SBCO Operations Strategy HB Student

D. Anthony CheversD. Anthony CheversSBCO 6240 - Production and Operations Management

Operations Strategy

Lecture #1b – Operations Strategy

• Strategic Planning• Strategy Formulation• Positioning of the Firm• Strategic Moves• Strategic Group Map• Performance Dimensions (Measures)• Exercises

Macro-environmental & Industry Forces – M. Porter

Three (3) Levels of Analysis

Macro-environmental Forces

Political-legal Economic

forces Indusry Forces forces

New entrants Buyers

FIRM

Suppliers Substitutes

Rivalry among firms

Social Technological

forces forces

Strategic Planning

Mission & Vision

Business Strategy

Marketing Strategy

Operations Strategy

Financial Strategy

Voice of the Business

Voice of the Customer

Operations Strategy

Customer Needs Corporate Strategy

Operations Strategy

Alignment

CoreCompetencies

Decisions

Processes, Infrastructure, and Capabilities

A Framework MISSION

OBJECTIVES Cost: Minimization, as competitive weapon, eliminate

waste Quality: Seeks to amaze customers, profitability &quality Delivery: Speed, Reliability … fast response time Flexibility: Volume, New product, Variety is a password,

Innovation is the norm, Customization is keyMANAGEMENT LEVERS – Controllable elements

Facilities, Capacity, Vertical Integration,Quality Management, Supply Chain Relationships,New products, Process and Technology,Human Resources, Operating Systems - Inventory

Management, Product planning and control

Operations Strategy at Wal-Mart

Strategy Formulation

1. Define primary task/mission…The purpose of the firm.

2. Assess core competency…distinctive (core) competencies

3. Determine order qualifiers & order winners Qualifiers: Characteristics that potential customers

perceive as minimum standards of acceptability for purchase. Winners: Characteristics of product/service that win orders

in the market place (perceived as better than the competition).

4. Position the firm World-class manufactures no longer view cost, quality, speed of delivery, and flexibility as tradeoffs!!!!!?????

Positioning The Firm

Positioning to compete (while meeting objectives) can be based on the nine competitive priorities:

Cost: Low-cost operations Quality: Top quality; Consistent quality; Time: Delivery speed; On-time delivery;

Development speed Flexibility: Customization; Variety &

Volume flexibility

Configuration of Process[Production & Inventory Strategy]

Make-to-stockA strategy that involves holding items in stock for immediate delivery,

thereby minimizing customer delivery times (Ritzman et al., 2007)Process activated to meet expected or forecast demandCustomer orders are served from target stocking levelMass production – A line process that uses the make-to-stock

strategy Make-to-order

A strategy used by manufacturers that make products to customer specifications in low volumes (Ritzman et al., 2007)

Only activated in response to an actual orderBoth work-in-process and finished goods inventory kept to a

minimum Assemble-to-order

add options according to customer specification

Strategic MovesLocking suppliers Reducing cost Creating barriers

or buyers to entrants

The Firm

Establishing Enhancing products Differentiating products

alliances or services and services

Strategic Moves - Jamaica Acquisitions – Lotto & Supreme Ventures? Mergers–MMB & Sigma;IMP & IMS;Barclay &

CIBC [2 + 2 = 5] Alliance – Kool FM & Nationwide Network Vertical Integration – Grace & Red Stripe Diversification – Butch Stewart Collaborative effort – AMV Mines for Alpart &

Alcoa Outsourcing – UWI Canteen & Security Re-engineering/Re-tooling – Most firms –IBM, NCB, BNS,

+++

Downsizing – Most firms (Air Ja. ++++)Assignment: Give other examples of strategic

moves in Jamaica.

Vertical Integration

The Production Continuum

Backward Integration

Forward Integration

Raw material Marketing && Ingredients Manuf. Distribution

Vertical Integration

Strategic Group Map

It is a management tool that assist operations managers in determining the best strategic moves to gain competitive advantage

It outlines the strategic moves firms should employ to be the dominate player in the industry

It guides operations managers in determining which firms to attack, merge and acquire in the industry

Performance DimensionsKey Performance Indicators (KPIs)

QualityPerformance; Conformance; Reliability

TimeSpeed and Reliability

FlexibilityMix – Ability to produce a wide range of

products/servicesChangeover – Ability to provide a new

product with minimal delayVolume – Ability to produce whatever

volume customer needs Cost

Labor; Materials; Engineering; Quality-related

Exercise When a customer calls Dell Computers to order a PC, Dell builds a

PC based on the customer’s unique requirements and ship it directly to the customer – all in a matter of hours. What do you think Dell Computers’ supply chain looks like? How important are Dell’s suppliers and transportation partners to the success of the supply chain? Can you think of any local examples?

One of your friends states that “operations management and supply chain management are primarily of interest to manufacturing firms.” Is this true or false? Give some examples to support your answer.

We have talked about how operations and supply chain strategies should be based on the business strategy. But can strategy flow the other way? That is, can operations and supply chain capabilities drive the business strategy? Can you think of any examples in our local industry?

Is it enough to just write down the business strategy of a firm? Why or why not? Conversely, what are the limitations of not writing down the strategy, but rather depending on the firm’s actions to define the strategy.

Discussion Questions The onset of exponential growth in the development of information

technologies has encouraged the birth of many “dot-com” companies. The Internet has enabled these companies to reach customers in very effective ways. Consider Amazon.com, whose Web site enjoys millions of “hits” each day and puts customers in touch with more than 18 million services and products. What are Amazon.com’s competitive priorities and what should its operations strategy focus on?

A local hospital declares that it is committed to provide care to patients arriving at the emergency unit in less than 15 minutes and that it will never turn away patients who need to be hospitalized for further medical care. What implications does this commitment have for strategic operations management decisions (e.g. decisions relating to capacity and workforce)?

FedEx has built its business on quick, dependable delivery of items being shipped by air from one business to another. Its early advantages included global tracking of shipments using Web technology. The advancement of Internet technology has enabled competitors to become much more sophisticated in order tracking. In addition, the advent of dot.com business has put pressure on increased ground transportation deliveries. Explain how this change in the environment could affect FedEx’s operations strategy, especially relative to UPS, which has a strong hold on the business-to-consumer ground delivery business.

Outline two (2) local strategic moves and explain the rationale for such moves and the benefits gained

Operations Strategy

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NEXT LECTURE:Quality Management & Control

D. Anthony Chevers

[email protected], Room #28