Identifying and developing core competencies
• Developing the firms core processes
• Adapting requires environmental scanning to
  monitor trends for opportunities and threats.
• Core Competencies are the unique resources and
  strengths an organization possesses.

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Core Competencies

• Core competencies include
• A well-trained and flexible Workforce
• Having well-located flexible Facilities
• Having Market and Financial Know-How.
• Expertise in Systems and Technology.
• The core competencies should determine the firms
  core processes.
• These can include customer relations, new
  service/product development, order fulfillment,
  and supplier relationships.
• A firm may have all of these or focus on a subset
  of them, as determined by its core competencies.

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Global Strategies

• A global strategy may include buying foreign
  services or parts and entering or expanding
  foreign markets.
• Two effective global strategies are
• Strategic Alliances
• Collaborative efforts
• Joint ventures
• Technology licensing
• Locating abroad

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Market Analysis

• A Market Analysis is one key to developing a
  customer-driven strategy, and is accomplished in
  two parts.
• Market Segmentation, which identifies groups of
  customers with enough in common to warrant
  developing services and/or products for them.
• Needs Assessment identifies the needs of each
  market segment. Needs include such things as
• Service or product needs
• Delivery system needs
• Volume needs

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Arriving at the Competitive Priorities

• Corporate Strategy
• environmental scanning
• core competencies
• core processes
• global strategies

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Competitive Priorities
Cost 1. Low-cost operations Quality 2. Top
quality 3. Consistent quality Time 4. Delivery
speed 5. On-time delivery 6. Development
speed Flexibility 7. Customization 8. Variety
9. Volume flexibility
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Competitive Capabilities

• The Competitive Capabilities are the cost,
  quality, time and flexibility dimensions of
  competitive priorities that a process or value
  chain actually possesses and is able to deliver.
• Low Cost means delivering a service or product at
  the lowest possible cost to the satisfaction of
  the customer.

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Quality as aCompetitive Capability

• Top Quality Delivering an outstanding service or
  product.
• Considerable interaction with the customers may
  be required to determine what that means.
• Consistent Quality Producing services or
  products that meet design specifications on a
  consistent basis.

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Time as aCompetitive Capability

• Delivery Speed is quickly filling a customers
  order.
• Lead Time is the time between receipt of an order
  and filling the order.
• On-Time Delivery means meeting the delivery time
  promises.
• Development Speed is quickly introducing a new
  service or product.
• Time-Based Competition is a strategy that focuses
  on development speed and delivery speed.

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Flexibility as aCompetitive Capability

• Customization means satisfying the unique needs
  of each customer by changing the service or
  product designs.
• Variety involves handling a wide assortment of
  services or products efficiently.
• Volume Flexibility requires accelerating or
  decelerating the rate of production quickly to
  handle large fluctuations in demand.

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Order Winners and Order Qualifiers

• These are criteria used by customers in service
  or product selection.
• Order Winners are criteria for differentiating
  services or products of one firm from those of
  another.
• Price, quality, time, flexibility, after sales
  support, reputation, etc.
• Order Qualifiers are demonstrated levels of
  performance required to do business in a
  particular market segment.

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Service or Product Development Strategies

• Product Variety Offering a wide assortment.
• Design Ease of use and desirable features.
• Innovation Translate new technology into new
  products.
• Service Products with services added.
• Leader Being first to introduce new services
  and/or products.
• Middle of the Road Wait for the leaders to
  introduce new services and/or products.
• Laggard Wait to see if the leaders new services
  and/or products catch on in the market.

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Service Package

• A Service Package is a collection of goods and
  services provided by a service process to its
  customers. It consists of four features
• Supporting Facility The physical resources that
  must be in place before a service can be offered.
• Facilitating Goods The materials purchased or
  consumed by the customer or the items provided by
  the customer to receive a service.
• Explicit Services The readily observable
  benefits.
• Implicit Services Psychological benefits.

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Quality Function Deployment (QDF)

• Quality Function Deployment (QDF) is a means of
  translating customer requirements into the
  appropriate technical requirements for service or
  product development. Questions it seeks to answer
  are
• What do our customers want?
• How well are we doing relative to our
  competition?
• What technical measures relate to our customers
  needs?
• What are the relationships between what our
  customers want and the technical measures?
• How does our service or product performance
  compare to the competition?
• What are the potential technical trade-offs?

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House of Quality
Voice of the Engineer
Competitive Analysis
Voice of the Customer
Correlations
Technical Comparison
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Development Process
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Concurrent Engineering

• Concurrent Engineering brings product engineers,
  process engineers, marketers, buyers, information
  specialists, quality specialists, and suppliers
  together to design a product and the processes
  that will meet customer expectations.
• This is an essential cross-functional effort
  during the service and/or product development
  phase to insure a timely and well-coordinated
  process that brings value to the customer.

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Corporate Strategy and Key Operations Management
Decisions
Corporate strategy
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Matching Capabilities to Priorities

• The table below shows how a credit card division
  matched their capabilities to their priorities
  and uncovered gaps in their operating strategy.