Sezione 2 - Operations Strategy - Content

Operations Strategy
-Content-
prof. Fabio Nonino
Thanks to
DIMENSIONS OF OPERATIONS STRATEGY
CONTEXT
OPERATION
STRATEGY
PROCESS CONTENT
11 ottobre 2022 Prof. Fabio Nonino 2

CONTENT MODEL OF OP. STRATEGY
BUSINESS
STRATEGY
OPERATIONS
STRATEGY
STRATEGIC CHOICES AND

STRATEGIC TYPES
PERFORMANCES
COMPETITIVE
DECISION AREAS
PRIORITIES
INFRASTRUCTURAL STRUCTURAL
Adapted from: Leong, Snyder and Ward (1989); Swink and Way (1995)
BUSINESS
STRATEGY
OPERATIONS
STRATEGY

STRATEGIC TYPES
PERFORMANCES
COMPETITIVE
DECISION AREAS
PRIORITIES
OPERATIONS PERFORMANCES
ONLY INTERNALLY VISIBLE TYPE OF PERFORMANCE ALSO EXTERNALLY VISIBLE
Production costs (materials, labour and machinery)
Total productivity COST Price

 Capital
Specific productivity
 Production
Supplying lead times

Delivery speed
 Run Times
Delivery dependability
 Set up Times
Manufacturing Lead Times
 Queue Times
TIME
 Move Times
Frequency of new products/services
introduction
Time-to-market
Product modification flexibility

Volume flexibility
Mix flexibility
FLEXIBILITY -
Process modification flexibility
Expansion flexibility
Produced Quality
In-bound Quality QUALITY Perceived Quality
Quality costs
11 ottobre 2022 Prof. Fabio Nonino Adapted from: De Toni and Tonchia (2001, 2005) 5
LINK BETWEEN OPERATIONS AND COMPETITIVE
FACTORS DRIVING PERFORMANCES
Competitive factors Operation tasks

Offer consistently low defect rates Process quality
Offer dependable delivery Delivery reliability
Provide high-perfomance products or amenities Product quality
Offer fast deliveries Delivery speed
Customize products and services to customer needs Flexibility
Profit in price competitive markets Low-cost production
Introduce new products quickly Rapid innovation
Offer a broad product line Flexibility
Make rapid volume changes Flexibility
Make rapid product mix changes Customization, flexibility
Make product easily available Delivery speed/reliability (distribution)
Make rapid changes in design Flexibility
Source: Brown et al., 2005: 60

COMPETITIVE PRIORITIES: AN EXAMPLE
FINANCIAL SERVICES COMPETITIVE STEEL PLANT

Associated Competitive Factors PRIORITY Associated Competitive Factors
 Professionalism of staff  Percentage of products conforming to their
 Friendliness of staff specification
QUALITY  Absolute specifications of products
 Accuracy of information
 Ability to change details in the future  Usefulness of technical advice
 Time for call center to respond

 Lead time from enquiry to quotation
 Prompt advice responses
 Lead time from order to delivery
 Fast loan decisions
TIME  Lead time for technical advice
 Fast availability of funds
 Percentage of deliveries on time and in full
 Reliability of original promise date
 Customers kept informed of delivery dates
 Customers kept informed
 Customization of terms, such as duration and

life of offer
 Cope with changes in circumstances, such as  Ability to change quantity, composition, and
level of demand
FLEXIBILITY timing of an order
 Ability to handle both commercial and
residential loans
 Interest rate charged  Price of products
 Arrangement charges  Price of technical advice
COSTS
 Insurance charges  Discounts available
 Loan origination fee  Payments terms
11 ottobre 2022 Prof. Fabio Nonino Adapted from: Slack and Lewis (2003) 7
THE IMPACT OF COMPETITIVE PRIORITIES
COMPETITIVE COMPETITIVE
ECONOMIC RESULTS
PRIORITIES ADVANTAGES
PRODUCT
QUALITY DIFFERENTIATION TURNOVER
TIME
FLEXIBILITY SERVICE
DIFFERENTIATION
PRICE
COST
PROFITABILITY
(PRODUCTIVITY)

