Q1. Explain the basic competitive priorities considered while formulating operations strategy by a firm?

Ans:Competitive Priorities
The key to developing an effective operations strategy lies in understanding how to create or add value for customers. Specifically, value is added through the competitive priority or priorities that are selected to support a given strategy. Skinner and others initially identified four basic competitive priorities. These were cost, quality, delivery, and flexibility. These four priorities translate directly into characteristics that are used to describe various processes by which a company can add value to the products it provides. There now exists a fifth competitive priority—service—and it was the primary way in which companies began to differentiate themselves in the 1990s. Cost Within every industry, there is usually a segment of the market that buys strictly on the basis of low cost. To successfully compete in this niche, a firm must necessarily, therefore, be the low-cost producer. But, as noted earlier, even doing this doesn‘t always guarantee profitability and success. Products sold strictly on the basis of cost are typically commodity-like. (Examples of commodities include flour, petroleum, and sugar.) In other words, customers cannot easily distinguish the products made by one firm from those of another. As a result, customers use cost as the primary determinant in making a purchase. Quality Quality can be divided into two categories: product quality and process quality. The level of quality in a product‘s design will vary as to the particular market that it is aimed to serve. Obviously, a child‘s first two-wheel bicycle is of significantly different quality than the bicycle of a world-class cyclist. The use of thicker sheetmetal and the application of extra coats of paint are some of the product quality characteristics that differentiate a MercedesBenz from a Hyundai. One advantage of offering higher-quality products is that they command higher prices in the marketplace. The goal in establishing the ―proper level‖ of product quality is to focus on the requirements of the customer. Overdesigned products with too much quality will be viewed as being prohibitively expensive. Under designed products, on the other hand, will lose customers to products that cost a little more but are perceived by the customers as offering much greater benefits. Delivery Another market niche considers speed of delivery to be an important determinant in its purchasing decision. Here, the ability of a firm to provide consistent and fast delivery allows it to charge a premium price for its products. George Stalk Jr., of the Boston Consulting Group, has demonstrated that both profits and market share are directly linked to the speed with which a company can deliver its products relative to its competition.11 In addition to fast delivery, the reliability of the delivery is also important. In other words, products should be delivered to customers with minimum variance in delivery times. Flexibility From a strategic perspective, in terms of how a company competes, flexibility consists of two dimensions, both of which relate directly to how the firm‘s processes are designed.

. iv. labor and other resources for operation are essentially needed by the managers.i. . If good projection of future demand is available. . then balanced work-load may be planned. COMPETE ON . . The ability to change the mix of different products or services produced. This is often referred to as mass customization. if production activities are accurately forecasted. Similarly. a. ii. The greatest flexibility along this dimension is achieved when every product is customized to meet the specific requirements of each individual customer. EXCELLENT OPERATIONS GIVES THE ABILITY TO PERFORMANCE IN . List the benefits of forecasting. iii. Q2. . The ability to innovate and introduce new products and services. Ans: BENEFITS OF FORECASTING Good forecast of material. the management may take suitable action regarding inventory. The ability to change the volume of production. The ability to change the time taken to produce. Good labor relations may be .One element of flexibility is the firm‘s ability to offer its customers a wide variety of products.

Thus. 2. 6. which may be due to unplanned labor. as there would be lesser hiring and firing activities by the management with better manpower planning. 4. predictions of the size and location of markets are of great significance. 3. 5. Therefore. Indeed. the issue of capacity expansion immediately raises the companion issue of where to expand in order to tie in effectively with the distribution network. forecasting is useful due to following benefits: 1. Ans: significance of Plant location: The strategic significance of facility location is connected with capacity decisions. Efforts in forecasting activity involve two types of costs.maintained. Effective handling of uncertainty Better labor relations Balanced work-load Minimization in the fluctuations of production Better use of production facilities Better material management Better customer service Better utilization of capital and resources Better design of facilities and production system. We have separated the materials into two areas because the approaches to the sub-problems are quite different and to divide the materials into manageable units. each firm should maintain a balance in its forecasting effort and stick to a zone near to accuracy cost trade off. 8. Therefore. The location of facilities involves a commitment of resources to a long-range plan. lesser forecasting activity involves lost revenue. unplanned material or unplanned capital cost. 7. b. Explain the significance of plant location decision. While more effort in forecasting causes increased cost due to data collection and analysis. 9. Given these .

