heizer om10 ch02

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10/16/2010 1 2 Operations Strategy in a Global Environment Operations Strategy in a Global Environment PowerPoint presentation to accompany PowerPoint presentation to accompany 2 - 1 © 2011 Pearson Education, Inc. publishing as Prentice Hall PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer and Render Heizer and Render Operations Management, 10e Operations Management, 10e Principles of Operations Management, 8e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl Outline Outline Global Company Profile: Boeing A Global View of Operations Cultural and Ethical Issues 2 - 2 © 2011 Pearson Education, Inc. publishing as Prentice Hall Developing Missions And Strategies Mission Strategy Outline Outline – Continued Continued Achieving Competitive Advantage Through Operations Competing On Differentiation 2 - 3 © 2011 Pearson Education, Inc. publishing as Prentice Hall Competing On Cost Competing On Response Ten Strategic OM Decisions Outline Outline – Continued Continued Strategy Development and Implementation Key Success Factors and Core 2 - 4 © 2011 Pearson Education, Inc. publishing as Prentice Hall Key Success Factors and Core Competencies Build and Staff the Organization Integrate OM with Other Activities Outline Outline – Continued Continued Global Operations Strategy Options International Strategy 2 - 5 © 2011 Pearson Education, Inc. publishing as Prentice Hall Multidomestic Strategy Global Strategy Transnational Strategy Learning Objectives Learning Objectives 1. Define mission and strategy When you complete this chapter you When you complete this chapter you should be able to: should be able to: 2 - 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall 2. Identify and explain three strategic approaches to competitive advantage 3. Identify and define the 10 decisions of operations management

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Page 1: Heizer om10 ch02

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1

22 Operations Strategy in a Global Environment

Operations Strategy in a Global Environment

PowerPoint presentation to accompanyPowerPoint presentation to accompany

2 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall

PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer and Render Heizer and Render Operations Management, 10e Operations Management, 10e Principles of Operations Management, 8ePrinciples of Operations Management, 8e

PowerPoint slides by Jeff Heyl

OutlineOutline

Global Company Profile: BoeingA Global View of Operations

Cultural and Ethical Issues

2 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall

Developing Missions And Strategies

MissionStrategy

Outline Outline –– ContinuedContinued

Achieving Competitive Advantage Through Operations

Competing On Differentiation

2 - 3© 2011 Pearson Education, Inc. publishing as Prentice Hall

Competing On CostCompeting On Response

Ten Strategic OM Decisions

Outline Outline –– ContinuedContinued

Strategy Development and Implementation

Key Success Factors and Core

2 - 4© 2011 Pearson Education, Inc. publishing as Prentice Hall

Key Success Factors and Core CompetenciesBuild and Staff the OrganizationIntegrate OM with Other Activities

Outline Outline –– ContinuedContinued

Global Operations Strategy Options

International Strategy

2 - 5© 2011 Pearson Education, Inc. publishing as Prentice Hall

gyMultidomestic StrategyGlobal StrategyTransnational Strategy

Learning ObjectivesLearning Objectives

1. Define mission and strategy

When you complete this chapter you When you complete this chapter you should be able to:should be able to:

2 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall

2. Identify and explain three strategic approaches to competitive advantage

3. Identify and define the 10 decisions of operations management

Page 2: Heizer om10 ch02

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2

Learning ObjectivesLearning Objectives

4. Understand the significant key f t d

When you complete this chapter you When you complete this chapter you should be able to:should be able to:

2 - 7© 2011 Pearson Education, Inc. publishing as Prentice Hall

success factors and core competencies

5. Identify and explain four global operations strategy options

Some Boeing Suppliers (787)Some Boeing Suppliers (787)Firm Country ComponentLatecoere France Passenger doorsLabinel France WiringDassault France Design and

PLM software

2 - 8© 2011 Pearson Education, Inc. publishing as Prentice Hall

Messier-Bugatti France Electric brakesThales France Electrical power

conversion system and integrated standby flight display

Messier-Dowty France Landing gear structureDiehl Germany Interior lighting

Some Boeing Suppliers (787)Some Boeing Suppliers (787)Firm Country ComponentCobham UK Fuel pumps and valvesRolls-Royce UK EnginesSmiths Aerospace UK Central computer

system

2 - 9© 2011 Pearson Education, Inc. publishing as Prentice Hall

yBAE SYSTEMS UK ElectronicsAlenia Aeronautics Italy Upper center

fuselage & horizontal stabilizer

Toray Industries Japan Carbon fiber for wing and tail units

Some Boeing Suppliers (787)Some Boeing Suppliers (787)Firm Country ComponentFuji Heavy Japan Center wing boxIndustries

Kawasaki Heavy Japan Forward fuselage,Industries fixed section of wing,

l di ll

2 - 10© 2011 Pearson Education, Inc. publishing as Prentice Hall

landing gear wellTeijin Seiki Japan Hydraulic actuatorsMitsubishi Heavy Japan Wing boxIndustries