COST
OTHER THINGS BEING EQUAL, EVERY EURO OR DOLLAR SAVED IN
OPERATIONS IS A FURTHER EURO OR DOLLAR ADDED TO PROFITS
labour
OPERATING EXPENDITURES materials
energy
land
facilities
CAPITAL EXPENDITURES
machinery Cash in-flow
other assets generated by sale
of Product/service
A
CASH FLOW
t0
WORKING CAPITAL 0
t1 TIME
Cash out-flow Delay Time → Costs

generated by order
of Product/service
A
QUALITY
HOSPITAL
• Patients receive the most appropriate

treatment QUALITY
• Treatment is carried out in the correct
manner
• Patients are consulted and kept informed
AUTOMOBILE PLANT HIGH CONSISTENT

• All parts are made to specification PERFORMANCE + QUALITY
• All assembly is to specification
• The product is reliable
SUPERMARKET
• All goods are in good condition EXTERNAL AND INTERNAL

• The store is clean and tidy CUSTOMERS SATISFACTION
• Decor is appropriate and attractive
11 ottobre 2022 Prof. Fabio Nonino Adapted from: Slack, Chambers and Johnston (2001) 10
TIME
HOSPITAL
• Minimum time between requiring The competitive priority of
treatment and receiving treatment
• Minimum time for test results to be time has two facets:
returned
• Keeping to appointment times
•…
AUTOMOBILE PLANT
• Minimum time between dealers
requesting a vehicle of a particular SPEED DEPENDABILITY
specification and receiving it
• Minimum time to deliver spares to service
centres
•…
SUPERMARKET
• The immediate availability of goods

• Minimum time for the total purchase
process  Punctuality
• Keeping to reasonable queuing times
•…
 Reliability
CLASSIFICATION OF TIME PERFORMANCES
PERFORMANCE
INTERNAL EXTERNAL
 TIME-TO-MARKET  FREQUENCY OF
(TTM) INTRODUCING (FI)
NEW PRODUCT ▪ New product
OPERATIONS
DEVELOPMENT ▪ Existing product

improvement
 LEAD TIME (LT)  DELIVERY TIME (DT)

SOURCING ▪ Sourcing ▪ Speed
MANUFACTURING ▪ Manufacturing ▪ Dependability
▪ Distribution
LOGISTICS
Adapted from: De Toni and Meneghetti (2000)

EXTERNAL TIME PERFORMANCES
NEW PRODUCTS
Δt
FREQUENCY OF
INTRODUCING
(FI)
Δt
NEW PRODUCT VERSIONS
Request for Delivery of a

product/service A product/service A
SPEED
Δt
DELIVERY TIME
(DT)
PUNCTUALITY Observing due dates
DEPENDABILITY
Mix Right mix
RELIABILITY
Quantity Right quantities

INTERNAL TIME PERFORMANCES
Δt
TIME-TO-MARKET
(TTM)
Concept/Idea First product introduction to market
Δt
SUPPLYING LEAD TIME
Supplier Firm
LEAD TIME
MANUFACTURING LEAD TIME
(LT)
Δt
DISTRIBUTION LEAD TIME
Firm Customer
MANUFACTURING LEAD TIME
RUN TIME Time spent for processing material
+
Time spent by materials waiting for
QUEUE TIME
being processed
+
Time spent for setting machinery for
SET-UP TIME
next operation
+
Time spent for moving material from
MOVE TIME
one processing stage to another

OVERALL EQUIPMENT EFFECTIVENESS (OEE)
Source: Slack et al., 2006: 247

EXAMPLE
In a typical 7-days period, the planning department programme a particular machine to work for 150 hours, its
loading time. Changeovers and setups take an average of 10 hours, and breakdown failures average 5 hours
every 7 days.
The time when the machine cannot work because it is waiting for materials to be delivered from other partes of
the processes in 5 hours on average, and during the period when the machine is running it averages 90 per cent
of its rated speed. Three per cent of the parts processed by the machine are subsequently found to be defective
in some way.
Maximum time available = 7 * 24 hours

= 168 hours
Loading time = 150 hours
Availability losses = 10 hours (setups) + 5 hours (breakdowns)
= 15 hours
Therefore,
Total operating time = loading time – availability
= 150 hours – 15 hours
= 135 hours
Speed losses while running amount to 10% (0.1) of rated speed, so
Total speed losses = 5 hours (idling) + ((135-5) * 0.1) hours (running)

= 18 hours

EXAMPLE
Therefore,
Net operating time = Total operating time – speed losses

= 135 -18
= 117 hours
Quality losses = 117 (Net operating time) * 0.03 (error rate)

= 3.51 hours
So,
Valuable operating time = Net operating time – Quality losses

= 117 – 3.51
= 113.49 hours

EXAMPLE

FLEXIBILITY IN OPERATIONS
UNCERTAINTY FLEXIBILITY
plant or
internal or
machine
external
level
“buffers”
inventories
capacity
lead time
Source: Newman et al. (1993)

Reducing the level of inventory (water) allows operations
management (the ship) to see the problems in the operation
(the rocks) and work, to reduce them….

