Guevarra, Jan Michael A.

Magsombol, Anthony

Written Report-Production and Operations Management IDENTIFYING MISSION AND STRATEGY An effective operations management effort must have a mission so it knows where it is going and a strategy so it knows how to get there. MISSION Economic Success, indeed survival is the result of identifying mission to satisfy a costumers needs and wants. We define the organizations mission as its purpose what it will contribute to society. Mission statement provide boundary and focus for organizations and the concept around which the firm can rally.The mission states the rationale for the organizations existence.Developing a good strategy is difficult, but it is much easier if the mission has been well defined. The mission can also be thought of as the intent of the strategy. STRATEGY Strategy is an organizations action plan to achieve the mission.Each functional area has a strategy for achieving its mission and for helping the organization reach the overall mission. These strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses. We suggest that firms achieve missions in three conceptual ways: (1) differentiation, (2) cost leadership, and (3) quick response.This means operations manager is called on to deliver goods and services that are better of at least different, cheaper, and more responsive. Operations manager translate these strategic concepts into tangible task to be more accomplished. Any one or combinations of this strategic concept can generate a system that has a unique advantage over competitors. Clearly strategies differ. And each strategy puts different demand on operations management. ACHIEVING COMPETITIVE ADVANTAGE THROUGH OPERATIONS Each of the three strategies provides an opportunity for operations manager to achieve competitive advantage. Competitive advantage implies the creation of a system that has a unique advantage over competitors. The idea is to create costumer value in

an efficient and sustainable way. Pure forms of these strategies may exist, but operations managers will more likely be called on to implement some combinations of them. COMPETING ON DIFFERENTIATION Differentiation is concerned with providing uniqueness. A firms operation for creating uniqueness is not located within a particular function or activity, but can arise in virtually everything that the firm does. Moreover, because most products include some services and most services include some product, the opportunities for creating this uniqueness are limited only by imagination. Indeed, differentiation should be thought of as going beyond both physical characteristics and services attributes to encompass everything about the product or service that influences the value that the costumer derive from it. Therefore effective operations manager assist in defining everything about a product or services that will influence the values to the costumer. This may be convenience of a broad product line, product features, or product services. COMPETING ON COST Low-cost leadership entails achieving maximum value as defined by your costumer. It requires examining each of the 10 OM decisions in a relentless effort to drive down cost while meeting costumer expectation of valued. A low cost strategy does not imply low value or low quality. COMPETING ON RESPONSE The third strategy option is response. Response is often thought of a flexible response, but it also refers to reliable and quick response. Indeed, we define response as including the entire range of values related to timely product development and delivery, as well as reliable scheduling and flexible performance. Flexible response may be thought of as the ability to match changes in a marketplace in which design innovations and volumes substantially. The second aspect of response is reliability of scheduling. The third aspect of response is quickness. In practice, these three concepts-differentiation, low cost, and response are often implemented via six specific strategies(1)flexibility in design and volume, (2) low price, (3) delivery,(4) quality, (5) after sale service, and (6) a broad product line. Through these six specific strategies, OM can increase productivity and generate a sustainable competitive advantage. Proper implementations of the following decisions by operations managers will allow these strategies to be achieved.

TEN STRATEGIC OM DECISIONS Differentiation, low cost, and response can be achieved when managers make effective decisions in 10 areas of OM. These are collectively known as operations decisions. The 10 decision of OM that support missions and implement strategies follow: 1. Goods and service design. Designing goods and services defines much of the transformation process. Cost, quality and human resource decision interact strongly with design decisions. Designs usually determine the lower limits of cost and the upper limit of quality. 2. Quality. The costumers quality expectations must be determines and policies and procedures established to identify and achieve that quality. 3. Process and capacity design. Process options are available for products and services. Process decisions commit management to specific technology, quality, human resource use, and maintenance. These expenses and capital commitments will determine much of the firms basic cost structure. 4. Location Selection. Facility-Location decisions for both manufacturing and service organization may determine the firms ultimate success. Errors made at this juncture may overwhelm other efficiencies. 5. Layout Design. Capacity needs, personnel levels, purchasing decisions, and inventory requirements influence layout. Additionally, process and materials must be sensibly located in relation to each other. 6. Human Resources and job design. People are an integral and expensive part of the total system design. Therefore, the quality of work life provided, the talent and skills required, and their cost must be determined. 7. Supply-chain management. These decisions determine what is to be made and what is to be purchased. Consideration is also given to quality, delivery, and innovation, all at satisfactory price. An atmosphere of mutual respect between buyer and supplier is necessary for effective purchasing. 8. Inventory. Inventory decisions can be optimized only when customer satisfaction, suppliers, production schedules, and human resource planning are considered. 9. Scheduling. Feasible and efficient schedules of production must be developed; the demands on human resources and facilities must be determined and controlled. 10. Maintenance. Decisions must be made regarding desired levels of reliability and stability, and system must be established to maintain that reliability and stability. Operations manager implement these decisions by identifying key task and he staffing needed to achieve them. However, the implementation of decisions is

influences by a variety of issues, including a products proportion of goods and services. Few products are either all goods or all services. While the 10 decisions remains the same for goods and services, their relative importance and method of implementation depend upon this ratio of goods and services. ISSUES ON OPERATIONS STRATEGY Once a firm has formed a mission, developing and implementing a specific strategy requires that the operations manager consider a number of issues. We will examine these issues in three ways. First, we look at what research tells us about effective operations management strategies. Econ, we identify some of the preconditions to developing effective OM strategy. Third, we look at the dynamics of the OM strategy development.

