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Strategic Management of Resources
Session 1Aligning Resourceswith Strategic Plans
Strategic Management of Resources, ver. 1.2—October 20021-2
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Strategic Management of ResourcesSession 1: Aligning Resources with Strategic Plans
Session 2: Choices Affecting Structure
Session 3: Choices Affecting Infrastructure
Session 4: Configuring and IntegratingOperating Processes
Session 5: Supply Chain Management
Session 6: Configuring and Integrating Design and Development and Cost
Management Processes
Session 7: Project Management
Session 8: Measurement Management
Session 9: Change Management
Strategic Management of Resources, ver. 1.2—October 20021-3
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Objectives of Session 1
Recognize the need for integration of the manufacturing process with the company strategy
Identify considerations to make in developing the strategy
Understand organizational strategy selection Explain how resources can be aligned with
strategic market objectives Determine the importance of customer
requirements in product design and development Describe the strategic importance of Just-in-Time
(JIT) and total quality management (TQM)
Strategic Management of Resources, ver. 1.2—October 20021-4
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Principle of Competitive Exclusion
“No two species can coexist that make their living in the
identical way.”
—Professor G.F. Gause
Strategic Management of Resources, ver. 1.2—October 20021-5
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Strategy (Strategic Plan)
The plan for how to marshal and determine actions to support the mission, goals,and objectives of an organization. Generally includes an organization’s explicit mission, goals, and objectives and the specific actions needed to achieve those goals and objectives.
— APICS Dictionary, 9th ed.
Strategic Management of Resources, ver. 1.2—October 20021-6
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Considerations in Developing Strategy Components
Development of time horizons Identification of key events Development of distinctive competence Creation of a competitive advantage Flexibility of decision patterns Transformation of inputs into value-added
outputs Commitment of necessary resources
Strategic Management of Resources, ver. 1.2—October 20021-7
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Strategic Planning Model
Source:Hayes, Robert H., Steven C. Wheelwright, and Kim B. Clark, Dynamic Manufacturing: Creating the Learning Organization, (The Free Press, 1988). Adapted with permission.
Corporateand
BusinessStrategy
ProductDevelopment
Strategy
OperationsStrategy
FinancialStrategy
MarketingStrategy
FacilitiesPlan
Short/LongTerm Planning
Plan
ControlsPlan
DirectionsPlan
MarketSegment
Plan
MarketNiches
Plan
CompetitiveAnalysis
Plan
ProductionTechnology
Plan
ProductionGeneration
Plan
MarketShares
Plan
CriticalSkillsPlan
UnitCapability
Plan
Economics New Technology
Cu
stom
er Req
uirem
ents
External FactorsRegulato
ry A
gen
cies
Co
mp
etit
ion
Financial PlanO
pera
tions P
lan
Marketing Plan
Product Dev
elop
men
t Pla
n
Strategic Management of Resources, ver. 1.2—October 20021-8
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A Corporate Strategy Model
Mission
Organizational Objectives
Environmental Scanning
Internal Strength and Weakness Analysis
Corporate Strategy
Vision
Strategic Management of Resources, ver. 1.2—October 20021-9
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Typical Strengths and Weaknesses
Function Weaknesses
Marketing Strong salesforceExcellent distribution
Excellent marketinginformation
Insufficient salesforcePoor forecasting
Finance/Accounting
Excess cashLarge line of credit
Excellent costinformationWall Street rating
Using wrong cost systemHeavily leveragedNo timely reporting
R&D/Design Experienced designersPatent protection
Insufficient R&D spending
Strengths
Strategic Management of Resources, ver. 1.2—October 20021-10
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Business Strategy ApproachesThree possible strategies for competitive distinction
Price leadership– Low-cost operations
– Effective supply chain management
– Standardized off-the-shelf products
– Standardized processes Product differentiation
– High-quality products
– Easily adaptable processes Focus toward a particular customer
– Responsive delivery, process flow
– Customized for targeted market segment
Strategic Management of Resources, ver. 1.2—October 20021-11
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Operations Strategy
“The content and process of activities, directed toward distinctive operations competence, that evaluate potential impacts of situations and alternatives in structured time dimensions and integrate a pattern of decisions to balance the resource commitments, output requirements, and risk in various focused transformation efforts”
Source: Stonebraker, Peter W. and G.Keong Leong , Operations Strategy, (Prentice-Hall, 1994). Reprinted with permission of Prentice-Hall..