Chengdu Aircraft China RudderGroup

Hafei Aviation China Parts

Some Boeing Suppliers (787)Some Boeing Suppliers (787)Firm Country ComponentKorean Aviation South Wingtips

KoreaSaab Sweden Cargo access doors

2 - 11© 2011 Pearson Education, Inc. publishing as Prentice Hall

Global StrategiesGlobal Strategies

Boeing – sales and production are worldwideBenetton – moves inventory to stores around the world faster than its

2 - 12© 2011 Pearson Education, Inc. publishing as Prentice Hall

around the world faster than its competition by building flexibility into design, production, and distributionSony – purchases components from suppliers in Thailand, Malaysia, and around the world

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Global StrategiesGlobal Strategies

Volvo – considered a Swedish company but until recently was controlled by an American company, Ford. The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in

2 - 13© 2011 Pearson Education, Inc. publishing as Prentice Hall

its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe.Haier – A Chinese company, produces compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina

35 –

30 –

25 –

20ent

Growth of World TradeGrowth of World Trade

Collapse of the Berlin Wall

2 - 14© 2011 Pearson Education, Inc. publishing as Prentice Hall

20 –

15 –

10 –

5 –

0 –| | | | | | | | | | |1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 (est*)

Year

Perc

e

Figure 2.1

Some Multinational Some Multinational CorporationsCorporations

% Sales % AssetsOutside Outside

Home Home Home % ForeignCompany Country Country Country Workforce

Citicorp USA 34 46 NA

2 - 15© 2011 Pearson Education, Inc. publishing as Prentice Hall

pColgate- USA 72 63 NAPalmoliveDow USA 60 50 NAChemicalGillette USA 62 53 NAHonda Japan 63 36 NAIBM USA 57 47 51

Some Multinational Some Multinational CorporationsCorporations

% Sales % AssetsOutside Outside

Home Home Home % ForeignCompany Country Country Country Workforce

ICI Britain 78 50 NA

2 - 16© 2011 Pearson Education, Inc. publishing as Prentice Hall

Nestle Switzerland 98 95 97Philips Netherlands 94 85 82ElectronicsSiemens Germany 51 NA 38Unilever Britain & 95 70 64

Netherlands

Reasons to GlobalizeReasons to Globalize

Reasons to GlobalizeReasons to Globalize1. Reduce costs (labor, taxes, tariffs, etc.)2. Improve supply chain3 P id b tt d d i

Tangible Reasons

2 - 17© 2011 Pearson Education, Inc. publishing as Prentice Hall

3. Provide better goods and services4. Understand markets5. Learn to improve operations6. Attract and retain global talent

Intangible Reasons

Reduce CostsReduce CostsForeign locations with lower wage rates can lower direct and indirect costs

Maquiladoras

2 - 18© 2011 Pearson Education, Inc. publishing as Prentice Hall

World Trade Organization (WTO)North American Free Trade Agreement (NAFTA)APEC, SEATO, MERCOSUR, CAFTAEuropean Union (EU)

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Improve the Supply ChainImprove the Supply Chain

Locating facilities closer to unique resources

Auto design to California

2 - 19© 2011 Pearson Education, Inc. publishing as Prentice Hall

Athletic shoe production to ChinaPerfume manufacturing in France

Provide Better Goods Provide Better Goods and Servicesand Services

Objective and subjective characteristics of goods and services

2 - 20© 2011 Pearson Education, Inc. publishing as Prentice Hall

servicesOn-time deliveriesCultural variablesImproved customer service

Understand MarketsUnderstand MarketsInteracting with foreign customers and suppliers can lead to new opportunities

Cell phone

2 - 21© 2011 Pearson Education, Inc. publishing as Prentice Hall

design from EuropeCell phone fads from JapanExtend the product life cycle

Learn to Improve Learn to Improve OperationsOperations

Remain open to the free flow of ideas

General Motors partnered with a J t f t t

2 - 22© 2011 Pearson Education, Inc. publishing as Prentice Hall

Japanese auto manufacturer to learn new approaches to production and inventory control Equipment and layout have been improved using Scandinavian ergonomic competence

Attract and Retain Global Attract and Retain Global TalentTalent

Offer better employment opportunities

Better growth opportunities and

2 - 23© 2011 Pearson Education, Inc. publishing as Prentice Hall

Better growth opportunities and insulation against unemploymentRelocate unneeded personnel to more prosperous locations

Cultural and Ethical IssuesCultural and Ethical IssuesCultures can be quite differentAttitudes can be quite different towards

2 - 24© 2011 Pearson Education, Inc. publishing as Prentice Hall

PunctualityLunch breaksEnvironmentIntellectual property

ThieveryBriberyChild labor

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Companies Want To ConsiderCompanies Want To ConsiderNational literacy rateRate of innovationRate of technology changeN mber of skilled