RESEARCH Strategic insight has been provided by the findings of the Strategic Planning Institute, Its PIMS program (profit impact of market strategy) was established in cooperation with the General Electric Corporation. PIMS has collected nearly 100 data items form about 3000 cooperating organization. Using the data collected and high return on investment as a measure of success. PIMS has been able to identify some characteristics of high ROI firms. Among those characteristics that impact strategic OM decisions are: 1. High product quality (relative to competition). 2. High capacity utilization. 3. High operating efficiency (the ration of expected to actual employee productivity). 4. Low investment intensity (the amount of capital required to produce a dollar of sales). 5. Low direct cost per unit (relative to the competition). These five finding supports a high return on investment and should therefore are considered as an organization develops a strategy. In the analysis of a firms relative strength and weaknesses, these characteristics can be measured and evaluated. PRECONDITIONS Before establishing and attempting to implement a strategy, the operations manager needs to understand that the firm is operating in an open system in which a multitude factors exist. These factors influence strategy development and execution. The more thorough the analysis and understanding of both the external and internal

factors, the more the likelihood of success. Although the list of factors to be considered is extensive, at a minimum it entails an understanding of: 1. Strengths and weaknesses of competitors, as well as possible new entrants into the market, substitute products, and commitment of suppliers and distributors. 2. Current and prospective environmental, technological. Legal and economic issues. 3. Product life cycle, which may dictate the limitations of operations strategy. 4. Resources available within the firm and within the OM function. 5. Integration of the OM strategy with the companys strategy and other functional areas. DYNAMICS Strategies change for two reasons. First, strategy is dynamic because of changes within the organization. All areas of the firm are subjected to change. Changes may be in a variety of areas, including purchasing, finance, technology, and product life. All may make a difference in an organizations strengths and weaknesses and therefore its strategy. Strategy is also dynamic because of change in the environment. STRATEGY DEVELOPMENT AND IMPLEMENTATION Once firms understand the issues involved in developing an effective strategy, they evaluate their internal strengths and weaknesses as well as the opportunities and threats of the environment. This is known as SWOT analysis (for Strength, Weakness, Opportunities, and Threats). Beginning with SWOT Analysis, firms position themselves, through their strategy, to have a competitive advantage. The firm may have excellent design skills or great talent at identifying outstanding locations. However, the firm may recognize limitations of its manufacturing process or in finding good suppliers. The idea is to maximize opportunities and minimize threats in the environment while maximizing the advantages of the organizations strengths and minimizing the weaknesses. Any preconceived ideas about mission are then reevaluated to ensure they are consistent with the SWOT analysis. Subsequently, a strategy for achieving the mission is developed. This strategy is continually evaluated against the value provided customers and competitive realities. IDENTIFY CRITICAL SUCCESS FACTORS Because no firm does everything exceptionally well, a successful strategy implementation requires identifying those tasks that are critical to success.

Critical success factors are selected in the light of achieving the mission, as well as the organizations internal strengths. Critical success factors (CSFs) are those relatively few activities that make a difference between having and not having a competitive advantage. Ultimately the CSFs make a difference between an organizations success and failure. Successful organizations identify and use critical success factors to develop a unique and distinct competence that allows them to achieve a competitive advantage. BUILD AND STAFF THE ORGANIZATION The operations managers job is a three step process. Once a strategy and a critical success factors have been identified, the second step is to group a necessary activities into an organizational structure. The third step is to staff it with personnel will get the job done. The manager works with the subordinate managers to build plans, budgets and programs that will successfully implement strategies that achieved missions. INTEGRATE OM WITH OTHER ACTIVITIES The organization of the operations function and its relationship to other parts of the organization vary with the OM mission. Moreover, the operations function is most likely to be successful when the operation strategy is integrated with other functional areas of the firm such as marketing finance and MIS, and human resources. The operations manager job is to implement OM strategy increase productivity and provide competitive advantage.

Why global operations are important There are many reasons why a domestic business operation will decide to change some form of international operation. These can be viewed as the continuum ranging from tangible reasons to intangible reasons.

