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Chapter 2
Operations Strategy and Competitiveness
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Operations Strategy
Competitive Dimensions
Order Qualifiers and Winners
Strategy Design Process
A Framework for Manufacturing Strategy
Service Strategy Capacity Capabilities
Productivity Measures
OBJECTIVES
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Operations StrategyExampleStrategy Process
Customer Needs
Corporate Strategy
Operations Strategy
Decisions on Processes and Infrastructure
More Product
Increase Org. Size
Increase Production Capacity
Build New Factory
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Competitive DimensionsCost or Price
Make the Product or Deliver the Service CheapQuality
Make a Great Product or Deliver a Great ServiceDelivery Speed
Make the Product or Deliver the Service QuicklyDelivery Reliability
Deliver It When PromisedCoping with Changes in Demand
Change Its VolumeFlexibility and New Product Introduction
SpeedChange It
Other Product-Specific CriteriaSupport It
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Dealing with Trade-offs
Cost
Quality
DeliveryFlexibility
For example, if we improve customer service 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 improve customer service 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 product quality inspections, we might reduce product quality.
For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.
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Order Qualifiers and WinnersDefinedOrder qualifiers are the basic criteria that permit the firm’s products to be considered as candidates for purchase by customers
Order winners are the criteria that differentiate the products and services of one firm from another
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Service Breakthroughs
A brand name car can be an “order qualifier”
Repair services can be “order winners”
Examples: Warranty, Roadside Assistance, Leases, etc.
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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 Norton’s Generic Strategy Map In the Kaplan and Norton’s Generic
Strategy Map, under the Financial Perspective, the Productivity Strategy is generally made up from two 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 Norton’s Generic Strategy Map (Continued)
In the Kaplan and Norton’s Generic Strategy Map, 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 with
existing customers to expand relationships with company
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Kaplan and Norton’s Generic Strategy Map (Continued)
In the Kaplan and Norton’s 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 leadership2. Customer intimacy3. Operational excellence
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Kaplan and Norton’s Generic Strategy Map (Continued)
In the Kaplan and Norton’s Generic
Strategy Map, under the Learning and Growth Perspective, there are three principle categories of intangible assets needed for learning:
1. Strategic competencies2. Strategic technologies3. Climate for action
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Operations Strategy Framework
Customer Needs
New product : Old product
Competitivedimensions & 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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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
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Service Strategy Capacity CapabilitiesProcess-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
entire operating system and provide advantages of short lead 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?Defined
Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio:
Outputs Inputs
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Total Measure Productivity
Total Measure Productivity = Outputs Inputs
or
= Goods and services produced
All resources used
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Partial Measure Productivity
Partial measures of productivity =
Output or Output or Output or Output Labor Capital Materials
Energy
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Multifactor Measure Productivity
Multifactor measures of productivity =
Output . Labor + Capital + Energy
or
Output . Labor + Capital + Materials
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Example of Productivity MeasurementYou 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: Could be classified as a Total Measure or Partial Measure.
Is productivity increasing or decreasing?
Answer: Last week’s productivity = 480/2000 = 0.24, and this week’s productivity is = 560/2400 = 0.23. So, productivity is decreasing slightly.