Mod7b - IE31

• Operations Strategy


  Concerned with setting broad policies and plans for using the resources of a firm to best support its long-term competitive strategy. It involves decisions that relate to the design of a process (technology selection, process sizing, inventory role, etc) and the infrastructure (planning & systems control, QA, QC, work payment structure, organization of the operations function) needed to support the process.
• Strategy


  Describes how a firm intends to create and sustain value for its shareholders
• 3 Major Components of Operations Strategy

  • Operations effectiveness
  • Customer Management
  • Product innovation
• Operations effectiveness


  Relates to the core business processes that are needed to run the business
• Customer Management


  Understanding customer needs and leveraging customer relationships better
• Product innovation


  Development of new products, markets, and relationships to sustain growth
• 3 Levels of Strategy

  • Corporate Level Strategy
  • Business Level Strategy
  • Functional Level Strategy
• Corporate Level Strategy


  The highest level of strategy which sets the long-term direction and scope for the whole organization. If the company comprises more than one business unit, corporate level strategy will be concerned with what those businesses should be, how resources will be allocated between them, and how relationships among the various business units with the corporate center should be managed. Often express their strategy in the form of a corporate mission or vision statement.
• Business Level Strategy


  Primarily concerned with how a particular business unit should compete within its industry, and what its strategic aims and objectives should be. Business unit's strategy may be constrained by lack of resources or strategic limitations placed upon it by the corporate center. In single-proprietorships, business level strategy is synonymous with corporate level strategy because of the nature and size of the enterprise.
• Functional Level Strategy


  The bottom level of strategy is that of the individual function (operations, marketing, finance, etc.). Concerned with how each function contributes to the business strategy, what their strategic objectives should be, and how they should manage their resources in pursuit of those objectives.
• Competitive Dimensions In Operations Management

  • Cost - "Make it Cheap"
  • Product Quality and Reliability - "Make it Good"
  • Delivery Speed - "Make it Fast"
  • Delivery Reliability - "Deliver it When Promised"
  • Coping with Changes in Demand - "Change its Volume"
  • Flexibility and New Product Introduction Speed - "Change It"
  • Other Product-Specific Criteria - "Support It"
• Technical liaison and support


  Supplier to provide technical assistance for product development specially during the early stages of design and manufacturing
• Meeting launch date


  Manufacturing while development work is still being completed – strict coordination between firms and working simultaneously
• Supplier after-sale support and response speed


  Support after sale of a product – spare parts, modification kits
• Other product-specific criteria


  • Colors available
  • Size
  • Weight
  • Location of the fabrication site
  • Customization available
  • Product mix options
• Trade-offs in competitive dimensions

  A strategic position is not sustainable unless there are compromises with other positions. The underlying logic behind it is that an operation cannot excel simultaneously on all competitive dimensions. Trade-offs occur when activities are incompatible, so that more of one thing necessitates less of another.
• Examples of Trade-offs


  • If a company wants to focus on speed of delivery, then it can't be very flexible in terms of its ability to offer a wide range of products.
  • If we reduce costs by reducing product quality inspections, we might reduce product quality.
  • If we improve customer service problem solving by cross-training personnel to deal with a wider-range of problems, they may become less efficient at dealing with commonly occurring problems.
• Order qualifiers


  The basic criteria that permit the firms products to be considered as candidates for purchase by customers
• Order winners


  The criteria that differentiates the products and services of one firm from another (e.g., cost of the product (price), product quality and reliability)
• Example of order qualifier and order winner

  • When buying a vehicle, a car with a popular brand name can make it an order qualifier. But with all the popular car brands, the level of efficiency and competency of the repair services (e.g., Warranty, Roadside Assistance, Leases) can convert a car brand from a qualifier into an order winner.
• Over time, as competitors adopt similar enhancements, what was once an order-winner becomes an order-qualifier. Operations managers must decide which dimensions to prioritize to prevent product characteristics from losing their competitive edge.
• Main Objectives of Strategy Development


  • Translate required competitive dimensions (obtained from marketing) into specific performance requirements for operations
  • Make the necessary plans to ensure that operations (and enterprise) capabilities are sufficient to accomplish
• Steps in Strategy Development

  1. Segment the market according to the product group

  2. Identify product requirements, demand patterns, and profit margins of each group

  3. Determine order qualifiers and winners for each group

  4. Convert order winners into specific performance requirements that will be translated into actions for the firm to execute
• Operations Strategy in Services


  The operations strategy in services is generally inseparable from the corporate strategy because, for most services, the service delivery system is the business itself, hence any strategic decisions must include operations considerations.
• Plant-within-a-plant (PWP)


  A concept where several different manufacturing activities are done in just one facility instead of making use of several facilities (e.g., hospitals cater to different fields of medicine like Neurology, Cardiology, Pediatrics, etc.)
• Types of Operations Strategy in Services

  • Process-based: capacities that transforms material or information and provide advantages on dimensions of cost and quality
  • Systems-based: capacities that are broad-based involving the entire operating system and provide advantages of short lead times and customize on demand
  • Organization-based: capacities that are difficult to replicate and provide abilities to master new technologies
• Productivity


  A common measure on how well resources are being used. If productivity is low, then we will want to check on our inputs to the system and how they are managed and transformed into output (via the feedback loop).
• Two types of Productivity Comparisons

  • Comparisons of institutions with similar operations within an industry
  • An operations performance through different time frames
• Issues and Challenges in Operations Strategy

  • Research - strategic insight on successful firms
  • Profit Impact of Strategy (PIMS) - established by Strategic Planning Institute with GE to identify characteristics of high-return-on-investment firms
  • Preconditions - understand the factors that influence strategy development & execution
  • Dynamics - due to changes within organization & changes in the environment
  • Ethics and Social Responsibility - Developing safe quality products, Maintaining a clean environment, Providing a safe workplace, Honoring community commitments
• Qualifier Dimensions


  • Good location
  • Availability of teller
  • Availability of loan officers
  • Availability of ATMs
• Winner Dimensions


  • Relationship banking
  • Customer-oriented banking hours
• Low-cost strategy


  Not compatible with speed of delivery or flexibility
• Low-cost strategy


  Trade off to high quality