these capital assets have enormous value.profitably and the production cost is minimum. and the general effect will be to disperse or decentralize facilities. Visvesvarirya the decision of plant location According to Dr. are consumer or client oriented in their locations. so that activity is then oriented toward the technical requirement. A plant should be located at a place where the inhabitantsare interested in its success. it is not uniformly important for all kinds of enterprises. but product prices vary. According to Dr.predictions. Decentralization within industries must mean that many good locations exist or that the location methods used could not discriminate among alternative locations. It is not immediately obvious that location is a dominant factor in the success or failure of an enterprise. If some technological requirements. including sales. water. then manufacturing industries are often transportation oriented. and service activities. namely should be based on nine M‘s. costs. Indeed. the product can be soldare interested in its success. we establish facilities for production and distribution that require large financial outlays. mining is raw material oriented. then the criterion for location choice becomes maximum revenue. or energy. locations will gravitate to the location of consumers. If the prices of products are uniform in all locations. If all processes and costs are independent of location then choice will be guided by proximity to potential customers or clients or to similar and competing organizations and to centers of economic activity in general. Or. In such instances. General technological constraints will commonly eliminate most of the possible locations. the commitment of resources may be very large. the product can be soldprofitably and the production cost is minimum. and even in service organizations. a technological requirement may dominate. Visvesvarirya the decision of plant locationshould be based on nine M‘s. to take the opposite point of view. Location and distribution take on even greater significance because these plans represent the basic strategy for accessing markets and may have significant impacts on revenue. beer is water oriented. namely  MONEYMONEY  MATERIALMATERIAL  MANPOWERMANPOWER  MARKETMARKET  MOTIVEMOTIVE  MANAGEMENT(POWER)MANAGEMENT(POWER)  MACHINERYMACHINERY  MEANS OF COMMUNICATIONMEANS OF COMMUNICATION  MOMENTUM TO AN EARLY STARTMOMENTUM TO AN EARLY START . does not dominate. If the costs of all inputs are independent of location. and service levels to customers and clients. then the criterion becomes one of minimizing relevant costs. In manufacturing organizations. such as the location of raw materials. For example. aluminum reduction is energy oriented. The criterion for the choice of location should be profit maximization for economic activities.

overtime is probably used or there are late deliveries. The LOADING data was found using historical production data of ACCEPTABLE parts only including downtime but only when the processes were scheduled with operator(s). Process 4: Taking longer than takt time. Overtime is probably used to make up production and is the #1 constraint. ApplyLean Manufacturing principles and try to alleviate workload to Process 2 or others that may be able be improved to absorb some of the workload. probably a lot of waiting and the excess capacity can be filled by absorbing some of the work from Process 1 and/or Process 4. Process 3 & 5: Very close to meeting takt time. Process 2: Exceeding the takt time. Objective Match the production rate after all wastes have been removed to the takt time at each process of the value stream. Process 1: Taking much longer than takt time. . not a focus area but possibly some best practices and application of LEAN tools can improve these loading rates. Again. The customer only wants acceptable parts and that is what the customer demand is based on within the takt time formula. high expediting costs or unhappy customers. Improvement in these areas could be used to share workload from constraint processes.Q3. When figuring the production rates (loading) the scrap or nonconforming pieces must be netted out. EXAMPLE: Taking the example from the takt time page as the starting point there were additional studies conducted each the remaining processes that it takes to make UNIT ABC. What do you understand by “line balancing”? What happens if balance doesn’t exist? Ans: Here is a simple definition and example of line balancing :       Everyone is doing the same amount of work Doing the same amount of work to customer requirement Variation is ‗smoothed‘ No one overburdened No one waiting Everyone working together in a BALANCED fashion Description Line Balancing is leveling the workload across all processes in a cell or value stream to remove bottlenecks and excess capacity. A constraint slows the process down and results if waiting for downstream operations and excess capacity results in waiting and absorption of fixed costs.

