Operations Management Modules 2 & 3 Operations Strategy & Competitiveness and Performance Measures S.Balachandran 2007 December 2007

Operations ManagementOperations Management

Modules 2 & 3Modules 2 & 3Operations Strategy & Competitiveness and Operations Strategy & Competitiveness and

Performance MeasuresPerformance Measures

S.BalachandranS.Balachandran

December 2007 2007

December 2007 © S.Balachandran 2 of 20

In this session . . .In this session . . .

• Strategy – Role of OperationsStrategy – Role of Operations

• Competitiveness – Dimensions, TradeoffsCompetitiveness – Dimensions, Tradeoffs

• Order Qualifiers & WinnersOrder Qualifiers & Winners

• OM Strategy – DecisionsOM Strategy – Decisions

• Strategy – Process LinkageStrategy – Process Linkage

• Strategic Map : Four PerspectivesStrategic Map : Four Perspectives

• Service Operations : CapabilitiesService Operations : Capabilities

• Operational Performance MeasuresOperational Performance Measures


Strategy – Role of OperationsStrategy – Role of Operations

Business strategy• Goals• Core Competencies• Environmental responses• New products/services• New Markets• Global strategies


Market analysis• Segmentation• Needs assessment


Competitive prioritiesOperations

Marketing• Cost• Quality Finance• Delivery• Reliability• Flexibility• Responsiveness Others







Market analysis• segmentation• needs assessment

Market analysis• segmentation• needs assessment





Cost 1. Low-cost operationsQuality 2. High-performance design

3. Consistent qualityDelivery 4. Fast delivery

5. Development speedReliability 6. Of Delivery, Prod. Performance

Flexibility 7. Customization & Variety 8. Volume flexibility

Responsiveness 9. Pre-sales Info 10. After-sales Service

Cost 1. Low-cost operationsQuality 2. High-performance design

3. Consistent qualityDelivery 4. Fast delivery

5. Development speedReliability 6. Of Delivery, Prod. Performance

Flexibility 7. Customization & Variety 8. Volume flexibility

Responsiveness 9. Pre-sales Info 10. After-sales Service



Functional area strategies• Finance• Marketing• Operations• Others

Functional area strategies• Finance• Marketing• Operations• Others









Capabilities• Current• Needed• Plans

Capabilities• Current• Needed• Plans


Competitiveness - DimensionsCompetitiveness - Dimensions• Cost or PriceCost or Price

– Make the Product or Deliver the Service CheapMake the Product or Deliver the Service Cheap

• QualityQuality– Make a Great Product or Deliver a Great ServiceMake a Great Product or Deliver a Great Service

• Delivery SpeedDelivery Speed– Make the Product or Deliver the Service QuicklyMake the Product or Deliver the Service Quickly

• Delivery ReliabilityDelivery Reliability– Deliver It When PromisedDeliver It When Promised

• Coping with Changes in DemandCoping with Changes in Demand– Change Its VolumeChange Its Volume

• Flexibility and New Product Introduction SpeedFlexibility and New Product Introduction Speed– Change ItChange It

• Other Product-Specific CriteriaOther Product-Specific Criteria– Support ItSupport It


TradeoffsTradeoffs

Cost

Quality

DeliveryFlexibility


Order Qualifiers & WinnersOrder Qualifiers & Winners

• Order qualifiersOrder qualifiers : : basic criteriabasic criteria that permit that permit the firms’ products to be considered as the firms’ products to be considered as candidates for purchase by customerscandidates for purchase by customers– NecessaryNecessary but but not Sufficientnot Sufficient Condition Condition

• Order winnersOrder winners : : criteria that criteria that differentiatedifferentiate the the products and services of firm from products and services of firm from competitorscompetitors


Operations Strategy - DecisionsOperations Strategy - Decisions

Market analysisMarket analysis

Competitive prioritiesCompetitive priorities

Corporate strategyCorporate strategy

Operations strategy






Operations strategy

Services Manufacturing• Standardized services• Assemble-to-order• Customized services

