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Chapter 2Chapter 2

Operations Operations StrategyStrategy

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Strategic PlanningStrategic PlanningMission and

Vision

Corporate Strategy

Voice of the Business

Voice of the Customer

Marketing Strategy

Operations Strategy

Financial Strategy

Figure 2.5Figure 2.5

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Operations Role in Operations Role in Corporate StrategyCorporate Strategy

Provide support for overall Provide support for overall strategy of a firmstrategy of a firm

Serve as firm’s distinctive Serve as firm’s distinctive competencecompetence

Must be consistentMust be consistentMust be consistent with overall Must be consistent with overall

strategystrategy

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Strategy FormulationStrategy Formulation

1.1. Define a primary taskDefine a primary task2.2. Assess core Assess core

competenciescompetencies3.3. Determine order Determine order

winners & order qualifierswinners & order qualifiers4.4. Positioning the firmPositioning the firm

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Competing on CostCompeting on CostEliminate all wasteEliminate all wasteInvest inInvest in

Updated facilities & equipmentUpdated facilities & equipment Streamlining operationsStreamlining operations Training & developmentTraining & development

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Competing on QualityCompeting on Quality

Please the customerPlease the customerUnderstand customer Understand customer

attitudes toward and attitudes toward and expectations of expectations of quality quality

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Competing on Competing on FlexibilityFlexibility

Produce wide variety of Produce wide variety of productsproducts

Introduce new productsIntroduce new productsModify existing Modify existing

products quicklyproducts quicklyRespond to customer Respond to customer

needsneeds

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Competing on SpeedCompeting on Speed

Fast movesFast movesFast adaptationsFast adaptationsTight linkagesTight linkages

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Strategic Decisions in Strategic Decisions in OperationsOperations

Products Processes and

Technology

Capacity

Human Resources Quality

Facilities Sourcing

Services

Operating Systems

Figure 2.2Figure 2.2

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OperationsOperationsStrategy at Strategy at Wal-MartWal-Mart Provide value for our customersProvide value for our customers

Low prices, everydayLow prices, everyday

Low inventory levelsLow inventory levels

Linked communications between stores

Linked communications between stores

Short flow timesShort flow times

Fast transportation system

Fast transportation system

Cross-dockingCross-docking Focused locationsFocused locations

satellitessatellites

Wal-MartWal-Mart

MissionMission

Competitive Competitive PriorityPriority

Operations Operations StrategyStrategy

Operations Operations StructureStructure

Enabling Process Enabling Process and Technologiesand Technologies

Figure 2.1Figure 2.1

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Products & ServicesProducts & ServicesMake-to-orderMake-to-order

Made to customer specifications Made to customer specifications after order receivedafter order received

Make-to-stockMake-to-stockMade in anticipation of demandMade in anticipation of demand

Assemble-to-orderAssemble-to-orderAdd options according to Add options according to

customer specificationcustomer specification

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Processes & TechnologyProcesses & Technology ProjectProject

One-time production of product to One-time production of product to customer ordercustomer order

Batch productionBatch production Process many jobs at same time in batchProcess many jobs at same time in batch

Mass productionMass production Produce large volumes of standard Produce large volumes of standard

product for mass marketproduct for mass market Continuous productionContinuous production

Very high volume commodity productVery high volume commodity product

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Product-Process MatrixProduct-Process MatrixV

olu

me

Vo

lum

e

LowLow

LowLow HighHigh

HighHigh

Projects

BatchProduction

MassProduction

ContinuousProduction

StandardizationStandardizationFigure 2.3Figure 2.3

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Service-Process MatrixService-Process MatrixL

abo

r In

ten

sity

Lab

or

Inte

nsi

ty

HighHigh

HighHigh LowLow

LowLow

Professional Service

Service Shop

MassService

Service Factory

CustomizationCustomizationFigure 2.4Figure 2.4

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Capacity & FacilitiesCapacity & FacilitiesHow much capacity to provideHow much capacity to provideSize of capacity changesSize of capacity changesHandling excess demandHandling excess demandHiring/firing Hiring/firing

workersworkersNeed for new Need for new

facilitiesfacilities

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Capacity Expansion StrategiesCapacity Expansion Strategies(a) Capacity lead strategy(a) Capacity lead strategy (b) Capacity lag strategy(b) Capacity lag strategy

(c) Average capacity strategy(c) Average capacity strategy (d) Incremental vs. one-step expansion(d) Incremental vs. one-step expansion

UnitsUnits

CapacityCapacity

TimeTime

DemandDemand

UnitsUnits

CapacityCapacity

TimeTime

DemandDemand

UnitsUnits

CapacityCapacity

TimeTime

DemandDemand

UnitsUnitsIncrementalIncrementalexpansionexpansion

TimeTime

DemandDemand

One-step expansionOne-step expansion

Figure 9.1Figure 9.1

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FacilitiesFacilities

Best size for facility?Best size for facility?Large or small facilitiesLarge or small facilitiesFacility focusFacility focusFacility locationFacility locationGlobal facilityGlobal facility

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Human ResourcesHuman Resources Skill levels requiredSkill levels required Degree of autonomyDegree of autonomy PoliciesPolicies Profit sharingProfit sharing Individual or team Individual or team

workwork Supervision methodsSupervision methods Levels of Levels of

managementmanagement TrainingTraining

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QualityQuality Target levelTarget level MeasurementMeasurement Employee involvementEmployee involvement TrainingTraining Systems needed to ensure qualitySystems needed to ensure quality Maintaining quality awarenessMaintaining quality awareness Evaluating quality effortsEvaluating quality efforts Determining customer perceptionsDetermining customer perceptions

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SourcingSourcingDegree of vertical Degree of vertical

integrationintegrationSupplier selectionSupplier selectionSupplier Supplier

relationshiprelationshipSupplier qualitySupplier qualitySupplier Supplier

cooperationcooperation