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PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-1
Operations ManagementOperations Management
Operations Strategy in a GlobalOperations Strategy in a Global
EnvironmentEnvironment
Chapter 2Chapter 2
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-2
OutlineOutline
♦GLOBAL COMPANY PROFILE: BOEING
♦DEVELOPING MISSIONS AND STRATEGIES
♦ Mission
♦ Strategy
♦ACHIEVING COMPETITIVE ADVANTAGE
THROUGH OPERATIONS
♦ Competing on Differentiation
♦ Competing on Cost
♦ Competing on Response
♦TEN STRATEGIC OM DECISIONS
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-3
Outline - ContinuedOutline - Continued
♦ISSUES IN OPERATIONS STRATEGY
♦ Research
♦ Preconditions
♦ Dynamics
♦STRATEGY DEVELOPMENT AND
IMPLEMENTATION
♦ Identify Critical Success Factors
♦ A Global view of Operations Cultural and Ethical
Issues
♦ Build and Staff the Organization
♦ Integrate OM with Other Activities
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-4
Outline - ContinuedOutline - Continued
♦GLOBAL OPERATIONS STRATEGY OPTIONS
♦ International Strategy
♦ Multidomestic Strategy
♦ Global Strategy
♦ Transnational Strategy
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-5
Learning ObjectivesLearning Objectives
When you complete this chapter, you should
be able to :
Identify or Define:
♦ Mission
♦ Strategy
♦ Ten Decisions of OM
♦ Multinational Corporations
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-6
Learning Objectives - ContinuedLearning Objectives - Continued
Describe or Explain:
♦ Specific approaches used by OM to achieve
strategies
♦Differentiation
♦Low Cost
♦Response
♦ Four Global Operations Strategies
♦ Why Global Issues are Important
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-7
Examples of Global StrategiesExamples of Global Strategies
♦Boeing – both sales and production are worldwide.
♦Benetton – moves inventory to stores around the
world faster than its competitor by building
flexibility into design, production, and distribution
♦Sony – purchases components from suppliers in
Thailand, Malaysia, and around the world
♦GM is building four similar plants in Argentina,
Poland, China, and Thailand
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-8
Boeing Suppliers (777)Boeing Suppliers (777)
Firm Country Parts
Alenia Italy Wing flaps
AeroSpace
Technologies
Australia Rudder
CASA Spain Ailerons
doors, wing section
Fuji Japan Landing gear
GEC Avionics United Kingdom Flight computers
Korean Air Korea Flap supports
Menasco Aerospace Canada Landing gears
Short Brothers Ireland Landing gear doors
Singapore
Aerospace
Singapore Landing gear doors
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-9
The Role ofThe Role of
♦Maquiladoras
♦World Trade Organization (WTC)
♦North American Free Trade Agreement (NAFTA)
♦European Union (EU)
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-10
Management Issues inManagement Issues in
Global OperationsGlobal Operations
Global Strategic Context
♦ Differentiation
♦ Cost leadership
♦ Response
Logistics
Management
Location DecisionsSupply Chain
Management
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-11
Supply-Chain ManagementSupply-Chain Management
♦Sourcing
♦Vertical integration
♦Make-or-buy decisions
♦Partnering
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Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-12
Location DecisionsLocation Decisions
♦Country-related issues
♦Product-related issues
♦Government policy/political risk
♦Organizational issues
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Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-13
Materials ManagementMaterials Management
♦Flow of materials
♦Transportation options and speed
♦Inventory levels
♦Packaging
♦Storage
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-14
Defining Global OperationsDefining Global Operations
♦ International business - engages in cross-border
transactions
♦ Multinational Corporation - has extensive involvement in
international business, owning or controlling facilities in
more than one country
♦ Global company - integrates operations from different
countries, and views world as a single marketplace
♦ Transnational company - seeks to combine the benefits of
global-scale efficiencies with the benefits of local
responsiveness
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-15
Some Multinational CorporationsSome Multinational Corporations
Workforce
Company Home
Country
% Sales
Outside
Home
Country
% Assets
Outside
Home
Country
% Foreign
Colgate-
Palmolive
USA 72 63 NA
Dow
Chemical
USA 60 50 NA
Gillette USA 62 53 NA
Honda Japan 63 36 NA
IBM USA 57 47 51
Citicorp USA 34 46 NA
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-16
Some Multinational CorporationsSome Multinational Corporations
Workforce
Company Home
Country
% Sales
Outside
Home
Country
% Assets
Outside
Home
Country
% Foreign
ICI Britain 78 50 NA
Nestlé Switzerland 98 95 97
Philips Netherlands 94 85 82
Siemens Germany 51 NA 38
Electronics
Unilever Britain &
Netherlands
95 70 64
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-17
Pontiac - the LeMans IncludedPontiac - the LeMans Included
the Followingthe Following
♦ About $6,000 heads to South Korea for auto’s assembly
♦ $3,500 goes to Japan for engines, axles, and electronics
♦ $1,500 goes to Germany for design
♦ $800 goes to Taiwan, Singapore, and Japan for smaller parts
♦ $500 heads to England for marketing
♦ $100 goes to Ireland for information technology
♦ the rest ≅ $7,600, goes to GM and its US bankers, insurance
agents, and attorneys.
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-18
Reasons to Globalize OperationsReasons to Globalize Operations
♦Reduce costs (labor, taxes, tariffs, etc.)
♦Improve the supply chain
♦Provide better goods and services
♦Attract new markets
♦Learn to improve operations
♦Attract and retain global talent
Tangible
Intangible
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-19
Trade and TariffTrade and Tariff
♦Maquiladoras - Mexican factories located along
the U.S.-Mexico border that receive preferential
tariff treatment
♦GATT - an international treaty that helps
promote world trade by lowering barriers to the
free flow of goods across borders
♦NAFTA - a free trade agreement between
Canada, Mexico, and the United States
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-20
Trade PaysTrade Pays
GDP (PPP*) per PersonGDP (PPP*) per Person
1990 Growth Rates, %1990 Growth Rates, %
-1
0
1
2
3
4
5
More globalized
poor countries
Rich
countries
Less globalized
poor countries
*PPP – Purchasing Power Parity
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-21
Free trade may
take us into the era of the floating factory - a six
person crew will take a factory from port to port
in order to obtain the best market, material, labor
and tax advantages
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-22
Achieving Global OperationsAchieving Global Operations
-Four Considerations--Four Considerations-
♦Global product design
♦Global process design and technology
♦Global factory location analysis
♦Impact of Culture and Ethics
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-23
GlobalGlobal
Product DesignProduct Design
♦Remember social and cultural differences
♦ packaging and marketing can help make product seem
“domestic” but -
♦ “liter” versus “quart”
♦ “sweetness” and “taste”
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-24
GlobalGlobal
Process Design and TechnologyProcess Design and Technology
♦Information technology enables management of
integrated, globally dispersed operation
♦Texas Instruments: 50 plants in 19 countries
♦Hewlett-Packard - product development teams in
U.S., Japan, Great Britain, and Germany
♦Reduces time-to-market
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Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-25
GlobalGlobal
Facility Location AnalysisFacility Location Analysis
♦Select CSFs based on parent organization;’s
strategic or operations objectives
♦Obtain country-specific information on the CSFs
♦Evaluate each country’s CSFs using a 1 (bad) to
5 (good) rating scale
♦Sum the ratings
Using CSFs for Country Selection
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Principles of Operations Management, 5e, and Operations
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-26
You May Wish To ConsiderYou May Wish To Consider
♦ national literacy rate
♦ rate of innovation
♦ rate of technology change
♦ number of skilled workers
♦ stability of government
♦ product liability laws
♦ export restrictions
♦ similarity in language
♦ work ethic
♦ tax rates
♦ inflation
♦ availability of raw materials
♦ interest rates
♦ population
♦ number of miles of highway
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-27
GlobalGlobal
Impact of Culture and EthicsImpact of Culture and Ethics
♦Cultures differ! Some accept/expect:
♦ variations in punctuality
♦ long lunch hours
♦ expectation of thievery
♦ bribery
♦ little protection of intellectual property
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-28
Ranking CorruptionRanking Corruption
1. Finland 9.7
2. Denmark & New Zealand (Tie) 9.5
7. Canada 9.0
10. United Kingdom 8.7
16. United States 7.7
18. Germany & Israel (Tie) 7.3
20. Japan 7.1
31. Italy 5.2
59. China 3.5
62. Egypt 3.4…
71. India & Russia (Tie) 2.7…
2. Nigeria 1.6
3. Bangladesh 1.2
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-29
To Establish Global ServicesTo Establish Global Services
♦Determine if sufficient people or facilities exist to
support the service
♦Identify foreign markets that are open - not
controlled by governments
♦Determine what services are of most interest to
foreign customers
♦Determine how to reach global customers
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-30
Managing Global ServiceManaging Global Service
OperationsOperations
Must take a different perspective on
♦Capacity planning
♦Location Planning
♦Facilities design and layout
♦Scheduling
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-31
Some DefinitionsSome Definitions
♦International business
♦ A firm that engages in cross-border
transactions.