TYPE OF FLEXIBILITY IN OPERATIONS
OBJECT OF VARIATION
QUANTITY OF COMPOSITION OF
OUTPUT OUTPUT
CHARACTERISTICS
OF THE VARIATION
STATE CONDITIONS Productive capacity Product range

TRANSITION
REVERSIBLE Volume flexibility Mix flexibility
IRREVERSIBLE Expansion flexibility Product flexibility
Adapted from: De Toni and Tonchia (2005)

MAIN EFFECTS OF COMPETITIVE
PRIORITIES
MAIN EFFECTS
INTERNAL EXTERNAL
 Error-free
processes  On-specification
QUALITY  Less waste and rework products/services
 Lower processing costs  Reliable products and services
 Reliable operation
 Faster throughput times  Short delivery lead time
TIME  Less queuing and/or inventory  Fast response to request
 Lower overheads  Dependable delivery
 Lower processing costs
 Abilityto change
 Frequent new products/service
 Better response to unpredicted
FLEXIBILITY events
 Wide products/service range
 Volume and delivery adjustments
 Lower processing costs
 High productivity
COSTS  Low price
 High margin
Adapted from: Slack, Chambers and Johnston (2001); Slack and Lewis (2003)
SELECTING COMPETITIVE PRIORITIES
 The trade-off concept (Skinner, 1969)
 The cumulative approach (De Meyer and Ferdows, 1990)
 Order winning and qualifiers (Hill, 1994)
 The importance-performance matrix (Slack, 1994)
 The focused-factory (Skinner, 1974)


THE TRADE-OFF CONCEPT
A factory cannot perform well on every yardstick

Skinner (1974)

TYPICAL TRADE-OFFS
Generic car brake
Cellular manufacturing Line assembly

OTHER TRADE-OFFS IN OPERATIONS
DECISION AREA DECISION ALTERNATIVES
Process Make or buy
Plant size One big plant or several smaller ones
PLANT AND Locate near markets (customers) or locate near
EQUIPMENT Plant location
materials (suppliers)
Choice of
General-purpose or special-purpose equipment
equipment
Inventory size High or low
PRODUCTION
Quality control High reliability and quality or low costs
PLANNING AND
CONTROL Frequency of
Few (batch) or many (unit)
picking
Job
WORFORCE & High specialized or not highly specialized
specialization
STAFF
Control systems Close supervision or loose supervision
PRODUCT Design stability Frozen design or many engineering change orders
DESIGN Features High performance or low costs
11 ottobre 2022 Prof. Fabio Nonino Adapted from: Skinner (1969) 32


THE CUMULATIVE APPROACH
Nakane (1986) proposed that Japanese manufacturers followed a rather specific sequence for
building manufacturing capabilities:
QUALITY DEPENDABILITY COST EFFICIENCY FLEXIBILITY
De Meyer and Ferdows (1990b), relying on the European Manufacturing Futures Survey, have
modified this model proposing:
THE SAND CONE MODEL
COSTS EFFICIENCY
SPEED
DEPENDABILITY
QUALITY
Source: De Meyer, Ferdows (1990b)


QUALIFIERS CRITERIA
They are competitive factors which do not in

themselves allow a company to win orders but provide
the opportunity to compete in a certain market
210cm
170cm minimum level
150cm

ORDER-WINNING CRITERIA
They are competitive factors which allow the company

to win the orders if it can give better performances
over its competitors
allow you to win

ORDER-WINNING AND QUALIFIERS BENEFITS
POSITIVE
ORDER-WINNING
COMPETITIVE BENEFIT
LESS IMPORTANT
NEUTRAL
QUALIFIERS
NEGATIVE
LOW HIGH
ACHIEVED PERFORMANCE
Source: Slack and Lewis (2003)

EXAMPLES OF ORDER-WINNING AND QUALIFIERS
CAR INDUSTRY
QUALIFIERS + ABS
ORDER-WINNERS Low environmental impact, consumption

(e.g. Hybrid)
MOBILE PHONE INDUSTRY
QUALIFIERS
ORDER-WINNERS

DYNAMICS OF ORDER-WINNING AND QUALIFIERS
Order-winning and qualifiers criteria are market-specific

and time specific:
 Qualifiers criteria become tougher

Car emissions standards against pollution
Euro 4 Euro 5 Euro 6
 Order-winning criteria become qualifiers
Car Navigator
optional included

