8/3/2019 Intro to Operations Mgmt
1/31
Ashok Kumar
Discover the Value
Conceptual
Contemporary
Experiential
Learning
Operations Management
1Ashok Kumar
8/3/2019 Intro to Operations Mgmt
2/31
Todays class you will learn..
Role of Operations Strategy
Developing an Operations Strategy
Linking it to Practice Competitive priorities of Operations function
Strategic Role of Technology
Home Assignment
Internet research and Case let
5/5/2012 Ashok Kumar 2
8/3/2019 Intro to Operations Mgmt
3/31
Inputs to a Business strategy
5/5/2012 Ashok Kumar 3
8/3/2019 Intro to Operations Mgmt
4/31
Business /Functional Strategy
5/5/2012 Ashok Kumar 4
8/3/2019 Intro to Operations Mgmt
5/31
Ashok Kumar 5
Importance of Operations Strategy
Essential differences between operational
efficiency and strategy:
Operational efficiency is performing tasks well,
even better than competitors
Strategy is a plan for competing in the
marketplace
Operations strategy ensures all tasksperformed are the right tasks
5/5/2012
8/3/2019 Intro to Operations Mgmt
6/31
Ashok Kumar 6
Operations Strategy Designing the
Operations Function
5/5/2012
8/3/2019 Intro to Operations Mgmt
7/31
OMs Contribution to Strategy
Product
Quality
Process
Location
Layout
Human resource
Supply-chain
Inventory
Scheduling
Maintenance
FLEXIBILITYSonys constant innovationof new products....DesignHPs ability to followthe printer marketVolume
Southwest Airlines No-frills service....LOW COST
DELIVERYPizza Huts five-minuteguarantee at lunchtime......SpeedFederal Expresss absolutely,positively on time...Dependability
QUALITY
Motorolas automotive productsignition systems......ConformanceMotorolas pagers...Performance
IBMs after-sale serviceon mainframe computers....AFTER-SALE SERVICE
Fidelity Securitys broadline of mutual funds.BROAD PRODUCT LINE
Figure 2.4
Operations Specific Competitive
Decisions Examples Strategy Used Advantage
Response(Faster)
Costleadership(Cheaper)
Differentiation(Better)
5/5/2012 7Ashok Kumar
8/3/2019 Intro to Operations Mgmt
8/31
Process Design
Low Moderate HighVolume
High
Moderate
Low
VarietyofProducts
Process-focused
JOB SHOPS
(Print shop, emergencyroom, machine shop, fine
dining Repetitive (modular)
focusASSEMBLY LINE
(Cars, appliances,TVs, fast-foodrestaurants) Product focused
CONTINUOUS
(steel, beer, paper,bread, institutional
kitchen)
Mass Customization
Customization at highVolume
(Dell Computers PC)
5/5/2012 8Ashok Kumar
8/3/2019 Intro to Operations Mgmt
9/31
Operations Strategies for Two
Drug CompaniesBrand Name Drugs, Inc. Generic Drug Corp.
CompetitiveAdvantage
Product Differentiation Low Cost
ProductSelection andDesign
Heavy R&D; labs; focuson development in abroad range of drugcategories
Low R&D; focus ondevelopment of genericdrugs
Quality Major priority, exceedregulatory requirements
Meets regulatoryrequirements on acountry by countrybasis
Table 2.25/5/2012 9Ashok Kumar
8/3/2019 Intro to Operations Mgmt
10/31
Operations Strategies for Two
Drug CompaniesBrand Name Drugs, Inc. Generic Drug Corp.
CompetitiveAdvantage
Product Differentiation Low Cost
Process Product and modularprocess; longproduction runs inspecialized facilities;build capacity ahead of
demand
Process focused;general processes; jobshop approach, shortproduction runs; focuson high utilization
Location Still located in the citywhere it was founded
Recently moved to low-tax, low-labor-costenvironment
Table 2.25/5/2012 10Ashok Kumar
8/3/2019 Intro to Operations Mgmt
11/31
Operations Strategies for Two
Drug CompaniesBrand Name Drugs, Inc. Generic Drug Corp.
