Operations Management Modules 2 & 3 Operations Strategy & Competitiveness and Performance Measures...
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Transcript of Operations Management Modules 2 & 3 Operations Strategy & Competitiveness and Performance Measures...
Operations ManagementOperations Management
Modules 2 & 3Modules 2 & 3Operations Strategy & Competitiveness and Operations Strategy & Competitiveness and
Performance MeasuresPerformance Measures
S.BalachandranS.Balachandran
December 2007 2007
December 2007 © S.Balachandran 2 of 20
In this session . . .In this session . . .
• Strategy – Role of OperationsStrategy – Role of Operations
• Competitiveness – Dimensions, TradeoffsCompetitiveness – Dimensions, Tradeoffs
• Order Qualifiers & WinnersOrder Qualifiers & Winners
• OM Strategy – DecisionsOM Strategy – Decisions
• Strategy – Process LinkageStrategy – Process Linkage
• Strategic Map : Four PerspectivesStrategic Map : Four Perspectives
• Service Operations : CapabilitiesService Operations : Capabilities
• Operational Performance MeasuresOperational Performance Measures
December 2007 © S.Balachandran 3 of 20
Strategy – Role of OperationsStrategy – Role of Operations
Business strategy• Goals• Core Competencies• Environmental responses• New products/services• New Markets• Global strategies
Business strategy• Goals• Core Competencies• Environmental responses• New products/services• New Markets• Global strategies
Market analysis• Segmentation• Needs assessment
Market analysis• Segmentation• Needs assessment
Competitive prioritiesOperations
Marketing• Cost• Quality Finance• Delivery• Reliability• Flexibility• Responsiveness Others
Competitive prioritiesOperations
Marketing• Cost• Quality Finance• Delivery• Reliability• Flexibility• Responsiveness Others
December 2007 © S.Balachandran 4 of 20
Strategy – Role of OperationsStrategy – Role of Operations
Business strategy• Goals• Core Competencies• Environmental responses• New products/services• New Markets• Global strategies
Business strategy• Goals• Core Competencies• Environmental responses• New products/services• New Markets• Global strategies
Market analysis• segmentation• needs assessment
Market analysis• segmentation• needs assessment
Competitive prioritiesOperations
Marketing• Cost• Quality Finance• Delivery• Reliability• Flexibility• Responsiveness Others
Competitive prioritiesOperations
Marketing• Cost• Quality Finance• Delivery• Reliability• Flexibility• Responsiveness Others
Cost 1. Low-cost operationsQuality 2. High-performance design
3. Consistent qualityDelivery 4. Fast delivery
5. Development speedReliability 6. Of Delivery, Prod. Performance
Flexibility 7. Customization & Variety 8. Volume flexibility
Responsiveness 9. Pre-sales Info 10. After-sales Service
Cost 1. Low-cost operationsQuality 2. High-performance design
3. Consistent qualityDelivery 4. Fast delivery
5. Development speedReliability 6. Of Delivery, Prod. Performance
Flexibility 7. Customization & Variety 8. Volume flexibility
Responsiveness 9. Pre-sales Info 10. After-sales Service
December 2007 © S.Balachandran 5 of 20
Strategy – Role of OperationsStrategy – Role of Operations
Functional area strategies• Finance• Marketing• Operations• Others
Functional area strategies• Finance• Marketing• Operations• Others
Business strategy• Goals• Core Competencies• Environmental responses• New products/services• New Markets• Global strategies
Business strategy• Goals• Core Competencies• Environmental responses• New products/services• New Markets• Global strategies
Market analysis• Segmentation• Needs assessment
Market analysis• Segmentation• Needs assessment
Competitive prioritiesOperations
Marketing• Cost• Quality Finance• Delivery• Reliability• Flexibility• Responsiveness Others
Competitive prioritiesOperations
Marketing• Cost• Quality Finance• Delivery• Reliability• Flexibility• Responsiveness Others
Capabilities• Current• Needed• Plans
Capabilities• Current• Needed• Plans
December 2007 © S.Balachandran 6 of 20
Competitiveness - DimensionsCompetitiveness - Dimensions• Cost or PriceCost or Price
– Make the Product or Deliver the Service CheapMake the Product or Deliver the Service Cheap