Work ethicTax ratesInflationAvailability of raw materials

2 - 25© 2011 Pearson Education, Inc. publishing as Prentice Hall

Number of skilled workersPolitical stabilityProduct liability lawsExport restrictionsVariations in language

materialsInterest ratesPopulationNumber of miles of highwayPhone system

Match Product & ParentMatch Product & ParentBraun Household AppliancesFirestone TiresGodiva ChocolateHaagen-Dazs Ice

1. Volkswagen2. Bridgestone3. Campbell Soup4 Tata Motors Limited

2 - 26© 2011 Pearson Education, Inc. publishing as Prentice Hall

Haagen-Dazs Ice CreamJaguar AutosMGM MoviesLamborghini AutosAlpo Petfoods

4. Tata Motors Limited5. Proctor and Gamble6. Nestlé7. Pillsbury8. Sony

Match Product & ParentMatch Product & ParentBraun Household AppliancesFirestone TiresGodiva ChocolateHaagen-Dazs Ice

1. Volkswagen2. Bridgestone3. Campbell Soup4 Tata Motors Limited

2 - 27© 2011 Pearson Education, Inc. publishing as Prentice Hall

Haagen-Dazs Ice CreamJaguar AutosMGM MoviesLamborghini AutosAlpo Petfoods

4. Tata Motors Limited5. Proctor and Gamble6. Nestlé7. Pillsbury8. Sony

Match Product & CountryMatch Product & CountryBraun Household AppliancesFirestone TiresGodiva ChocolateH D I

1. Great Britain2. Germany

2 - 28© 2011 Pearson Education, Inc. publishing as Prentice Hall

Haagen-Dazs Ice CreamJaguar AutosMGM MoviesLamborghini AutosAlpo Pet Foods

3. Japan4. United States5. Switzerland6. India

Match Product & CountryMatch Product & CountryBraun Household AppliancesFirestone TiresGodiva ChocolateH D I

1. Great Britain2. Germany

2 - 29© 2011 Pearson Education, Inc. publishing as Prentice Hall

Haagen-Dazs Ice CreamJaguar AutosMGM MoviesLamborghini AutosAlpo Pet Foods

3. Japan4. United States5. Switzerland6. India

Developing Missions and Developing Missions and StrategiesStrategies

MissionMission statements tell an organization where it is going

2 - 30© 2011 Pearson Education, Inc. publishing as Prentice Hall

organization where it is going

The StrategyStrategy tells the organization how to get there

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MissionMission

Mission - where are you going?

Organization’s

2 - 31© 2011 Pearson Education, Inc. publishing as Prentice Hall

purpose for beingAnswers ‘What do we provide society?’Provides boundaries and focus

MerckMerck

The mission of Merck is to provide society with superior products and

services—innovations and solutions that improve the quality of life and

2 - 32© 2011 Pearson Education, Inc. publishing as Prentice Hall

p q ysatisfy customer needs—to provide

employees with meaningful work and advancement opportunities and

investors with a superior rate of return.

Figure 2.2

Hard Rock CafeHard Rock Cafe

Our Mission: To spread the spirit of Rock ’n’ Roll by delivering an

exceptional entertainment and dining experience. We are committed to being

2 - 33© 2011 Pearson Education, Inc. publishing as Prentice Hall

an important, contributing member of our community and offering the Hard

Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success.

Figure 2.2

Arnold Palmer HospitalArnold Palmer Hospital

Arnold Palmer Hospital for Children provides state-of-the-art,

family centered healthcare

2 - 34© 2011 Pearson Education, Inc. publishing as Prentice Hall

yfocused on restoring the joy of childhood in an environment of compassion, healing, and hope.

Figure 2.2

Factors Affecting MissionFactors Affecting MissionPhilosophy and Values

Profitability and GrowthEnvironment

2 - 35© 2011 Pearson Education, Inc. publishing as Prentice Hall

Benefit to Society

Mission

Customers Public Image

Sample MissionsSample Missions

Sample Company Mission

To manufacture and service an innovative, growing, and profitable worldwide microwave communications business that exceeds our customers’ expectations.

2 - 36© 2011 Pearson Education, Inc. publishing as Prentice Hall

Sample Operations Management Mission

To produce products consistent with the company’s mission as the worldwide low-cost manufacturer.

Figure 2.3

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Sample MissionsSample MissionsSample OM Department Missions

Product design To design and produce products and services with outstanding quality and inherent customer value.

Quality management To attain the exceptional value that is consistent with our company mission and

2 - 37© 2011 Pearson Education, Inc. publishing as Prentice HallFigure 2.3

consistent with our company mission and marketing objectives by close attention to design, procurement, production, and field service operations

Process design To determine, design, and produce the production process and equipment that will be compatible with low-cost product, high quality, and good quality of work life at economical cost.

