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)
2
3. Competitive
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
3
4. Order Qualifiers and
Winners
Defined
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
4
5. 5
Service Breakthroughs
A brand name car can be an
“order qualifier”
Repair services can be “order
winners”
•
Examples: Warranty, Roadside Assistance,
Leases, etc
6. 6
Operations Strategy
Strategy Process
Customer Needs
Corporate Strategy
Operations Strategy
Decisions on Processes
and Infrastructure
Example
More Products
Increase Org. Size
Increase Production Capacity
Build New Factory
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-Achieve
Learning and Growth Perspective
A Motivated and Prepared
Workforce
8. 8
The Balanced Scorecard
Judicious mix of financial and operational
measures for measuring the performance
• Customer perspective
• Business process perspective
• Innovation and learning perspective
9. Balanced Scorecard Model for Measuring
Operations Performance How do
stakeholders view
Operations?
Financial Perspective
How do customers
view the
Operations?
Goals
Measures
Customer Perspective
Goals
At which
Operations tasks
must we excel
Internal / Process
Perspective
Measures
Goals
Innovation & Learning
Perspective
Goals
Measures
measures
10. 10
Kaplan 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. Kaplan and Norton’s
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:
1. Build the franchise: Develop new sources of
revenue
2. Increase customer value: Work with
existing customers to expand relationships
with company
11
12. Kaplan and Norton’s
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 leadership
2. Customer intimacy
3. Operational excellence
12
13. 13
Kaplan 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. Developing an Operations Strategy
Corporate
Corporate
Objectives
Objectives
Business Plan
Marketing Plan
Budget
Production Plan
Other Plan
Functional Areas
Operations
Marketing
Business Strategies
Financing/Accounting
Business Strategies
Research & Dev.
Strengths and Weaknesses Human Capital
Operations
Operations
Objectives
Objectives
Operation Strategies
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
Steps in Developing a
Manufacturing 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
Service Strategy Capacity
Capabilities
•
Process-based
•
Systems-based
•
Organization-based
Capacities that transforms material or information and
provide advantages on dimensions of cost and
quality
Capacities that are broad-based involving the entire
operating system and provide advantages of short
lead times and customize on demand
Capacities that are difficult to replicate and provide
abilities to master new technologies
17. 17
What is Productivity?
Defined
Productivity is a common measure
on how well resources are being
used. In the broadest sense, it can
be defined as the following ratio:
Outputs
Inputs
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
19. Factors affecting Productivity
External 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. 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
24. Example of Productivity
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.
24
25. 25
Question Bowl
An operations strategy is concerned
with which of the following?
a. Setting specific policies and plans
b. Short-term competitive strategies
c. Coordination of operational goals
d. All of the above
e. None of the above
Answer: c. Coordination of operational
goals
26. 26
Question Bowl
Typically a strategy breaks down
into what major components?
a. Operations effectiveness
b. Customer management
c. Production innovation
d. All of the above
e. None of the above
Answer: d. All of the above
27. 27
Question Bowl
A criterion that differentiates the
products and services of one firm
from another can be which of the
following?
a. An order qualifier
b. An order winner
c. PWP
d. KPI
e. None of the above
Answer: b. An order winner
28. 28
Question Bowl
a.
b.
c.
d.
e.
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
Question Bowl
In addition to traditional financial measures, what
critical questions can a Balanced Scorecard
help a company answer?
a.
How do customers see us?
b.
What must we excel at?
c.
How can we continue to improve and create
value?
d.
All of the above
e.
None of the above
Answer: d. All of the above
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
Output
Sales
Input
Labour
Raw
Material
Energy
Capital
Answer :-
Others
2003
$
2,00,000
$2,20,000
30,000
40,000
35,000
45,000
5,000
6,000
50,000
50,000
2,000
Total Productivity 3,000
= Output
Input
32. 32
a)
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
b)
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
40,000
c) 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
d) 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