♦Multinational Corporation (MNC)
♦ A firm that has extensive involvement in
international business, owning or controlling
facilities in more than one country
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-32
Some Global StrategiesSome Global Strategies
♦ International Strategy: uses exports and licenses to
penetrate the global area
♦ Multidomestic Strategy: uses decentralized authority with
substantial autonomy at each business
♦ Global Strategy: Uses a high degree of centralization, with
headquarters coordinating to seek standardization and
learning between plants
♦ Transnational Strategy: Exploits economies of scale and
learning, as well as pressure for responsiveness, by
recognizing that core competencies reside everywhere in
the organization
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-33
Match Product & ParentMatch Product & Parent
♦ Arrow shirts
♦ Braun Household Appliances
♦ Burger King
♦ Firestone Tires
♦ Godiva Chocolate
♦ Haagen_dazs Ice Cream
♦ Jaguar Autos
♦ MGM Movies
♦ Lamborghini Autos
♦ Goodrich Tires
♦ Alpo Petfoods
1. Volkswagen
2. Bidermann International
3. Bridgestone
4. Campbell Soup
5. Credit Lyonnais
6. Ford Motor Company
7. Gillette
8. Grand Metropolitan
9. Michelin
10. Nestlé
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-34
Match Product & CountryMatch Product & Country
♦ Arrow shirts
♦ Braun Household Appliances
♦ Burger King
♦ Firestone Tires
♦ Godiva Chocolate
♦ Haagen_Dazs Ice Cream
♦ Jaguar Autos
♦ MGM Movies
♦ Lamborghini Autos
♦ Goodrich Tires
♦ Alpo Petfoods
1. France
2. Great Britain
3. Germany
4. Japan
5. United States
6. Switzerland
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-35
Developing Missions andDeveloping Missions and
StrategiesStrategies
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Principles of Operations Management, 5e, and Operations
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-36
MissionMission
♦ Mission - where are you
going?
♦ Organization’s purpose for being
♦ Provides boundaries & focus
♦ Answers ‘What do we provide
society?’
© 1995 Corel Corp.
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Mission of FedExMission of FedEx
FedEx is committed to our People-Service-Profit philosophy.
We will produce outstanding financial returns by providing
total reliable, competitively superior, global air-ground
transportation of high priority goods and documents that
require rapid, time-certain delivery. Equally important,
positive control of each package will be maintained using
real time electronic tracking and tracing systems. A
complete record of each shipment and delivery will be
presented with our request for payment. We will be
helpful, courteous, and professional to each other and the
public. We will strive to have a completely satisfied
customer at the end of each transaction.
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Sample Mission - MerckSample Mission - Merck
The mission of Merck is to provide society with superior
products and services - innovations and solutions that
improve the quality of life and satisfy customer needs - to
provide employees with meaningful work and
advancement opportunities and investors with a superior
rate of return
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-39
Mission of the Hard Rock CaféMission of the Hard Rock Café
To spread the spirit of Rock ‘n’ Roll by delivering an
exceptional entertainment and dining experience. We are
committed to being 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.
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-40
Factors Affecting MissionFactors Affecting Mission
Mission
Philosophy &
Values
Profitability
& Growth
Environment
Customers Public Image
Benefit to
Society
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Principles of Operations Management, 5e, and Operations
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Mission/StrategyMission/Strategy
♦Mission - where you are going
♦Strategy - how you are going to get there; an
action plan
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Principles of Operations Management, 5e, and Operations
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-42
StrategyStrategy
♦ Action plan to achieve
mission
♦ Shows how mission will be
achieved
♦ Company has a business
strategy
♦ Functional areas have
strategies © 1995 Corel Corp.
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Principles of Operations Management, 5e, and Operations
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-43
Strategy ProcessStrategy Process
Marketing
Decisions
Operations
Decisions
Fin./Acct.
Decisions
Company
Mission
Business
Strategy
Functional AreaFunctional Area
Strategies
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-44
Strategies for CompetitiveStrategies for Competitive
AdvantageAdvantage
♦Differentiation
♦Cost leadership
♦Quick response
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Competing on DifferentiationCompeting on Differentiation
Uniqueness can go beyond both the physical
characteristics and service attributes to
encompass everything that impacts customer’s
perception of value
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Competing on CostCompeting on Cost
Provide the maximum value as perceived by
customer
Does not imply low value or low quality
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Competing on ResponseCompeting on Response
♦Flexibility
♦Reliability
♦Timeliness
Requires institutionalization within the firm of the
ability to respond
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Competing, Regardless of the Basis,Competing, Regardless of the Basis,
Requires the institutionalization within the firm of
the ability to change, and to adapt
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OM’s Contribution to StrategyOM’s Contribution to Strategy
Response
(Faster)
Quality
Product
Process
Location
Layout
Human Resource
Supply Chain
Inventory
Scheduling
Maintenance
HP’s ability to follow the printer market
Differentiation
(Better)
Cost
leadership
(Cheaper)
Southwest Airlines No-frills service
Sony’s constant innovation of new products
Pizza Hut’s five-minute guarantee at lunchtime
Federal Express’s “absolutely, positively on time”
Motorola’s automotive products ignition systems
Motorola’s pagers
IBM’s after-sale service on mainframe computers
Fidelity Security’s broad line of mutual funds
FLEXIBILITY
Design
Volume
LOW COST
DELIVERY
Speed
Dependability
QUALITY
Conformance
Performance
AFTER-SALE SERVICE
BROAD PRODUCT LINE
Operations
Decisions Examples Specific
Strategy Used
Competitive
Advantage
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10 Strategic OM Decisions10 Strategic OM Decisions
♦ Goods & service design
♦ Quality
♦ Process & capacity design
♦ Location selection
♦ Layout design
♦ Human resource and job design
♦ Supply-chain management
♦ Inventory
♦ Scheduling
♦ Maintenance
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Principles of Operations Management, 5e, and Operations
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Operations
Decisions
Goods Services
Goods &
services
decisions
Product is usually
tangible
Product is usually
intangible
Quality Objective quality
standards
Subjective quality
standards
Process
and
capacity
design
Customer not involved
in most of process
Customer may be directly
involved in process.
Capacity must match
demand to avoid lost sales
Goods & Services and the 10 OMGoods & Services and the 10 OM
DecisionsDecisions
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Operations
Decisions
Goods Services
Location
Selection
May need to be near raw
materials or labor force
Product is usually
intangible
Layout
Design
Layout can enhance
production efficiency
Subjective quality
standards
Human
Resources
and Job
Design
Workforce focused on
technical skills.
Labor standards consistent.
Output-based wage system.
