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8/4/2019 S1 Krm8 c2(Chap02 Op Strategy)
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2007 Pearson Education
Operations Strategy
Chapter 2Chapter 2
8/4/2019 S1 Krm8 c2(Chap02 Op Strategy)
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2007 Pearson Education
HowOperations Strategy
fits the Operations Management
Philosophy
Operations As a CompetitiveWeapon
Operations Strategy
Project Management Process StrategyProcess Analysis
Process Performance and QualityConstraint Management
Process Layout
Lean Systems
Supply Chain StrategyLocation
Inventory ManagementForecasting
Sales and Operations PlanningResource Planning
Scheduling
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Starbucks
If someone says, Lets go out for coffee,Starbucks often comes to mind.
Entrepreneur Howard Schultz had anoperations strategy in mind in 1990 when hebought the 17-store Seattle chain and turnedit into a global success.
Service strategy was key.
Offering a variety of specialized productsand services, such as Internet access,phone ahead ordering, and CD burning,all in a socially interactive atmosphere.
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Operations Strategy
Operations strategyis the means by which
operations implements the firms corporate
strategy and helps to build a customer-drivenfirm.
It links long-term and short-term operations
decisions to corporate strategy.
It is the core of managing processes and
value chains.
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Customer-Driven
Operations Strategy
Corporate strategyviews the organization
as a system of interconnected parts, each
working with the others to achieve desiredgoals.
Operations Strategysupports the
corporate strategy and requires continuous
cross-functional interaction.
The operations strategy should be customer
driven.
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Developing a Corporate
Strategy
Developing a corporate strategy involvesthree considerations:
1. Monitoring and adapting to the environment
2. Identifying and developing core competencies
3. Developing the firms core processes
Adapting requires environmental scanningto monitor trends for opportunities and
threats. Core Competencies are the unique
resources and strengths an organizationpossesses.
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Core Competencies
Core competencies includeA well-trained and flexible Workforce
Having well-located & flexible Facilities
Having Market andFinancial Know-How.Expertise in Systems and Technology.
The core competencies should determinethe firms core processes.
These can include customer relations, newservice/product development, order fulfillment,and supplier relationships.
A firm may have all of these or focus on a subsetof them, as determined by its core competencies.
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Global Strategies
A global strategy may include buying
foreign services orparts and entering or
expanding foreign markets.
Two effective global strategies are:
1. Strategic Alliances
a) Collaborative efforts
b) Joint ventures
c) Technology licensing
2. Locating abroad
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Market Analysis
A Market Analysis is one key to developing
a customer-driven strategy, and is
accomplished in two parts.Market Segmentation, which identifies groups of
customers with enough in common to warrant
developing services and/orproducts for them.
Needs Assessment identifies the needs of each
market segment. Needs include such things as:
Service orproduct needs
Delivery system needs
Volume needs
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Competitive priorities cost quality time
flexibility
Market analysis segmentation needs analysis
Arriving at the
Competitive Priorities
Corporate Strategy environmental scanning core competencies core processes
global strategies
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Competitive Priorities
Cost 1. Low-cost operations
Quality 2. Top quality
3. Consistent qualityTime 4. Delivery speed
5. On-time delivery
6. Development speedFlexibility 7. Customization
8. Variety
9. Volume flexibility
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Competitive Capabilities
The Competitive Capabilities are the cost,
quality, time and flexibility dimensions of
competitive priorities that a process or value
chain actually possesses and is able to
deliver.
LowCost means delivering a service orproduct at the lowest possible cost to the
satisfaction of the customer.
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Top Quality: Delivering an outstanding
service orproduct.
Considerable interaction with the customers
may be required to determine what that
means.
Consistent Quality: Producing servicesorproducts that meet design
specifications on a consistent basis.
Qualityas a
Competitive Capability
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Time as a
Competitive Capability
Delivery Speedis quickly filling acustomers order.Lead Time is the time between receipt of an
order and filling the order.
On-Time Deliverymeans meeting thedelivery time promises.
Development Speedis quickly introducing
a new service orproduct.Time-Based Competition is a strategy
that focuses on development speed anddelivery speed.
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Customization means satisfying the unique
needs of each customer by changing the
service orproduct designs.
Variety involves handling a wide assortment
of services orproducts efficiently.
Volume Flexibility requires accelerating or
decelerating the rate ofproduction quickly to
handle large fluctuations in demand.
Flexibilityas a
Competitive Capability
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Northrup GrummanNewportNews Ship Building
The worlds only producer of full-sized
aircraft carriers
Long lead times of 8 years or more
often involve many changes.
Theirprocesses have a high degree of
flexibility to handle changes in design.
Flexibility in workforce skills as well as
process flexibility is necessary.
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OrderWinners
and Order Qualifiers
These are criteria used by customers in
service orproduct selection.
Order Winners are criteria fordifferentiating services orproducts of one
firm from those of another.
Price, quality, time, flexibility, after sales
support, reputation, etc.Order Qualifiers are demonstrated levels
ofperformance required to do business in
a particular market segment.
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Service or Product
Development Strategies
Product Variety: Offering a wide assortment.
Design: Ease of use and desirable features.
Innovation: Translate new technology into newproducts.
Service: Products with services added.
Leader: Being first to introduce new services and/orproducts.
Middle of the Road: Wait for the leaders tointroduce new services and/orproducts.
Laggard: Wait to see if the leaders new servicesand/orproducts catch on in the market.
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Service Package
A Service Package is a collection of goods andservices provided by a service process to itscustomers. It consists of four features:
1. Supporting Facility: The physical resourcesthat must be in place before a service can beoffered.
2. Facilitating Goods: The materials purchasedor consumed by the customer or the items
provided by the customer to receive a service.3. Explicit Services: The readily observable
benefits.
4. Implicit Services: Psychological benefits.
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QualityFunction
Deployment (QDF)
Quality Function Deployment (QDF) is a means oftranslating customer requirements into the appropriate technical
requirements for service orproduct development. Questions it
seeks to answer are1. What do our customers want?
2. How well are we doing relative to our competition?
3. What technical measures relate to our customers needs?
4. What are the relationships between what our customers
want and the technical measures?
5. How does our service orproduct performance compare to
the competition?
6. What are the potential technical trade-offs?
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Quality
FunctionDeployment
Voice of
the
Customer
Competitive
Analysis
Voice of
the
Engineer
Correlations
Technical Comparison
House of QualityHouse of Quality
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Development Process
Service or productService or product
not profitablenot profitable
Need to rethinkNeed to rethink
the idea.the idea.
PostPost--launchlaunch
reviewreview
DesignDesign
Specifications aredeveloped for new
services orproducts AnalysisAnalysis
A critical review of how
it will be produced,
resource requirementsand capabilities. DevelopmentDevelopment
Cross-functional
coordination,
process design. Full LaunchFull Launch
Sales & promotion
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Concurrent Engineering
Concurrent Engineering brings product
engineers, process engineers, marketers,
buyers, information specialists, quality
specialists, and suppliers together to design
a product and the processes that will meet
customer expectations.
This is an essential cross-functional effort duringthe service and/orproduct development phase to
insure a timely and well-coordinated process that
brings value to the customer.
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Corporate Strategy and KeyOperations Management Decisions
Capabilities
PerformanceGap?
NoNo
YesYes
Operations strategy
Decisions
Managing Processes
Managing Value Chains
New Service/
Product Development
Market analysis
Competitive priorities
Corporate strategy
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Matching Capabilities
to Priorities
The table below shows how a credit card division
matched their capabilities to theirpriorities and
uncovered gaps in their operating strategy.