Op Strategy

7/29/2019 Op Strategy

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Session 2

Manufacturing Strategy and Competitiveness


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Manufacturing Strategy

Competitive Dimensions

Strategy Design ProcessA Framework for Manufacturing Strategy

Order Qualifiers and Winners

OBJECTIVES


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StrategyStrategy is defined as the determination

of basic long term goals and theobjectives of the enterprise and the

adoption ofcourses of action and

allocation of resources to meet thesegoals and objectives.


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Hierarchy of strategies

The strategy can be for three major levels.Corporate Strategy

what set of businesses should we be in?

Business StrategyHow we should compete in a given business?

Functional Strategy

How can this function contribute towards thecompetitive advantage of the business?


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Manufacturing StrategyExampleStrategy Level

Corporate strategy

Business Strategy


Policy Decisions on Processes

and Infrastructure

Expansion More

market share

Increase Org. Size

Increase Production Capacity

Build New Factory

Health of the manufacturing function in a company

is at the heart of its success.


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Manufacturing objectives are derived frombusiness objectives.

Manufacturing policies are developed to

address these objectives. Manufacturing objectives cover such

aspects as cost, quality, delivery and

flexibility. There are trade-offs between them.

Trade-off decisions are required in a

number of key areas


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Key areas

1)

plant and equipment;

2) production planning and control;

3) labour and staffing;

4) product design / engineering; and

5) organisation and management.


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Components of strategyOperations Effectiveness,

- in core business processes needed to run the business.Taking orders, handling returns manufacture and shipping

of product, cost associated with doing business

initiatives such as quality improvement, process

redesign, technology investment have shown short term

results.

Customer management,

- relates to better understanding of customer needs and

relationships, e.g.. segmenting customers takes longer torealise.

product innovation

development of new products, markets, takes stilllonger to realize for manufacturers.


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Dealing with Trade-offs

Cost

Quality

DeliveryFlexibility

For example, if we

improve customerservice problem solving

by cross-training

personnel to deal with a

wider-range of

problems, they may

become less efficient at

dealing with commonly

occurring problems.

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


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Strategic issues

Manufacturing capacity

Production facilities

Use of technology

Vertical integrationQuality

Production planning/materials control

OrganisationPersonnel

All issues are of concern to Technologymanagement


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Current IssuesLow Cost Countries (LLCs)

- set up manufacturing in geographicalareas with a low cost base.

Outsourcing

- suppliers all over the world can beidentified and contracted

Mass customization

- adopt technologies with increasedflexibility and respond quickly and cost-effectively to customization demands

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Competitive Dimensions Cost or Price

Make the Product or Deliver the Service Cheap

Quality Make a Great Product or Deliver a Great Service

Delivery Speed Make the Product or Deliver the Service Quickly

Delivery Reliability Deliver It When Promised

Coping with Changes in Demand Change Its Volume

Flexibility and New Product Introduction Speed Change It

Other Product-Specific Criteria Support It

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Strategy Design ProcessStrategy Map

Financial Perspective

Customer Perspective

Internal Perspective

Learning and Growth Perspective

Improve Shareholder Value

Customer Value Proposition

Build-Increase-Achieve

A Motivated and Prepared

Workforce

What it is about!

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Kaplan and Nortons GenericStrategy Map

In the Kaplan and Nortons Generic Strategy

Map, under the Financial Perspective, the

Productivity Strategy is generally made up fromtwo components:

1. Improve cost structure: Lower direct and

indirect costs

2. Increase asset utilization: Reduce working

and fixed capital

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Kaplan and Nortons GenericStrategy Map (Continued)In the Kaplan and Nortons Generic StrategyMap, under the Financial Perspective, the

Revenue Growth Strategy is generally made

up from two components:

1. Build the franchise: Develop new sources of

revenue

2. Increase customer value: Work withexisting customers to expandrelationshipswith company

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Kaplan and Nortons GenericStrategy Map (Continued)