Customer may be directly
involved in process.
Capacity matches
demand to avoid lost
sales
Goods & Services and the 10 OMGoods & Services and the 10 OM
Decisions – ContinuedDecisions – Continued
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Operations
Decisions
Goods Services
Supply chain
management
Supply-chain
relationships critical to
final product
Supply-chain relationships
important, not necessarily
critical
Inventory Raw materials, work-
in-process, and
finished goods
Most services cannot be
stored
Scheduling Ability to convert
inventory may allow
leveling of production
rates
Primarily concerned with
meeting the customer's
immediate schedule
Goods & Services and the 10 OMGoods & Services and the 10 OM
Decisions – ContinuedDecisions – Continued
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Goods & Services and the 10 OMGoods & Services and the 10 OM
Decisions – ContinuedDecisions – Continued
Operations
Decisions
Goods Services
Maintenance Maintenance is often
preventive and takes
place at the production
site
Maintenance is often
"repair" and takes place at
the customer's site
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Process DesignProcess Design
Low Moderate High
Volume
High
Moderate
Low
VarietyofProducts
Process-focused
Job Shops
(Print shop, emergency
room , machine shop,
fine dining
Repetitive (modular)
focus
Assembly line
(Cars, appliances, TVs,
fast-food restaurants) Product-focused
Continuous
(steel, beer, paper,
bread, institutional
kitchen)
Mass Customization
Customization at high
Volume
(Dell Computer’s PC)
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Operations Strategies for TwoOperations Strategies for Two
Drug CompaniesDrug Companies
Brand Name Drugs,
Inc.
Generic Drug Corp.
Product
Selection
and Design
Heavy R & D;
Extensive labs; focus
on development in
broad range of drug
categories
Low R & D investment; focus on
development of generic drugs
Quality Quality is a major
priority;
Standards exceed
regulatory
requirements
Meets regulatory requirements on
a country-by-country basis as
necessary
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-57
Operations Strategies for TwoOperations Strategies for Two
Drug Companies - ContinuedDrug Companies - Continued
Brand Name Drugs,
Inc.
Generic Drug Corp.
Process Product & modular
production processes
Long product runs in
specialized facilities
Build capacity ahead of
demand
Process focused
General production processes;
“Job Shop” approach, short run;
Focus on high utilization
Location Still located in city in
which it was founded
Recently moved to low tax, low labor cost
environment
Scheduling Central production
planning
Many short run products complicate
scheduling
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-58
Operations Strategies for TwoOperations Strategies for Two
Drug Companies - ContinuedDrug Companies - Continued
Brand Name Drugs,
Inc.
Generic Drug Corp.
Human
Resources
Hires the best; nation-
wide searches
Very experienced top executives
provide direction; other
personnel paid below average
Supply
Chain
Long term supplier
relationship
Tends to purchase competitively
to find bargains
Inventory Maintains high finished
goods inventory,
primarily to ensure all
demands are met
Process focus drives up WIP
inventory.
Finished goods inventory tends
to be low
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-59
Operations Strategies for TwoOperations Strategies for Two
Drug Companies - ContinuedDrug Companies - Continued
Brand Name
Drugs, Inc.
Generic Drug Corp.
Maintenance Highly trained staff;
Extensive parts
inventory
Highly trained staff to meet
challenging demands
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-60
Characteristics of High ROI FirmsCharacteristics of High ROI Firms
♦High quality product
♦High capacity utilization
♦High operating effectiveness
♦Low investment intensity
♦Low direct cost per unit
From the PIMS study of the Strategic
Planning Institute
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-61
Strategic Options Managers UseStrategic Options Managers Use
to Gain Competitive Advantageto Gain Competitive Advantage
♦28% - Operations Management
♦18% - Marketing/distribution
♦17% - Momentum/name recognition
♦16% - Quality/service
♦14% - Good management
♦ 4% - Financial resources
♦ 3% - Other
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-62
Strategic Options Managers UseStrategic Options Managers Use
to Gain Competitive Advantageto Gain Competitive Advantage
♦28% Operations Management
♦ Low- cost product
♦ Product-line breadth
♦ Technical superiority
♦ Product characteristics/differentiation
♦ Continuing product innovation
♦ Low-price/high-value offerings
♦ Efficient, flexible operations adaptable to consumers
♦ Engineering research development
♦ Location
♦ Scheduling
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-63
Preconditions -Preconditions -
To Implement a StrategyTo Implement a Strategy
One must understand:
♦ Strengths & weaknesses of competitors and new
entrants into the market
♦ Current and prospective environmental, legal, and
economic issues
♦ The notion of product life cycle
♦ Resources available with the firm and within the OM
function
♦ Integration of OM strategy with company strategy and
with other functions.
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-64
Impetus for Strategy ChangeImpetus for Strategy Change
♦Changes in the organization
♦Stages in the product life cycle
♦Changes in the environment
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-65
Stages in the Product Life CycleStages in the Product Life Cycle
Introduction
Growth
Maturity
Decline
Growthrate
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-66
Best period to increase market share
R&D engineering are critical
Product design and development are critical
Frequent product and process design changes
Over-capacity
Short production runs
High skilled-labor content
High production costs
Limited number of models
Utmost attentions to quality
Quick elimination of market-revealed design defects
Introduction
Strategy & Issues During Product LifeStrategy & Issues During Product Life
♦ Company
Strategy &
Issues
♦ OM Strategy
& Issues
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-67
Strategy & Issues During Product LifeStrategy & Issues During Product Life
Practical to change prices or quality image
Marketing is critical
Strengthen niche
Forecasting is critical
Product and process reliability
Competitive product improvements and options
Shift toward product oriented
Enhance distribution
Company
Strategy
& Issues
OM Strategy
& Issues
Growth
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-68
Strategy & Issues During Product LifeStrategy & Issues During Product Life
Poor time to increase market share
Competitive costs become critical
Poor time to change price, image, or quality
Defend position via fresh promotional and distribution
approaches
Standardization
Less rapid product changes and more minor annual model
changes
Optimum capacity
Increasing stability of manufacturing process
Lower labor skills
Long production runs
Attention to product improvement and cost cutting
Re-examination of necessity of design compromises
Company
Strategy
& Issues
OM Strategy
& Issues
Maturity
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-69
Strategy & Issues During Product LifeStrategy & Issues During Product Life
Cost control critical to market share
Little product differentiation
Cost minimization
Overcapacity in the industry
Prune line to eliminate items not returning
Good margin
Reduce capacity
Company Strategy
& Issues
OM Strategy
& Issues
Decline
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-70
Strategy and Issues During aStrategy and Issues During a
Product’s LifeProduct’s Life
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-71
Strategy Development andStrategy Development and
ImplementationImplementation
♦Identify critical success factors
♦Build and staff the organization
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-72
SWOT Analysis ProcessSWOT Analysis Process
♦Environmental Analysis
♦ Determine Corporate Mission
♦ Form a Strategy
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-73
SWOT Analysis to StrategySWOT Analysis to Strategy
FormulationFormulation
Strategy
Mission
External
Opportunities
Internal
Strengths
Internal
Weaknesses
External
Threats
Competitive
Advantage
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-74
IdentifyingIdentifying
Critical Success FactorsCritical Success Factors
Decisions Sample Option Chapter
Product Customized, or standardized 5
Quality Define customer expectations and how to achieve them 6, S6
Process Facility size, technology, capacity 7, S7
Location Near supplier or customer 8
Layout Work cells or assembly line 9
Human resource Specialized or enriched jobs 10, S10
Supply chain Single or multiple source suppliers 11, S11
Inventory When to reorder, how much to keep on hand 12, 14,16
Schedule Stable or fluctuating productions rate 13, 15
Maintenance Repair as required or preventive maintenance 17
Marketing
Service
Distribution
Promotion
Channels of distribution
Product positioning
(image, functions)
Finance/Accounting
Leverage
Cost of capital
Working capital
Receivables
Payables
Financial control
Lines of credit
Production/Operations
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-75
Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s
Low Cost Competitive AdvantageLow Cost Competitive Advantage
Courteous, but limited
passenger service
Lean, productive
employees
Short haul, point-to-point
routes, often to secondary
airports
High aircraft
utilization
Standardized fleet of
Boeing 737 aircraft
Frequent, reliable
schedules
Competitive Advantage:
Low Cost
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-76
Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s