Sample MissionsSample MissionsSample OM Department Missions

Location To locate, design, and build efficient and economical facilities that will yield high value to the company, its employees, and the community.

Layout design To achieve, through skill, imagination, and

2 - 38© 2011 Pearson Education, Inc. publishing as Prentice HallFigure 2.3

Layout design To achieve, through skill, imagination, and resourcefulness in layout and work methods, production effectiveness and efficiency while supporting a high quality of work life.

Human resources To provide a good quality of work life, with well-designed, safe, rewarding jobs, stable employment, and equitable pay, in exchange for outstanding individual contribution from employees at all levels.

Sample MissionsSample MissionsSample OM Department Missions

Supply-chainmanagement

To collaborate with suppliers to develop innovative products from stable, effective, and efficient sources of supply.

Inventory To achieve low investment in inventory consistent with high customer service levels

2 - 39© 2011 Pearson Education, Inc. publishing as Prentice HallFigure 2.3

gand high facility utilization.

Scheduling To achieve high levels of throughput and timely customer delivery through effective scheduling.

Maintenance To achieve high utilization of facilities and equipment by effective preventive maintenance and prompt repair of facilities and equipment.

Strategic ProcessStrategic Process

Functional

Organization’s Mission

2 - 40© 2011 Pearson Education, Inc. publishing as Prentice Hall

Marketing Operations Finance/ Accounting

Functional Area Missions

StrategyStrategy

Action plan to achieve missionFunctional areas have strategies

2 - 41© 2011 Pearson Education, Inc. publishing as Prentice Hall

gStrategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

Strategies for Competitive Strategies for Competitive AdvantageAdvantage

Differentiation – better, or at least different

2 - 42© 2011 Pearson Education, Inc. publishing as Prentice Hall

Cost leadership – cheaperResponse – rapid response

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Competing on Competing on DifferentiationDifferentiation

Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception

2 - 43© 2011 Pearson Education, Inc. publishing as Prentice Hall

that impacts customer s perception of value

Safeskin gloves – leading edge productsWalt Disney Magic Kingdom –experience differentiationHard Rock Cafe – dining experience

Competing on CostCompeting on CostProvide the maximum value as

perceived by customer. Does not imply low quality.

S th t Ai li d

2 - 44© 2011 Pearson Education, Inc. publishing as Prentice Hall

Southwest Airlines – secondary airports, no frills service, efficient utilization of equipmentWal-Mart – small overhead, shrinkage, distribution costsFranz Colruyt – no bags, low light, no music, doors on freezers

Competing on ResponseCompeting on ResponseFlexibility is matching market changes in design innovation and volumes

A way of life at Hewlett-PackardReliability is meeting schedules

2 - 45© 2011 Pearson Education, Inc. publishing as Prentice Hall

German machine industryTimeliness is quickness in design, production, and delivery

Johnson Electric, Pizza Hut, Motorola

OM’s Contribution to StrategyOM’s Contribution to Strategy

Product

Quality

Process

Location

DIFFERENTIATIONInnovative design … Safeskin’s innovative glovesBroad product line … Fidelity Security’s mutual fundsAfter-sales service … Caterpillar’s heavy equipment

serviceExperience … Hard Rock Café’s dining

experience

COST LEADERSHIPLow overhead … Franz-Colruyt’s warehouse-type

t

10 Operations CompetitiveDecisions Approach Example Advantage

Differentiation

2 - 46© 2011 Pearson Education, Inc. publishing as Prentice Hall

Layout

Humanresource

Supply chain

Inventory

Scheduling

Maintenance

storesEffective capacity

use … Southwest Airline’saircraft utilization

Inventory management … Wal Mart’s sophisticated

distribution system

RESPONSEFlexibility … Hewlett-Packard’s response to

volatile world marketReliability … FedEx’s “absolutely, positively,

on time”Quickness … Pizza Hut’s 5-minute guarantee

at lunchtime Figure 2.4

Response(faster)

Cost leadership(cheaper)

Differentiation(better)

10 Strategic OM Decisions10 Strategic OM Decisions

1. Goods and service design

2. Quality

6. Human resources and job design

7. Supply-chain

2 - 47© 2011 Pearson Education, Inc. publishing as Prentice Hall

3. Process and capacity design

4. Location selection

5. Layout design

management8. Inventory9. Scheduling10. Maintenance

Goods and Services and Goods and Services and the 10 OM Decisionsthe 10 OM Decisions

OperationsOperationsDecisionsDecisions GoodsGoods ServicesServicesGoods and service design

Product is usually tangible

Product is not tangible

2 - 48© 2011 Pearson Education, Inc. publishing as Prentice Hall

des gQuality Many objective

standardsMany subjective standards

Process and capacity design

Customers not involved

Customer may be directly involvedCapacity must match demand

Table 2.1

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Goods and Services and Goods and Services and the 10 OM Decisionsthe 10 OM Decisions

