© Wiley 20051 Chapter 2 Operations Strategy and Competitiveness Operations Management by R. Dan Reid & Nada R. Sanders 2 nd Edition © Wiley 2005 PowerPoint.

© Wiley 2005 1

Chapter 2 Operations Strategy and

Competitiveness

Operations Managementby

R. Dan Reid & Nada R. Sanders2nd Edition © Wiley 2005

PowerPoint Presentation by R.B. Clough - UNH

MGMT 326

Foundationsof Operations

Introduction

Strategy

QualityAssurance

Capacity,Facilities,and Work

Design

Planning& Control

Products &Processes

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Operations Strategy - Outline Business mission and strategy Operations strategy and other

functional strategies Order qualifiers & order winners How operations helps firms

compete Competitive priorities in operations Strategic role of technology

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Mission Statement Explains

What business the organization is in Who the customers are How the company's values will

determine what the company does A mission statement explains

what the organization will do.

Examples of Mission Statements Levi-Strauss: We will market and

distribute the most appealing & widely worn apparel brands.

Dell: Dell listens to customers and delivers technology they trust and value.

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Business Strategy

Explains how the organization will achieve its mission Long-range plan to compete in the

marketplace Explains how the firm will

differentiate itself from competitors Sets competitive priorities Basis for functional strategies

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Three Inputs to a Business Strategy

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Business Strategyand Functional Strategies

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Functional Strategies

Marketing Operations Finance Management information systems Human resources management The functional strategies should be

consistent with each other and with the business strategy

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Order Qualifiers & Order Winners

Order qualifiers are competitive priorities that must be met for a company to qualify as a competitor in the marketplace.

Order winners are competitive priorities that win orders in the marketplace.

Both depend on the target market. Both change over time.

If most competing firms have a certain competitive priority, it is likely to become an order qualifier.

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Competitive Priorities

Meeting the needs of a target market What are the order qualifiers? What are the order winners? These dictate your competitive priorities.

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Competitive Priorities in Operations

Cost Quality Time Flexibility

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Competing on Cost

In marketing books, this is called competing on price Low prices require low costs

Basic product with acceptable quality

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2 Ways to Compete on Product Quality

High performance design: Superior features, high durability, and

excellent customer service Product or service consistency:

Meets customer requirements in its market Product is made according to the design Error free service and delivery

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Process Quality

Designing and operating a process to produce error-free products

Essential for firms that compete on quality

Reduces operating costs for any firm – "doing it right the first time" reduces costs and keeps customers

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Ways to Compete on Time

Fast delivery or fast service: Reduce time between order placement and delivery of the product or service

On-time delivery: Deliver product exactly when needed every time

Rapid new product development:

Shorten new product development

time

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2 Ways to Compete on Flexibility

Product flexibility: Must be able to easily switch production

from one item to another May customize product to customer needs

Volume flexibility: Ability to increase or decrease production to match market demands

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Strategic Role of Technology

Technology should support competitive priorities

Product technology: used to create product

characteristics and performance. Note the

change from the definition in the book.

Examples: PDA's, hybrid vehicles, stain-

resistant fabric, GPS systems

May include information technology

Product technology affects costs

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Strategic Role of Technology (2)

Process technology: how goods and services are produced Includes both equipment and methods Often includes information technology Examples: Just-in-time, automation, fast food

process, self-service checkout, bar-code scanners

Requires capital investment Can reduce variable costs Can be used to produce new goods or

services

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Strategic Role of Technology (3)

Information technology: allows users to create, collect, process, store, and transmit information Internet, wireless communication, point of

sale systems, management information

systems, decision support systems,

communication networks