A GLOBAL PERSPECTIVE PROVIDES COMPETETIVE ADVANTAGE PROVIDE BETTER GOODS AND SERVICES- while the characteristics of good and services can be objective and measurable, they can also be subjective and less measurable. ATTRACT NEW MARKETS- because international operations require local interaction w/ foreign costumers, suppliers, and other international businesses. International services inevitably learn about unique opportunities for new products and services. LEARN TO IMPROVE OPERATIONS- learning does not take place in isolation. Firms serve themselves and their costumers well when they remain open to the free flow of ideas. ATTRACT AND RETAIN GLOBAL TALENT- global organizations can attract and retain better employees by offering more employment opportunities, people are needed in all functional areas of expertise worldwide.

ACHIEVING GLOBAL OPERATIONS 1. 2. 3. 4. Product design Process design and technology Facility location Culture and ethics

GLOBAL PRODUCT DESIGN because products are designed for the user. Social and cultural differences must be taken into consideration in any global product design. GLOBAL FACILITY LOCATION ANALYSIS- one of the first steps in going international is to determine the country in which to locate a new factory or service facility

IMPACT OF CULTURE AND ETHICS

One of the greatest challenges to global operations is reconciling differences in social and cultural behavior. Managers sometimes do not know how to behave when operating a business w/ people of diff. social or cultural backgrounds.

GLOBAL ISSUES IN SERVICE OPERATIONS Globalization affects services just as it does manufacturing. An international service provider is a firm that creates utility for global costumer by transforming resources into services. Global service operations are on rise all over the world. One quarter of all international trade is estimated to derive from the sale of services. Experts generally agree that providing services to foreign markets offers greater growth potential than either manufacturing or agriculture. Typically, procedures for establishing global services operations involve four steps. Step1: Determine if sufficient people or facilities exist to support the service. Step 2: Identify markets that are open that is, not protected by foreign countries. Step 3: Determine what service are of most interest to foreign customers. Start with services that the domestic operations does well. Then see if similar services are offered and what resources would be needed to enter the foreign market. Step 4: Determine how to reach global costumers. Approaches include exploring the Internet, buying clients lists, using existing business suppliers for initial referrals, and getting information from local colleges and government agencies in the foreign country.

MANAGING GLOBAL SERVICE OPERATIONS Managing new global service operations involves a fresh perspective on several interesting issues, including the following: y y y y Capacity planning Location planning Facilities design and layout Scheduling

Capacity planning. A new or unique service can be a significant challenge to capacity planning, particularly in a new cultural environment. Location Planning.Setting up branch facilities in foreign markets and then staffing with locals can present some unique challengers. An understanding of such local issues as attitudes towards commuting and housing may make a difference in the quality of personnel hired. Facility Design and Layout. To establish the appropriate look and layout, global facilities must also have careful design. Scheduling. Finally, global firms must schedule operations to meet customers needs. GLOBAL OPERTATIONS STRATEGIES To help understand international business activity, experts have categorized firms according to the extent of their global activities. An international business is any firm that engages in international trade or investment. This is a very broad category and is the opposite of a domestic or local firm. A multinational corporation (MNC) is a firm with extensive international business involvement. MNCs buy resources, create goods or services, and sell goods or services in a variety of countries. The term multinational corporation applies to most of the worlds large, well-known businesses. Operations mangers of international and multinational firms approach global opportunities with one of four operations strategies. They are: International, Multidomestic, Global, and transnational. International Strategy An international strategy uses exports and licenses to penetrate the global arena. The international strategy is least advantageous with little local responsiveness and little cost advantage. There is little responsiveness because we are exporting or licensing a good from home country. And the cost advantage may be few because we are using the existing production process at some distance from the new market. However, an international strategy is often the easiest, as exports can require little change in operations, and licensing agreement often leave much of the risk to the licensee. Multidomestic Strategy The multidomestic strategy has decentralized authority with substantial autonomy at each business. Organizationally these are typically subsidiaries, franchises, or joint ventures with substantial independence. The advantage of this strategy is maximizing a competitive response for the local market. However, the strategy has little or no cost

advantage. Many food products such as Heinz use a multidomestic strategy to accommodate local taste, because global integration of the production process is not critical. Global Strategy A global strategy has a high degree of centralization, with headquarters coordinating the organization to seek out standardization and learning between plants, thus generating economies of scale. This strategy is appropriate when the strategic focus is cost reduction, but has little to recommend it when the demand for local responsiveness is high. Transnational Strategy A transnational strategy exploits the economies of scale and learning, as well as pressure for responsiveness, by recognizing that core competence does not reside in just the home country, but can exist anywhere in the organization. Transnational describes a condition in which material, people, and ideas cross or transgress national boundaries. These firms have the potential to pursue all three operational strategies. Such firms can be thought of as world companies whose country identity is not as important as its interdependent network of worldwide operations. Key activities in a transnational company are neither centralized in the parent company nor decentralized so that each subsidiary can carry out its own task on a local basis. Instead, the resource and activities are dispersed, but specialized, so As to be both efficient and flexible in an interdependent network.