 Some steps in each process were no longer required as former paradigms and rules were challenged. Describe the various approaches to TQM? Ans: approaches of Total Quality Management (TQM). BEFORE AFTER Q4. . you have to evaluate which methods best suit your company and your management style.  And/on lights were added as communication signals. The term came from the teachings of the late statistician and industrial consultant.  Kanbans were established for materials. who promoted five basic principles:   Reduce errors that occur during the manufacture or presentation of a product or service.  Standard operating procedures and training were done for all operators. There speeds were dramatically improved (the "performance" component of OEE)  Error-proof jig to prevent defects and rework was implemented. W. Edwards Deming. Render efficiency among the components (staff or company departments) necessary to produce the product or service.  SMED activity was done on all operations with focus on Process 1.After Line Balancing:  Visual Management tools were added to reduce complexity and improve consistency of units produced.  Point-of-use tooling and shadow boards were implemented.  The machines in a couple operations received upgrades and overdue minor rebuild and were added to a TPM program.

Management = the system of managing the different steps of the business management strategy: Primary Elements of TQM: (i) Top management has to demonstrate its commitment to TQM and provide strategic direction to the movement strategic outlook.Total = involvement from everyone at the company  Q . team-based problem solving. (ix) Innovation is must for survival. SPC (ii) Scientific styling. Process improvement. Automation deployment (iv) Process Engineering. Total quality control. employees. (ii) Customer involvement/satisfaction. meeting customer requirements. Policy deployment. New technology deployment. High technology circle. Process architecting. (viii) Employees Empowerment.Quality = the standard in which you define product perfection  M . . Maintain constant levels of employee training and education. process redesign. long-range thinking. Total preventive maintenance. TQM is an integrated management philosophy and a set of practices that emphasize continuous improvement.   Utilize the most modern equipment or procedures available. employer) partnership. (vi) Products and services to be delivered at lowest social cost. (v) Team work consensus. competitive benchmarking. (iii) Shares vision (suppliers/vendors. including increased profits. (x) System thinking has to be development. reducing rework. increased employee involvement and teamwork. and closer relationships with suppliers (Ross. Assess levels of customer satisfaction. off line quality control. JIT. more satisfied customers. customer driven quality. 1993). (iv) Process orientation process ownership. Quality circle. Statistical and management tools. and better business practices in general.TQM is broken down into the following shortening:  T . Approches: (i) Dc buffering. (vii) Cultural change at all levels. Robust design. Process execution automation. constant measurement of results. Using TQM in manufacturing will result in a number of improvements. (iii) Whole work force deployment. Process deployment automation.

Ans: Productivity is a measure of the efficiency of production. (ii) Increased production under the optimum conditions. Production Management encompasses all activities which go into conversion of a set of inputs into outputs which are useful to meet human needs. What is meant by productivity? Explain. and installation of equipments necessary to convert or transform the materials to products. (v) Fewer customer complaints. quality maintained and products delivered in time to meet the demands. However. a. Adapting to new technologies: 1. buildings and the distribution system as well as working capital is components of the cost of manufacture and need to be productive. specifications detailed out. strategies are needed to maximize the utilization of the funds allotted towards capital. Demand fluctuations. Productivity is a ratio of production output to what is required to produce it (inputs). The measure of productivity is defined as a total output per one unit of a total input. Q5. knowledge of the processes. machinery. Capital Productivity Capital deployed in plant. (iv) Quality consciousness. Therefore. The quantities to be produced have to be ascertained. Outsourcing Strategies When capacity requirements are determined it will be easy to determine whether some goods or services can be outsourced so that the capital and manpower requirements can be reduced and the available capacities are used to augment core competencies thus reducing the cost of the product or service to the customer. (iii) Reduction in scrap. the following factors may restrict outsourcing(a) Lack of expertise – the outsourced firm may not have the requisite expertise to do the job .Benefits of quality control are: (i) Builds an information system for improving quality and reducing the cost. It involves the identification of the requisite materials. processes established. uncertainties of production owing to breakdowns and inventories being created drag the productivity down.