CompetitiveAdvantage
Product Differentiation Low Cost
Scheduling Centralized productionplanning
Many short-runproducts complicatescheduling
Layout Layout supportsautomated product-focused production
Layout supportsprocess-focused jobshop practices
Table 2.25/5/2012 11Ashok Kumar
8/3/2019 Intro to Operations Mgmt
12/31
Operations Strategies for Two
Drug CompaniesBrand Name Drugs, Inc. Generic Drug Corp.
CompetitiveAdvantage
Product Differentiation Low Cost
HumanResources
Hire the best;nationwide searches
Very experienced topexecutives; otherpersonnel paid belowindustry average
Supply Chain Long-term supplierrelationships Tends to purchasecompetitively to findbargains
Table 2.25/5/2012 12Ashok Kumar
8/3/2019 Intro to Operations Mgmt
13/31
Operations Strategies for Two
Drug CompaniesBrand Name Drugs, Inc. Generic Drug Corp.
CompetitiveAdvantage
Product Differentiation Low Cost
Inventory High finished goodsinventory to ensure alldemands are met
Process focus drives upwork-in-processinventory; finishedgoods inventory tendsto be low
Maintenance Highly trained staff;extensive partsinventory
Highly trained staff tomeet changing demand
Table 2.25/5/2012 13Ashok Kumar
8/3/2019 Intro to Operations Mgmt
14/31
Strategic Options to Gain aCompetitive Advantage
28% - Operations Management
18% - Marketing/distribution
17% - Momentum/name recognition
16% - Quality/service
14% - Good management4% - Financial resources
3% - Other
5/5/2012 14Ashok Kumar
8/3/2019 Intro to Operations Mgmt
15/31
Elements of OperationsManagement Strategy
Low-cost product
Product-line breadth Technical superiority
Product characteristics/differentiation Continuing product innovation Low-price/high-value offerings Efficient, flexible operations adaptable to
consumers
Engineering research development Location Scheduling
5/5/2012 15Ashok Kumar
8/3/2019 Intro to Operations Mgmt
16/31
Strategy Development and
Implementation
Identify critical success factors
Build and staff the organization
Integrate OM with other activities
The operations managers job is to implement anOM strategy, provide competitive advantage, and
increase productivity
5/5/2012 16Ashok Kumar
8/3/2019 Intro to Operations Mgmt
17/31
Product Life Cycle
Best period toincrease marketshare
R&D engineering iscritical
Practical to changeprice or qualityimage
Strengthen niche
Poor time to changeimage, price, orquality
Competitive costsbecome criticalDefend marketposition
Cost controlcritical
Introduction Growth Maturity Decline
Comp
anyStrategy/I
ssues
Internet
Flat-screenmonitors
Sales
DVD
CD-ROM
Drive-throughrestaurants
Fax machines
3 1/2Floppydisks
Color printers
Figure 2.55/5/2012 17Ashok Kumar
8/3/2019 Intro to Operations Mgmt
18/31
Product Life Cycle
Product designand developmentcritical
Frequent product
and processdesign changes
Short productionruns
High productioncosts
Limited modelsAttention toquality
Introduction Growth Maturity Decline
OM
Strategy/Issu
es
Forecasting critical
Product andprocess reliability
Competitiveproductimprovements andoptions
Increase capacity
Shift towardproduct focus
Enhancedistribution
Standardization
Less rapid productchanges moreminor changes
Optimum capacity
Increasing stabilityof process
Long productionruns
Product
improvement andcost cutting
Little productdifferentiation
Costminimization
Overcapacityin the industry
Prune line toeliminate itemsnot returninggood margin
Reducecapacity
Figure 2.55/5/2012 18Ashok Kumar
8/3/2019 Intro to Operations Mgmt
19/31
Ashok Kumar 19
Competitive Priorities- The Edge
Four Key Operations Questions:
Will you compete on
Cost?Quality?
Time?
Flexibility? All of the above? Some? Tradeoffs?
