OPSM 301 Operations Management

Class 2:

Operations management strategy

Strategic fit

Koç University

Zeynep Aksinzaksin@ku.edu.tr

Firms compete on product attributes.This requires process capabilities.

Price (Cost) P Quality Q

– Customer service– Product quality

Time T– Rapid, reliable delivery– New product development

Variety V– Degree of customization

“order winners”

To deliver we need “capabilities”

Fit between Strategy and Processes

Processes must fit the operations strategy of the firm:Competing on

-Cost (Southwest Airlines)-Quality (Toyota, Arçelik)-Flexibility (HP)-Speed (McDonalds)

all require different process designs and different measures to focus on.

Corporate StrategyKey Performance Indicators Operations StrategyProcess Design& Improvement

Strategic Fit:

Desired Capabilities Processes

Match processes with desired capabilities

Order-Winners and QualifiersOrder-Winners and Qualifiers

PerformancePerformance

LowLow HighHigh

Com

petit

ive

Ben

efit

Com

petit

ive

Ben

efit PositivePositive

NegativeNegative

NeutralNeutral

OrderOrderWinnerWinner

LessLessImportantImportant

OrderOrderQualifierQualifier

Source: Slack and LewisSource: Slack and Lewis

Order Qualifiers and WinnersDefined

Order qualifiers: the basic criteria that permit the firms products to be considered as candidates for purchase by customers– Screening criteria– Standard, expected performance

Order winners: the criteria that differentiates the products and services of one firm from another – The more, the better– Customer chooses based on this criteria

Mission/Strategy

Mission - where you are going

Strategy - how you are going to get there; an action plan

Strategy Process

MarketingDecisions

OperationsDecisions

Fin./Acct.Decisions

CompanyMission

BusinessStrategy

Functional AreaFunctional AreaStrategies

Strategy vs. Operational Effectiveness: The Operations Frontier as the minimal curve containing all current

positions in an industry

Responsiveness

operations frontier

A

B

C

CostHigh Low

Increasing Customer Value

Value

A

B

C

PriceHigh Low

High

Low

Operations Frontier

Increasing Value

Lowering Costs

Value

A

B

C

PriceHigh Low

High

Low

Operations Frontier

Lowering Costs

Shouldice HospitalVideo Case

Shouldice Business Model

Medical– Simple hernias– Optimized process– Check-ups and follow-up

Social– Club Med like experience– Co-production at individual

and cohort level– A network for life

Shouldice Patient Experience

COST

QUALITY

SPEED

FLEXIBILITY

Low, both real and opportunity

Low recurrence, satisfaction with experience

Fast operation and recovery

The process rules; only simple hernias

Comparison to General Hospital

Hernia complexity

Shouldice: preparesfor the simplest

General Hospital: prepares for the most complex

A product/process matrix

General Hospital:

Variety & flexibility

High cost

Low margins

Low Cost

High margins

Shouldice Hospital:

Standardization

Cost, speed, quality

Process

Flexible job

Rigid line flow

ProductHigh customization

Low volumeHigh unit margin

High standardizationHigh volume

Low unit margin

Industrialization

Shouldice as a lean enterprise

Shouldice General Hospital

Focus on low risk cases No focus, multiple goals

Clear single value prop. Confusion of value prop.

Predictable process Unpredictable process

Strive for perfection Strive for threshold perf.

Eliminate waste Tolerate some excess

Manage patient flows View patients as functional tasks

Pull patients into process Push patients through process

Womack and Jones (2000) From Lean Production to Lean Enterprise, HBR March-April 1994

Focus at Shouldice: the results

Breakthrough service High customer and employee satisfaction Industrial approach

Shouldice Process Life Cycle

Birth of the Shouldice formula Process selection, design,

and improvement Innovation at the interfaces Process overtaken (when?)