Chapter 2. Operations Strategy

1
Chapter 2. Operations Strategy Competitiveness

• Carefully read Southwest Airlines (pp.23-24)
• Operations Strategy Competitive Dimensions
• Order Qualifiers and Winners
• Strategy Design Process
• A Framework for Manufacturing Strategy
• Service Strategy Capacity Capabilities
• Productivity Measures

2
Operations Strategy Competitive Dimensions

• Setting broad policies and plans to utilize the
  firms resources optimally to support its longer
  term competitive strategy.
• TREK ops strategy goals
• Consider Southwest Airlines, their competitive
  strategy is
• Low-cost point-to-point service targeting price
  and convenience sensitive consumers (travelers)
• In contrast, Continental Airlines is a
  full-service airline offering travel from almost
  any point A to any point B via hub-and-spoke
  system centered on major airports along with code
  sharing (partnership) agreements with other
  full-service airlines.
• Offer first and/or business class services,
  coordinate schedules within and with other
  airlines, transfer luggage, serve meals on longer
  flights or even on flights that fly during dining
  hours (since some passengers are expected to make
  connecting flights).
• Southwest does none of this but because of their
  operational simplicity they can fly planes on the
  air longer, have 15 minutes of turnarounds.

3
Competitive Dimension

• Competitive Dimensions include
• Cost or Price
• Make the Product or Deliver the Service Cheap
• Quality
• Make a Great Product and (not or) deliver a
  Great Service ( X vs Mercedes)
• Delivery Speed
• Make the Product or Deliver the Service Quickly
• Delivery Reliability
• Deliver It When Promised
• Coping with Changes in Demand
• Change Its Volume
• Flexibility and New Product Introduction Speed
• Change It, more frequently then GM or Ford, who
  is this company?
• Other Product-Specific Criteria
• Support It

4
Trade-Offs

• Focus and trade-offs, cant do it all at the same
  time
• Lexus cant be made and sold for 25,000. T or F?
• A few examples
• Generally low-cost strategy is not compatible
  with flexibility or speed of delivery
• High quality and low cost tend to be incompatible
• Straddling occurs when a firm seeks to mimic a
  competitors position while trying to maintain
  their original (successful) position.
• The case of Continental Airlines (CA) response
  Southwest Airlines (SW)
• CA reacted to Southwest.
• While maintaining its full-service position,
  sought to match SW on some routes
• Eliminated meals, 1st class service, lowered
  prices, increased frequency but maintained other
  features because it remained as a full service
  airline for other routes (transfer luggage, agent
  commissions, etc.)
• Lost millions, CEO got fired, returned to the
  former market.

5
Order Qualifiers and Winners

• Order qualifiers are the basic criteria that
  permit the firms products to be considered as
  candidates for purchase by customers
• Through the 1980s ? nobody got fired buying IBM
  products
• Order winners are the criteria that differentiate
  the products and services of one firm from
  another
• Caterpillar ? 48 hours parts/service guarantee
• Class examples

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Steps in Developing a Manufacturing Strategy

• Segment the market according to the product group
• Identify product requirements, demand patterns,
  and profit margins of each group
• Determine order qualifiers and winners for each
  group
• Convert order winners into specific performance
  requirements

7
Differing Manufacturing Requirements
Why buy?
Focus on?
8
Service Strategy Capacity Capabilities

• Process-based
• Capabilities derived from activities that
  transform material or information and provide
  advantages on dimensions of cost and quality
• Systems-based
• Operating capabilities that are broad-based
  involving the entire operating system and provide
  advantages of short lead times and customize on
  demand
• Organization-based
• Organizational ability to master/implement
  (learn) new technologies, faster new
  plant/product introductions
• These capabilities are more difficult to
  replicate thus provide a strong operations-based
  competitive advantage

9
Productivity

• A common, seemingly simple but very complicated
  measure
• How a country, region, industry, company,
  business unit, department, ... uses its resources
  (relative to others).
• Broadly defined as the ratio of OUTPUTS to INPUTS
• Total, partial, or multifactor measures

10
Productivity Example
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Some Partial Productivity Measures

• Business
• Restaurant
• Retail Store
• Chicken Farm
• Utility Plant
• Paper Mill
• Case Lasik Vision Corporation pp. 47-48

• Productivity Measure
• Meals per hour
• Sales per square foot (meter)
• Kilo of meat per Kg. of feed
• Kilowatt per ton of coal
• Tons of paper per cord of wood