1Operations Strategy       and Competitiveness
2          Operations Strategy as a            competitive weapon    One of the key objectives of any business    organiza...
Competitive                           3                Dimensions•   Cost or Price    Make the Product or Deliver the Serv...
Order Qualifiers and                      4WinnersDefined  Order   qualifiers are the basic  criteria that permit the fir...
5Service Breakthroughs   A brand name car can be an    “order qualifier”•Repair services can be “orderwinners”    Example...
6    Operations StrategyStrategy Process                  Example Customer Needs                  More ProductsCorporate S...
7     Strategy Design Process      Strategy Map                    What it is about!     Financial Perspective        Impr...
8The Balanced Scorecard Judicious mix of financial and operational measures for measuring the performance• Customer perspe...
Balanced Scorecard Model for MeasuringOperations Performance How do                       stakeholders view               ...
10Kaplan and Norton’s Generic       Strategy Map  In the Kaplan and Norton’s Generic Strategy  Map, under the Financial Pe...
Kaplan and Norton’s                           11  Generic Strategy Map      (Continued)  In the Kaplan and Norton’s Generi...
Kaplan and Norton’s                           12  Generic Strategy Map      (Continued)  In the Kaplan and Norton’s Generi...
13Kaplan and Norton’s Generic Strategy Map (Continued)     In the Kaplan and Norton’s Generic Strategy    Map, under the L...
Developing an Operations Strategy                                    Corporate                                    Objectiv...
15 Steps in Developing aManufacturing Strategy   1. Segment the market according to the    product group   2. Identify p...
16Service Strategy Capacity       Capabilities •   Process-based     Capacities that transforms material or information an...
17What is Productivity?DefinedProductivity is a common measureon how well resources are beingused. In the broadest sense, ...
Productivity – Introduction &                 Definition•   Productivity primarily is an attitude of mind – an attitude of...
Factors affecting ProductivityExternal Factors  •    Beyond the control of individual Enterprise  •    External Infrastruc...
Factors affecting Productivity ( contd.)Internal Factors   • Hard Factors – Products / Technology / Plant & Eqpt.     / Ra...
21      Total Measure       ProductivityTotal Measure Productivity = Outputs                               Inputs         ...
22       Partial Measure        Productivity   Partial measures of productivity =   Output or Output or Output or Output...
23    Multifactor Measure        Productivity   Multifactor measures of productivity =                     Output       ...
Example of Productivity                                                          24         Measurement   You have just d...
25     Question BowlAn operations strategy is concerned    with which of the following?b. Setting specific policies and pl...
26      Question BowlTypically a strategy breaks down   into what major components?b. Operations effectivenessc. Customer ...
27         Question BowlA criterion that differentiates the   products and services of one firm   from another can be whic...
28             Question Bowl     A travel agency processed 240 customers on Day 1      with a staff of 12, and 360 custome...
29       Question BowlIn addition to traditional financial measures, what    critical questions can a Balanced Scorecard  ...
30              Solved Problems – OPERATIONS MANAGEMENT                                 (Class of 2010)  Q3. d) Various fi...
31   Output           2002        2003                     2,00,000    2,20,000   Input            2002        2003    L...
32a)   Total Productivity measure     Year 2002          Total Productivity = Output                                Input ...
33-   Partial Productivity measure (Labour)          Partial Productivity measure = Total Output                          ...
34d) Partial Productivity measure (Raw Materials)         Partial Productivity measure = Total Output                     ...
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Ch2 op.str & comp.

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  • Ch2 op.str & comp.

