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Session 2

Operations Strategy and Competitiveness

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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

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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

3 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 .

4 Dealing with Trade-offs For example. 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. problems Cost Flexibility Quality Delivery . they may become less efficient at dealing with commonly occurring problems. e educe educ g product quality inspections. if we reduce costs by reducing p oduct o e a p e. we might reduce product quality.

Strategy. Straddling St ddli – when a company seeks t h k to match the benefits of a successful position. each with their own opn.5 PWP Concept – diff locations within the facility f ilit are allocated t diff product li ll t d to d t lines. .

Leases. etc . Roadside Assistance.Order Qualifiers and Winners 6 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.

7 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 .

Dependability. 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 . Speed.Operations Strategy Framework Customer Needs 8 New product : Old product Competitive dimensions & requirements Quality.

Steps in Developing a Manufacturing Strategy 1. Convert order winners into specific performance requirements 9 . Identify product requirements. Segment the market according to the product group 2. Determine order qualifiers and winners for each group 4. demand patterns. and profit margins of each group d fit i f h 3.

10 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 – .

the following ratio: Outputs Inputs Total Measure Productivity = Outputs Inputs or = Goods and services produced All resources used . In the broadest sense it can be defined as sense.What is Productivity? 11 Defined D fi d Productivity is a common measure on y how well resources are being used.

+ Materials e s .Partial Measure Productivity Partial measures of productivity = Output or Output or Output or Output Labor Capital Materials Energy 12 Multifactor Measure Productivity Multifactor measures of productivity = Output . Labor + Capital + Energy or Output Labor + C p bo Capital .

Which productivity measure should be used? Answer: Could be classified as a Total Measure or Partial Measure Measure. p y g g y 13 . productivity is decreasing slightly. Is productivity increasing or decreasing? Answer: Last week’s productivity = 480/2000 = 0 24 week s 0.24.23. So. Last week the same cre used onl 2000 ho rs of labor eek crew sed only hours to process 480 forms. and this week’s productivity is = 560/2400 = 0.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.

c Coordination of operational goals d. N None of th above f the b . Short-term competitive strategies c. 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. All of the above e.14 Question Bowl 1.

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

KPI e. A order qualifier An d lifi b.16 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. None of the above . PWP d. An order winner c.

. d. A travel agency processed 240 customers on Day 1 with a staff of 12 and 360 customers the on Day 12. b. 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. 2 with a staff of 15. e.17 Question Bowl 4. c.

How do customers see us? b.18 Question Bowl 5. In addition to traditional financial measures. What must we excel at? c. All of the above e. None of the above . what critical questions can a Balanced Scorecard help a company answer? a. How can we continue to improve and create value? d.

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35.000 6.000 30 000 40 000 40.000 Other 2.000 Capital 50.000 45.000 Rs.000 50.000 Input: I t Labour L b 30. Calculate the total productivity & partial measures for labour. 200. capital & raw materials for this company for both years. What do these measures tell you about this company? 2004 2005 Output: Sales Rs. 220.Problem 3 20 Various Financial data for 2004 & 2005 follow.000 Energy 5.000 3.000 .000 Raw Mat.

300 2 300 devices and took 25 workers two weeks ( 40 hours/ week) to complete. The company just completed two contracts.Problem 4 21 An electronics company makes communications devices for military contracts. The navy contact was for 2.500 devices that were produced by 35 workers in 3 weeks. On which contract were the workers more productive? d ti ? . The army contract was for 5.