Session 2

Operations Strategy and Competitiveness

OBJECTIVES
Operations Strategy Operations Competitive Dimensions Order Qualifiers and Winners Strategy Design Process A Framework for Manufacturing Strategy Service Strategy Capacity Capabilities C biliti Productivity Measures

Operations Strategy
Strategy Process
Customer Needs

Example
More Product

Corporate St t C t Strategy

Increase Org. Size

Operations Strategy

Increase Production Capacity

Decisions on Processes and Infrastructure

Build New Factory

Competitive Dimensions
Cost or Price
Make the Product or Deliver the Service Cheap

Quality
Make a Great Product or Deliver a Great Service

Delivery Speed
Make the Product or Deliver the Service Quickly

Delivery Reliability
Deliver It When Promised

Coping with Changes in Demand

Change Its Volume

Flexibility and New Product Introduction Speed

Change It

Other Product-Specific Criteria

Support It

Dealing with Trade-offs

For example, if we reduce costs by reducing p oduct o e a p e, e educe educ g product quality inspections, we might reduce product quality. For example, if we improve customer service ser ice problem sol ing solving by cross-training personnel to deal with a wider-range of problems, they may become less efficient at dealing with commonly occurring problems. problems

Cost

Flexibility Quality

Delivery

PWP Concept diff locations within the facility f ilit are allocated t diff product li ll t d to d t lines, each with their own opn. Strategy. Straddling St ddli when a company seeks t h k to match the benefits of a successful position.

Order Qualifiers and Winners

Defined

Order qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customers Order winners are the criteria that p differentiates the products and services of one firm from another
A brand name car can be an order qualifier Repair services can be order winners Examples: Warranty, Roadside Assistance, Leases, etc

Strategy Design Process

Strategy Map
Financial Perspective

What it is about!
Improve Shareholder Value

Customer Perspective

Customer Value Proposition

Internal Perspective

Build-Increase-Achieve

Learning and Growth Perspective

A Motivated and Prepared Workforce W kf

Operations Strategy Framework

Customer Needs

New product : Old product

Competitive dimensions & requirements

Quality, Dependability, Speed, Flexibility, and Price

Enterprise capabilities Operations andSupplier capabilities Operations & Supplier Capabilities R&D R&D Technology Systems Technology Systems People People Distribution Distribution

Support Platforms Financial management g Human resource management g Information management g

Steps in Developing a Manufacturing Strategy

1. Segment the market according to the product group 2. Identify product requirements, demand patterns, and profit margins of each group d fit i f h 3. Determine order qualifiers and winners for each group 4. Convert order winners into specific performance requirements

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Service Strategy C S i St t Capacity it Capabilities

Process-based

Capacities that transforms material or information and provide advantages on dimensions of cost and quality Capacities that are broad-based involving the entire p g y p g operating system and provide advantages of short lead times and customize on demand Capacities that are difficult to replicate and provide abilities to master new technologies

Systems-based

Organization-based

What is Productivity?

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Defined D fi d

Productivity is a common measure on y how well resources are being used. In the broadest sense it can be defined as sense, the following ratio: Outputs Inputs
Total Measure Productivity = Outputs Inputs or = Goods and services produced All resources used

Partial Measure Productivity

Partial measures of productivity =
Output or Output or Output or Output Labor Capital Materials Energy

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Multifactor Measure Productivity

Multifactor measures of productivity = Output . Labor + Capital + Energy or Output Labor + C p bo Capital . + Materials e s

Example of Productivity Measurement

You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same cre used onl 2000 ho rs of labor eek crew sed only hours to process 480 forms. Which productivity measure should be used? Answer: Could be classified as a Total Measure or Partial Measure Measure. Is productivity increasing or decreasing? Answer: Last weeks productivity = 480/2000 = 0 24 week s 0.24, and this weeks productivity is = 560/2400 = 0.23. So, productivity is decreasing slightly. p y g g y

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Question Bowl
1. An 1 A operations strategy i ti t t is concerned with which of the following? a Sett g spec c po c es and plans a. Setting specific policies a d p a s b. Short-term competitive strategies c. c Coordination of operational goals d. All of the above e. N None of th above f the b

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Question Bowl
2. Typically a strategy breaks down j p into what major components? a. Operations effectiveness b. b Customer management c. Production innovation d. All of the above e. None of the above

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Question Bowl
3. 3 A criterion that differentiates the it i th t diff ti t th products and services of one firm from another can be which of the f th b hi h f th following? a. A order qualifier An d lifi b. An order winner c. PWP d. KPI e. None of the above

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Question Bowl
4. A travel agency processed 240 customers on Day 1 with a staff of 12 and 360 customers the on Day 12, 2 with a staff of 15. What can be said about the productivity shift from Day 1 to Day 2? An increase in productivity from Day 1 to Day 2 A decrease in productivity from Day 1 to Day 2 p y y y The same productivity from Day 1 to Day 2 Can not be computed from data above p None of the above

a. b. c. d. e.

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Question Bowl
5. In addition to traditional financial measures, what critical questions can a Balanced Scorecard help a company answer? a. How do customers see us? b. What must we excel at? c. How can we continue to improve and create value? d. All of the above e. None of the above

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End of Session 2

Problem 3

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Various Financial data for 2004 & 2005 follow. Calculate the total productivity & partial measures for labour, capital & raw materials for this company for both years. What do these measures tell you about this company? 2004 2005 Output: Sales Rs. 200,000 Rs. 220,000 Input: I t Labour L b 30,000 30 000 40 000 40,000 Raw Mat. 35,000 45,000 Energy 5,000 6,000 Capital 50,000 50,000 Other 2,000 3,000

Problem 4

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An electronics company makes communications devices for military contracts. The company just completed two contracts. The navy contact was for 2,300 2 300 devices and took 25 workers two weeks ( 40 hours/ week) to complete. The army contract was for 5,500 devices that were produced by 35 workers in 3 weeks. On which contract were the workers more productive? d ti ?