Production and Operations Management: Manufacturing and Services

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CHASE AQUILANO JACOBS
Operations Management
For Competitive Advantage
Chapter 2
Operations Strategy and Competitiveness
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Chapter 2Operations Strategy and Competitiveness

• Operations Strategy
• A Framework for Operations Strategy
• Meeting the Competitive Challenge
• Productivity Measurement

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Operations Strategy Strategic Alignment
Customer Needs
Corporate Strategy
Operations Strategy
Processes, Infrastructure, and Capabilities
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Operations Priorities

• Cost
• Quality
• Delivery Speed (Also, New Product Introduction
  Speed)
• Delivery Flexibility
• Greenness
• Delivery Reliability
• Coping with Changes in Demand
• Other Product-Specific Criteria

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Dealing with Trade-offs
Traditional Approach
Plant within a Plant (PWP)
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World-Class Organizations

• World-class Organizations no longer view cost,
  quality, speed of delivery, and even flexibility
  as tradeoffs.
• They have become order qualifiers.
• What are the order winners in todays market?

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Service Breakthroughs

• Service can be an order winner

Travel Planning
Warranty
Leases
Roadside Assistance
Loaner Vehicles
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A Framework for Organizational Strategy
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OPERATIONS STRATEGY OBJECTIVES

• TRANSLATE MARKET REQMTS TO SPECIFIC OPERATIONS
  PRIMARY MISSIONS
• ASSURE OPERATIONS IS CAPABLE TO ACCOMPLISH
  PRIMARY MISSION.
• 1) SEGMENT MARKET BY PRODUCT GROUPS
• 2) IDENTIFY PRODUCT REQUIREMENTS
• 3) DETERMINE ORDER WINNERS AND QUALIFIERS
• 4) CONVERT ORDER WINNERS INTO SPECIFIC
  PERFORMANCE REQMTS

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Strategy Begins with Priorities

• Consider the case of a Business School.
• 1. How would we segment the market according to
  product group?
• 2. How would we identify product requirements,
  demand patterns, and profit margins for each
  group?
• 3. How do we identify order winner and order
  qualifiers for each group?
• 4. How do we convert order winners into specific
  performance requirements?

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Operations Role in Overall Organizational
Strategy

• Stage 1 Operations is Internally Neutral
• Minimize operations negative potential
• Management control systems
• Stage IIOperations is Externally Neutral
• Achieve parity with competitors
• Follow industry practice
• Stage IIIOperations is Internally Supportive
• Support the business strategy
• Stage IV Operations is Externally Supportive
• Operations-based competitive advantage

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Four Stages of Service Firm CompetitivenessConsid
er Higher Education as an Example

• Stage I. Available for Service
• Reactive, non-performance-based survival
• Stage II. Journeyman
• Firm neither sought nor avoided
• Reliable but uninspired operation

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Four Stages of Service Firm Competitiveness
(continued)

• Stage III. Distinctive Competence Achieved
• Reputation for meeting customers expectations
• Customer-focused operations--management support
• Stage IV. World Class Service Delivery
• Firm name synonymous with service
  excellence--focus on delighting rather than
  satisfying customers
• Continuous learning and improvement of operations

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MIT Commission on Industrial Productivity1985
Recommendations - Still Very Accurate Today

• Less emphasis on short-term financial payoffs and
  invest more in RD.
• Revise corporate strategies to include responses
  to foreign competition.
• greater investment in people and equipment
• Knock down communication barriers within
  organizations and recognize mutuality of
  interests with other companies and suppliers.

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MIT Commission on Industrial Productivity1985
Recommendations

• Recognize that the labor force is a resource to
  be nurtured, not just a cost to be avoided.
• Get back to basics in managing production/
  operations.
• Build in quality at the design stage.
• Place more emphasis on process innovations rather
  than focusing sole attention on product
  innovations - dramatically improve costs,
  quality, speed, flex.

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U. S. Competitiveness Drivers

• Product/Service Development - NPD
• Teams speed development and enhance
  manufacturability
• Waste Reduction (LEAN/JIT Philosophy)
• WIP, space, tool costs, and human effort
• Improved Customer-Supplier Relationships
• Look for Win-Win! Taken from Japanese Keiretsu
• Early Adoption of IT Technology Including
• PC Technology WWW - ERPS

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SPEED SHORTEN PRODUCT CYCLE TIMES

• GM 60 TO 40 MOS. BUICK
• HP 52 TO 24 MOS. PRINTERS
• IBM 48 TO 13 MOS. PCs
• HONEYWELL 48 TO 12 MOS. THERMST.
• INGERSOLL 42 TO 12 MOS. GRINDER
• WARNER ELECT 36 TO 10 MOS. BRAKE

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Productivity

• Partial measures
• output/(single input)
• Multi-factor measures
• output/(multiple inputs)
• Total measure
• output/(total inputs)

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Example - Why is This Important?
10,000 Units Produced Sold for 10/unit 500
labor hours Labor rate 9/hr Cost of raw
material 5,000 Cost of purchased material
25,000
What is the labor productivity?
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Example--Labor Productivity

• 10,000 units/500hrs 20 units/hour ...
• ... or we can arrive at a unitless figure
• (10,000 unit10/unit)/(500hrs9/hr)
  22.22Can you think of any advantages or
  disadvantages of each approach?

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Applying Productivity Figures

• Youve just told your boss that the plant labor
  productivity is better than that of a plant in a
  related business.
• Why might he not be pleased with you?

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