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Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

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Page 1: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Manufacturing Strategy & Operations

Saad Ahmed JavedNational College of Business Administration & Economics

Page 2: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Chapter 3 (Part-I)

Operations Strategy and Competitiveness• Operations Strategy

• Competitive Dimensions

• Order Qualifiers and Winners

• A Framework for Manufacturing Strategy

• Distinctive Competencies and Capabilities

• Productivity Measures

Page 3: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Operations StrategyExampleStrategy Process

Customer Needs

Corporate Strategy

Operations Strategy

Decisions on Processes and Infrastructure

Page 4: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Competitive Dimensions• Cost - • Product Quality and Reliability - • Delivery Speed - • Flexibility & Innovation -• New Product Introduction Speed - • Other Product-Specific Criteria - Technical

support, after-sales support

Page 5: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Dealing with Trade-offs

Cost

Quality

DeliveryFlexibility

For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.

For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.

Firms must decide how they are going to compete on these dimensions.Who determines the winning combination?

Current thinking -

Page 6: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Order Qualifiers and Winners - Terry Hill•Order qualifiers–

•Order winners–

•Order losers–

Page 7: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Service Breakthroughs• A brand name car

can be an “order qualifier”

· Repair services can be “order winners”

Examples: Warranty, Roadside Assistance, Leases, etc.

Page 8: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Kaplan and Norton’s Strategy Map

Strategy Map

Financial Perspective

Customer Perspective

Internal Perspective

Learning and Growth Perspective

What it is about!

Page 9: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Kaplan and Norton’s Generic Strategy MapUnder the Financial Perspective, there are two generic strategies for driving financial performance

· Revenue Growth Strategy is made up of two

components

– Build the franchise:

– Increase customer value:

· Productivity Strategy is made up of two components

– Improve cost structure:

– Increase asset utilization:

Page 10: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Kaplan and Norton’s Strategy Map (Cont.)Under the Customer Perspective, there are three ways suggested as means of differentiating a company from others in a marketplace:

1. Product leadership -

2. Customer intimacy -

3. Operational excellence -

Page 11: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Kaplan and Norton’s Strategy Map (Cont.)The Internal Perspective defines the business processes that the organization will use to support the customer value proposition. Operations management supports these propositions through:

1. Innovation processes -

2. Customer management processes -

3. Operational processes -

4. Regulatory and environmental processes -

Page 12: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Kaplan and Norton’s Strategy Map (Cont.)

In the Learning and Growth Perspective, there are three principle categories of intangible assets needed for learning:

1. Strategic competencies -

2. Strategic technologies -

3. Climate for action -

Page 13: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Operations Strategy Framework

Page 14: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Steps in Developing a Manufacturing Strategy

1. Segment the market according to the product group.

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.

Page 15: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Distinctive CompetenciesDistinctive Competencies• Organizational strengths (SWOT) possessed by

few competing firms– e.g., ability to engineer small-sized products

• Exploiting can lead to competitive advantage– Condition that increases chances of achieving

strategy– e.g., miniaturization of products to meet customer

demands and lower shipping costs• Sometimes referred to as core competencies

Page 16: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Strategy Capacity Capabilities• Process-based

• Systems-based –

• Organization-based–

Page 17: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Total Measure Productivity

• Total measure Productivity = Outputs Inputs

Page 18: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Partial Measure Productivity

• Partial measures of productivity =

Labor

OutputCapital

Output

Materials

OutputEnergy

Outputor or or etc.or

Page 19: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Multifactor Measure Productivity

• Multifactor measures of productivity =

EnergyCapitalLabor

Output

MaterialsCapitalLabor

Output

or

or etc.

Page 20: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Example of Productivity Measurement• You have just determined that your service employees

have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms.

• Which productivity measure should be used?• Answer:

• Is productivity increasing or decreasing?• Answer:

Page 21: Manufacturing Strategy & Operations Saad Ahmed Javed National College of Business Administration & Economics

Another ExampleA factory manufactures three industrial components, H, C, and S. The factory counts C as equivalent to 1.2 H and S as equivalent to 0.8 H. Five employees work 40 hours/week at the factory. If the factory sold 500 C, 700 H, and 1000 S in one week, what is its productivity?

Answer: