Oper. Strategy and Compt SVR Sect B

Operations Strategy
21
Competitive Priorities
Operations Role in Corporate
Strategy
Strategic Decisions in Operations
Strategy Deployment
Issues and Trends in Operations
Copyright 2006 John Wiley & Sons,
Inc.
Copyright 2014 by McGraw Hill Education (India) Private Limited. All rights
reserved.
Lecture Outline
2-2
22
Competitive Priorities
Cost
Quality
Highperformance
design
Consistent
quality
Flexibility
Customization
Volume
flexibility
Speed
Fast delivery
Development
speed

Inc.
2-3
23
Lincoln Electric
reduced costs by $10 million a year for 10 years
skilled machine operators save the company millions
that would have been spent on automated
equipment
Southwest Airlines
one type of airplane facilitates crew changes, recordkeeping, maintenance, and inventory costs
direct flights mean no baggage transfers
$30 million annual savings in travel agent
commissions by requiring customers to contact the
airline directly
Inc.
reserved.
Competitive
Priorities: Cost
2-4
24
Ritz-Carlton - one customer at a time

Every employee is empowered to satisfy a guests wish
Teams at all levels set objectives and devise quality
action plans
Each hotel has a quality leader
Quality reports tracks
guest room preventive maintenance cycles
percentage of check-ins with no waiting
time spent to achieve industry-best clean room
appearance
reserved.
Competitive
Priorities: Quality
Guest Preference Reports are recorded in a database

Inc.
2-5
25
Andersen Windows
number of products offered grew from 28,000 to 86,000
number of errors are down to 1 per 200 truckloads
Custom Foot Shoe Store:

customers feet are scanned electronically to capture
measurements
custom shoes are mailed to the customers home in weeks
prices are comparable to off-the-shelf shoes
National Bicycle Industrial Company
reserved.
Competitive
Priorities: Flexibility
offers 11,231,862 variations

delivers within two weeks at costs only 10% above
standard models
Inc.
2-6
26
Citicorp
advertises a 15-minute mortgage approval
L.L. Bean
ships orders the day they are received
Wal-Mart
replenishes its stock twice a week
Hewlett-Packard
produces electronic testing equipment in five days
General Electric
reduces time to manufacture circuit-breaker boxes

into three days and dishwashers into 18 hours
Dell
reserved.
Competitive Priorities:
Speed
ships custom-built computers in two days
Motorola
needs less than 30 minutes to build to order pagers

Inc.
2-7
27
Operations provides support for a

differentiated strategy
Operations serves as a firms distinctive
competence in executing similar
strategies better than competitors

Inc.
reserved.
Operations Role in
Corporate Strategy
2-8
28
reserved.
Operations Strategy at
Wal-Mart
2-9
29
Strategic Decisions in
Operations
Product
s
Capacity
Facilities
Services
Human
Resources
Sourcing
Process
and
Technology
Quality
Operating
Systems
2-10
210
Make-to-Order
products and services are made to customer
specifications after an order has been received
Make-to-Stock
products and services are made in anticipation
of demand
Assemble-to-Order
products and services add options according to
customer specifications

Inc.
reserved.
Operations Strategy:
Products and Services
2-11
211
Production Strategy:
Processes and technology
Project
one-at-a-time production of a product to customer
order
Batch Production
systems process many different jobs at the same time
in groups (or batches)
Mass Production
large volumes of a standard product for a mass market
Continuous Production
used for very high volume commodity products
Copyright 2006 John Wiley & Sons, Inc.
2-12
212
Source: Adapted from Robert

Hayes and Steven Wheelwright,
Restoring the Competitive Edge:
Competing Through
Manufacturing (New York: John
Wiley & Sons, 1984), p. 209

Inc.
reserved.
ProductProcess Matrix
2-13
213
Continuous Production
Hi
gh
er
Vo
lum
e
A paper manufacturer produces a

continuous sheet paper from wood
pulp slurry, which is mixed, pressed,
dried, and wound onto reels.
Mass Production
St
an
da
rd
ize
d
Here in a clean room a worker performs

quality checks on a computer assembly line.
M
or
e
Batch Production
At Martin Guitars bindings on the guitar frame are

installed by hand and are wrapped with a cloth
webbing until glue is dried.
Project
Construction of the aircraft carrier USS Nimitz was a huge

project that took almost 10 years to complete.
2-14
214
Service Strategy:
Processes and Technology
Professional Service
highly customized and very labor intensive
Service Shop
customized and labor intensive
Mass Service
less customized and less labor intensive
e.g. Call Centre, Mass customization in Manf.
Service Factory
least customized and least labor intensive
2-15
215
Source: Adapted from Roger

