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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.

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

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. 3. which may be due to unplanned labor. Explain the significance of plant location decision. 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. the issue of capacity expansion immediately raises the companion issue of where to expand in order to tie in effectively with the distribution network. While more effort in forecasting causes increased cost due to data collection and analysis. Thus. Therefore. Given these . lesser forecasting activity involves lost revenue. 8. 6. The location of facilities involves a commitment of resources to a long-range plan. Ans: significance of Plant location: The strategic significance of facility location is connected with capacity decisions.maintained. Indeed. Therefore. 9. 7. 4. unplanned material or unplanned capital cost. 2. each firm should maintain a balance in its forecasting effort and stick to a zone near to accuracy cost trade off. b. predictions of the size and location of markets are of great significance. 5. Efforts in forecasting activity involve two types of costs. as there would be lesser hiring and firing activities by the management with better manpower planning. forecasting is useful due to following benefits: 1.

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

not a focus area but possibly some best practices and application of LEAN tools can improve these loading rates. The customer only wants acceptable parts and that is what the customer demand is based on within the takt time formula. 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. Improvement in these areas could be used to share workload from constraint processes. 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. Again. 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). high expediting costs or unhappy customers. overtime is probably used or there are late deliveries. 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. Process 1: Taking much longer than takt time. 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. Process 3 & 5: Very close to meeting takt time. Overtime is probably used to make up production and is the #1 constraint.Q3. A constraint slows the process down and results if waiting for downstream operations and excess capacity results in waiting and absorption of fixed costs. . When figuring the production rates (loading) the scrap or nonconforming pieces must be netted out. 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. Process 4: Taking longer than takt time.

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

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

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

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

Again. These electronic measuring devices often have to be customized to individual customer requirements. finance. others on customising their products and services to individual customer needs. 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. organisations would find it difficult to ‗invent‘ strategies in a total vacuum. for example. operations. this is then interpreted by the different functional areas of the company (marketing. Figure 3. Their ideas are formed from their previous experience of dealing with customers. See the figure below for another example. the ‗bottom-up‘ view of operations strategy is to see strategic decision making as an accumulation of practical experiences.) in their functional strategies. According to this ‗top-down‘ approach. By contrast. and so on. 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. 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. It describes and instrument manufacturer with two product groups. some may compete primarily on cost. These are strategic ideas which emerge over time as an organisation begins to understand the realities of their situation. 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. suppliers and their own processes. 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). . overall business strategy sets the general direction of the organisation. After all. So. 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. The first product group is a range of standard electronic medical equipment which is sold ‗off the shelf‘ direct to hospitals and clinics. Different ways of competing imply different competitive factors and therefore different performance objectives.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. Table 3. Again also. others on high levels of customer service. it is not a real clash in the sense that neither perspective is right or wrong. remember that they are not ‗rival‘ ideas. This is the idea behind emergent strategies. Companies compete in different ways. Market requirements versus operations resources The chapter goes on to propose another apparent clash of perspectives – that between market requirements and operations resources. In reality we can see both top-down and bottom-up influences on strategy making.6 shows how competitive factors can be ‗translated‘ into performance objectives. others on the excellence of their products or services.1 gives an example of how this translation process works in the banking industry. etc. When thinking about top-down versus bottom-up perspectives of operations strategy.

however. 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. are particularly influential on certain objectives. . Therefore different performance objectives are required from the manufacturing operation. 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).The analysis of the two product groups shows that they have very different competitive factors. Some strategies.

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

Logical Process Model consists only of the business activities and shows the connectivity among them. The process model is a representation of the business activities different from the technology dependent ones. to allow the business oriented executives to be in control of the inputs. 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. Some of the activities may occur in sequential order whereas some of them may run parallel. It can be decomposed and meaningful names given to the details. Verb and Noun combinations can be used to describe at each level. . Every business activity when considered as a logical process model and represented by a diagram. The steps are as under: Ans: (a) Capturing relevant data in detail to be acted upon. this unique model is helpful. 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. Thus we have a model that is singularly structured only for business activities. (d) Making sure that all relevant data are available for all the tasks that need to be in the order determined. (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. 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. Nouns give the name of the activity uniquely and used for the entire model meaning the same activity.Q6. Complexities arise out of the manner in which process activities are connected together. (e) Making available the relevant and appropriate data for that task. The initial data collected need to be arranged in a logical manner so that links are made between nodes for making the workflow smooth. processes and outputs. There may be circular paths. (b) Establishing controls and limiting access to the data during process execution. Since computer programs are also present in the total system. (c) Determining as which task in the process to be done and subsequent tasks in that process. like rework loops.

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