Operations Strategy and Competitiveness

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Chapter 2
Operations Strategy and Competitiveness
Mission and Strategy Competitive Dimensions Order
Qualifiers and Winners Strategy Design
Process Trade-offs Strategic Decisions Service
Strategy Capacity Capabilities Productivity
Measures Schonbergers 16 Principles of OM
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Mission / Strategy Process
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Competitive Dimensions

• Cost
• Product Quality and Reliability
• Delivery Speed
• Delivery Reliability
• Coping with Changes in Demand
• Flexibility and New Product Introduction Speed
• Other Product-Specific Criteria

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Steps in Manufacturing Strategy

• Segment the market according to the product group
• Identify product requirements, demand patterns,
  and profit margins of each group
• Determine order qualifiers and order winners for
  each group
• Convert order winners into specific performance
  requirements

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Order Qualifiers and Winners

• Order qualifiers are the basic criteria that
  permit the firms products to be considered as
  candidates for purchase by customers
• Order winners are the criteria that
  differentiates the products and services of one
  firm from another

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Order Qualifiers and Winners

• An order qualifier might be 2-seater sports
  car.

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Trade-offs
Examples Cost vs. Quality Flexibility
to customize vs. Speed of delivery

• Managers have two jobs
• Short-term work in the system
• Deal effectively with the trade-offs
• Long-term work on the system
• Reduce and eliminate the trade-offs

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Buffas 3 Basic Strategic Decisions

• Type of Product Design
• Standardized
• Customized

• Type of Process Design
• Process Oriented
• Product Oriented

• Finished Goods Inventory Policy
• Produce to Stock
• Produce to Order

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Productivity

• 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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Partial Measure Productivity

• Labor productivity Output / Labor
• Others
• Output , Output ,
  Output
• Capital Materials
  Energy

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Example Labor Productivity
Units produced 10,000 Labor hours used
400 Calculate labor productivity
PL 10,000 units / 400 hours 25
units/hour
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Total Productivity
Output

• Productivity

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Total Productivity Example
Units produced 10,000 Labor
hours used 400 Labor cost
10 / hour Capital investment
100,000 Capital usage 10 /
year Energy used 500,000 BTU Energy
cost 0.005 / BTU Materials used
16,000
Calculate total productivity
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Solution
Total Productivity
10,000 units

4000 10,000 2500 16,000 (labor)
(capital) (energy) (materials)
10,000 units
0.308 units / dollar


32,500
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Calculating Changes in Productivity
Percentage change is calculated as
Example Suppose total productivity was Last
Year -- .308 units/ This Year -- .334
units/ Calculate change in productivity
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Schonbergers 16 Principles of OM
Schonbergers 16 Principles of OM

• Know and team up with the next and final
  customer.
• Become dedicated to continual, rapid
  improvement in quality, cost, response time,
  flexibility, variability, and service.
• Achieve unified purpose via shared information
  and team involvement in planning and
  implementation of change.
• Know the competition and the world-class leaders.

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Schonbergers 16 Principles of OM
Schonbergers 16 Principles of OM

• (a) Cut the number of product or service
  components or operations
• (b) Cut the number of suppliers to a few good
  ones.
• Organize resources into multiple "chains of
  customers," each focused on a product, service,
  or customer family create work-flow teams,
  cells, and "plants-in-a-plant."
• Continually invest in human resources
  thru cross-training (for mastery of multiple
  skills), education, job and career-path
  rotation, and improved health, safety, and
  security.

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Schonbergers 16 Principles of OM
Schonbergers 16 Principles of OM

• Maintain and improve present equipment and human
  work before thinking about new equipment
  automate incrementally when process variability
  cannot otherwise be reduced.
• Look for simple, flexible, movable, low-cost
  equipment that can be acquired in multiple
  copies-- each assignable to work-flow teams,
  focused cells, and plants-in-a-plant.
• Make it easier to make/provide goods or services
  without error or process variation.
• Cut flow time (wait time),distance, and inventory
  all along the chains of customers.
• Cut setup, changeover, get-ready, and startup
  times.

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Schonbergers 16 Principles of OM
Schonbergers 16 Principles of OM

• Operate at the customer's rate of use (or a
  smoothed representation of it) decrease cycle
  interval and lot size.
• Record and own quality, process, and problem
  data at the workplace. Ensure that front-line
  improvement teams get first chance at problem
  solving -- before staff experts.
• Cut transactions and reporting control causes,
  not symptoms.
• Market each improvement share results with
  employees, suppliers, and customers. Create a
  foundation for revisions to strategy.

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End of Chapter 2