• QualityQuality– Make a Great Product or Deliver a Great ServiceMake a Great Product or Deliver a Great Service
• Delivery SpeedDelivery Speed– Make the Product or Deliver the Service QuicklyMake the Product or Deliver the Service Quickly
• Delivery ReliabilityDelivery Reliability– Deliver It When PromisedDeliver It When Promised
• Coping with Changes in DemandCoping with Changes in Demand– Change Its VolumeChange Its Volume
• Flexibility and New Product Introduction SpeedFlexibility and New Product Introduction Speed– Change ItChange It
• Other Product-Specific CriteriaOther Product-Specific Criteria– Support ItSupport It
December 2007 © S.Balachandran 7 of 20
TradeoffsTradeoffs
Cost
Quality
DeliveryFlexibility
December 2007 © S.Balachandran 8 of 20
Order Qualifiers & WinnersOrder Qualifiers & Winners
• Order qualifiersOrder qualifiers : : basic criteriabasic criteria that permit that permit the firms’ products to be considered as the firms’ products to be considered as candidates for purchase by customerscandidates for purchase by customers– NecessaryNecessary but but not Sufficientnot Sufficient Condition Condition
• Order winnersOrder winners : : criteria that criteria that differentiatedifferentiate the the products and services of firm from products and services of firm from competitorscompetitors
December 2007 © S.Balachandran 9 of 20
Operations Strategy - DecisionsOperations Strategy - Decisions
Market analysisMarket analysis
Competitive prioritiesCompetitive priorities
Corporate strategyCorporate strategy
Operations strategy
December 2007 © S.Balachandran 10 of 20
Operations Strategy - DecisionsOperations Strategy - Decisions
Market analysisMarket analysis
Competitive prioritiesCompetitive priorities
Corporate strategyCorporate strategy
Operations strategy
Services Manufacturing• Standardized services• Assemble-to-order• Customized services
• Make-to-stock• Assemble-to-order• Make-to-order
December 2007 © S.Balachandran 11 of 20
Market analysisMarket analysis
Competitive prioritiesCompetitive priorities
Corporate strategyCorporate strategy
Operations strategy
Services Manufacturing• Standardized services• Assemble-to-order• Customized services
• Make-to-stock• Assemble-to-order• Make-to-order
Operations Strategy - DecisionsOperations Strategy - Decisions
Services Manufacturing• Standardized services• Assemble-to-order• Customized services
• Make-to-stock• Assemble-to-order• Make-to-order
December 2007 © S.Balachandran 12 of 20
Operations Strategy - DecisionsOperations Strategy - Decisions
Market analysisMarket analysis
Competitive prioritiesCompetitive priorities
Corporate strategyCorporate strategy
Operations strategy
Services Manufacturing• Standardized services• Assemble-to-order• Customized services
• Make-to-stock• Assemble-to-order• Make-to-order
• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions– Sourcing, Order
Placement: Party, Qty., Frequency, Inventory Level, No. of Shifts, Manning
• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions– Sourcing, Order
Placement: Party, Qty., Frequency, Inventory Level, No. of Shifts, Manning
December 2007 © S.Balachandran 13 of 20
Operations Strategy - DecisionsOperations Strategy - Decisions
Market analysisMarket analysis
Competitive prioritiesCompetitive priorities
Corporate strategyCorporate strategy
Operations strategy
Services Manufacturing• Standardized services• Assemble-to-order• Customized services
• Make-to-stock• Assemble-to-order• Make-to-order
• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions
• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions
• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions – Sourcing, Order
Placement: Party, Qty., Frequency, Inventory Level, No. of Shifts, Manning
• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions – Sourcing, Order
Placement: Party, Qty., Frequency, Inventory Level, No. of Shifts, Manning
December 2007 © S.Balachandran 14 of 20
Strategy & Process Design - ExampleStrategy & Process Design - Example
Decision Area Hospital 1 Hospital 2
Business Low-volume, High-volumestrategy customized services standardized products
made to stock