5/5/2012
8/3/2019 Intro to Operations Mgmt
20/31
Ashok Kumar 20
Competing on Cost
Offering product at a low price relative to competition
Typically high volume products
Often limit product range & offer little customization
May invest in automation to reduce unit costs
Can use lower skill labor
Probably uses product focused layouts
Process chain lean and less waste
Low cost does not mean low quality
5/5/2012
8/3/2019 Intro to Operations Mgmt
21/31
Ashok Kumar 21
Competing on Quality
Quality is often subjective
Quality is defined differently depending on who is defining it
Two major quality dimensions include High performance design:
Superior features, high durability, & excellent customer service
Product & service consistency: Meets design specifications
Close tolerances
Error free delivery
Quality needs to address Product design quality product/service meets requirements
Process quality error free products
5/5/2012
8/3/2019 Intro to Operations Mgmt
22/31
Ashok Kumar 22
Competing on Time
Time/speed one of most important competition priorities
First that can deliver often wins the race
Time related issues involve
Rapid delivery:
Focused on shorter time between order placement and delivery
On-time delivery:
Deliver product exactly when needed every time
5/5/2012
8/3/2019 Intro to Operations Mgmt
23/31
Ashok Kumar 23
Competing on Flexibility
Company environment changes rapidly
Company must accommodate change by being flexible
Product flexibility:
Easily switch production from one item to another
Easily customize product/service to meet specific requirements of a
customer
Volume flexibility:
Ability to ramp production up and down to match market demands
5/5/2012
8/3/2019 Intro to Operations Mgmt
24/31
Ashok Kumar 24
The Need for Trade-offs
Decisions must emphasize priorities that support business strategy
Decisions often required trade offs
Decisions must focus on order qualifiers and order winners Which priorities are Order Qualifiers?
Must have excellent quality since everyone expects it
Which priorities are Order Winners?
Dell competes on all four priorities
Southwest Airlines competes on cost
McDonalds competes on consistency
FedEx competes on speedCustom tailors compete on flexibility
5/5/2012
8/3/2019 Intro to Operations Mgmt
25/31
Ashok Kumar 25
Translating to Production Requirements
Specific Operation requirements include two
general categories
Structure decisions related to the production
process, such as characteristics of facilities used,selection of appropriate technology, and the flow
of goods and services
Infrastructure decisions related to planning and
control systems of operations
5/5/2012
8/3/2019 Intro to Operations Mgmt
26/31
Ashok Kumar 26
Translating to Production Requirements
Dell Computer examplestructure & infrastructure
They focus on customer service, cost, and speed
ERP system developed to allow customers to order directly
from Dell Product design and assembly line allow make to order
strategy lowers costs, increases turns
Suppliers ship components to a warehouse within 15
minutes of the assembly plant - VMI Dell set up a shipping arrangement with UPS
5/5/2012
8/3/2019 Intro to Operations Mgmt
27/31
Ashok Kumar 27
Strategic Role of Technology
Technology should support competitive priorities
Three Applications: product technology, process
technology, and information technology Products - Teflon, CDs, fiber optic cable
Processes flexible automation, CAD
Information Technology POS, EDI, ERP, B2B
5/5/2012
8/3/2019 Intro to Operations Mgmt
28/31
Ashok Kumar 28
Technology for Competitive Advantage
Technology has positive and negative potentials
Positive
Improve processes
Maintain up-to-date standards Obtain competitive advantage
Negative
Costly
Risks such as overstating benefits
5/5/2012
8/3/2019 Intro to Operations Mgmt
29/31
Ashok Kumar 29
Technology for Competitive Advantage
Technology should:
Support competitive priorities
Can require change to strategic plans
Can require change to operations strategy
Technology is an important strategic decision
5/5/2012
8/3/2019 Intro to Operations Mgmt
30/31
Wrap-Up: World-Class Practice
Put customers first
Get new products/services to market faster
Are high quality producers Have high labor productivity & low production
costs
Carry little excess inventory . . . more
5/5/2012 Ashok Kumar 30
8/3/2019 Intro to Operations Mgmt
31/31
Wrap-Up: World-Class Practice
Think more globally in purchasing and selling
Quickly adopt and develop new technologies
Trim organizations to be lean and flexible Are less resistant to strategic alliances/joint
ventures
Consider relevant social issues when settingstrategies
5/5/2012 Ashok Kumar 31
Top Related