• Make-to-stock• Assemble-to-order• Make-to-order





Operations strategy











Operations strategy



• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions– Sourcing, Order

Placement: Party, Qty., Frequency, Inventory Level, No. of Shifts, Manning

• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions– Sourcing, Order







Operations strategy



• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions

• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions

• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions – Sourcing, Order


• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions – Sourcing, Order



Strategy & Process Design - ExampleStrategy & Process Design - Example

Decision Area Hospital 1 Hospital 2

Business Low-volume, High-volumestrategy customized services standardized products

made to stock

Competitive Customized services, Low-cost, fast delivery,priorities consistent quality, and consistent quality

and volume flexibility

Process Labor intensive Capital intensivedesign


Improve Shareholder ValueImprove Shareholder Value

Shareholder Value

ROCE

Shareholder Value

ROCE

Strategic Map – Four PerspectivesStrategic Map – Four Perspectives

Revenue Growth StrategyRevenue Growth Strategy Productivity StrategyProductivity Strategy

Build the FranchiseBuild the Franchise Increase Customer ValueIncrease Customer Value

New Revenue Sources Customer Profitability

Improve Cost StructureImprove Cost Structure Improve Asset UtilizationImprove Asset Utilization

Cost per Unit Asset Utilization

Product Leadership

Customer Intimacy

Operational ExcellenceCustomer Value Proposition

Price Quality Time

Function-ality

Service

Relation-ships Brand

ImageRelationshipProduct/Service Attributes

A Motivated and Prepared WorkforceA Motivated and Prepared Workforce

Strategic CompetenciesStrategic Competencies Strategic TechnologiesStrategic Technologies Climate for ActionClimate for Action

Source: Kaplan & Norton, The Strategy Focused Organization

“Be a Good Corporate Citizen” (Regulatory and Environmental Processes)

“Build the Frnchise” (Innovation Processes)

“Achieve Operational Excellence” (Operational Processes)

“Increase Customer Value” (Customer Management Processes)

Financial Perspective

Financial Perspective

Customer Perspective

Customer Perspective

Internal Perspective

Internal Perspective

Learning &GrowthPerspective

Learning &GrowthPerspective


Rockwater Strategy MapRockwater Strategy MapA : Operational ExcellenceB : Customer Management

A : Operational ExcellenceB : Customer Management


Activity Map – Southwest StrategyActivity Map – Southwest Strategy


Operations Strategy FrameworkOperations Strategy Framework

Customer NeedsCustomer Needs

New product : Old productNew product : Old product

Competitivedimensions & requirements

Competitivedimensions & requirements

Cost, Quality, Delivery, Flexibility,Reliability, Responsiveness

Cost, Quality, Delivery, Flexibility,Reliability, Responsiveness

Operations & Supplier capabilities

R&D Technology Systems People Distribution

Support Platforms

Financial management Human resource management Information management

Enterprise capabilitiesEnterprise capabilities

Operations and Supplier Capabilities Operations and Supplier Capabilities

R&D Technology Systems People DistributionR&D Technology Systems People Distribution


Operations Capabilities for ServicesOperations Capabilities for Services

• Process-based Process-based – TransformTransform material or information and provide material or information and provide

advantagesadvantages on dimensions of on dimensions of costcost and and qualityquality

• Systems-based Systems-based – Broad-basedBroad-based - involving the entire operating - involving the entire operating

system and provide advantages of short system and provide advantages of short lead lead timestimes and and customizecustomize on demand on demand

• Organization-basedOrganization-based– Difficult to replicateDifficult to replicate and provide abilities to and provide abilities to

master master new technologiesnew technologies


Productivity MeasuresProductivity Measures• Productivity Productivity : a common measure on how well resources: a common measure on how well resources are being used. In the broadest sense, it can be defined asare being used. In the broadest sense, it can be defined as the ratio: the ratio: OutputsOutputs

InputsInputs• Total Measure ProductivityTotal Measure Productivity

= Goods and services produced

All resources used• Partial measures of productivityPartial measures of productivity = =

OutputOutput or or OutputOutput or or Output Output or or OutputOutput

Labor Capital Materials EnergyLabor Capital Materials Energy

• Multifactor measures of productivity = Output .

Labor + Capital + Energy or

Output . Labor + Capital + Materials

Documents

Operations Management Modules 2 & 3 Operations Strategy & Competitiveness and Performance Measures S.Balachandran 2007 December 2007