OperationsOperationsDecisionsDecisions GoodsGoods ServicesServicesLocation selection

Near raw materials and labor

Near customers

2 - 49© 2011 Pearson Education, Inc. publishing as Prentice Hall

labor

Layout design

Production efficiency

Enhances product and production

Human resources and job design

Technical skills, consistent labor standards, output based wages

Interact with customers, labor standards vary

Table 2.1

Goods and Services and Goods and Services and the 10 OM Decisionsthe 10 OM Decisions

OperationsOperationsDecisionsDecisions GoodsGoods ServicesServicesSupply chain

Relationship critical to final product

Important, but may not be critical

2 - 50© 2011 Pearson Education, Inc. publishing as Prentice Hall

product criticalInventory Raw materials,

work-in-process, and finished goods may be held

Cannot be stored

Scheduling Level schedules possible

Meet immediate customer demand

Table 2.1

Goods and Services and Goods and Services and the 10 OM Decisionsthe 10 OM Decisions

OperationsOperationsDecisionsDecisions GoodsGoods ServicesServicesMaintenance Often preventive

and takes place at production site

Often “repair” and takes place at customer’s site

2 - 51© 2011 Pearson Education, Inc. publishing as Prentice Hall

at p oduct o s te custo e s s te

Table 2.1

Managing Global Service Managing Global Service OperationsOperations

Requires a different perspective on:Requires a different perspective on:

2 - 52© 2011 Pearson Education, Inc. publishing as Prentice Hall

Capacity planningLocation planningFacilities design and layoutScheduling

Process DesignProcess Design

High

oduc

ts

Process-focusedJOB SHOPS

(Print shop, emergency room, machine shop,

fine-diningrestaurant)

Repetitive (modular) focus

Mass CustomizationCustomization at high

Volume(Dell Computer’s PC,

cafeteria)

2 - 53© 2011 Pearson Education, Inc. publishing as Prentice Hall

Low Moderate HighVolume

Moderate

Low

Varie

ty o

f Pro ASSEMBLY LINE

(Cars, appliances, TVs, fast-food restaurants) Product focused

CONTINUOUS(Steel, beer, paper, bread, institutional

kitchen)

Operations Strategies of Operations Strategies of Two Drug CompaniesTwo Drug Companies

Brand Name Drugs, Inc.Brand Name Drugs, Inc. Generic Drug Corp.Generic Drug Corp.

Competitive Competitive AdvantageAdvantage Product DifferentiationProduct Differentiation Low CostLow Cost

Product Heavy R&D investment; Low R&D investment;

2 - 54© 2011 Pearson Education, Inc. publishing as Prentice Hall

Product Selection and Design

Heavy R&D investment; extensive labs; focus on development in a broad range of drug categories

Low R&D investment; focus on development of generic drugs

Quality Major priority, exceed regulatory requirements

Meets regulatory requirements on a country by country basis

Table 2.2

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Operations Strategies of Operations Strategies of Two Drug CompaniesTwo Drug Companies

Brand Name Drugs, Inc.Brand Name Drugs, Inc. Generic Drug Corp.Generic Drug Corp.

Competitive Competitive AdvantageAdvantage Product DifferentiationProduct Differentiation Low CostLow Cost

Process Product and modular Process focused;

2 - 55© 2011 Pearson Education, Inc. publishing as Prentice Hall

Process Product and modular process; long production runs in specialized facilities; build capacity ahead of demand

Process focused; general processes; “job shop” approach, short-run production; focus on high utilization

Location Still located in the city where it was founded

Recently moved to low-tax, low-labor-cost environment

Table 2.2

Operations Strategies of Operations Strategies of Two Drug CompaniesTwo Drug Companies

Brand Name Drugs, Inc.Brand Name Drugs, Inc. Generic Drug Corp.Generic Drug Corp.

Competitive Competitive AdvantageAdvantage Product DifferentiationProduct Differentiation Low CostLow Cost

Scheduling Centralized production Many short run

2 - 56© 2011 Pearson Education, Inc. publishing as Prentice Hall

Scheduling Centralized production planning

Many short-run products complicate scheduling

Layout Layout supports automated product-focused production

Layout supports process-focused “job shop” practices

Table 2.2

Operations Strategies of Operations Strategies of Two Drug CompaniesTwo Drug Companies

Brand Name Drugs, Inc.Brand Name Drugs, Inc. Generic Drug Corp.Generic Drug Corp.

Competitive Competitive AdvantageAdvantage Product DifferentiationProduct Differentiation Low CostLow Cost

Human Hire the best; Very experienced top

2 - 57© 2011 Pearson Education, Inc. publishing as Prentice Hall

Human Resources

Hire the best; nationwide searches

Very experienced top executives; other personnel paid below industry average

Supply Chain Long-term supplier relationships

Tends to purchase competitively to find bargains

Table 2.2

Operations Strategies of Operations Strategies of Two Drug CompaniesTwo Drug Companies

Brand Name Drugs, Inc.Brand Name Drugs, Inc. Generic Drug Corp.Generic Drug Corp.

