PRODUCTION OPERATIONS

MANAGEMENT

By: ZAHID HUSSAIN

University of Central Punjab
Lahore Pakistan

Session-2
Operations Strategy and
Competitiveness

OBJECTIVES
Operations Strategy
Competitive Dimensions
Order Qualifiers and Winners
Strategy Design Process
A Framework for Manufacturing Strategy
Service Strategy

DEFINITION
"Strategy is the direction and scope of
an organization over the long-term:
which achieves advantage for the
organization through its configuration of
resources within a challenging
environment, to meet the needs of
markets and to fulfill stakeholder
expectations".

DEFINITION
"Strategy is the direction and scope of an organization over the longterm: which achieves advantage for the organization through its
configuration of resources within a challenging environment, to
meet the needs of markets and to fulfill stakeholder expectations".
Where is the business trying to get to in the long-term (direction)

Which markets should a business compete in and what kind of

activities are involved in such markets? (markets; scope)
How can the business perform better than the competition in those
markets? (advantage)?
What resources (skills, assets, finance, relationships, technical
competence, facilities) are required in order to be able to compete?
(resources)?
What external, environmental factors affect the businesses' ability
to compete? (environment)?
What are the values and expectations of those who have power in
and around the business? (stakeholders)

HIERARCHY OF STRATEGY
Corporate Strategy
Business Unit Strategy

Operations
Strategy

LEVELS OF STRATEGY
Corporate Strategy is concerned with the overall
purpose and scope of the business to meet
stakeholder expectations. This is a crucial level
since it is heavily influenced by investors in the
business and acts to guide strategic decisionmaking throughout the business.
Business Unit Strategy is concerned more with how
a business competes successfully in a particular
market. It concerns strategic decisions about choice
of products, meeting needs of customers, gaining
advantage over competitors, exploiting or creating
new opportunities etc

LEVELS OF STRATEGY
Operations Strategy
OS concerned with how each part of the business is
organized to deliver the corporate and business-unit
level strategic direction. Operational strategy therefore
focuses on issues of resources, processes, people etc.
OS involves decisions related with the design of a process
and infrastructure needed to support the process.
Process design decisions: Selection of technology,
process time, role of inventory in process,
Infrastructure decisions: associated with planning &
Control systems, QA and QC approach, Op functions
organization,

Operations Strategy
Strategy Process

Example

Customer Needs

More Product

Corporate Strategy

Increase Org. Size

Operations Strategy

Decisions on Processes
and Infrastructure

Increase Production Capacity

Build New Factory

Operations Strategy Framework

Strategic Vision

Identifies target
market, firm
product line, core
enterprises and
operational
capabilities.

Customer Needs

New product : Old product

Competitive
dimensions & requirements

Quality, Dependability, Speed, Flexibility, and Price

Enterprise capabilities
Operations
and
Supplier
Capabilities
Operations &
Supplier
capabilities
R&DR&D

Technology

Systems
Technology
Systems

People
People

Distribution
Distribution

Support Platforms
Financial management

Human resource management

Information management

Competitive Dimensions
Competitive dimensions form competitive
position of a company.
Cost (Low cost producer can establish the selling price)
Product Quality and Reliability (Over and under design
product)

Delivery Speed (Onsite repair of computer)

Delivery Reliability (Tires at car assembly line)
Coping with Changes in Demand (Cost reduced &
Laying off)

Flexibility and New Product Introduction Speed

Other Product-Specific Criteria (Tech Support- After
sales service- colors, size, weight, product mix)

Competitive Dimensions

Activity Mapping: Southwest Airlines Low Cost

Competitive Advantage
Courteous, but
limited passenger
service
Pilot training on only one type of Short haul, point-to-point
High number
level
ofgate
stock
ownership
High
of flights
reduces
Lower
costs
atstandardroutes, often to secondary
Lean, productive aircraft
Flexible
employees
and
No
seat
assignments
Hire for
attitude,
then
train
employee
idle time
between
employees
secondary
airports
Reduced
maintenance
inventory
planes
aids
scheduling
airports
Noemployee
baggage transfers
Competitive
Advantage:
High
compensation
flights
required
because
ofofonly
one type of
Automated
ticketing
machines
Flexible
union
contracts
High
number
flights,
Low
Cost
Empowered
employees
Saturate
a
city
with
flights
No meals personnel trained on
aircraft
Maintenance
reduces
employee
idle per
Automated
ticket
machines
lowering
administrative
costs
Excellent
relations
only one
type
of aircraft
timesupplier
between
flights with
passenger
for
that
city
Boeing
hasgate
aided
financing
High aircraft
20 minute
turnarounds
Frequent, reliable
utilization

Standardized fleet of
Boeing 737 aircraft

PowerPoint presentation to accompany Heizer/Render Principles

of Operations Management, 5e, and Operations Management, 7e

schedules

Activity Mapping: Southwest Airlines Low Cost

Competitive Advantage

PowerPoint presentation to accompany Heizer/Render Principles of

Operations Management, 5e, and Operations Management, 7e

Dealing with Trade-offs

Operations can not excel simultaneously on all competitive
dimensions. Have to decide the most significant performance
parameter, critical to organization success.
To gain a competitive advantage on one side you have to cost
on other side.
Trade off between delivery performance and material holding
and in process cost.
Trade off between response and equipment cost:
Cost
For
Forexample,
example,ififwe
wereduce
reduce
costs
costsby
byreducing
reducingproduct
product
quality
qualityinspections,
inspections,we
wemight
might
reduce
reduceproduct
productquality.
quality.So
So
what
whatis
isimportant?
important?

Flexibility

Delivery
Quality

Order Qualifiers and Winners

(A Marketing Operation Link)

Order qualifiers are the Screening

criterion that permit a firms products to
be considered as possible candidates for
purchase by customers
Order winners are the criterion that
differentiates the products and services
of one firm from another. It may be price,
quality, reliability,

Service Breakthroughs
A brand name car
can be an
order qualifier

Repair services can be order winners

Examples: Warranty, Roadside Assistance,
Leases, etc

Steps in Developing a Manufacturing

Strategy
Objective to develop manufacturing strategy
a). To translate required competitive dimension
into specific performance requirement for
operations.
b). To make and implement plan to ensure that
the operations capabilities are sufficient to
accomplish them

Steps in Developing a Manufacturing

Strategy
1. Segment the market according to the
product group (St medical equip, Electronic measuring devices
for hospitals and original equipment manufacturers)

2. Identify product requirements, demand

patterns, and profit margins of each group
3. Determine order qualifiers and winners
for each group
4. Convert order winners into specific
performance requirements

Service Strategy
Service strategy begins by selecting performance
priorities by which the service firm will compete. It
include:
Treatment of customer in term of friendliness and
helpfulness.
Speed and convenience of service delivery.
Price of services
Variety of service
Quality of tangible goods that accompany the
services.
Unique skill that constitute the services offering.

Strategy Design Process

Strategy Map

What it is about!

Financial Perspective

Improve Shareholder Value

Customer Perspective

Customer Value Proposition

Internal Perspective

Build-Increase-Achieve

Learning and Growth Perspective

A Motivated and Prepared

Workforce

Kaplan & Nortons Generic Strategy Map

Return on
capital
Productivity
employed

strategy yield
result sooner
than revenue
growth
strategy
Customer
management
Three ways
process,
to
Relationship
differentiate
management
for better
customer
Strategic
solution

skill &
knowledge
to support
the strategy

QUESTIONS