In the Kaplan and Nortons Generic Strategy

Map, 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

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Kaplan and Nortons GenericStrategy Map (Continued)In the Kaplan and Nortons Generic StrategyMap, under the Learning and Growth

Perspective, there are three principle

categories of intangible assets needed for

learning:

1. Strategic competencies

2. Strategic technologies3. Climate for action

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20Operations Strategy FrameworkCustomer Needs

New product : Old product

Competitive

dimensions & requirements

Quality, Dependability, Speed, Flexibility, and Price

Operations & Supplier capabilities

R&D Technology Systems People Distribution

Support Platforms

Financial management Human resource management Information management

Enterprise capabilities

Operations and Supplier Capabilities

R&D Technology Systems People Distribution

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Order Qualifiers and WinnersDefinedOrder qualifiers are the basiccriteria that permit the firmsproducts to be considered as

candidates for purchase bycustomers

Order winners are the criteria thatdifferentiates the products andservices of one firm from another

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Order Qualifiers and WinnersDefinedOrder qualifiers are the basiccriteria that permit the firmsproducts to be considered as

candidates for purchase bycustomers

Order winners are the criteria thatdifferentiates the products andservices of one firm from another

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Steps in Developing aManufacturing 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

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Question BowlAn operations strategy is concerned

with which of the following?

a. Setting specific policies and plans

b. Short-term competitive strategiesc. Coordination of operational goals

d. All of the above

e. None of the aboveAnswer: c. Coordination of operational

goals

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Question BowlTypically a strategy breaks down

into what major components?

a. Operations effectiveness

b. Customer managementc. Production innovation

d. All of the above

e. None of the above

Answer: d. All of the above

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Question BowlA criterion that differentiates the

products and services of one firm

from another can be which of the

following?a. An order qualifier

b. An order winner

c. PWP

d. KPIe. None of the above

Answer: b. An order winner

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Question BowlA travel agency processed 240 customers on Day 1

with a staff of 12, and 360 customers the on Day 2

with a staff of 15. What can be said about the

productivity shift from Day 1 to Day 2?

a. An increase in productivity from Day 1 to Day2

b. A decrease in productivity from Day 1 to Day 2

c. The same productivity from Day 1 to Day 2

d. Can not be computed from data above

e. None of the above

Answer: a. An increase in productivity from Day 1 to

Day 2(Day 1 productivity = 240/12=20

Day 2 productivity = 360/15=24)

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Question BowlIn addition to traditional financial measures, what

critical questions can a Balanced Scorecard

help a company answer?

a. How do customers see us?b. What must we excel at?

c. How can we continue to improve and create

value?

d. All of the abovee. None of the above

Answer: d. All of the above

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Service Strategy Capacity Capabilities

Productivity Measures

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Service Strategy CapacityCapabilities

Process-based Capacities that transforms material or information

and provide advantages on dimensions of cost and

quality Systems-based

Capacities that are broad-based involving the entireoperating system and provide advantages of shortlead times and customize on demand

Organization-based Capacities that are difficult to replicate and provide

abilities to master new technologies

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What is Productivity?DefinedProductivity is a common measure

on how well resources are being

used. In the broadest sense, it canbe defined as the following ratio:

Outputs

Inputs

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Total Measure ProductivityTotal Measure Productivity = Outputs

Inputs

or

= Goods and services produced

All resources used

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Partial Measure ProductivityPartial measures of productivity =

Output or Output or Output or OutputLabor Capital Materials Energy

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Multifactor MeasureProductivity

Multifactor measures of productivity =

Output .

Labor + Capital + Energy

or

Output .

Labor + Capital + Materials

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Example of ProductivityMeasurement

You have just determined that your serviceemployees 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: Could be classified as a Total Measure or

Partial Measure.

Is productivity increasing or decreasing?

Answer: Last weeks productivity = 480/2000 = 0.24,

and this weeks productivity is = 560/2400 = 0.23.

So, productivity is decreasing slightly.

Documents

Op Strategy