Strategic Management of Resources, ver. 1.2—October 20021-12
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Four Elements of Operations Strategy
Method for evaluating the impact of activities
Definition of time dimensions– Time horizon – Time fences
A mechanism for integrating decisions
Transformation efforts
Source: Hayes, Robert H., Wheelwright, Steven C., and Clark, Kim B., Dynamic Manufacturing, (The Free Press, 1988). Reprinted with permission of The Free Press.
Strategic Management of Resources, ver. 1.2—October 20021-13
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Focus of an Operations Strategy Process-focused strategy
– Wide range of customized products or services at low volumes
Product- or service-focused strategy– Narrow range of standardized products
or services at high volumes Customer-focused strategy
Strategic Management of Resources, ver. 1.2—October 20021-14
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Strategy Development Approaches
Overview approach– Identify several core
strategic focuses– Make a checklist– Focus on one or two
issues Trade-off approach
– Identify most important variables and contributing factors
– Identify interaction and possible impacts
Reductionist approach– Identify root causes– Reduce effects
Sequential approach– Address competitive
priorities one at a time– Build upon foundation
priority
Source: Stonebraker, Peter W. and Leong G.Keong, Operations Strategy, (Allyn and Bacon, 1994). Adapted with permission of Allyn and Bacon.
Strategic Management of Resources, ver. 1.2—October 20021-15
Visual
Strategic Planning Model
Source:Hayes, Robert H., Wheelwright, Steven C., and Clark, Kim B., Dynamic Manufacturing: Creating the Learning Organization, (The Free Press, 1988). Adapted with permission of Prentice-Hall.
Corporateand
BusinessStrategy
ProductDevelopment
Strategy
OperationsStrategy
FinancialStrategy
MarketingStrategy
FacilitiesPlan
Short/LongTerm Planning
Plan
ControlsPlan
DirectionsPlan
MarketSegment
Plan
MarketNiches
Plan
CompetitiveAnalysis
Plan
ProductionTechnology
Plan
ProductionGeneration
Plan
MarketShares
Plan
CriticalSkillsPlan
UnitCapability
Plan
Economics New Technology
Cus
tom
er Req
uirem
ents
External FactorsRegula
tory
Age
ncie
sC
om
pet
itio
n
Financial PlanO
pera
tions Plan
Marketing Plan
Product Dev
elop
men
t Pla
n
Strategic Management of Resources, ver. 1.2—October 20021-16
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Operations Strategy
Source: Stonebraker, Peter W. and Keong Leong, G., Operations Strategy (Boston: Allyn and Bacon, 1994). Adapted with permission of Allyn and Bacon.
Corporate StrategyFocus: Survival
Service-enhanced product or delivered service Satisfied customer
Policy
Manufacturing Operations Strategy
Focus: Competitive Strategies
Cost Flexibility Quality Delivery
Other OperationsStrategies
MarketingFinance
Human ResourceEngineering
Business StrategyFocus: Distinctive competence in the field
• Cost leadership• Product differentiation• Focus (cost or differentiation)
Strategic Management of Resources, ver. 1.2—October 20021-17
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A Firm Can Compete On
PriceQuality
Time
Flexibility
Delivery
Product Design Service
Strategic Management of Resources, ver. 1.2—October 20021-18
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Competitive Advantage Categories
Nonissues
Characteristics that do not enter into the competitive picture for that market niche
Order Winners
Characteristics that make your customers prefer you over competitors
Qualifiers
Characteristics you need to get into the game
Source: Hill, Terry, Manufacturing Strategy, (Irwin McGraw-Hill, 1994). Reprinted with permission of Irwin McGraw-Hill.
Strategic Management of Resources, ver. 1.2—October 20021-19
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Determinants of Industry Attractiveness
Source: Porter, Michael E., and Victor E. Millar, How Information Gives You Competitive Advantage (Harvard Business Review Strategic Management of Resources APICS Readings APICS, 2000.
