What is a strategy?
A plan of action intended to accomplish a specific goal
Business strategy
-The long-range plan of a business, designed to provide and sustain shareholder value (pp.29).
-Michael Porter's competitive strategies (pp.29)
Operation Strategy (OS)
-A long-range plan for the operations function that specifies the design and use of resources to support the business strategy
-An OS must be aligned with the company's business strategy and enable the company to achieve its long-term plan
Role of Operations Strategy
Developing a Business Strategy
Environmental Scanning
-Marketplace trends
-Economics trends
-Political trends
-Social trends
SWOT Analysis
(Core Competencies)
-Strength
-Weakness
(Environmental)
-Opportunities
-Threats
Which of the following would not be considered a core competency that a company might have?
an inefficient distribution system
Developing an Operating Strategy
-Operations Strategy is a long-term plan for the design and management of operations functions
-Operation Strategy developed after the business strategy
-Operations Strategy focuses on specific capabilities which give it a competitive edge - competitive p
Four Important Operations Questions: Will you compete on -
Cost?
Quality?
Time?
Flexibility?
Competing on Cost
Offering product at a low price relative to competitors
(-Typically high volume products
-Often limit product range & offer little customization
-May invest in automation to reduce unit costs
-Can use lower skill labor
-Probably use product focused layout
Competing on Quality
-Quality is often subjective
-Quality is defined differently depending on who is defining it
(Two major quality dimensions include:
-High performance design
-Product & service consistency)
High performance design
-Superior features
-High durability
-Excellent customer service
Product & service consistency
-Meets design specifications
Competing on Time
-Time/speed one of most important competition priorities
-The first that can deliver often wins the race (first-mover advantage)
(Time related issues involve:
-Rapid delivery
-On-time delivery)
Rapid Delivery
- Focused on how quickly an order is received
On-time delivery
-How often deliveries are made on time
Competing on Flexibility
-Company environment changes rapidly
-Company must accommodate change by being flexible
(-Product flexibility
-Volume flexibility)
Product flexibility
-Easily switch production from one item to another
-Easily customize product/service to meet specific requirements of a customer
Volume flexibility
- Ability to ramp production up and down to match market demands
Trade-offs
-Decisions must emphasize priorities that support business strategy
-Decisions often required trade offs
(-Order Qualifiers
-Order Winners)
Order Qualifiers
Competitive priorities that must be met for a company to qualify as a competitor in the market place
Order Winners
Competitive priorities that win orders in the market place
(e.g.-Dell competes on all four priorities
-Southwest Airlines competes on cost
-McDonald's competes on consistency
-FedEx competes on speed
-Custom tailors compete on flexibility)
Structure
Decisions related to the design of production process, such as characteristics of facilities used, selection of appropriate technology, and the flow of goods and services
Infrastructure
Decisions related to planning and control systems of operations, such as organization of workers, payment, quality control measures, policies
Technology vs. Competitive Priorities
Technology should support competitive priorities
Technology on Product
e.g. Teflon, CD, fiber optic cable
Technology on Process
Technology is used to improve the process of creating goods and services
( e.g. Flexible automation; CAD/CAM)
Technology on Information Technology
Technology that enables communication, processing, and storage of information
( e.g. Internet; Databases; EDI; ERP )
Positive effects of Technology
-Improve processes
-Maintain up-to-date standards
-Obtain competitive advantage
Negative effects of Technology
-Costly
-Risks such as overstating benefits
Technology should
-Support competitive priorities
-Can require change to strategic plans
-Can require change to operations strategy
Productivity
A measure of how efficiently inputs are converted to outputs
Total Productivity Measures
the ratio of outputs to all inputs
Multi-factor Measures
a ratio of outputs to several, but not all, inputs
Partial Measures
A ratio of outputs to only one input
Interpreting Productivity Measures
-Productivity measures must be compared to something, i.e. another year, a different company
-Raw productivity calculations do not tell the complete story unless there are no major structure differences.
-Productivity measure provides information on how t