THE COMPETITIVE SQUEEZE
COST COST
TIME TIME
QUALITY QUALITY
COST COST
TIME TIME
QUALITY QUALITY
Source: Corbett and Van Wassenhove (1993)


EVALUATING FEATURES IMPORTANCE
A NINE-POINT IMPORTANCE SCALE

Strong 1 Provides a crucial advantage
ORDER WINNING OBJECTIVES Medium 2 Provides an important advantage
Weak 3 Provides a useful advantage
Strong 4 Needs to be up to good industry standard
QUALIFYING OBJECTIVES Medium 5 Needs to be around median industry standard
Weak 6 Needs to be within close range of the rest of industry
Not usually considered but could become more

Strong 7
important in the future
LESS IMPORTANT OBJECTIVES Medium 8 Very rarely considered by customers
Weak 9 Never considered by customers
Source: Slack (1994)

EVALUATING FEATURES PERFORMANCE
A NINE-POINT PERFORMANCE SCALE

Strong 1 Considerably better than competitors
BETTER THEN COMPETITORS Medium 2 Clearly better then competitors
Weak 3 Marginally better than competitors
Strong 4 Sometimes marginally better then competitors
SAME AS COMPETITORS Medium 5 About the same as most competitors
Slightly lower than the average of most

Weak 6
competitors
Strong 7 Usually marginally worse than most competitors
WORSE THAN COMPETITORS Medium 8 Usually worse than competitors
Weak 9 Consistently worse than competitors

IMPORTANCE-PERFORMANCE MATRIX
GOOD
F
1
EXCESS?
BETTER 2
THAN
APPROPRIATE
3 B
PERFORMANCE SCALE
E
4 D
SAME
AS 5
6
A
IMPROVE
7
URGENT ACTION
WORSE
THAN 8
BAD
9
C
9 8 7 6 5 4 3 2 1
LESS IMPORTANT QUALIFYING ORDER WINNING
LOW IMPORTANCE SCALE HIGH


DEFINITION OF FOCUSED FACTORY
A factory that focuses on a narrow product mix for a

particular market niche will outperform the
conventional plant, which attempts a broader
mission … such a plant can become a competitive
weapon because its entire apparatus is focused to
accomplish the particular manufacturing task
demanded by the company's overall strategy and
marketing objective
Source: Skinner (1974)

FOCUSED FACTORY ASSUMPTIONS
 There are many ways to compete besides by

producing at low cost
 A factory can’t perform well on every yardstick
 Simplicity and repetition breed competence
Source: Skinner (1974)

FIT AND FOCUS CONCEPTS
What we What What What
OUTPUT MARKET
INPUT MARKET
HAVE we we we
DO WANT NEED
PERFORMANCE
SPECIFIC DECISION AREAS MARKET REQUIREMENTS
OBJECTIVES
FIT between
FIT between resources, capabilities, processes and performances and FIT between market
operations choices specific decision requirements and
areas performances

WHERE IS FIT REQUIRED?
OUTPUT MARKET
INPUT MARKET
HAVE we we we
DO WANT NEED
FIT

THE FOCUS CONCEPT
A) Focused company
Coherence on
B) wrong strategic
decision
Incoherence on
C) operations choices
Lack of a clear
D) objective

A) THE FOCUSED COMPANY
OUTPUT MARKET
INPUT MARKET
HAVE we we we
DO WANT NEED
Resources
Operations Internal External
Capabilities
choices performances performances
Processes

THE FOCUS CONCEPT
A) Focused company
Coherence on
B) wrong strategic
decision
Incoherence on
Lack of a clear
D) objective

B) COHERENCE ON WRONG STRATEGIC
DECISION
OUTPUT MARKET
INPUT MARKET
HAVE we we we
DO WANT NEED
Lack of coherence
Resources
Capabilities
Processes

THE FOCUS CONCEPT
A) Focused company
Coherence on
B) wrong strategic
decision
Incoherence on
Lack of a clear
D) objective

C) INCOHERENCE ON OPERATIONS CHOICES
OUTPUT MARKET
INPUT MARKET
HAVE we we we
DO WANT NEED
Lack of coherence
Resources
Capabilities
Processes

THE FOCUS CONCEPT
A) Focused company
Coherence on
B) wrong strategic
decision
Incoherence on
Lack of a clear
D) objective