Low Cost Competitive AdvantageLow Cost Competitive Advantage
Courteous, but limited
passenger service
No seat assignments
No baggage transfers
Automated ticketing machines
No meals
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-77
Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s
Low Cost Competitive AdvantageLow Cost Competitive Advantage
Short haul, point-to-point
routes, often to secondary
airports
Lower gate costs at
secondary airports
High number of flights,
reduces employee idle
time between flights
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-78
Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s
Low Cost Competitive AdvantageLow Cost Competitive Advantage
Frequent, reliable
schedules
High number of flights reduces
employee idle time between
flights
Saturate a city with flights
lowering administrative costs
per passenger for that city
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-79
Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s
Low Cost Competitive AdvantageLow Cost Competitive Advantage
Standardized fleet of
Boeing 737 aircraft
Pilot training on only one type of
aircraft
Reduced maintenance inventory
required because of only one type
of aircraft
Excellent supplier relations with
Boeing has aided financing
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-80
Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s
Low Cost Competitive AdvantageLow Cost Competitive Advantage
High aircraft
utilization
Flexible employees and
standard planes aids scheduling
Flexible union contracts
Maintenance personnel trained
on only one type of aircraft
20 minute gate turnarounds
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-81
Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s
Low Cost Competitive AdvantageLow Cost Competitive Advantage
Lean, productive
employees
High level of stock ownership
Hire for attitude, then train
High employee compensation
Empowered employees
Automated ticket machines
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-82
Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s
Low Cost Competitive AdvantageLow Cost Competitive Advantage
Courteous, but limited
passenger service
Lean, productive
employees
Short haul, point-to-point
routes, often to secondary
airports
High aircraft
utilization
Standardized fleet of
Boeing 737 aircraft
Frequent, reliable
schedules
Competitive Advantage:
Low Cost
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-83
Southwest Airline’s Low CostSouthwest Airline’s Low Cost
Competitive AdvantageCompetitive Advantage
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-84
Vanguard’s Activity SystemVanguard’s Activity System
A broad array of mutual
funds excluding some fund
categories
Efficient investment
management approach
offering good consistent
performance
Straightforward client
communication and
education
Strict cost
control
Direct
distributions
Very low
expenses
passed on to
client
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-85
How It WorksHow It Works
Company
Mission
Business
Strategy
Functional Area
Strategies
Marketing
Decisions
Operations
Decisions
Fin./Acct.
Decisions
If competitive
advantage, leads to
achieving
Distinctive
competencies affect
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-86
Four International OperationsFour International Operations
StrategiesStrategies
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-87
Multidomestic StrategyMultidomestic Strategy
Operating decisions are decentralized to each
country to enhance local responsiveness
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-88
Global StrategyGlobal Strategy
Operating decisions are centralized and
headquarters coordinates the standardization
and learning between facilities
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-89
Transnational StrategiesTransnational Strategies
Combines the benefits of global-scale efficiencies
with the benefits of local responsiveness
PowerPoint presentation to accompany Heizer/Render –
Principles of Operations Management, 5e, and Operations
Management, 7e
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
2-90
International StrategyInternational Strategy
Global markets are penetrated using exports and
licenses

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Operations Strategy and Globalization in Operations Management

  • 1. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-1 Operations ManagementOperations Management Operations Strategy in a GlobalOperations Strategy in a Global EnvironmentEnvironment Chapter 2Chapter 2
  • 2. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-2 OutlineOutline ♦GLOBAL COMPANY PROFILE: BOEING ♦DEVELOPING MISSIONS AND STRATEGIES ♦ Mission ♦ Strategy ♦ACHIEVING COMPETITIVE ADVANTAGE THROUGH OPERATIONS ♦ Competing on Differentiation ♦ Competing on Cost ♦ Competing on Response ♦TEN STRATEGIC OM DECISIONS
  • 3. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-3 Outline - ContinuedOutline - Continued ♦ISSUES IN OPERATIONS STRATEGY ♦ Research ♦ Preconditions ♦ Dynamics ♦STRATEGY DEVELOPMENT AND IMPLEMENTATION ♦ Identify Critical Success Factors ♦ A Global view of Operations Cultural and Ethical Issues ♦ Build and Staff the Organization ♦ Integrate OM with Other Activities
  • 4. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-4 Outline - ContinuedOutline - Continued ♦GLOBAL OPERATIONS STRATEGY OPTIONS ♦ International Strategy ♦ Multidomestic Strategy ♦ Global Strategy ♦ Transnational Strategy
  • 5. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-5 Learning ObjectivesLearning Objectives When you complete this chapter, you should be able to : Identify or Define: ♦ Mission ♦ Strategy ♦ Ten Decisions of OM ♦ Multinational Corporations
  • 6. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-6 Learning Objectives - ContinuedLearning Objectives - Continued Describe or Explain: ♦ Specific approaches used by OM to achieve strategies ♦Differentiation ♦Low Cost ♦Response ♦ Four Global Operations Strategies ♦ Why Global Issues are Important
  • 7. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-7 Examples of Global StrategiesExamples of Global Strategies ♦Boeing – both sales and production are worldwide. ♦Benetton – moves inventory to stores around the world faster than its competitor by building flexibility into design, production, and distribution ♦Sony – purchases components from suppliers in Thailand, Malaysia, and around the world ♦GM is building four similar plants in Argentina, Poland, China, and Thailand
  • 8. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-8 Boeing Suppliers (777)Boeing Suppliers (777) Firm Country Parts Alenia Italy Wing flaps AeroSpace Technologies Australia Rudder CASA Spain Ailerons doors, wing section Fuji Japan Landing gear GEC Avionics United Kingdom Flight computers Korean Air Korea Flap supports Menasco Aerospace Canada Landing gears Short Brothers Ireland Landing gear doors Singapore Aerospace Singapore Landing gear doors
  • 9. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-9 The Role ofThe Role of ♦Maquiladoras ♦World Trade Organization (WTC) ♦North American Free Trade Agreement (NAFTA) ♦European Union (EU)
  • 10. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-10 Management Issues inManagement Issues in Global OperationsGlobal Operations Global Strategic Context ♦ Differentiation ♦ Cost leadership ♦ Response Logistics Management Location DecisionsSupply Chain Management
  • 11. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-11 Supply-Chain ManagementSupply-Chain Management ♦Sourcing ♦Vertical integration ♦Make-or-buy decisions ♦Partnering
  • 12. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-12 Location DecisionsLocation Decisions ♦Country-related issues ♦Product-related issues ♦Government policy/political risk ♦Organizational issues
  • 13. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-13 Materials ManagementMaterials Management ♦Flow of materials ♦Transportation options and speed ♦Inventory levels ♦Packaging ♦Storage
  • 14. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-14 Defining Global OperationsDefining Global Operations ♦ International business - engages in cross-border transactions ♦ Multinational Corporation - has extensive involvement in international business, owning or controlling facilities in more than one country ♦ Global company - integrates operations from different countries, and views world as a single marketplace ♦ Transnational company - seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness
  • 15. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-15 Some Multinational CorporationsSome Multinational Corporations Workforce Company Home Country % Sales Outside Home Country % Assets Outside Home Country % Foreign Colgate- Palmolive USA 72 63 NA Dow Chemical USA 60 50 NA Gillette USA 62 53 NA Honda Japan 63 36 NA IBM USA 57 47 51 Citicorp USA 34 46 NA
  • 16. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-16 Some Multinational CorporationsSome Multinational Corporations Workforce Company Home Country % Sales Outside Home Country % Assets Outside Home Country % Foreign ICI Britain 78 50 NA Nestlé Switzerland 98 95 97 Philips Netherlands 94 85 82 Siemens Germany 51 NA 38 Electronics Unilever Britain & Netherlands 95 70 64
  • 17. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-17 Pontiac - the LeMans IncludedPontiac - the LeMans Included the Followingthe Following ♦ About $6,000 heads to South Korea for auto’s assembly ♦ $3,500 goes to Japan for engines, axles, and electronics ♦ $1,500 goes to Germany for design ♦ $800 goes to Taiwan, Singapore, and Japan for smaller parts ♦ $500 heads to England for marketing ♦ $100 goes to Ireland for information technology ♦ the rest ≅ $7,600, goes to GM and its US bankers, insurance agents, and attorneys.