Competitive Competitive AdvantageAdvantage Product DifferentiationProduct Differentiation Low CostLow Cost

Inventory High finished goods Process focus drives up

2 - 58© 2011 Pearson Education, Inc. publishing as Prentice Hall

Inventory High finished goods inventory to ensure all demands are met

Process focus drives up work-in-process inventory; finished goods inventory tends to be low

Maintenance Highly trained staff; extensive parts inventory

Highly trained staff to meet changing demand

Table 2.2

Issues In Operations StrategyIssues In Operations Strategy

Resources viewValue Chain analysisPorter’s Five Forces model

2 - 59© 2011 Pearson Education, Inc. publishing as Prentice Hall

Porter s Five Forces modelOperating in a system with many external factorsConstant change

Product Life CycleProduct Life CycleBest period to increase market share

R&D engineering is critical

Practical to change price or quality image

Strengthen niche

Poor time to change image, price, or quality

Competitive costs become criticalDefend market

Cost control critical

Introduction Growth Maturity Decline

egy/

Issu

es

2 - 60© 2011 Pearson Education, Inc. publishing as Prentice Hall

position

Com

pany

Str

ate

Figure 2.5

Internet search engines

Sales

Drive-through restaurants

CD-ROMs

Analog TVs

iPods

Boeing 787

LCD & plasma TVs

Twitter

Avatars

Xbox 360

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Product Life CycleProduct Life CycleProduct design and development criticalFrequent product and process design

Introduction Growth Maturity Decline

y/Is

sues

Forecasting criticalProduct and process reliabilityCompetitive

d t

StandardizationFewer product changes, more minor changesOptimum capacity

Little product differentiationCost minimizationOvercapacity in the i d t

2 - 61© 2011 Pearson Education, Inc. publishing as Prentice Hall

process design changesShort production runsHigh production costsLimited modelsAttention to quality

OM

Str

ateg

y product improvements and optionsIncrease capacityShift toward product focusEnhance distribution

Increasing stability of processLong production runsProduct improvement and cost cutting

industryPrune line to eliminate items not returning good marginReduce capacity

Figure 2.5

SWOT Analysis SWOT Analysis

Internal External

Mission

2 - 62© 2011 Pearson Education, Inc. publishing as Prentice Hall

Strategy

AnalysisStrengths

Internal Weaknesses

Opportunities

External Threats

Strategy Development ProcessStrategy Development Process

Determine the Corporate Mission

Analyze the EnvironmentIdentify the strengths, weaknesses, opportunities, and threats.

Understand the environment, customers, industry, and competitors.

2 - 63© 2011 Pearson Education, Inc. publishing as Prentice Hall

Determine the Corporate MissionState the reason for the firm’s existence and identify the

value it wishes to create.

Form a StrategyBuild a competitive advantage, such as low price, design, or

volume flexibility, quality, quick delivery, dependability, after-sale service, broad product lines.

Figure 2.6

Strategy Development and Strategy Development and ImplementationImplementation

Identify key success factorsBuild and staff the organization

2 - 64© 2011 Pearson Education, Inc. publishing as Prentice Hall

Integrate OM with other activities

The operations manager’s job is to implement an OM strategy, provide competitive advantage, and increase productivity

Key Success FactorsKey Success Factors

Production/OperationsMarketing

ServiceDistributionPromotionChannels of distributionProduct positioning(image, functions)

Finance/Accounting

LeverageCost of capitalWorking capitalReceivablesPayablesFinancial control

Support a Core Competence and Implement Strategy byIdentifying and Executing the Key Success Factors in the Functional Areas

2 - 65© 2011 Pearson Education, Inc. publishing as Prentice Hall Figure 2.7

( g )Lines of credit

Decisions Sample Options Chapter

ProductQualityProcessLocationLayoutHuman resourceSupply chainInventoryScheduleMaintenance

Customized, or standardizedDefine customer expectations and how to achieve themFacility size, technology, capacityNear supplier or near customerWork cells or assembly lineSpecialized or enriched jobsSingle or multiple suppliersWhen to reorder, how much to keep on handStable or fluctuating production rateRepair as required or preventive maintenance

56, S67, S7

8910

11, S1112, 14, 16

13, 1517

Courteous, but Limited Passenger

Service

Lean, Productive Employees

Short Haul, Point-to-Point Routes, Often to

Secondary Airports

Activity Mapping atActivity Mapping atSouthwest AirlinesSouthwest Airlines

2 - 66© 2011 Pearson Education, Inc. publishing as Prentice Hall

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:Low Cost

Employees Secondary Airports

High Aircraft

Utilization

Frequent, Reliable

Schedules

Figure 2.8

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Activity Mapping atActivity Mapping atSouthwest AirlinesSouthwest Airlines