D) LACK OF A CLEAR OBJECTIVE

INPUT MARKET
HAVE we we we
DO WANT NEED
Lack of coherence
Resources
Capabilities
Processes

THE PLANT WITHIN A PLANT (PWP)
PLANT 2
PLANT 1
PRODUCT B
PRODUCT A
MARKET b
MARKET a
TECHNOLOGY y
UNFOCUSED COMPANY TECHNOLOGY x
PLANT 3
PRODUCT C
MARKET c
TECHNOLOGY z
FOCUSED
COMPANY
PRODUCT A PRODUCT B
FOCUSED PWP
MARKET a MARKET b
TECHNOLOGY x TECHNOLOGY y
PLANT 1
PRODUCTS A, B, C, FOCUSED PWP
MARKETS a, b, c,
TECHNOLOGIES x, y, z
PRODUCT C
MARKET c
TECHNOLOGY z FOCUSED PWP

BUSINESS
STRATEGY
OPERATIONS
STRATEGY

STRATEGIC TYPES
PERFORMANCES
COMPETITIVE
DECISION AREAS
PRIORITIES
CAPACITY AND FACILITIES
LOCATION
COUNTRY
AREA
SITE
CAPACITY
HIGH CAPACITY LOW CAPACITY

LOCATION DECISIONS
HIGH HIGH HIGH MAIN ISSUES
 Land costs
POTENTIAL
REVENUES  Labour costs
 Energy costs
LEVEL OF  Transportation costs
SERVICE
OFFERED  Labour skills
 Local taxes
 Local governmental rules
SPATIALLY
VARIABLE  Political stability
COSTS
 Culture and habits
 Image of the location
LOW LOW LOW  Etc.
LOCATION DECISIONS OBJECTIVE

CAPACITY DECISIONS
UNITS
CAPACITY
POLICY A: CAPACITY LEADS
DEMAND
DEMAND
TIME
UNITS
CAPACITY
POLICY A: CAPACITY MATCHES

DEMAND
DEMAND
TIME
UNITS
DEMAND
POLICY C: CAPACITY LAGS DEMAND
CAPACITY
11 ottobre 2022 Prof. Fabio Nonino TIME

63
SUPPLY NETWORK & VERTICAL
INTEGRATION
UPSTREAM VERTICAL INTEGRATION DOWNSTREAM VERTICAL INTEGRATION
NON TOTALLY TOTALLY

DEDICATED CAPACITY DEDICATED CAPACITY
SECOND-TIER FIRST-TIER FIRST-TIER SECOND-TIER

FIRM
SUPPLIER SUPPLIER CUSTOMER CUSTOMER
NARROW SPAN OF INTEGRATION
WIDE SPAN OF INTEGRATION
PROCESS TECHNOLOGY
The operations manager’s must:
 Understand how the process technology works
 Understand the process technology economics
 Identifying the key problems associated with the

process technology management

THE PRODUCT-PROCESS MATRIX
PRODUCT LIFE CYCLE STAGES
I II III IV
Low volume, low Multiple products, low Few major products, High volume. high
standardization, one volume higher volume standardization,
of a kind commodity products
I
PROCESS LIFE CYCLE STAGES
COMMERCIAL
Jumbled flow PRINTER
(job shop)
II
Disconnected HEAVY
line flow EQUIPMENT
(batch)
III
Connected AUTO
line-flow ASSEMBLY
(assembly-line)
IV
SUGAR
Continuous REFINERY
flow
Flexibility - Quality Dependability-Cost
COMPETITIVE PRIORITY
11 ottobre 2022 Prof. Fabio Nonino Source: Hayes and Wheelwright (1979, 1984) 66
PRODUCT-PROCESS INNOVATION
PRODUCT INNOVATION
RATE OF MAJOR INNOVATION
PROCESS INNOVATION
UNCOORDINATED SEGMENTAL SYSTEMIC

STAGE STAGE STAGE
TIME
11 ottobre 2022 Prof. Fabio Nonino Source: Utterback and Abernathy (1975) 67
VOLUME-VARIETY REQUIREMENTS
INFLUENCE PROCESS DESIGN
The process’ volume – variety position

High Variety Low
Low Volume High
Process design
characteristics,
e.g.
performance
objectives, tasks,
flow, layout,
technology, job
design