  • 18. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-18 Reasons to Globalize OperationsReasons to Globalize Operations ♦Reduce costs (labor, taxes, tariffs, etc.) ♦Improve the supply chain ♦Provide better goods and services ♦Attract new markets ♦Learn to improve operations ♦Attract and retain global talent Tangible Intangible
  • 19. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-19 Trade and TariffTrade and Tariff ♦Maquiladoras - Mexican factories located along the U.S.-Mexico border that receive preferential tariff treatment ♦GATT - an international treaty that helps promote world trade by lowering barriers to the free flow of goods across borders ♦NAFTA - a free trade agreement between Canada, Mexico, and the United States
  • 20. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-20 Trade PaysTrade Pays GDP (PPP*) per PersonGDP (PPP*) per Person 1990 Growth Rates, %1990 Growth Rates, % -1 0 1 2 3 4 5 More globalized poor countries Rich countries Less globalized poor countries *PPP – Purchasing Power Parity
  • 21. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-21 Free trade may take us into the era of the floating factory - a six person crew will take a factory from port to port in order to obtain the best market, material, labor and tax advantages
  • 22. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-22 Achieving Global OperationsAchieving Global Operations -Four Considerations--Four Considerations- ♦Global product design ♦Global process design and technology ♦Global factory location analysis ♦Impact of Culture and Ethics
  • 23. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-23 GlobalGlobal Product DesignProduct Design ♦Remember social and cultural differences ♦ packaging and marketing can help make product seem “domestic” but - ♦ “liter” versus “quart” ♦ “sweetness” and “taste”
  • 24. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-24 GlobalGlobal Process Design and TechnologyProcess Design and Technology ♦Information technology enables management of integrated, globally dispersed operation ♦Texas Instruments: 50 plants in 19 countries ♦Hewlett-Packard - product development teams in U.S., Japan, Great Britain, and Germany ♦Reduces time-to-market
  • 25. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-25 GlobalGlobal Facility Location AnalysisFacility Location Analysis ♦Select CSFs based on parent organization;’s strategic or operations objectives ♦Obtain country-specific information on the CSFs ♦Evaluate each country’s CSFs using a 1 (bad) to 5 (good) rating scale ♦Sum the ratings Using CSFs for Country Selection
  • 26. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-26 You May Wish To ConsiderYou May Wish To Consider ♦ national literacy rate ♦ rate of innovation ♦ rate of technology change ♦ number of skilled workers ♦ stability of government ♦ product liability laws ♦ export restrictions ♦ similarity in language ♦ work ethic ♦ tax rates ♦ inflation ♦ availability of raw materials ♦ interest rates ♦ population ♦ number of miles of highway
  • 27. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-27 GlobalGlobal Impact of Culture and EthicsImpact of Culture and Ethics ♦Cultures differ! Some accept/expect: ♦ variations in punctuality ♦ long lunch hours ♦ expectation of thievery ♦ bribery ♦ little protection of intellectual property
  • 28. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-28 Ranking CorruptionRanking Corruption 1. Finland 9.7 2. Denmark & New Zealand (Tie) 9.5 7. Canada 9.0 10. United Kingdom 8.7 16. United States 7.7 18. Germany & Israel (Tie) 7.3 20. Japan 7.1 31. Italy 5.2 59. China 3.5 62. Egypt 3.4… 71. India & Russia (Tie) 2.7… 2. Nigeria 1.6 3. Bangladesh 1.2
  • 29. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-29 To Establish Global ServicesTo Establish Global Services ♦Determine if sufficient people or facilities exist to support the service ♦Identify foreign markets that are open - not controlled by governments ♦Determine what services are of most interest to foreign customers ♦Determine how to reach global customers
  • 30. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-30 Managing Global ServiceManaging Global Service OperationsOperations Must take a different perspective on ♦Capacity planning ♦Location Planning ♦Facilities design and layout ♦Scheduling
  • 31. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-31 Some DefinitionsSome Definitions ♦International business ♦ A firm that engages in cross-border transactions. ♦Multinational Corporation (MNC) ♦ A firm that has extensive involvement in international business, owning or controlling facilities in more than one country
  • 32. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-32 Some Global StrategiesSome Global Strategies ♦ International Strategy: uses exports and licenses to penetrate the global area ♦ Multidomestic Strategy: uses decentralized authority with substantial autonomy at each business ♦ Global Strategy: Uses a high degree of centralization, with headquarters coordinating to seek standardization and learning between plants ♦ Transnational Strategy: Exploits economies of scale and learning, as well as pressure for responsiveness, by recognizing that core competencies reside everywhere in the organization
  • 33. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-33 Match Product & ParentMatch Product & Parent ♦ Arrow shirts ♦ Braun Household Appliances ♦ Burger King ♦ Firestone Tires ♦ Godiva Chocolate ♦ Haagen_dazs Ice Cream ♦ Jaguar Autos ♦ MGM Movies ♦ Lamborghini Autos ♦ Goodrich Tires ♦ Alpo Petfoods 1. Volkswagen 2. Bidermann International 3. Bridgestone 4. Campbell Soup 5. Credit Lyonnais 6. Ford Motor Company 7. Gillette 8. Grand Metropolitan 9. Michelin 10. Nestlé
  • 34. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-34 Match Product & CountryMatch Product & Country ♦ Arrow shirts ♦ Braun Household Appliances ♦ Burger King ♦ Firestone Tires ♦ Godiva Chocolate ♦ Haagen_Dazs Ice Cream ♦ Jaguar Autos ♦ MGM Movies ♦ Lamborghini Autos ♦ Goodrich Tires ♦ Alpo Petfoods 1. France 2. Great Britain 3. Germany 4. Japan 5. United States 6. Switzerland
  • 35. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-35 Developing Missions andDeveloping Missions and StrategiesStrategies
  • 36. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-36 MissionMission ♦ Mission - where are you going? ♦ Organization’s purpose for being ♦ Provides boundaries & focus ♦ Answers ‘What do we provide society?’ © 1995 Corel Corp.
  • 37. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-37 Mission of FedExMission of FedEx FedEx is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing total reliable, competitively superior, global air-ground transportation of high priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained using real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional to each other and the public. We will strive to have a completely satisfied customer at the end of each transaction.
  • 38. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-38 Sample Mission - MerckSample Mission - Merck The mission of Merck is to provide society with superior products and services - innovations and solutions that improve the quality of life and satisfy customer needs - to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return
  • 39. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-39 Mission of the Hard Rock CaféMission of the Hard Rock Café To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being 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.
  • 40. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-40 Factors Affecting MissionFactors Affecting Mission Mission Philosophy & Values Profitability & Growth Environment Customers Public Image Benefit to Society
  • 41. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-41 Mission/StrategyMission/Strategy ♦Mission - where you are going ♦Strategy - how you are going to get there; an action plan
  • 42. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-42 StrategyStrategy ♦ Action plan to achieve mission ♦ Shows how mission will be achieved ♦ Company has a business strategy ♦ Functional areas have strategies © 1995 Corel Corp.