Competitive Customized services, Low-cost, fast delivery,priorities consistent quality, and consistent quality
and volume flexibility
Process Labor intensive Capital intensivedesign
December 2007 © S.Balachandran 15 of 20
Improve Shareholder ValueImprove Shareholder Value
Shareholder Value
ROCE
Shareholder Value
ROCE
Strategic Map – Four PerspectivesStrategic Map – Four Perspectives
Revenue Growth StrategyRevenue Growth Strategy Productivity StrategyProductivity Strategy
Build the FranchiseBuild the Franchise Increase Customer ValueIncrease Customer Value
New Revenue Sources Customer Profitability
Improve Cost StructureImprove Cost Structure Improve Asset UtilizationImprove Asset Utilization
Cost per Unit Asset Utilization
Product Leadership
Customer Intimacy
Operational ExcellenceCustomer Value Proposition
Price Quality Time
Function-ality
Service
Relation-ships Brand
ImageRelationshipProduct/Service Attributes
A Motivated and Prepared WorkforceA Motivated and Prepared Workforce
Strategic CompetenciesStrategic Competencies Strategic TechnologiesStrategic Technologies Climate for ActionClimate for Action
Source: Kaplan & Norton, The Strategy Focused Organization
“Be a Good Corporate Citizen” (Regulatory and Environmental Processes)
“Build the Frnchise” (Innovation Processes)
“Achieve Operational Excellence” (Operational Processes)
“Increase Customer Value” (Customer Management Processes)
Financial Perspective
Financial Perspective
Customer Perspective
Customer Perspective
Internal Perspective
Internal Perspective
Learning &GrowthPerspective
Learning &GrowthPerspective
December 2007 © S.Balachandran 16 of 20
Rockwater Strategy MapRockwater Strategy MapA : Operational ExcellenceB : Customer Management
A : Operational ExcellenceB : Customer Management
December 2007 © S.Balachandran 17 of 20
Activity Map – Southwest StrategyActivity Map – Southwest Strategy
December 2007 © S.Balachandran 18 of 20
Operations Strategy FrameworkOperations Strategy Framework
Customer NeedsCustomer Needs
New product : Old productNew product : Old product
Competitivedimensions & requirements
Competitivedimensions & requirements
Cost, Quality, Delivery, Flexibility,Reliability, Responsiveness
Cost, Quality, Delivery, Flexibility,Reliability, Responsiveness
Operations & Supplier capabilities
R&D Technology Systems People Distribution
Support Platforms
Financial management Human resource management Information management
Enterprise capabilitiesEnterprise capabilities
Operations and Supplier Capabilities Operations and Supplier Capabilities
R&D Technology Systems People DistributionR&D Technology Systems People Distribution
December 2007 © S.Balachandran 19 of 20
Operations Capabilities for ServicesOperations Capabilities for Services
• Process-based Process-based – TransformTransform material or information and provide material or information and provide
advantagesadvantages on dimensions of on dimensions of costcost and and qualityquality
• Systems-based Systems-based – Broad-basedBroad-based - involving the entire operating - involving the entire operating
system and provide advantages of short system and provide advantages of short lead lead timestimes and and customizecustomize on demand on demand
• Organization-basedOrganization-based– Difficult to replicateDifficult to replicate and provide abilities to and provide abilities to
master master new technologiesnew technologies
December 2007 © S.Balachandran 20 of 20
Productivity MeasuresProductivity Measures• Productivity Productivity : a common measure on how well resources: a common measure on how well resources are being used. In the broadest sense, it can be defined asare being used. In the broadest sense, it can be defined as the ratio: the ratio: OutputsOutputs
InputsInputs• Total Measure ProductivityTotal Measure Productivity
= Goods and services produced
All resources used• Partial measures of productivityPartial measures of productivity = =
OutputOutput or or OutputOutput or or Output Output or or OutputOutput
Labor Capital Materials EnergyLabor Capital Materials Energy
• Multifactor measures of productivity = Output .
Labor + Capital + Energy or
Output . Labor + Capital + Materials