Chapter 8

Operations Strategy And

Innovation
Introduction
Strategy starts with how the firm chooses to differentiate
itself from competition.
Operations strategy is the systematic building of operations
capabilities.
Operations can be divided into three broad categories.
Technology and facilities
operating policies
operations organization
Manufacturing Strategy
In 1974 Skinner published The Focused
Factory.
This began a focus on manufacturing.
His argument was that a factory that
focuses on a narrow product mix for a
particular market niche will outperform the
conventional plant, which attempts a
broader mission
continued
He observed that if a firm had a manufacturing
philosophy it was more likely to be successful.
He developed the idea of the focused factory.
Focused manufacturing is based on the concept
that simplicity, repetition, experience, and
homogeneity of tasks breeds competence.
Five Key Characteristics of the
Focused Factory
Process technologies
Market Demands
Product Volumes
Quality Levels
Manufacturing Tasks
Empirical tests have met with limited
success.
Hayes and Wheelwright
Eight decision categories
Structural Categories
capacity, facilities, technology and vertical integration
Infrastructural Categories
workforce, quality, production planning/material
control, and organization.
The field has suffered from the lack of theoretical
development especially rigorous empirical validation.
Four Basic Strategic
Configurations
Niche differentiation
Broad differentiation
Cost leadership
Lean competition
Mass Customization
Hybrid strategy that has emerged during the
last decade.
The use a fixed options at each stage of the
production process, can create alternative
products or service configurations.
Maybe best suited to low technology
industries with large volume requirements.
Mass Customization
Extends the concept of joint production to
capture the best of both worlds
manufacturing.
Better customer response and satisfaction.
Tailoring products and economies of scale
savings.
Joint Production and Economies
of Scope
Theory of contestable markets.
When there is free entry into a market,
exploitation of a natural monopoly is
limited by the costs of exit not entry.
Therefore the magnitude of some costs is
critical in determining the need for
regulatory protection.
Team or joint production
Several types of resources are used.
The product is not a sum of separable
outputs of each cooperating resource. An
additional factor creates a team organization
problem.
Not all resources used in team production
belong to one person.
Scope
The idea of scope is quite different.
A few smaller plants alternating production between
several jointly produced parts or products can outperform
larger factories dedicated to one production product.
The ideal scope varies by situation.
Is assumed there is no penalty for changing from one
product to another.
the key to creating scope and making this a viable option to
scale is the flexible technology offered by computer
technology applied to the factory floor.
The second industrial divide
A modern-day application of the craft
methods of production coupled with
general-purpose equipment which affords
considerably more flexibility and avoids the
dehumanization of work.
flexible specialization accommodation to
ceaseless change.