SERVICE COMPANIES
Source: Schemenner, 1986

CHALLENGES FOR MANAGERS IN SERVICE
OPERATIONS

DIFFERENT PROCESS TYPES IMPLY DIFFERENT
VOLUME-VARIETY CHARACTERISTICS
High Variety Low

Low Volume High
Diverse/complex Intermittent
Professional
services
Service
Process Process shops
Tasks flow
Mass
services
Repeated/divided Continuous SERVICE PROCESS TYPES

DIFFERENT PROCESS TYPES IMPLY DIFFERENT
VOLUME-VARIETY CHARACTERISTICS
High Variety Low

Low Volume High
Diverse/complex Intermittent
Project
processes
Jobbing
processes
Batch
Process Process processes
Tasks flow
Mass
processes
Continous
processes
Repeated/divided Continuous MANUFACTURING PROCESS TYPES

VOLUME-VARIETY FIT
High Variety Low
Low Volume High
Based around Fixed position layout

process resources
Functional layout
Cell layout
Process
layout FiFfFFff Product layout
Based around
products/services
11 ottobre 2022 Prof. Fabio Nonino Slack et al., 2006: 113 73

FIXED POSITION LAYOUT
11 ottobre 2022 Prof. Fabio Nonino Slack et al., 2006 74

FUNCTIONAL LAYOUT

CELL LAYOUT

PRODUCT LAYOUT

ADVANTAGES/DISADVANTAGES OF
BASIC LAYOUT TYPES
Advantages Disadvantages
Fixed • Very high mix and product flexibility • High unit costs
position • Product or customer not moved or • Scheduling of space and activities can be
disturbed difficult
• High variety of tasks for staff • Can mean much movement of plant and
staff
Functional • High mix and product flexibility • Low facilities utilization
• Relatively robust in case of disruptions • Can have very high work-in-progress or
• Relatively easy supervision of equipment customer queuing
or plant • Complex flow can be difficult to control
Cell • Can give a good compromise between • Can be costly to rearrange existing layout
cost and flexibility for relatively high- • Can need more plant and equipment
variety operations • Can give lower plant utilization
• Fast throughput
• Group work can result in good motivation
Product • Low unit cost for high volume • Can have low mix flexibility
• Gives the opportunity for specialization of • Not very robust if there is disruption
equipment • Work can be very repetitive
• Materials of customer movement is
convenient
11 ottobre 2022 Prof. Fabio Nonino Source: Slack et al., 2006: 116 78
INFORMATION AND COMMUNICATION
TECHNOLOGY (ICT)
Senior management and
stakeholders
Strategic
Financial
reporting
applications
applications
ERP Sales and

Enterprise marketing
Resource applications
Operation Planning
Front office staff

Back office staff
applications
Integrated
Empl Delivery and Customers
Suppliers database distribution
applications
Purchasing
and supply
applications
Service
applications
Human
resource
applications
Employees

HUMAN RESOURCE ISSUES IN
OPERATIONS STRATEGY

ORGANIZATION AND WORKFORCE
COMMAND AND CONTROL CONTINUAL IMPROVEMENT
 Maximize skills (both technical and
 Minimize skills (deskill)
problem solving)
SKILLS  Narrow job definitions
 Broad job definitions
 Optimize defined tasks
 Improve evolving tasks
 Mental effort
 Physical effort
 Worker adds value to the process
 Process should be worker-independent
WORKFORCE ROLE  Process should be improved by the
 Maintain process stability
worker
 Staff over line
 Line over staff
 Coordination (what and when)  Problem solving (cause-effect and
 Fixed responses to problems through problem elimination)
INFORMATION NEEDS standard operating procedures  Flexible responses to problems as they
arise
 Performance evaluation based on

 Performance evaluation based on
success of the business
adherence to procedures
CONTROL  Direct control
 Second-order (systems and procedures)
and third-order (norms and values) control
 Strict hierarchy and status
 Peers working as a team
PEOPLE MAKE IT HAPPEN

11 ottobre 2022 Prof. Fabio Nonino Adapted from: Hayes, Wheelwright and Clark (1988) 83
THE STRUCTURE OF JOBS
JOB’S BREADTH
 Machine operation
 Equipment monitoring JOB 2
JOB
 Materials handling ENLARGEMENT
 Quality checking
 Preventive maintenance JOB 1 JOB
 … ENRICHMENT
JOB’S DEPTH
 Process design
 Methods improvement
 Scheduling
 Accounting and control
 Planning
 Problem solving
 …
11 ottobre 2022 Prof. Fabio Nonino Adapted from: Hayes, Wheelwright and Clark (1988) 84
EXAMPLES OF ISSUES IN OP. STRATEGY
NESTLÉ WAL-MART
 Plant location relatively close to