Courteous, but Limited Passenger

Service

Lean, Productive Employees

Short Haul, Point-to-Point Routes, Often to

Secondary Airports

2 - 67© 2011 Pearson Education, Inc. publishing as Prentice Hall

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:Low Cost

Employees Secondary Airports

High Aircraft

Utilization

Frequent, Reliable

Schedules

Figure 2.8

Automated ticketing machinesNo seat assignmentsNo baggage transfersNo meals (peanuts)

Activity Mapping atActivity Mapping atSouthwest AirlinesSouthwest Airlines

Courteous, but Limited Passenger

Service

Lean, Productive Employees

Short Haul, Point-to-Point Routes, Often to

Secondary Airports

No meals (peanuts)Lower gate costs at secondary airports

2 - 68© 2011 Pearson Education, Inc. publishing as Prentice Hall

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:Low Cost

Employees Secondary Airports

High Aircraft

Utilization

Frequent, Reliable

Schedules

Figure 2.8

y pHigh number of flights

reduces employee idle time between flights

Activity Mapping atActivity Mapping atSouthwest AirlinesSouthwest Airlines

Courteous, but Limited Passenger

Service

Lean, Productive Employees

Short Haul, Point-to-Point Routes, Often to

Secondary Airports

High number of flights reduces employee idle time

between flightsSaturate a city with flights,

lowering administrative

2 - 69© 2011 Pearson Education, Inc. publishing as Prentice Hall

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:Low Cost

Employees Secondary Airports

High Aircraft

Utilization

Frequent, Reliable

Schedules

Figure 2.8

o e g ad st at ecosts (advertising, HR, etc.) per passenger for that cityPilot training required on only one type of aircraftReduced maintenance

inventory required because of only one type of aircraft

Activity Mapping atActivity Mapping atSouthwest AirlinesSouthwest Airlines

Courteous, but Limited Passenger

Service

Lean, Productive Employees

Short Haul, Point-to-Point Routes, Often to

Secondary Airports

Pilot training required on only one type of aircraftReduced maintenance

inventory required because of only one type of aircraft

2 - 70© 2011 Pearson Education, Inc. publishing as Prentice Hall

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:Low Cost

Employees Secondary Airports

High Aircraft

Utilization

Frequent, Reliable

Schedules

Figure 2.8

Excellent supplier relations with Boeing has aided

financing

Activity Mapping atActivity Mapping atSouthwest AirlinesSouthwest Airlines

Courteous, but Limited Passenger

Service

Lean, Productive Employees

Short Haul, Point-to-Point Routes, Often to

Secondary Airports

Reduced maintenance inventory required because of only one type of aircraft

Flexible employees and Flexible union

2 - 71© 2011 Pearson Education, Inc. publishing as Prentice Hall

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:Low Cost

Employees Secondary Airports

High Aircraft

Utilization

Frequent, Reliable

Schedules

Figure 2.8

p ystandard planes aid

schedulingMaintenance personnel trained only one type of

aircraft20-minute gate turnarounds

Flexible union contracts

Activity Mapping atActivity Mapping atSouthwest AirlinesSouthwest Airlines

Courteous, but Limited Passenger

Service

Lean, Productive Employees

Short Haul, Point-to-Point Routes, Often to

Secondary Airports

Automated ticketing machines

Empowered employeesHigh employee compensation

2 - 72© 2011 Pearson Education, Inc. publishing as Prentice Hall

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:Low Cost

Employees Secondary Airports

High Aircraft

Utilization

Frequent, Reliable

Schedules

Figure 2.8

Hire for attitude, then trainHigh level of stock

ownershipHigh number of flights

reduces employee idle time between flights

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13

Four International Four International Operations StrategiesOperations Strategies

Con

side

ratio

ns

High Figure 2.9

Import/export or license existing product

International Strategy

2 - 73© 2011 Pearson Education, Inc. publishing as Prentice Hall

Cos

t Red

uctio

n C

Low

HighLowLocal Responsiveness Considerations

(Quick Response and/or Differentiation)

ExamplesU.S. SteelHarley Davidson

Four International Four International Operations StrategiesOperations Strategies

Con

side

ratio

ns

High Figure 2.9

2 - 74© 2011 Pearson Education, Inc. publishing as Prentice Hall

Cos

t Red

uctio

n C

Low

HighLowLocal Responsiveness Considerations

(Quick Response and/or Differentiation)

International Strategy

Import/export or license existing product

ExamplesU.S. SteelHarley Davidson

Four International Four International Operations StrategiesOperations Strategies

Con

side

ratio

ns

High Figure 2.9

Standardized productEconomies of scaleCross-cultural

Global Strategy

2 - 75© 2011 Pearson Education, Inc. publishing as Prentice Hall

Cos

t Red

uctio

n C

Low

HighLowLocal Responsiveness Considerations

(Quick Response and/or Differentiation)