(c) Nature of demand – When the load is uniform and steady. the description becomes the input for analysis. continuous monitoring – both for quantities and operations. Space is at a premium and therefore stacking and storing have to more scientific. Absence of spervisaion and control may be a hindrance to meet any urgent requirements of the customer. Methods Improvement Methods Improvement starts with Methods analysis focus of this process is how a job is done breaking it down to elemental tasks so that they are amenable for analysis. The first part of the chapter (the larger part) looks at the content of operations strategy by taking four. Rationalization of Packaging Methods With logistics becoming an important function of the supply chain and outsourcing becoming the norm. This is done for both running jobs and new jobs. the analyst depends on observations. The analyst should involve all concerned persons in the process so that acceptance becomes possible and opportunities open up for further improvements. 4. . records and suggestions of the persons involved in the job. the people actually involved would be interested in improving their productivity and will help the analyst in the process. packaging has become important ..required (b) Quality considerations Loss of control over operations may result in lower quality. b. mainly by describing two relatively well-known processes for devising an operations strategy. Since the workflow has to be uniform and operations may require different periods for completion the necessity of Line Balancing is felt. Ans:Obviously operations strategy is a huge subject. For current jobs. they are implemented and records created for assessing the consequences of the methods improvement procedures. Moreover. Movements inside the premises from one location to another location are being done with automated systems and they need that the packaging systems are designed for safe transit. What do you mean by operations strategy? Explain in brief. This is a risk that the firm gets exposed to. And although this textbook takes a slightly more strategic view than most books in the area. When improved methods are suggested. Chapter 3 only ‗scratches the surface‘ of the subject. packaging has become an important aspect. In case of outsourced products the materials used and their design should facilitate reuse of the same which brings in economy. The second part of the chapter looks at the process of operations strategy. Capacities at workstations and the workforce to man are so adjusted that a product in the process of assembly almost approximately the same amount of time. it may not be worthwhile to outsourcing. For a new job. This affects the business especially if no production facilities are built in the organization. 3 Balancing of Workstations Assembly lines necessitate out stringing together workstations which carry out operations in a sequence so that the product gets completed in stages. quite distinct perspectives. (d) Cost when the fixed costs that goes along with making the product does not get reduced considerably 2.

The market requirements perspective starts from the commonsense notion that any operations strategy should reflect what the organisation is trying to do in its markets. Table 3. Again also. . Again. These electronic measuring devices often have to be customized to individual customer requirements. Market requirements versus operations resources The chapter goes on to propose another apparent clash of perspectives – that between market requirements and operations resources. After all. So. suppliers and their own processes. some may compete primarily on cost.6 shows how competitive factors can be ‗translated‘ into performance objectives. What is important to remember is that the pure ‗top-down‘ view of operations strategy is simplistic in the sense that it does not recognise the importance of learning through experience. finance. Companies compete in different ways. In reality we can see both top-down and bottom-up influences on strategy making. operations. Figure 3. others on customising their products and services to individual customer needs. In some ways this is a ‗translation‘ task because the techniques and language used by marketing managers to understand the requirements of markets are different to the language and techniques used by operations managers to manage their productive resources. others on high levels of customer service. organisations would find it difficult to ‗invent‘ strategies in a total vacuum. This is the idea behind emergent strategies. By contrast. The second product group is a wider range of electronic measuring devices which are sold to original equipment manufacturers who incorporate them in their own products. Their ideas are formed from their previous experience of dealing with customers. Different ways of competing imply different competitive factors and therefore different performance objectives. this is then interpreted by the different functional areas of the company (marketing. It describes and instrument manufacturer with two product groups. the ‗bottom-up‘ view of operations strategy is to see strategic decision making as an accumulation of practical experiences. it is not a real clash in the sense that neither perspective is right or wrong. for example. The first product group is a range of standard electronic medical equipment which is sold ‗off the shelf‘ direct to hospitals and clinics. others on the excellence of their products or services. The operations function therefore must respond to this by providing the capabilities which allow it perform in an appropriate manner to satisfy the requirements of its market. etc. overall business strategy sets the general direction of the organisation. it is a comparison between what has been the orthodox view (market requirements perspective) and what is a more recent view (the operations resource perspective).) in their functional strategies. and so on. These are strategic ideas which emerge over time as an organisation begins to understand the realities of their situation. See the figure below for another example. According to this ‗top-down‘ approach. remember that they are not ‗rival‘ ideas.1 gives an example of how this translation process works in the banking industry. When thinking about top-down versus bottom-up perspectives of operations strategy.Top-down versus bottom-up perspectives of operations strategy One view of operations strategy (the more traditional one) is operations strategy is one of several functional strategies which are governed by decisions taken at the top of the organisational tree.

