Title: Gaining Competitive Advantage Through Operations
1CHAPTER 2
Gaining Competitive Advantage Through Operations
2Learning Objectives
- Understand how business processes create
competitive capabilities that enable
organizations to satisfy customer requirements. - Describe some of the key business processes,
including strategy development, product
development, developing systems to produce
services and goods, and order fulfillment. - Explain how operations management can maintain an
organization's competitive edge through
high-quality production, convenient delivery,
effective customer service, and competitive cost. - Discuss why operations are strategically
important. - List and define the steps necessary to link
operations to corporate strategy. - Describe how operations managers are using
information technology to increase productivity,
improve quality, provide a safer environment, and
reduce costs. - Discuss how computer and information technology
affect operations.
3General Topics In Chapter
- Strategic Issues Achieving Competitive Advantage
with Operations - Customer Requirements
- Competitive Capabilities
- Designing Business Processes That Build
Competitive Capabilities - Strategy Development and Operations
- The Role Of Computer And Information Technology
In Operations - The Role of Computer and Information Technology
in Manufacturing - The Role of Computer and Information Technology
in Service Operations
4Competitive Advantage
- Capability which customers value which gives an
organization an edge on its competition - Short delivery lead time
- High product quality
- Operations can be an important tool for
- Improving profits
- Increasing market share
- Developing new markets
5Model for Developing Competitive Advantage
6Customer Requirements
- Meeting specific needscustom blended paint
- Quick responsewindow of opportunity
- Product performance and featuresair bags in a
car - Product qualitydurable finish on a wooden table
- Pricebetter value to customer
- Serviceeasy way to order accessories
7Competitive Capabilities
- Flexibility
- Productivity
- Building Quality into Products
- Time
- E-Business
- Flexibility
- Productivity
- Building Quality into Products
- Time
- E-Business
8Operations for Competitive Advantage
Competitive Capability Leads to
- Flexible operations
- Productivity
- Quality systems
- Short response time from product design to
delivery
- Rapid and inexpensive response to changing
customer demand - Low cost services and goods
- Meeting customer needs instead of engineerings
definition of quality - Satisfying customers desire for instant
gratification
9Using Flexibility to Gain a Competitive Advantage
- Changeover and operating costs are reduced
- Production costs are reduced because the system
is more easily adapted to producing new and
different products
- Marketing can meet specific customer demands
- Timely deliveries are possible because
inexpensive and quick changes can be made from
one product to another
10Productivity
output Productivity ---------
input
number of
units Labor Productivity ---------------------
labor hour
11Achieving Productivity Improvements
- Structure of operationsnumber, size, location
and capacity of facilities - Equipment and methodselecting equipment and
methods that fit the job - Individual jobs and activitiesfinding the most
efficient way to do a job
A
for landscaping
or a
12Results of ProductivityImprovements
Productivity improvements free resources for
innovation
- 1st Revolution farm labor declines from 95 to
5 of labor force - 2nd Revolution improved manufacturing methods
frees resources for service operations - 3rd Revolution computer and information
technology creates smart automation systems to
improve white collar productivity
13Building Quality into Products
- High Quality and Low Costs The Ideal
- Moving toward the Ideal through Technology
- Moving toward the Ideal through Better Management
14High Quality and Low Costs Blending Quality
and Costs
15Time
- Time-based competition is a strategy of seeking
competitive advantage by quickening the tempo of
critical organizational processes - The emphasis is on end-to-end time (i.e.,
aggregate time) from the generation of new
product concepts to the delivery of finished
products, rather than the time to perform
specific tasks or functions.
16E-Business
- Two types of E-Business
- Supply Chain Management
- Customer Relationship Management
17Two types of E-Business
- business-to-business (B2B)
- business-to-consumer (B2C)
18Supply Chain Management
- Supply chains encompass all activities associated
with the flow and transfer of goods and services
from raw material extraction through use by the
organization that sells to the final consumer. - Supply chain management is the integration of
these activities through improved supplier
relationships to achieve a sustainable
competitive advantage for all members in the
supply chain.
19Customer Relationship Management
- Financial benefits
- Social benefits
- Structural ties
20Designing Business Processes that Build
Competitive Capabilities
- Strategy development
- Product development
- Developing systems to produce services and goods
- Order fulfillment
21Strategy Development
- Strategy coordinates the various business
functions - Strategy drives the organization towards its
ultimate objective
22Product Development
- A teamwork oriented process
- Develops a product concept
- Generates a product design
- Determines methods for producing the service or
good
23Process for developing systems to produce
services and goods
- Acquiring the resources (facility, equipment,
etc.) which enable the organization to produce
the product
24Order Fulfillment Process
- Order entry
- Credit verification
- Scheduling production
- Distribution
25Strategy Development and Operations
- Linking Corporate Strategy to Operations
- A Changing Global Environment Offers Greater
Competition
26- Linking Corporate Strategy to Operations
- Operations can become a positive factor that
contributes to organizational success. - To make this happen, facilities, equipment, and
training should be viewed as a means to achieve
organizational, rather than operational,
objectives.
27An Example
- How are operations important to Midas?
- Limited service permits special design of the
equipment and the shop so that the employees can
be more productive. - Limited service requires a limited inventory that
allows convenient storage close to the point
where materials are needed. - Multiple shops and limited service permit careful
engineering of the necessary hand tools and the
work procedures. - Because employees have few variations in service,
they learn how to do these jobs more quickly. - Workers' skill levels and knowledge requirements
focus on a limited area of service so they
quickly become experts in a particular area.
28An Example
- How does Genoa Motors design operations to match
its objectives? - The facility is adaptable to changing needs.
- Genoa Motors has more tools than a specialist
like Midas does because Genoa Motors does a
greater variety of jobs. - There is some job specialization.
- The workers' skill levels and pay rates are
higher than workers at Midas. - A significant inventory of many different parts
is maintained. These parts are physically
separated from the repair stalls and controlled
by specialists in parts.
29An Example
How do organizations successfully link corporate
strategy and operating strategy?
- Analyzing the competitive environment (external
environmentthreats and opportunities) - Appraising the organization's skills and
resources (internal environmentstrengths and
weaknesses) - Formulating corporate strategy
- Determining the implications of corporate
strategy for operating strategy - Examining the limitations economics and
technology place on operations - Designing systems for operations
- Planning and managing operations
30Steps of Linking Corporate Strategy to Operations
- Analyzing the Competitive Environment
- Appraising the Organization's Skills and
Resources - Formulating Corporate Strategy
- Determining the Implications of Corporate
Strategy for Operating Strategy - Examining the Limitations of Economics and
Technology on Operations - Designing Systems for Operations
- Planning and Managing Operations
31A Changing Global Environment Offers Greater
Competition
- European Community (EC)
- NAFTA North American Free Trade Agreement
(NAFTA)
32Role of Computers and Information Technology in
Operations
- Expert Systems (ES)
- Decision Support Systems (DSS)
- Information Super Highway
- Virtual Reality
33The Role of Computer and Information Technology
in Manufacturing
- Computer-based control systems can be combined
with manufacturing technology to improve
manufacturing operations. - The computer can assist in integrating these
technologies into a lean and efficient factory
capable of competing in world markets.
34The Role of Computer and Information Technology
in Service Operations
- Services do not have a physical dimension. The
operations categorized as service operations are
really services and goods operations. - In order to provide better and faster customer
service, managers can use information systems
that provide up-to-date and accurate information
about availability of the service and how
customers can acquire it.