Chapter 2

Operations Strategy

Ch 2 - 2© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Strategy Formulation

1. Define primary task2. Assess core competency3. Determine order winners & order qualifiers4. Position the firm

Michael E. Porter’s Competitive Strategy

Ch 2 - 3© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Competing On Cost

• Eliminate all waste• Invest in

–updated facilities & equipment–streamlining operations–training & development

Ch 2 - 4© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Competing On Quality

Please the customer–Understand customer attitudes toward and expectations of quality

Ch 2 - 5© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Competing On Flexibility

• Produce wide variety of products• Introduce new products• Modify existing products quickly• Respond to customer needs

Ch 2 - 6© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Competing On Speed

• Fast moves

• Fast adaptations

• Tight linkages

Ch 2 - 7© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Process-Centered Strategies

• Processes cut across functional lines and departments

• Strategy is led by competencies

Ch 2 - 8© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Changing Focus from Function to Process

Ch 2 - 9© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Exploiting Core Competencies

• Enhance value a competency provides to customers

• Transform internal competence into salable item• Apply competencies to new products & services• Create new ways of working & finding markets

Ch 2 - 10© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e

Policy Deployment

• Focuses employees on common goals & priorities

• Translates strategy into measurable objectives• Aligns day-to-day decisions with strategic plan

Ch 2 - 11© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 2/e

Strategic PlanningMission & Vision

Business Strategy

Marketing Strategy

Operations Strategy

Financial Strategy

Voice of the Business

Voice of the Customer

Ch 2 - 12© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Derivation of an Action Plan

Ch 2 - 13© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Operations Role In Corporate Strategy

• Provide support for overall strategy of a firm• Serve as firm’s distinctive competence• Must be consistent• Must be consistent with overall strategy

Ch 2 - 14© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Operations Strategy

Products

Processes andTechnology

Capacity

Human Resources Quality

Facilities Sourcing

Services

Operating Systems

Ch 2 - 15© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Products & Services

• Make-to-order–made to customer specifications after order received

• Make-to-stock–made in anticipation of demand

• Assemble-to-order–add options according to customer specification

Ch 2 - 16© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Processes & Technology

• Project–one-time production of product to customer order

• Batch production–process many jobs at same time in batch

• Mass production–produce large volumes of standard product for mass market

• Continuous processes–very high volume commodity product

Ch 2 - 17© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Product-Process MatrixV

olu

me

LowLow High

High

Projects

Batchproduction

Massproduction

Continuousproduction

Standardization

Ch 2 - 17© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Product-Process MatrixL

abo

r In

ten

sity

LowLow High

High

Professional Service

ServiceShop

MassService

ServiceFactory

Customization

Ch 2 - 19© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Capacity & Facilities

• How much capacity to provide• Size of capacity changes• Handling excess demand• Hiring/firing workers• Need for new facilities

Ch 2 - 20© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Facilities

• Best size for facility?• Large or small facilities• Facility focus• Facility location• Global facility

Ch 2 - 21© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Human Resources• Skill levels required• Degree of autonomy• Policies• Profit sharing• Individual or team work• Supervision methods• Levels of management• Training

Ch 2 - 22© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Quality• Target level• Measurement• Employee involvement• Training• Systems needed to ensure quality• Maintaining quality awareness• Evaluating quality efforts• Determining customer perceptions

Ch 2 - 23© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Sourcing

• Degree of vertical integration• Supplier selection• Supplier relationship• Supplier quality• Supplier cooperation

Ch 2 - 24© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Operating Systems

• Execute strategy daily• Information technology support• Effective planning & control systems• Alignment of inventory levels, scheduling

priorities, & reward systems