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Operations

Management
Operations Strategy
Chapter 2

Business Elements
Structural
buildings, equipment, technology,
computer systems

Infrastructural
organization, planning & control,
decision rules, quality management,
purchasing, product/service development

( Personnel )

Mission
The organizations purpose for being; provides
boundaries and focus

Merck The mission of Merck is to provide society with


superior products and services - innovations and solutions that
improve the quality of life and satisfy customer needs - to provide
employees with meaningful work and advancement opportunities
and investors with a superior rate of return

Hard Rock Caf To spread the spirit of Rock n Roll


by delivering an exceptional entertainment and dining experience.
We are committed to being an important, contributing member of
our community and offering the Hard Rock family a fun, healthy,
and nurturing work environment while ensuring our long-term
success.

Mission / Strategy / Core Competencies


Mission The organizations purpose for being;
provides boundaries and focus

Business strategy Action plan for the business


to achieve the mission

Functional strategies Translate the business strategy


into specific actions for the functional areas

Core competencies Organizational abilities/strengths,


developed over a long period, which customers find
valuable, and competitors find difficult to copy

Strategy Linkages / Alignment


All functional strategies must support the business strategy
Marketing strategy based on differentiation and customization
Operations strategy to build to stock
Financial strategy to minimize capital investment
Operations strategy to increase investment for quality improvement
Engineering strategy to specify an entirely new part when an
existing part will do
Operations strategy for low cost

Strategy Process
Mission Statement
Business Strategy
- Targeted customers / markets
- Areas of sustainable competitive advantage
- Role of supply chain partners
- Time frames & performance objectives

Strategic

Operations Strategy
- Translate business strategy into
operations & supply chain actions
- Provide value to targeted customers
- Develop supporting core competencies

Alignment

Other Functional Strategies


- Marketing
- Finance
- Human Resources
- Research & Development
- Engineering

Four Performance Dimensions


Mission Statement

Quality
Performance quality
Business
Strategy
Conformance quality
- Targeted customers / markets
- Areas-of sustainable
competitive advantage
Reliability
quality
- Role of supply chain partners
Time
Delivery
speed
- Time frames & performance
objectives
Delivery reliability
Flexibility Volume flexibility
Mix flexibility
Operations StrategyOther Functional Strategies
- Translate business strategy
- Marketing flexibility
- into Changeover
operations & supply chain actions
- Finance
Cost
Low-cost
operations
- Provide value to targeted customers
- Human
Resources
- Develop supporting core competencies

- Research & Development


- Engineering

Order Winners vs. Order Qualifiers


Order winners performance dimensions that
differentiate a companys products and services from
its competitors

Order Qualifiers performance dimensions on which


customers expect a minimum level of performance
Item

Supplier A

Supplier B

Conformance
quality

99.9% pure - Meets

98% pure Does not meet

Delivery

3 days

2 days

Cost

$30 / liter

$20 / liter

Flexibility

100 liter minimum order

50 liter minimum order

Operations Strategy
Mission Statement

Operations strategy
Services

Business StrategyManufacturing

Customized
Make-to-order
servicescustomers / markets
- Targeted
Assemble-to-order
Assemble-to-order
- Areas of sustainable competitive
advantage
Standardized
Make-to-stock
services
- Role
of supply chain partners
- Time frames & performance objectives

Process decisions
Operations
Strategy
Quality
decisions
Other Functional Strategies
Capacity,
location,
- Translate business
strategy
into and layout decisions
- Marketing
Operating
operations & supply
chaindecisions
actions
- Finance
- Provide value to targeted customers
- Human Resources
- Develop supporting core competencies
- Research & Development
- Engineering

Operations Strategy
Service Strategies

Customized Services Strategy

Manufacturing Strategies

Make to Order (MTO)

Individualized services

Receive order before producing goods

e.g. Health clinic

e.g. Machine shop

Assemble to Order Strategy

Assemble to Order (ATO)

Assemble standardized offerings for


a specific customers needs

Stock standardized components/assemblies


assemble finished product to customer order

e.g. Cellular phone service

e.g. Dell Computer

Standardized Services Strategy

Make to Stock (MTS)

High volume with little variety

Satisfy customer orders from inventory

e.g. U.S. Postal Service

e.g. Paper

Generic Operations Strategies


Mission Statement

Differentiation better / unique


Business Strategy

- Targeted customers / markets


- Areas of sustainable competitive advantage
- Role of supply chain partners
- Time frames & performance objectives

Cost leadership cheaper / value


Operations Strategy

Other Functional Strategies


Quick
response

faster
- Translate business strategy into
- Marketing
operations & supply chain actions
- Provide value to targeted customers
- Develop supporting core competencies

- Finance
- Human Resources
- Research & Development
- Engineering

Operations Strategies - Examples

Closing the Loop


Mission Statement
Business Strategy
- Targeted customers / markets
- Areas of sustainable competitive advantage
- Role of supply chain partners
- Time frames & performance objectives

Strategic

Operations Strategy
- Translate business strategy into
operations & supply chain actions
- Provide value to targeted customers
- Develop supporting core competencies

Alignment

Other Functional Strategies


- Marketing
- Finance
- Human Resources
- Research & Development
- Engineering

OMs Contribution to Strategy


Operations
Decisions

Specific
Strategy Used

Examples

Quality
Product

FLEXIBILITY

Sonys constant innovation of new products


HPs ability to follow the printer market

Process

Design
Volume

Southwest Airlines No-frills service

LOW COST

Location

DELIVERY

Pizza Huts five-minute guarantee at lunchtime


Federal Expresss absolutely, positively on time

Layout
Human Resource
Supply Chain

Speed
Dependability

Maintenance

Differentiation
(Better)

QUALITY

Motorolas automotive products ignition systems


Motorolas pagers

Conformance
Performance

Inventory
Scheduling

Competitive
Advantage

IBMs after-sale service on mainframe computers


Fidelity Securitys broad line of mutual funds

AFTER-SALE SERVICE

BROAD PRODUCT LINE

Cost
leadership
(Cheaper)

Response
(Faster)

Strategy and Issues During a Products Life

Summary
Strategy is how we accomplish our mission
Functional strategies must be aligned to support
the business strategy
OM goals are to be faster, better and/or cheaper
Operations strategy:

Where the product or service is in its life cycle


Determines our mix of faster, better, and cheaper to
satisfy our customers (trade-offs where necessary)
Specifies process choice, work flow, order processing,
inventory, capacity, etc.