Schmenner, How Can Service
Businesses Survive and
Prosper? Sloan Management
Review 27(3):29

Inc.
reserved.
Service-Process Matrix
2-16
216
In
ten
siv
e
Le
ss
Cu
sto
mi
ze
dLe
ss
La
bo
r
Service Factory
Electricity is a commodity available

continuously to customers.
Mass Service
A retail store provides a standard array of

products from which customers may choose.
Service Shop
Although a lecture may be prepared in advance, its

delivery is affected by students in each class.
Professional Service
A doctor provides personal service to each patient based

on extensive training in medicine.
2-17
217
Capacity and facilities

Human resources
Quality
Sourcing
Operating systems
Inc.
reserved.
Operations Strategy:
Continued
2-18
218
Global Markets, Global Sourcing,

and Global Operations
Virtual Companies
Greater Choice, More
Individualism
Emphasis on Service
Speed and Flexibility
Inc.
reserved.
Issues and Trends in

Operations
2-19
219
Supply Chains
Collaborative Commerce
Technological Advances
Knowledge and Ability to Learn
Environmental and Social
Responsibilities

Inc.
reserved.
Issues and Trends in

Operations (cont.)
2-20
220
Management must decide which

parameters of performance are critical and
concentrate resources on those
characteristics
For example, a firm that is focused on lowcost production may not be capable of
quickly introducing new products
Straddling seeking to match a successful
competitor by adding features, services, or
technology to existing activities
reserved.
Trade-Offs
Often a risky strategy

221
Order qualifiers are those dimensions that

are necessary for a firms products to be
considered for purchase by customers
Features customers will not forego
Order winners are criteria used by

customers to differentiate the products
and services of one firm from those of
other firms
reserved.
Order Winners and Order

Qualifiers
Features that customers use to determine

which product to ultimately purchase
222
Productivity is a measure of how well resources are

used
Productivity =
Productivity is a relative measure
Must be compared to something else to be meaningful
Operations can be compared to each other
Firms can be compared to other firms
Partial productivity measures compare output to a

single input
Multifactor productivity measures compare output
to a group of inputs
Total productivity measures compare output to all
inputs
reserved.
Productivity Measurement
223
reserved.
Productivity Calculation
224
1.Consider the following financial data from the past year for Midwest
Outdoor Equipment Corporation.
Gross
Income
Total Sales
Total Credit
Sales
Net Income
Cost of
Goods Sold
Total Assets
Average
Inventory
Average
Receivables
$25,240,000
24,324,000
18,785,000
2,975,000
12,600,000
10,550,000
2,875,000
3,445,000
Receivable Turnover
Ratio:
Inventory Turnover
Ratio :
Asset Turnover Ratio :
reserved.
Problems
225

Oper. Strategy and Compt SVR Sect B

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Operations Strategy

Copyright 2006 John Wiley & Sons,

Ritz-Carlton - one customer at a time

Guest Preference Reports are recorded in a database

Copyright 2006 John Wiley & Sons,

Custom Foot Shoe Store:

National Bicycle Industrial Company

offers 11,231,862 variations

advertises a 15-minute mortgage approval

ships orders the day they are received

replenishes its stock twice a week

produces electronic testing equipment in five days

reduces time to manufacture circuit-breaker boxes

ships custom-built computers in two days

needs less than 30 minutes to build to order pagers

Operations provides support for a

Copyright 2006 John Wiley & Sons,

Copyright 2006 John Wiley & Sons,

Copyright 2006 John Wiley & Sons, Inc.

Source: Adapted from Robert

Copyright 2006 John Wiley & Sons,

A paper manufacturer produces a

Here in a clean room a worker performs

At Martin Guitars bindings on the guitar frame are

Construction of the aircraft carrier USS Nimitz was a huge

Copyright 2006 John Wiley & Sons, Inc.

Copyright 2006 John Wiley & Sons, Inc.

Source: Adapted from Roger

Copyright 2006 John Wiley & Sons,

Electricity is a commodity available

A retail store provides a standard array of

Although a lecture may be prepared in advance, its

A doctor provides personal service to each patient based

Capacity and facilities

Global Markets, Global Sourcing,

Issues and Trends in

Copyright 2006 John Wiley & Sons,

Issues and Trends in

Management must decide which

Often a risky strategy

Order qualifiers are those dimensions that

Order winners are criteria used by

Order Winners and Order

Features that customers use to determine

Productivity is a measure of how well resources are

Partial productivity measures compare output to a

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