Bargainingpowerof buyers
Bargainingpowerof suppliers
Threat of substitute products or services
Threat of newentrants
Rivalry among existing competitors
Strategic Management of Resources, ver. 1.2—October 20021-20
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Total Quality Management
“An effective system for integrating the quality development, quality maintenance, and quality improvement efforts of the various groups in an organization so as to enable production and service at the most economical levels which allow for full customer satisfaction”
—Armand Fiegenbaum
Quality
Strategic Management of Resources, ver. 1.2—October 20021-21
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Approaches to Quality
Transcendent quality is an ideal, a condition of excellence
Product-based quality is based on a product attribute
User-based quality is fitness for use Manufacturing-based quality is
conformance to requirements Value-based quality is the degree of
excellence at an acceptable price
Strategic Management of Resources, ver. 1.2—October 20021-22
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Quality Function Deployment
A methodology designed to ensure that all the major requirements of the customer are identified and subsequently met or exceeded through the resulting product design process and the design and operation of the supporting production management system.
Source: APICS Dictionary, 9th Ed. 1998
Strategic Management of Resources, ver. 1.2—October 20021-23
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--The Committee
Strategic Management of Resources, ver. 1.2—October 20021-24
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Internal and External Customers
OrganizationProcess
Process
Internal Customer
Internal Customer
External Customer
Output
Output
Strategic Management of Resources, ver. 1.2—October 20021-25
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Quality Costs
Internal failure costs External failure costs Appraisal costs Prevention costs
Strategic Management of Resources, ver. 1.2—October 20021-26
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Quality at the Source
Companywide involvement Employee empowerment Development of world-class suppliers Prevention orientation Employee morale/attitudes
Strategic Management of Resources, ver. 1.2—October 20021-27
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Strategic Importance One way to achieve competitive advantage Customer focused and customer driven Necessary for survival and competitive
advantage
Customer
Overall Business Strategy
JIT TQM
Strategic Management of Resources, ver. 1.2—October 20021-28
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Definition of JIT
JIT is a philosophy of operations based on planned elimination of all waste and on continuous improvement of productivity. It encompasses the successful execution of all manufacturing activities required to produce a final product or service, from design engineering to delivery, including all stages of conversion from raw material onward.
Source: APICS Dictionary, 9th Ed. 1998
Strategic Management of Resources, ver. 1.2—October 20021-29
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Important Concepts of JIT
Elimination of Waste Respect for People
Continuous Improvement Focus on Customer
Customer
Strategic Management of Resources, ver. 1.2—October 20021-30
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Lean and JIT Similarities
Based on the Toyota production system Focus on value as defined by the customer Focus on eliminating all forms of waste Employ total quality management tools Employ continuous improvement
Strategic Management of Resources, ver. 1.2—October 20021-31
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--The Committee
Strategic Management of Resources, ver. 1.2—October 20021-32
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--The Committee
Strategic Management of Resources, ver. 1.2—October 20021-33
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--The Committee
Strategic Management of Resources, ver. 1.2—October 20021-34
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Benefits of JIT
50-90% reduction in throughput times 50-90% reduction in work in process 60-80% reduction in scrap and rework 50-90% reduction in setup times 30-60% reduction in manufacturing space
required
Source: Sandras, W. A. Jr., Just-in-Time: Making It Happen (Unleashing the Power of Continuous Improvement.), (John Wiley and Sons, 1989.) Adapted with permission of John Wiley and Sons.
Strategic Management of Resources, ver. 1.2—October 20021-35
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Benefits of JIT (cont.)
20% increase in shipments 40% reduction in space utilization 33% reduction in labor standards
Source: Hall, Robert W., Attaining Manufacturing Excellence, (Dow Jones-Irwin, 1987). Adapted with permission of Dow Jones-Irwin.
Strategic Management of Resources, ver. 1.2—October 20021-36
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Benefits of JIT (cont.)
Source: Wantuck, K.A., Just in Time for America, (KWA Media, 1989). Adapted with permission of KWA Media.
Improved ReducedQuality Inventory
Productivity Lot sizes
Service Lead times
Capacity Unit costs
Standardization Design time
Transport Systems Space
Flexibility Energy
Strategic Management of Resources, ver. 1.2—October 20021-37
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Objectives of JIT
To gain a competitive advantage To improve responsiveness to customers To achieve perfect quality To improve quality of work life To improve flexibility To improve resource productivity To use time-based management To reduce product cost