International Strategy

Import/export or license existing product

ExamplesU.S. SteelHarley Davidson

learningExamples

Texas InstrumentsCaterpillarOtis Elevator

Four International Four International Operations StrategiesOperations Strategies

Con

side

ratio

nsHigh

Standardized productEconomies of scaleCross-cultural learning

Examples:Texas InstrumentsCaterpillarOtis Elevator

Global Strategy

Figure 2.9

2 - 76© 2011 Pearson Education, Inc. publishing as Prentice Hall

Cos

t Red

uctio

n C

Low

HighLowLocal Responsiveness Considerations

(Quick Response and/or Differentiation)

International Strategy

Import/export or license existing product

ExamplesU.S. SteelHarley Davidson

Four International Four International Operations StrategiesOperations Strategies

Con

side

ratio

ns

High

Standardized productEconomies of scaleCross-cultural learning

Examples:Texas InstrumentsCaterpillarOtis Elevator

Global Strategy

Figure 2.9

Use existing domestic model globallyFranchise, joint ventures

Multidomestic Strategy

2 - 77© 2011 Pearson Education, Inc. publishing as Prentice Hall

Cos

t Red

uctio

n C

Low

HighLowLocal Responsiveness Considerations

(Quick Response and/or Differentiation)

International Strategy

Import/export or license existing product

ExamplesU.S. SteelHarley Davidson

ventures, subsidiaries

ExamplesHeinzMcDonald’sThe Body ShopHard Rock Cafe

Four International Four International Operations StrategiesOperations Strategies

Con

side

ratio

ns

High

Standardized productEconomies of scaleCross-cultural learning

Examples:Texas InstrumentsCaterpillarOtis Elevator

Global Strategy

Figure 2.9

2 - 78© 2011 Pearson Education, Inc. publishing as Prentice Hall

Cos

t Red

uctio

n C

Low

HighLowLocal Responsiveness Considerations

(Quick Response and/or Differentiation)

International Strategy

Import/export or license existing product

ExamplesU.S. SteelHarley Davidson

Multidomestic StrategyUse existing domestic model globallyFranchise, joint ventures, subsidiaries

ExamplesHeinz The Body ShopMcDonald’s Hard Rock Cafe

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14

Four International Four International Operations StrategiesOperations Strategies

Con

side

ratio

ns

High

Standardized productEconomies of scaleCross-cultural learning

Examples:Texas InstrumentsCaterpillarOtis Elevator

Global Strategy

Figure 2.9

Move material, people, ideas across national boundaries

Transnational Strategy

2 - 79© 2011 Pearson Education, Inc. publishing as Prentice Hall

Cos

t Red

uctio

n C

Low

HighLowLocal Responsiveness Considerations

(Quick Response and/or Differentiation)

International Strategy

Import/export or license existing product

ExamplesU.S. SteelHarley Davidson

Multidomestic StrategyUse existing domestic model globallyFranchise, joint ventures, subsidiaries

ExamplesHeinz The Body ShopMcDonald’s Hard Rock Cafe

Economies of scaleCross-cultural learning

ExamplesCoca-ColaNestlé

Four International Four International Operations StrategiesOperations Strategies

Con

side

ratio

ns

High

Standardized productEconomies of scaleCross-cultural learning

Examples:Texas InstrumentsCaterpillarOtis Elevator

Global Strategy Transnational StrategyMove material, people, ideas across national boundariesEconomies of scaleCross-cultural learning

ExamplesCoca-ColaNestlé

Figure 2.9

2 - 80© 2011 Pearson Education, Inc. publishing as Prentice Hall

Cos

t Red

uctio

n C

Low

HighLowLocal Responsiveness Considerations

(Quick Response and/or Differentiation)

International Strategy

Import/export or license existing product

ExamplesU.S. SteelHarley Davidson

Multidomestic StrategyUse existing domestic model globallyFranchise, joint ventures, subsidiaries

ExamplesHeinz The Body ShopMcDonald’s Hard Rock Cafe

Ranking CorruptionRanking CorruptionRank Country 2009 CPI Score (out of 10)1 New Zealand 9.42 Demark 9.33 Singapore, Sweden 9.25 Switzerland 9.08 Australia, Canada, Iceland 8.712 Hong Kong 8.2

Least Corrupt

2 - 81© 2011 Pearson Education, Inc. publishing as Prentice Hall

12 Hong Kong 8.214 Germany 8.017 Japan, UK 7.719 USA 7.537 Taiwan 5.639 South Korea 5.556 Malaysia 4.579 China 3.689 Mexico 3.3146 Russia 2.2

Most Corrupt

2 - 82© 2011 Pearson Education, Inc. publishing as Prentice Hall

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