Capacity and  High-capacity facilities for
facilities
the customers for fast delivery
exploiting economies of scale
and freshness
Supply network  Automated shipping centers

 High level of service through an
and vertical which speed up reordering and
integration appropriate logistics management
shipping processes
 Investments in processes for

Process  State-of-the-art sales monitoring
Technology
preserving rigid adherence to
systems
health and safety standards
 Profit-sharing practices for

 Decentralizationas a means for
Organization and encouraging employees in giving
workforce
paying attention to local values
contributions for continuous
and desires
improvement
11 ottobre 2022 Prof. Fabio Nonino Adapted from: Slack and Lewis (2003) 85
BUSINESS
STRATEGY
OPERATIONS
STRATEGY

STRATEGIC TYPES
PERFORMANCES
COMPETITIVE
DECISION AREAS
PRIORITIES
4 STAGES FOR DEVELOPING OP. STRATEGY
STRATEGIC ROLE
OPERATIONS FOCUS
INTERNAL EXTERNAL
NEUTRAL
STAGE I STAGE II
STRATEGIC ROLE
INTERNALLY NEUTRAL EXTERNALLY NEUTRAL

FIRM FIRM
SUPPORTIVE
STAGE III STAGE IV

INTERNALLY SUPPORTIVE EXTERNALLY SUPPORTIVE
FIRM FIRM
Adapted from: Hayes and Wheelwright (1984)

STAGE 1 – INTERNALLY NEUTRAL FIRMS
OPERATIONS FOCUS
INTERNAL EXTERNAL
NEUTRAL
STAGE I STAGE II
STRATEGIC ROLE
FIRM FIRM
SUPPORTIVE
STAGE III STAGE IV

INTERNALLY SUPPORTIVE EXTERNALLY
FIRM SUPPORTIVE FIRM
 their aim is to minimize manufacturing’s negative

potential
 they use external experts for taking decisions about
strategic manufacturing issues
 they consider internal management control systems as
the primary means for monitoring manufacturing
performance
 they keep manufacturing is flexible and reactive
11 ottobre 2022 Prof. Fabio Nonino
Adapted from: Hayes and Wheelwright (1984) 88
STAGE 2 – EXTERNALLY NEUTRAL FIRMS
OPERATIONS FOCUS
INTERNAL EXTERNAL
NEUTRAL
STAGE I STAGE II
STRATEGIC ROLE
FIRM FIRM
SUPPORTIVE
STAGE III STAGE IV

 their aim is seeking competitive neutrality, that is parity

with major competitors
 they follow “industry practice” (same workforce
management, same equipment, same capacity addition as
main competitors)
 they often rely on outsourcing for improvements in process
technology (R&D labs, suppliers, etc.)
STAGE 3 – INTERNALLY SUPPORTIVE FIRMS
OPERATIONS FOCUS
INTERNAL EXTERNAL
NEUTRAL
STAGE I STAGE II
STRATEGIC ROLE
FIRM FIRM
SUPPORTIVE
STAGE III STAGE IV

 they expect operations to provide credible and significant

support to the overall competitive strategy
 they take operations decisions with a long-term
perspective and drive them considering the consistency
with business strategy
 they see operations competitiveness as a means for
enhancing competitive position
STAGE 4 – EXTERNALLY SUPPORTIVE FIRMS
OPERATIONS FOCUS
INTERNAL EXTERNAL
NEUTRAL
STAGE I STAGE II
STRATEGIC ROLE
FIRM FIRM
SUPPORTIVE
STAGE III STAGE IV

 they base competitive strategy to a significant degree on

operations capabilities
 they develop operations strategy in an iterative fashion
with the business strategy and the other functional
strategies
 they anticipate the potential of new practices and
technologies in the operations
EVOLVING OPERATIONS STRATEGY
OPERATIONS FOCUS
INTERNAL EXTERNAL
1
NEUTRAL
STAGE I STAGE II
STRATEGIC ROLE

FIRM FIRM
SUPPORTIVE
STAGE III STAGE IV

INTERNALLY SUPPORTIVE EXTERNALLY SUPPORTIVE
FIRM FIRM
3

THE CONTRIBUTION OF OP. STRATEGY
EXTERNALLY
SUPPORTIVE
Give an
operations Redefine the
advantage INTERNALLY industry’s
SUPPORTIVE expectations
Link strategy
with Be clearly the best
EXTERNALLY
operations NEUTRAL in the industry
Adopt the INTERNALLY Be as good as

best practice NEUTRAL competitors
Correct the
worst
Stop holding the
problems organization back
STAGE I STAGE II STAGE III STAGE IV