  • 43. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-43 Strategy ProcessStrategy Process Marketing Decisions Operations Decisions Fin./Acct. Decisions Company Mission Business Strategy Functional AreaFunctional Area Strategies
  • 44. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-44 Strategies for CompetitiveStrategies for Competitive AdvantageAdvantage ♦Differentiation ♦Cost leadership ♦Quick response
  • 45. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-45 Competing on DifferentiationCompeting on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value
  • 46. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-46 Competing on CostCompeting on Cost Provide the maximum value as perceived by customer Does not imply low value or low quality
  • 47. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-47 Competing on ResponseCompeting on Response ♦Flexibility ♦Reliability ♦Timeliness Requires institutionalization within the firm of the ability to respond
  • 48. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-48 Competing, Regardless of the Basis,Competing, Regardless of the Basis, Requires the institutionalization within the firm of the ability to change, and to adapt
  • 49. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-49 OM’s Contribution to StrategyOM’s Contribution to Strategy Response (Faster) Quality Product Process Location Layout Human Resource Supply Chain Inventory Scheduling Maintenance HP’s ability to follow the printer market Differentiation (Better) Cost leadership (Cheaper) Southwest Airlines No-frills service Sony’s constant innovation of new products Pizza Hut’s five-minute guarantee at lunchtime Federal Express’s “absolutely, positively on time” Motorola’s automotive products ignition systems Motorola’s pagers IBM’s after-sale service on mainframe computers Fidelity Security’s broad line of mutual funds FLEXIBILITY Design Volume LOW COST DELIVERY Speed Dependability QUALITY Conformance Performance AFTER-SALE SERVICE BROAD PRODUCT LINE Operations Decisions Examples Specific Strategy Used Competitive Advantage
  • 50. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-50 10 Strategic OM Decisions10 Strategic OM Decisions ♦ Goods & service design ♦ Quality ♦ Process & capacity design ♦ Location selection ♦ Layout design ♦ Human resource and job design ♦ Supply-chain management ♦ Inventory ♦ Scheduling ♦ Maintenance
  • 51. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-51 Operations Decisions Goods Services Goods & services decisions Product is usually tangible Product is usually intangible Quality Objective quality standards Subjective quality standards Process and capacity design Customer not involved in most of process Customer may be directly involved in process. Capacity must match demand to avoid lost sales Goods & Services and the 10 OMGoods & Services and the 10 OM DecisionsDecisions
  • 52. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-52 Operations Decisions Goods Services Location Selection May need to be near raw materials or labor force Product is usually intangible Layout Design Layout can enhance production efficiency Subjective quality standards Human Resources and Job Design Workforce focused on technical skills. Labor standards consistent. Output-based wage system. Customer may be directly involved in process. Capacity matches demand to avoid lost sales Goods & Services and the 10 OMGoods & Services and the 10 OM Decisions – ContinuedDecisions – Continued
  • 53. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-53 Operations Decisions Goods Services Supply chain management Supply-chain relationships critical to final product Supply-chain relationships important, not necessarily critical Inventory Raw materials, work- in-process, and finished goods Most services cannot be stored Scheduling Ability to convert inventory may allow leveling of production rates Primarily concerned with meeting the customer's immediate schedule Goods & Services and the 10 OMGoods & Services and the 10 OM Decisions – ContinuedDecisions – Continued
  • 54. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-54 Goods & Services and the 10 OMGoods & Services and the 10 OM Decisions – ContinuedDecisions – Continued Operations Decisions Goods Services Maintenance Maintenance is often preventive and takes place at the production site Maintenance is often "repair" and takes place at the customer's site
  • 55. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-55 Process DesignProcess Design Low Moderate High Volume High Moderate Low VarietyofProducts Process-focused Job Shops (Print shop, emergency room , machine shop, fine dining Repetitive (modular) focus Assembly line (Cars, appliances, TVs, fast-food restaurants) Product-focused Continuous (steel, beer, paper, bread, institutional kitchen) Mass Customization Customization at high Volume (Dell Computer’s PC)
  • 56. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-56 Operations Strategies for TwoOperations Strategies for Two Drug CompaniesDrug Companies Brand Name Drugs, Inc. Generic Drug Corp. Product Selection and Design Heavy R & D; Extensive labs; focus on development in broad range of drug categories Low R & D investment; focus on development of generic drugs Quality Quality is a major priority; Standards exceed regulatory requirements Meets regulatory requirements on a country-by-country basis as necessary
  • 57. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-57 Operations Strategies for TwoOperations Strategies for Two Drug Companies - ContinuedDrug Companies - Continued Brand Name Drugs, Inc. Generic Drug Corp. Process Product & modular production processes Long product runs in specialized facilities Build capacity ahead of demand Process focused General production processes; “Job Shop” approach, short run; Focus on high utilization Location Still located in city in which it was founded Recently moved to low tax, low labor cost environment Scheduling Central production planning Many short run products complicate scheduling
  • 58. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-58 Operations Strategies for TwoOperations Strategies for Two Drug Companies - ContinuedDrug Companies - Continued Brand Name Drugs, Inc. Generic Drug Corp. Human Resources Hires the best; nation- wide searches Very experienced top executives provide direction; other personnel paid below average Supply Chain Long term supplier relationship Tends to purchase competitively to find bargains Inventory Maintains high finished goods inventory, primarily to ensure all demands are met Process focus drives up WIP inventory. Finished goods inventory tends to be low
  • 59. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-59 Operations Strategies for TwoOperations Strategies for Two Drug Companies - ContinuedDrug Companies - Continued Brand Name Drugs, Inc. Generic Drug Corp. Maintenance Highly trained staff; Extensive parts inventory Highly trained staff to meet challenging demands
  • 60. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-60 Characteristics of High ROI FirmsCharacteristics of High ROI Firms ♦High quality product ♦High capacity utilization ♦High operating effectiveness ♦Low investment intensity ♦Low direct cost per unit From the PIMS study of the Strategic Planning Institute
  • 61. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-61 Strategic Options Managers UseStrategic Options Managers Use to Gain Competitive Advantageto Gain Competitive Advantage ♦28% - Operations Management ♦18% - Marketing/distribution ♦17% - Momentum/name recognition ♦16% - Quality/service ♦14% - Good management ♦ 4% - Financial resources ♦ 3% - Other
  • 62. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-62 Strategic Options Managers UseStrategic Options Managers Use to Gain Competitive Advantageto Gain Competitive Advantage ♦28% Operations Management ♦ Low- cost product ♦ Product-line breadth ♦ Technical superiority ♦ Product characteristics/differentiation ♦ Continuing product innovation ♦ Low-price/high-value offerings ♦ Efficient, flexible operations adaptable to consumers ♦ Engineering research development ♦ Location ♦ Scheduling
  • 63. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-63 Preconditions -Preconditions - To Implement a StrategyTo Implement a Strategy One must understand: ♦ Strengths & weaknesses of competitors and new entrants into the market ♦ Current and prospective environmental, legal, and economic issues ♦ The notion of product life cycle ♦ Resources available with the firm and within the OM function ♦ Integration of OM strategy with company strategy and with other functions.
