02 OSD Categories

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Operations StrategyDecisions

Henry C. CoTechnology and Operations Management,California Polytechnic and State University



11 Categories of Operations StrategyDecisions

I. Structural Decisions – the organization’s brick andmortal attributes (requires substantial capitalinvestment; difficult to alter or reverse)

II. Infrastructural Policies and Systems – systems,

policies and practices that determine howorganization’s structural aspects are to be managed.

Hayes, et al, Table 2-1, p. 41



Group Technology Applications (Henry C. Co) 3

I. Structural Decisions1. Capacity – amount, type, timing2. Sourcing and vertical integration –

direction, extent, balance3. Facilities – size, location,

specialization4. Information and process technology

– degree of automation,

interconnectedness, lead versusfollow.




II. Infrastructural Policies and System5. Resource allocation and capital

budgeting systems6. Human resource systems – selection,

skills, compensation, employment

security7. Work planning and control systems –

purchasing, aggregate planning,scheduling, control of inventoryand/or waiting time backlog




8. Quality systems - defect prevention,monitoring, intervention, and elimination

9. Measurement and reward systems – measures, bonuses, promotion policies

10. Product and process development systems– leader or follower, project teamorganization

11. Organization – centralized versusdecentralized, which decisions to delegate,role of staff groups



Structural Decisions

CapacitySourcing and vertical integrationFacilitiesInformation and process technology

Hayes, et al, Section 2.3.4




1. CapacityHOW much long range capacity will beneeded?WHEN will the additional capacity berequired?




Factors affecting actual capacity1. Process technology affects the

efficiency with which variousresources are consumed.

2. Capacity fluctuates as one bottleneckis supplanted by another.

3. Capacity is mix dependent.4. Capacity cushion (maintaining excess

equipment or labor as “safety”

capacity) adds to the maximumcapacity but may not be sustainableover a longer period of time.

Hayes, et al, Section 3.2




5. Management policies affect capacity - hoursworked per week on an operation,inventory of final or intermediate products,capacity cushion.

6. Learning curve affects capacity (efficiency

improves over time; successive bottlenecksdiscovered and removed)

7. Capacity is location specific – excess labor,materials, machinery and space in the

wrong location are not usable capacity.8. Capacity depends on variability of arrival

rates of work (see Figure 3-1, p.81)




2. Sourcing and Vertical integrationSpan of process – make versus buyOutsourcing strategies




3. FacilitiesWHERE should the facility be located? - near

markets or near sources of inputs?WHAT should the layout and characteristicsof the facility be?HOW focused (product vs. process focused)?One large vs. many small plants?Choice of equipment – general purpose orspecial purpose?

Tooling – temporary, minimum tooling or “production tooling?”




4. Information/Process TechnologyDegree of automation InterconnectednessLead versus follow

http://www.csupomona.edu/~hco/Strategy/02-Automation_Strategies.ppt

http://www.csupomona.edu/~hco/Strategy/02-Automation_Strategies.ppt



Infrastructural Policies andSystems

5 R A i i




5. Resource A ocation an apitaBudgeting

Investment in buildings, equipment,inventory and researchFinancial analysis ( week 10 )

http://www.csupomona.edu/~hco/MoT/09cJustificationFinancing.ppt

http://www.csupomona.edu/~hco/MoT/09cJustificationFinancing.ppt




6. Human Resource SystemsSelection, skills, compensation, employment

securityJob specialization – highly specialized or nothighly specialized?Supervision – technically trained first-linesupervisors or non-technically trainedsupervisors? Close supervision or loosesupervision?Wage system – many job grades or few jobgrades; incentive wages or hourly wages?Industrial engineers – many or few of suchpeople?

7 W P i




7. Wor P anning an ontroSystems

Purchasing, aggregate planning,scheduling, control of inventoriesand/or waiting time backlogFrequency of inventory takingInventory size – high or low?Degree of inventory control – controlin great detail or in lesser detail?What to control – controls designed to

reduce machine downtime or laborcost or time to process, or tomaximize output or material usage?




8. Quality SystemsDefect prevention, monitoring,intervention, and eliminationHigh reliability and quality or lowcosts?

M R




. Measurement an RewarSystems

Measures, bonuses, promotion policiesUse of standards – formal or informalor none at all?

1 P P D




1 .Pro uct an Process Deve opmentSystems

Leader or follower, project team organization

Size of product line – many customerspecials or few specials or none at all?Design stability – frozen design or manyengineering change orders?

Technological risk – use of new processesunproved by competitors or follow-the-leader policy?Engineering – complete packaged design ordesign-as-you-go approach?Use of manufacturing engineers – few ormany manufacturing engineers?




11.OrganizationCentralized versus decentralized, which

decisions to delegate, role of staff groupsKind of organization – functional or productfocus or geographical?Executive use of time – highly involvement

in investment or production planning or costcontrol or quality control or other activitiesDegree of risk assumed – decisions based onmuch or little information?Use of staff – large or small staff group?Executive style – much or little involvementin detail; authoritarian or nondirective style;much or little contact with organization?

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