    1. 1. 1Operations Strategy and Competitiveness
    2. 2. 2 Operations Strategy as a competitive weapon One of the key objectives of any business organization is to reach a position where it is able to attract more customers than it’s competitors• Shorter Product Cycle / Pioneer status advantage• Production flexibility• Low-cost process (e.g. Outsourcing)• Convenience and Location (e.g. Courier services)• Product variety and Facility size (e.g. super markets)• Quality (e.g. MNCs’ producing cars in India for Exports)
    3. 3. Competitive 3 Dimensions• Cost or Price Make the Product or Deliver the Service Cheap• Quality Make a Great Product or Deliver a Great Service• Delivery Speed Make the Product or Deliver the Service Quickly• Delivery Reliability Deliver It When Promised• Coping with Changes in Demand Change Its Volume• Flexibility and New Product Introduction Speed Change It• Other Product-Specific Criteria Support It
    4. 4. Order Qualifiers and 4WinnersDefined Order qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customers Order winners are the criteria that differentiates the products and services of one firm from another
    5. 5. 5Service Breakthroughs A brand name car can be an “order qualifier”•Repair services can be “orderwinners” Examples: Warranty, Roadside Assistance, Leases, etc
    6. 6. 6 Operations StrategyStrategy Process Example Customer Needs More ProductsCorporate Strategy Increase Org. SizeOperations Strategy Increase Production Capacity Decisions on Processes and Infrastructure Build New Factory
    7. 7. 7 Strategy Design Process Strategy Map What it is about! Financial Perspective Improve Shareholder Value Customer Perspective Customer Value Proposition Internal Perspective Build-Increase-AchieveLearning and Growth Perspective A Motivated and Prepared Workforce
    8. 8. 8The Balanced Scorecard Judicious mix of financial and operational measures for measuring the performance• Customer perspective• Business process perspective• Innovation and learning perspective• Financial perspective
    9. 9. Balanced Scorecard Model for MeasuringOperations Performance How do stakeholders view Operations? Financial Perspective Goals Measures How do customers At which view the Operations tasks Operations? must we excel Customer Perspective Internal / Process Goals Measures Perspective Goals measures Innovation & Learning Perspective Goals Measures
    10. 10. 10Kaplan and Norton’s Generic Strategy Map In the Kaplan and Norton’s Generic Strategy Map, under the Financial Perspective, the Productivity Strategy is generally made up from two components: 1. Improve cost structure: Lower direct and indirect costs 2. Increase asset utilization: Reduce working and fixed capital
    11. 11. Kaplan and Norton’s 11 Generic Strategy Map (Continued) In the Kaplan and Norton’s Generic Strategy Map, under the Financial Perspective, the Revenue Growth Strategy is generally made up from two components:• Build the franchise: Develop new sources of revenue• Increase customer value: Work with existing customers to expand relationships with company
    12. 12. Kaplan and Norton’s 12 Generic Strategy Map (Continued) In the Kaplan and Norton’s Generic Strategy Map, under the Customer Perspective, there are three ways suggested as means of differentiating a company from others in a marketplace:1. Product leadership2. Customer intimacy3. Operational excellence
    13. 13. 13Kaplan and Norton’s Generic Strategy Map (Continued) In the Kaplan and Norton’s Generic Strategy Map, under the Learning and Growth Perspective, there are three principle categories of intangible assets needed for learning: 1. Strategic competencies 2. Strategic technologies 3. Climate for action
    14. 14. Developing an Operations Strategy Corporate Objectives Functional AreasBusiness Plan Operations MarketingMarketing Plan Business Strategies Financing/Accounting Research & Dev.Budget Strengths and Weaknesses Human Capital Operations ObjectivesProduction PlanOther Plan Operation Strategies Long-range Decisions about Products, Processes and Facilities Position the Production System Focus of Factories or Service Facilities Product / Service Design and Development Allocation of Resources to Alternatives Facility Planning : Capacity, Location and Layout
    15. 15. 15 Steps in Developing aManufacturing Strategy 1. Segment the market according to the product group 2. Identify product requirements, demand patterns, and profit margins of each group 3. Determine order qualifiers and winners for each group 4. Convert order winners into specific performance requirements
    16. 16. 16Service Strategy Capacity Capabilities • Process-based Capacities that transforms material or information and provide advantages on dimensions of cost and quality • Systems-based Capacities that are broad-based involving the entire operating system and provide advantages of short lead times and customize on demand • Organization-based Capacities that are difficult to replicate and provide abilities to master new technologies
    17. 17. 17What is Productivity?DefinedProductivity is a common measureon how well resources are beingused. In the broadest sense, it canbe defined as the following ratio: Outputs Inputs
    18. 18. Productivity – Introduction & Definition• Productivity primarily is an attitude of mind – an attitude of looking at the scope for improvement• It stands for the elimination of MUDA( Japanese ) or Waste in all forms• It is the function of providing more and more of everything, for more and more people with less and less consumption of Resources• The essence of productivity lies in producing the same volume with less resources or producing more output with proportionately less increase in inputs
    19. 19. Factors affecting ProductivityExternal Factors • Beyond the control of individual Enterprise • External Infrastructure • Non- availability of Funds, Water, Power, Transportation • Raw Material Supply constraints • Government Policies ( Emission Laws etc.) • Social / Political / Economic Environment
    20. 20. Factors affecting Productivity ( contd.)Internal Factors • Hard Factors – Products / Technology / Plant & Eqpt. / Raw Materials • Soft Factors – People / Work Methods / Systems & Procedures / Organisation Structure / Management Practices
    21. 21. 21 Total Measure ProductivityTotal Measure Productivity = Outputs Inputs or = Goods and services produced All resources used
    22. 22. 22 Partial Measure Productivity Partial measures of productivity = Output or Output or Output or Output Labor Capital Materials Energy
    23. 23. 23 Multifactor Measure Productivity Multifactor measures of productivity = Output . Labor + Capital + Energy or Output . Labor + Capital + Materials
    24. 24. Example of Productivity 24 Measurement You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms. Which productivity measure should be used? Answer: Could be classified as a Total Measure or Partial Measure. Is productivity increasing or decreasing? Answer: Last week’s productivity = 480/2000 = 0.24, and this week’s productivity is = 560/2400 = 0.23. So, productivity is decreasing slightly.