  • 64. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-64 Impetus for Strategy ChangeImpetus for Strategy Change ♦Changes in the organization ♦Stages in the product life cycle ♦Changes in the environment
  • 65. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-65 Stages in the Product Life CycleStages in the Product Life Cycle Introduction Growth Maturity Decline Growthrate
  • 66. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-66 Best period to increase market share R&D engineering are critical Product design and development are critical Frequent product and process design changes Over-capacity Short production runs High skilled-labor content High production costs Limited number of models Utmost attentions to quality Quick elimination of market-revealed design defects Introduction Strategy & Issues During Product LifeStrategy & Issues During Product Life ♦ Company Strategy & Issues ♦ OM Strategy & Issues
  • 67. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-67 Strategy & Issues During Product LifeStrategy & Issues During Product Life Practical to change prices or quality image Marketing is critical Strengthen niche Forecasting is critical Product and process reliability Competitive product improvements and options Shift toward product oriented Enhance distribution Company Strategy & Issues OM Strategy & Issues Growth
  • 68. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-68 Strategy & Issues During Product LifeStrategy & Issues During Product Life Poor time to increase market share Competitive costs become critical Poor time to change price, image, or quality Defend position via fresh promotional and distribution approaches Standardization Less rapid product changes and more minor annual model changes Optimum capacity Increasing stability of manufacturing process Lower labor skills Long production runs Attention to product improvement and cost cutting Re-examination of necessity of design compromises Company Strategy & Issues OM Strategy & Issues Maturity
  • 69. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-69 Strategy & Issues During Product LifeStrategy & Issues During Product Life Cost control critical to market share Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning Good margin Reduce capacity Company Strategy & Issues OM Strategy & Issues Decline
  • 70. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-70 Strategy and Issues During aStrategy and Issues During a Product’s LifeProduct’s Life
  • 71. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-71 Strategy Development andStrategy Development and ImplementationImplementation ♦Identify critical success factors ♦Build and staff the organization
  • 72. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-72 SWOT Analysis ProcessSWOT Analysis Process ♦Environmental Analysis ♦ Determine Corporate Mission ♦ Form a Strategy
  • 73. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-73 SWOT Analysis to StrategySWOT Analysis to Strategy FormulationFormulation Strategy Mission External Opportunities Internal Strengths Internal Weaknesses External Threats Competitive Advantage
  • 74. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-74 IdentifyingIdentifying Critical Success FactorsCritical Success Factors Decisions Sample Option Chapter Product Customized, or standardized 5 Quality Define customer expectations and how to achieve them 6, S6 Process Facility size, technology, capacity 7, S7 Location Near supplier or customer 8 Layout Work cells or assembly line 9 Human resource Specialized or enriched jobs 10, S10 Supply chain Single or multiple source suppliers 11, S11 Inventory When to reorder, how much to keep on hand 12, 14,16 Schedule Stable or fluctuating productions rate 13, 15 Maintenance Repair as required or preventive maintenance 17 Marketing Service Distribution Promotion Channels of distribution Product positioning (image, functions) Finance/Accounting Leverage Cost of capital Working capital Receivables Payables Financial control Lines of credit Production/Operations
  • 75. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-75 Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s Low Cost Competitive AdvantageLow Cost Competitive Advantage Courteous, but limited passenger service Lean, productive employees Short haul, point-to-point routes, often to secondary airports High aircraft utilization Standardized fleet of Boeing 737 aircraft Frequent, reliable schedules Competitive Advantage: Low Cost
  • 76. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-76 Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s Low Cost Competitive AdvantageLow Cost Competitive Advantage Courteous, but limited passenger service No seat assignments No baggage transfers Automated ticketing machines No meals
  • 77. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-77 Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s Low Cost Competitive AdvantageLow Cost Competitive Advantage Short haul, point-to-point routes, often to secondary airports Lower gate costs at secondary airports High number of flights, reduces employee idle time between flights
  • 78. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-78 Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s Low Cost Competitive AdvantageLow Cost Competitive Advantage Frequent, reliable schedules High number of flights reduces employee idle time between flights Saturate a city with flights lowering administrative costs per passenger for that city
  • 79. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-79 Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s Low Cost Competitive AdvantageLow Cost Competitive Advantage Standardized fleet of Boeing 737 aircraft Pilot training on only one type of aircraft Reduced maintenance inventory required because of only one type of aircraft Excellent supplier relations with Boeing has aided financing
  • 80. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-80 Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s Low Cost Competitive AdvantageLow Cost Competitive Advantage High aircraft utilization Flexible employees and standard planes aids scheduling Flexible union contracts Maintenance personnel trained on only one type of aircraft 20 minute gate turnarounds
  • 81. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-81 Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s Low Cost Competitive AdvantageLow Cost Competitive Advantage Lean, productive employees High level of stock ownership Hire for attitude, then train High employee compensation Empowered employees Automated ticket machines
  • 82. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-82 Activity Mapping: Southwest Airline’sActivity Mapping: Southwest Airline’s Low Cost Competitive AdvantageLow Cost Competitive Advantage Courteous, but limited passenger service Lean, productive employees Short haul, point-to-point routes, often to secondary airports High aircraft utilization Standardized fleet of Boeing 737 aircraft Frequent, reliable schedules Competitive Advantage: Low Cost
  • 83. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-83 Southwest Airline’s Low CostSouthwest Airline’s Low Cost Competitive AdvantageCompetitive Advantage
  • 84. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-84 Vanguard’s Activity SystemVanguard’s Activity System A broad array of mutual funds excluding some fund categories Efficient investment management approach offering good consistent performance Straightforward client communication and education Strict cost control Direct distributions Very low expenses passed on to client
  • 85. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-85 How It WorksHow It Works Company Mission Business Strategy Functional Area Strategies Marketing Decisions Operations Decisions Fin./Acct. Decisions If competitive advantage, leads to achieving Distinctive competencies affect
  • 86. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-86 Four International OperationsFour International Operations StrategiesStrategies
  • 87. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-87 Multidomestic StrategyMultidomestic Strategy Operating decisions are decentralized to each country to enhance local responsiveness
  • 88. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-88 Global StrategyGlobal Strategy Operating decisions are centralized and headquarters coordinates the standardization and learning between facilities
  • 89. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-89 Transnational StrategiesTransnational Strategies Combines the benefits of global-scale efficiencies with the benefits of local responsiveness
  • 90. PowerPoint presentation to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 2-90 International StrategyInternational Strategy Global markets are penetrated using exports and licenses

Editor's Notes

  1. You might begin the the thread of a discussion about mission and strategies forming the context for decision making within the company. This discussion can be continued throughout the chapter.
  2. This slide can be used to begin a discussion of the benefits and risks of “going global.” Students should be asked how risk is affected when there is a localized economic downturn such as that in Asia (particularly Japan) in early 1998. Students should also be asked to discuss the role of “paperless” design in such a global arrangement.
  3. This slide frames the discussion of management issues in global operations. Subsequent slides expand on the issues in Supply-Chain Management, Location Decisions, and Logistics Management. Students should not only understand these issues, but should also have some concept as to why there are significant differences between global and domestic (or national) operations.
  4. One way to get at the differences between these definitions is to have students visit the web sites of a number of companies and gather information about them, then use these companies as examples. The list of companies could be give out in a prior class, or at the beginning of the semester (we suggest that the list be given at the beginning of the semester - and the information gathered used throughout the semester). Ask the students to identify their company and place it in one of the categories. Seek their justification for its placement.
  5. This slide can be used to further explore the characteristics of multinational companies
  6. This slide can be used to further explore the characteristics of multinational companies
  7. This slide uses a familiar example to demonstrate the degree of globalization in the production of a common product.
  8. This slide can be used to frame a discussion of the benefits of globalization. You should be certain to ask students if they can see any pitfalls.
  9. You can use this slide to frame a discussion as to the role and impact of trade and tariffs. If time permits, you might ask students to, as preparation for this class, use the World-Wide Web to research the differing opinions of U.S. business and labor regarding the GATT and NAFTA agreements.
  10. This may sound like a strange proposition to students - but is it an extreme example of what may occur if trade is complete unregulated? Ask students what other alternatives to (or extensions of) today’s practices they can think of.
  11. This slide introduces four considerations required for global operations. Ask students which consideration they believe to present the most difficult problems. The following several slides elaborate on the four considerations.
  12. In June 1998, a company began marketing caskets (that’s right, caskets) directly to the consumer over the Internet. Ask your students to consider how the design of this product might be impacted if the company begins to offer this product globally.