Operations strategy influences performance objectives To some extent all the decisions made in all strategy areas will exert some influence on all the performance objectives of the operation. The table below highlights those objectives which will be particularly influenced by each strategy (though remember that the important links between strategies and objectives will to some extent depend on the type of operation and the circumstances in which it finds itself). Some strategies.The analysis of the two product groups shows that they have very different competitive factors. are particularly influential on certain objectives. however. Therefore different performance objectives are required from the manufacturing operation. . Such very different competitive needs could possibly require two separate operations – one for each product group – each focused on its own objectives and devoted to providing the things which are important in its particular markets.

Strategies with a particularly significant effect on particular performance objectives The process of operations strategy The final part of the chapter illustrates two processes. Both have similarities but neither claims to be a complete answer. When reading about these two processes bear in mind that they are both primarily ‗market requirements‘ driven. the Hill methodology and the PlattsGregory procedure. . or ‗how to do it‘ process.

(c) Determining as which task in the process to be done and subsequent tasks in that process. Complexities arise out of the manner in which process activities are connected together. (f) Establishing a mechanism to indicate acceptance of the results after every task or process to have the assurance that flow is going ahead with accomplishments in the desired path. like rework loops. It can be decomposed and meaningful names given to the details. Some of the activities may occur in sequential order whereas some of them may run parallel. Logical Process Model – improves control on the access to data and identifies who is in possession of data at different nodes in the dataflow network that has been structured. The steps are as under: Ans: (a) Capturing relevant data in detail to be acted upon. The process model is a representation of the business activities different from the technology dependent ones. What is logical process modelling? What is physical modelling? Logical Process Modeling is the representation of putting together all the activities of business process in detail and making a representation of them. this unique model is helpful. Verb and Noun combinations can be used to describe at each level.Q6. Since computer programs are also present in the total system. A few of the logical modeling formats are given below – a) Process Descriptions with task sequences and data addresses b) Flow Charts with various activities and relationships c) Flow Diagrams d) Function hierarchies e) Function dependency diagrams. (d) Making sure that all relevant data are available for all the tasks that need to be in the order determined. (e) Making available the relevant and appropriate data for that task. . processes and outputs. (b) Establishing controls and limiting access to the data during process execution. Thus we have a model that is singularly structured only for business activities. There may be circular paths. Logical Process Model consists only of the business activities and shows the connectivity among them. The initial data collected need to be arranged in a logical manner so that links are made between nodes for making the workflow smooth. Every business activity when considered as a logical process model and represented by a diagram. to allow the business oriented executives to be in control of the inputs. Nouns give the name of the activity uniquely and used for the entire model meaning the same activity.

(ii) Acquisition. This means that the objects during physical modeling vary on the database software being used. and control of data across tasks in the process. storage. The objects here are tables created on the basis of entities and attributes. All the information is put together to make the database software specific. Selective recall a means tendency to bring out of memory the facts that reinforce our assumptions and biased evaluation and tendency to accept evidence or fact as absolute which support our hypotheses. Decision failures are common and research has shown that it is because of biases in perception and fallacies in reasoning. Another reason is a tendency to act on assumptions even when data are available easily for verification and/or confirmation. (iv) Decisions that modify and enhance the value of data during the process. These factors result in faulty decision making and being aware and avoiding them consciously improves the processes. teams and organizational units that perform and responsible for tasks. distribution. (iii) Persons. .Physical Modeling Physical modeling is concerned with the actual design of data base meeting the requirements of the business. Physical modeling deals with the conversion of the logical model described above into a relational model. We have some behavioral aspects of the business process mainly the decision making process Where humans are involved. Here the database is defined for the business. The ingredients The ingredients that go into a business process can be briefly outline as under: (i) The data that are needed to accomplish the desired business objective. The outcomes are server model diagrams showing tables and relationships with a database. Objects get defined at the schema level.

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