    25. 25. 25 Question BowlAn operations strategy is concerned with which of the following?b. Setting specific policies and plansc. Short-term competitive strategiesd. Coordination of operational goalse. All of the abovef. None of the above Answer: c. Coordination of operational goals
    26. 26. 26 Question BowlTypically a strategy breaks down into what major components?b. Operations effectivenessc. Customer managementd. Production innovatione. All of the abovef. None of the aboveAnswer: d. All of the above
    27. 27. 27 Question BowlA criterion that differentiates the products and services of one firm from another can be which of the following?b. An order qualifierc. An order winnerd. PWPe. KPIf. None of the aboveAnswer: b. An order winner
    28. 28. 28 Question Bowl A travel agency processed 240 customers on Day 1 with a staff of 12, and 360 customers the on Day 2 with a staff of 15. What can be said about the productivity shift from Day 1 to Day 2?↑ An increase in productivity from Day 1 to Day 2↑ A decrease in productivity from Day 1 to Day 2↑ The same productivity from Day 1 to Day 2↑ Can not be computed from data above↑ None of the above Answer: a. An increase in productivity from Day 1 to Day 2(Day 1 productivity = 240/12=20 Day 2 productivity = 360/15=24)
    29. 29. 29 Question BowlIn addition to traditional financial measures, what critical questions can a Balanced Scorecard help a company answer?b. How do customers see us?c. What must we excel at?d. How can we continue to improve and create value?e. All of the abovef. None of the aboveAnswer: d. All of the above
    30. 30. 30 Solved Problems – OPERATIONS MANAGEMENT (Class of 2010) Q3. d) Various financial data for 2002 & 2003 follow. Calculate the total productivity measure and the partial measure for labour, capital and raw materials for this company for both years. What do these measures tell you about this company? 2002 2003 Output Sales $ $2,20,000 2,00,000 Input Labour 30,000 40,000 Raw Material 35,000 45,000 Energy 5,000 6,000 Capital 50,000 50,000 Others 2,000 3,000Answer :- Total Productivity = Output Input
    31. 31. 31 Output 2002 2003 2,00,000 2,20,000 Input 2002 2003 Labour 30,000 40,000 Raw Materials 35,000 45,000 Energy 5,000 6,000 Capital 50,000 50,000 Others 2,000 3,000 Total Inputs 1,22,000 1,44,000
    32. 32. 32a) Total Productivity measure Year 2002 Total Productivity = Output Input = 2,00,000 1,22,000 = 1.66 Year 2003 Total Productivity = 2,20,000 1,44,000 = 1.53
    33. 33. 33- Partial Productivity measure (Labour) Partial Productivity measure = Total Output Cost of Labour for the year 2002 = 2,00,000 = 6.67 30,000 for the year 2003 = 2,20,000 = 5.5 40,000c) Partial Productivity measure (Capital) Partial Productivity measure = Total Output Capital for the year 2002 = 2,00,000 = 4 50,000 for the year 2003 = 2,20,000 = 4.4 50,000
    34. 34. 34d) Partial Productivity measure (Raw Materials) Partial Productivity measure = Total Output Cost of Raw Materials for the year 2002 = 2,00,000 = 5.71 35,000 for the year 2003 = 2,20,000 = 4.88 45,000

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