  13. This slide looks at some of the process design benefits of going global. Are there some pitfalls?
  14. This slide introduces the use of Critical Success Factors in Global Location Analysis. One might ask students to consider the problem of obtaining the information required for such an analysis. How does information technology contribute? What are its limitations?
  15. This slide presents a list of national characteristics one may wish to consider. Ask students to add to this list.
  16. This slide introduces the impact of culture and ethics on management of the global enterprise. Students should be asked “How does a manager of a U.S. firm deal with differing cultural expectations?” One example would be the use of bribery as an element in contract negotiations. U.S law prohibits the use of bribery. What problems or ethical dilemmas does this create for the manager?
  17. The best approach to this slide may be to present examples to illustrate the points listed. Two examples might be: a lack of infra-structure within many second and third world countries limits the nature or degree of many services; and countries may place special restrictions on the import of particular products (Brazil, at least until recently, required that all computers sold in the country be assembled there).
  18. Here, it is important to at least note why one must take a different perspective on these issues.
  19. You might either suggest or ask the students to suggest the names of one or more companies which use one or another of these strategies.
  20. This and the subsequent slide simply prompt students to think about some of the unexpected relationships. You might ask students to suggest some of the reasons such relationships developed.
  21. You might ask students to prepare for class by visiting several company web sites, and, for each company: locating the company mission, and printing a copy of the mission to bring to class. The students should also be asked to, if possible, determine the strategy used by the company to achieve its avowed mission. You might even ask that a student finding a mission statement that they believe of special interest, bring a copy of the statement on a transparency. You might begin the class by asking students why a company’s mission is so important. Does it really convey important information, or is it, as some cynics might claim, simply an expression of wishful thinking? Among other benefits, the mission provides an “umbrella” under which decisions should be made. This may be especially useful for a global enterprise. If the students have obtained the mission statements of companies with which they are familiar, you might ask if their perception of the company suggests that it is fulfilling it published mission. If the answer is “No,” ask what suggests otherwise.
  22. Ask the students to compare the mission of Circle K with this of Merck (and with those they have located). What does the recognition of employees and investors signify? Is it reasonable to suggest that employees and investors should be recognized in all mission statements? Does such recognition have any significance with regard to employee working conditions, corporate decision making, or corporate attitude toward risk?
  23. One can obviously discuss the impact of each of these factors on a company mission. An alternative is to have each student take a company mission and identify the connection to each of the factors. In particular, ask students if the connection is uni- or bi-directional, i.e., “The environment within which a company operates may impact its mission, can the mission also impact the environment?”
  24. The distinction between mission and strategy probably requires some discussion. The best approach might be to ask students, who have obtained the mission statements of companies with which they are familiar, to discuss their perception of the company strategy. There may also be companies which publish a statement of strategy as well their mission on their web site.
  25. Here, you might introduce the hierarchical nature of strategies, and, as prelude to subsequent slides, ask students whether they believe it is better to plan from the top down, or bottom up.
  26. This slide can be used to frame a discussion of the process of developing strategies. If so, the steps of Environmental and SWOT Analysis should be expanded. You might also ask the students “Whose responsibility is Strategy Planning?” Is participation in this process restricted to upper level management, or does it involve all levels of employees? Might one have different expectations for the answer to this question for a particular company ( Circle K as opposed to Merck)? The contrast between strategy planning for all levels of the organization at once, versus strategy planing for the organization as a whole, with subsequent “rolldown” to lower levels might be discussed.
  27. This slide simply opens the discussion on the several modes of competing.
  28. Ask students for examples of companies competing on the basis of differentiation. If they cannot identify any, you can fall back on a discussion of McDonalds, Burger King, and Wendys. Ask the students to identify the differences between the three franchises.
  29. One of the major points to be made here is that “competing on cost” does not necessarily mean “having the lowest cost: There is also the notion of value, and in particular, value defined by the customer. There are some drivers who will argue that Volvo competes on cost suggesting that Volvos are “low cost” for a vehicle with such “demonstrated” safety benefits and long life expectancy.
  30. Most students readily acknowledge that competing on the basis of response involves the notion of quickness or speed, so the discussion should probably concentrate on the other three elements. The concept of and need for “institutionalization” will likely require significant discussion. Here you might point out that “response” is seldom the prerogative of any, single, individual - appropriate response is often the outcome of the work of many.
  31. You might point out that businesses now operate in a very rapidly changing environment - and that these changes are often in fundamental characteristics of the environment, e.g., use of the world-wide web is enabling some very fundamental changes in the way in which firms do business. Competing on any basis (differentiation, cost, or response) requires the ability to adapt to these changes on a firm-wide basis, not as individuals..
  32. Students can be asked to add to the list of examples shown in this slide. You might also ask students whether OM can contribute in similar ways in all industries.
  33. This slide simply introduces the 10 decisions. You may not wish to do more than “define” the decision area and give one or two examples.
  34. Here again, you might look particularly at the impact of the difference between goods and services. You may be able to get students to consider such consequences as the level of worker skill required, the difficulty in controlling quality, etc.
  35. This slide can be used to introduce the process design options, and help students begin to understand the conditions of volume and variety under which they are most useful. Student should be asked to provide and discuss examples.
  36. Here it may be helpful to point out that although the strategies are significantly different for the two companies, both successful. If possible, you should have students consider what the missions of the two companies might be.
  37. This is the first of several slides portraying the results of some fairly recent research. You might point out that these are necessary conditions, perhaps not sufficient.
  38. If one argues that the quality/service categories really belong in OM, the total for OM reaches 44%.
  39. A second study: 248 business were asked to rate thirty two categories. The more general results are given in the next slide
  40. Make the point here that this is a minimum set of “necessary” issues which must be understood. Understanding these alone does not guarantee success. If you have not done it before, here is where you can begin to prod students into looking at the true complexity faced by the operations manager.,
  41. You might begin here to raise the notion that change in strategy is not optional - but must occur when any other factor(s) change(s). The Japanese have come to view strategy as being continually adaptive. The next slide lists the stages in the product life cycle. The several slides following that elaborate on strategic issues over the product life cycle.
  42. The purpose of this slide is simply to introduce the stages of the product life cycle and provide time for the instructor to present brief definitions. A context for further elaboration is provided by the following four slides. The fifth enables a useful summary.
  43. As you discuss the product life cycle, it may be helpful to ask students to identify products they believe to currently be in the stage under discussion. Ask them what evidence they have to support their conclusions.
  44. This slide can be useful in summarizing strategy changes over the lifecycle of the product.
  45. It might be helpful here to define “critical success factors.”
  46. This slide can be used to frame a discussion of SWOT analysis. Students should be asked what types of questions might be appropriate at each stage.
  47. This slide frames the individual elements of the SWOT analysis process. The notion that SWOT must look at both internal and external issues can be raised here. It may also be worthwhile stressing that the Internal analysis must be: 1. A critical analysis with an honest, open-minded assessment, not politically driven 2. An assessment of strengths and weaknesses in light of the specific corporate mission.
  48. This slide introduces the notion of Critical Success Factors. Many students seem to perceive Critical Success Factor analysis as an “easy” process. It may help to ask your students to develop a list of critical success factors for a business with which they are familiar. (If all else fails, ask them to develop the critical success factors for the college or university they attend.) Once they have identified a number of factors (the number depending on the time available), make them go back and justify the importance of each factor. As they are in the process of justification, ask “What happens if the business fails to adequately address this factor?” At this point, begin to help them differentiate between factors which will result in sub-optimal performance and those which will result in outright failure. In many colleges/universities, for example, offering a top quality program may not be necessary, while ensuring that each graduate has a job offer upon graduation may be.
  49. Discuss how the individual strategies combine to achieve the overall company mission.
  50. This slide can be used to tie coverage of Chapter 2 together.