Chapter 2 Operations Strategy BA 320 Operations Management

Strategy Formulation 1. Define a primary task 2. Assess core competencies 3. Determine order winners & order qualifiers 4. Positioning the firm BA 320 Operations Management

Competing on Cost ü Eliminate all waste ü Invest in ü ü ü Updated facilities & equipment Streamlining operations Training & development BA 320 Operations Management

Competing on Quality ü Please the customer ü Understand customer attitudes toward and expectations of quality BA 320 Operations Management

Competing on Flexibility ü Produce wide variety of products ü Introduce new products ü Modify existing products quickly ü Respond to customer needs BA 320 Operations Management

Competing on Speed ü Fast moves ü Fast adaptations ü Tight linkages BA 320 Operations Management

Operations Role in Corporate Strategy ü Provide support for overall strategy of a firm ü Serve as firm’s distinctive competence ü Must be consistent with overall strategy BA 320 Operations Management

Operations Strategy at Wal-Mart BA 320 Operations Management

Operations Strategy at Wal-Mart Mission Competitive Priority Wal-Mart Provide value for our customers Low prices, everyday Operations Strategy Low inventory levels Short flow times Operations Structure Linked communications between stores Fast transportation system Enabling Process and Technologies EDI/satellites Cross-docking Figure 2. 1 BA 320 Operations Management Focused locations

Strategy and the Internet ü Create a distinctive business strategy ü Strengthen existing competitive advantages ü Integrate new and traditional activities ü Must provide a unique value to the customer BA 320 Operations Management

Strategic Decisions in Operations BA 320 Operations Management

Strategic Decisions in Operations Products Services Capacity Human Resources Facilities Sourcing Processes and Technology Quality Operating Systems Figure 2. 2 BA 320 Operations Management

Products & Services ü Make-to-order ü Made to customer specifications after order received ü Make-to-stock ü Made in anticipation of demand ü Assemble-to-order ü Add options according to customer specification BA 320 Operations Management

Processes & Technology ü Project ü One-time production of product to customer order ü Batch production ü Process many jobs at same time in batch ü Mass production ü Produce large volumes of standard product for mass market ü Continuous production ü Very high volume commodity product BA 320 Operations Management

Product-Process Matrix BA 320 Operations Management

Product-Process Matrix High Continuous Production Volume Mass Production Batch Production Projects Low Figure 2. 3 Standardization BA 320 Operations Management High

Service-Process Matrix BA 320 Operations Management

Service-Process Matrix High Service Factory Volume Mass Service Low Service Shop Professional Service Low Figure 2. 4 Standardization BA 320 Operations Management High

Capacity & Facilities ü How much capacity to provide ü Size of capacity changes ü Handling excess demand ü Hiring/firing workers ü Need for new facilities BA 320 Operations Management

Facilities ü Best size for facility? ü Large or small facilities ü Facility focus ü Facility location ü Global facility BA 320 Operations Management

Human Resources ü Skill levels required ü Degree of autonomy ü Policies ü Profit sharing ü Individual or team work ü Supervision methods ü Levels of management ü Training BA 320 Operations Management

Quality ü Target level ü Measurement ü Employee involvement ü Training ü Systems needed to ensure quality ü Maintaining quality awareness ü Evaluating quality efforts ü Determining customer perceptions BA 320 Operations Management

Sourcing ü Degree of vertical integration ü Supplier selection ü Supplier relationship ü Supplier quality ü Supplier cooperation BA 320 Operations Management

Operating Systems ü Execute strategy daily ü Information technology support ü Effective planning & control systems ü Alignment of inventory levels, scheduling priorities, & reward systems BA 320 Operations Management

Strategic Planning BA 320 Operations Management

Strategic Planning Mission and Vision Voice of the Business Marketing Strategy Corporate Strategy Operations Strategy Voice of the Customer Financial Strategy Figure 2. 5 BA 320 Operations Management

Policy Deployment ü Hoshin planning ü Focuses employees on common goals & priorities ü Translates strategy into measurable objectives ü Aligns day-to-day decisions with strategic plan BA 320 Operations Management

Derivation of an Action Plan BA 320 Operations Management

Derivation of an Action Plan Reduce production cycle time by 30% Reduce queue time by 50% Reduce setup time by 50% Cut lot sizes in half What Who When Measure Resource Improve work flow Billy Wray 9 -1 -03 Average queue time per job . . . Increase electronic transactions by 30% Reduce business cycle time by 50% . . . Redesign supplier quality reporting process . . . Reduce purchasing cycle time by 30% Set up supplier education groups Reduce supplier base by 50% . . . Figure 2. 6 BA 320 Operations Management $5, 000 . . .

Balanced Scorecard ü Finance — How should we look to our shareholders? ü Customer — How should we look to our customers? ü Processes — At which business processes must we excel? ü Learning and Growing — How will we sustain our ability to change and improve? BA 320 Operations Management

Mobil’s Strategy Map BA 320 Operations Management

Mobil’s Strategy Map Revenue Growth Strategy Finances Customers Processes Learning and Growth Volume growth Net margin Nongasoline products & services More premium brands Delight the customer Win-win dealer relations Clean/safe/fast Develop business skills Create new products & services Build best-in-class franchise Convenience store Teamwork, quality Personal growth Align goals Deliver products on spec, on time Inventory management Functional excellence Strategic & job skills Process improvement New technology Figure 2. 7 BA 320 Operations Management

Issues and Trends ü Global markets, sourcing, operations ü Virtual companies ü Greater choice ü Emphasis on service ü Speed and flexibility ü Supply chains ü C-commerce ü Technological advances ü Knowledge ü Environment and social responsibilities BA 320 Operations Management

The Changing Corporation BA 320 Operations Management

The Changing Corporation CHARACTERISTIC 20 TH CENTURY CORPORATION Organization Focus Style Source of strength Structure Resources Operations Products Reach Financials Inventories Strategy Leadership Workers Job expectations Motivation Improvements Quality The Pyramid Internal Structures Stability Self-sufficient Physical assets Vertical integration Mass production Domestic Quarterly Months Top-down Dogmatic Employees Security To compete Incremental Affordable best 21 ST CENTURY CORPORATION The Web External Flexible Change Interdependencies Information Virtual integration Mass customization Global Real-time Hours Bottom-up Inspirational Employees, free agents Personal growth To build Revolutionary No compromise Table 2. 1 BA 320 Operations Management