The ability The ability The ability
to to be to drive
implement appropriate strategy
A TAXONOMY OF OPERATIONS STRATEGIES
TAXONS
COMPETITIVE COMPETITIVE
DEFINED AS … DEFINED AS..
CAPABILITY CAPABILITY
Low price the capability to compete on price Dependability the capability to deliver on time (as promised)
the capability to make rapid design changes and/or

Design flexibility After sale service the capability to provide after sale service
introduce new products quickly
the capability to advertise and promote the
Volume flexibility the capability to respond to swings in volume Advertising
product
Conformance the capability to offer consistent quality Broad distribution the capability to distribute the product broadly
Performance the capability to provide high performance products Broad line the capability to deliver a broad product line
Speed the capability to deliver products quickly
CLUSTER COMPETITIVE PRIORITY BUSINESS LIFE CYCLE STAGE

Price
CARETAKERS Decline
(Cost)
Conformance
MARKETEERS Maturity
(Quality)
High performance Introduction/
INNOVATORS
(Quality) Development
Adapted from: Miller and Roth (1994)
Operations Strategy
-Content-
prof. Fabio Nonino
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Operations Strategy

prof. Fabio Nonino

11 ottobre 2022 Prof. Fabio Nonino 2

STRATEGIC CHOICES AND

STRATEGIC CHOICES AND

Total productivity COST Price

Supplying lead times

Product modification flexibility

Competitive factors Operation tasks

Offer dependable delivery Delivery reliability

Provide high-perfomance products or amenities Product quality

Offer fast deliveries Delivery speed

Customize products and services to customer needs Flexibility

Profit in price competitive markets Low-cost production

Introduce new products quickly Rapid innovation

Offer a broad product line Flexibility

Make rapid volume changes Flexibility

Make rapid product mix changes Customization, flexibility

Make product easily available Delivery speed/reliability (distribution)

Make rapid changes in design Flexibility

Source: Brown et al., 2005: 60

11 ottobre 2022 Prof. Fabio Nonino 6

FINANCIAL SERVICES COMPETITIVE STEEL PLANT

 Time for call center to respond

 Customization of terms, such as duration and

11 ottobre 2022 Prof. Fabio Nonino 8

Cash out-flow Delay Time → Costs

• Patients receive the most appropriate

AUTOMOBILE PLANT HIGH CONSISTENT

• All goods are in good condition EXTERNAL AND INTERNAL

• The immediate availability of goods

DEVELOPMENT ▪ Existing product

 LEAD TIME (LT)  DELIVERY TIME (DT)

Adapted from: De Toni and Meneghetti (2000)

Request for Delivery of a

11 ottobre 2022 Prof. Fabio Nonino 13

Concept/Idea First product introduction to market

RUN TIME Time spent for processing material

11 ottobre 2022 Prof. Fabio Nonino 15

Source: Slack et al., 2006: 247

Maximum time available = 7 * 24 hours

Speed losses while running amount to 10% (0.1) of rated speed, so

Total speed losses = 5 hours (idling) + ((135-5) * 0.1) hours (running)

11 ottobre 2022 Prof. Fabio Nonino 17

Net operating time = Total operating time – speed losses

Quality losses = 117 (Net operating time) * 0.03 (error rate)

Valuable operating time = Net operating time – Quality losses

11 ottobre 2022 Prof. Fabio Nonino 18

11 ottobre 2022 Prof. Fabio Nonino 19

Source: Newman et al. (1993)

Source: Slack et al., 2006: 346

11 ottobre 2022 Prof. Fabio Nonino 25

STATE CONDITIONS Productive capacity Product range

REVERSIBLE Volume flexibility Mix flexibility

IRREVERSIBLE Expansion flexibility Product flexibility

Adapted from: De Toni and Tonchia (2005)

 The trade-off concept (Skinner, 1969)

 The cumulative approach (De Meyer and Ferdows, 1990)

 Order winning and qualifiers (Hill, 1994)

 The importance-performance matrix (Slack, 1994)

 The focused-factory (Skinner, 1974)

11 ottobre 2022 Prof. Fabio Nonino 28

 The trade-off concept (Skinner, 1969)