Session 2 Operations Strategy and Competitiveness Chapter Objectives Introduce the concept of operations strategy and its various components,and show how it relates to the overall business strategy of the firm. llustrate how operations strategy pertains to adding value for the customer. Identify the different ways in which operations strategy can provide an organization with a competitive advantage. Introduce the concept of tradeoffs between different strategies and the need for a firm to align its operations strategy to meet the needs of the particular markets it is serving. Explain the difference between order-qualifiers and order-winners as they pertain to operations strategy. Describe how firms are integrating manufacturing and services to provide an overall"bundle of benefits"to their customers. Operations Management 2-2 1
1 Operations Strategy and Competitiveness Session 2 Operations Management 2–2 Chapter Objectives Chapter Objectives Chapter Objectives • Introduce the concept of operations strategy and its various components, and show how it relates to the overall business strategy of the firm. • Illustrate how operations strategy pertains to adding value for the customer. • Identify the different ways in which operations strategy can provide an organization with a competitive advantage. • Introduce the concept of tradeoffs between different strategies and the need for a firm to align its operations strategy to meet the needs of the particular markets it is serving. • Explain the difference between order-qualifiers and order-winners as they pertain to operations strategy. • Describe how firms are integrating manufacturing and services to provide an overall “bundle of benefits” to their customers
Productivity Contribution:Wal-Mart (VIDEO LINK) (FINANCING) (Organizationa WAL-MAT Learning) (Point-of-sale data) satellite ofsale data) communications Retail Outlet SUPPORT) Distribution Center Operations Management 23 Southwest Airlines A review of the operational and cultural aspects of Southwest Airlines Southwest Airlines was established in 1971 in Texas with 3 planes and routes between Dallas.Houston and San Antonio. Business model was simply:"If you get your passengers to their destinations when they want to get there,on time,at the lowest possible fares,and make darn sure they have a good time doing it, people will fly your airline. Today Southwest Airlines is the 4th largest airline in the United States servicing 58 cities with a fleet of 366 planes and is on its 34th straight year of profitability. Operations Management 飞 2
2 Operations Management 2–3 Productivity Contribution: Wal Productivity Contribution: Wal Productivity Contribution: Wal-Mart -Mart (COMMUNICATIONS SUPPORT) Distribution Center Suppliers Payment WAL-MAT (FINANCING) satellite communications Retail Outlet (Point-of-sale data) (Organizational Learning) （VIDEO LINK） (Point-of-sale data) Operations Management 2–4 Southwest Airlines Southwest Airlines Southwest Airlines • A review of the operational and cultural aspects of Southwest Airlines Southwest Airlines was established in 1971 in Texas with 3 planes and routes between Dallas, Houston and San Antonio. Business model was simply: “If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline.” Today Southwest Airlines is the 4th largest airline in the United States servicing 58 cities with a fleet of 366 planes and is on its 34th straight year of profitability
Southwest Airlines 1.No assigned seating 2.No beverage carts on-board 3.Point-to-point short haul only-no hubs 4.Fly into secondary cities 5.Only Boeing 737 airplanes 6.Colored Plastic Boarding Cards 7.Captains help clean-up the plane,if necessary Operations Management 2-5 Southwest Airlines Nb32g Limited 名 No seat departures High pc gate crews contracts airline" 3
3 Operations Management 2–5 Southwest Airlines Southwest Airlines Southwest Airlines 1. No assigned seating 2. No beverage carts on-board 3. Point-to-point short haul only – no hubs 4. Fly into secondary cities 5. Only Boeing 737 airplanes 6. Colored Plastic Boarding Cards 7. Captains help clean-up the plane, if necessary Operations Management 2–6 Southwest Airlines Southwest Airlines Southwest Airlines
Ikea More with omple buying parking Limited egr Self-selection by customers Ease of g Most items in Self-assembly by customers "Knock down" Year-round kit packoging stocking anfchuing cost 100 Operations Strategy-An Overview ·Operations Strategy -How the operations function contributes to competitive advantage. ·Competitiveness -A company's position in the marketplace relative to its competition. Competitive Priorities -How the operations function provides a firm with a competitive advantage. -Priorities-Low cost,high quality,fast delivery, flexibility,and service. Operations Management w 4
4 Operations Management 2–7 Ikea Ikea Operations Management 2–8 Operations Strategy Operations Strategy Operations Strategy – An Overview – An Overview • Operations Strategy –How the operations function contributes to competitive advantage. • Competitiveness –A company’s position in the marketplace relative to its competition. • Competitive Priorities –How the operations function provides a firm with a competitive advantage. –Priorities—Low cost, high quality, fast delivery, flexibility, and service
What is Operations Strategy? ·Operations Strategy -Determining how to best utilize the firm's resources to achieve corporate objectives. Major long-term structural issues -How big do we make the facilities? -Where do we locate them? -When do we build them? -What type of process(es)do we install to make the products? Operations Management 29 Operations Strategy Means Adding Value for the Customer Maximize value added Transformation Inputs process Outputs (customers and/or (goods and services) materials) ·How to add value: -Reduce product costs to customer. -Make the product more readily available. -Provide faster service. -Provide customers with additional relevant information. -Customize the product to the customer's specific needs. Operations Management 2-10 J
5 Operations Management 2–9 What is Operations Strategy? What is Operations Strategy? What is Operations Strategy? • Operations Strategy –Determining how to best utilize the firm’s resources to achieve corporate objectives. • Major long-term structural issues –How big do we make the facilities? –Where do we locate them? –When do we build them? –What type of process(es) do we install to make the products? Operations Management 2–10 Operations Strategy Means Adding Value for the Customer Operations Strategy Means Operations Strategy Means Adding Value for the Customer Adding Value for the Customer • How to add value: –Reduce product costs to customer. –Make the product more readily available. –Provide faster service. –Provide customers with additional relevant information. –Customize the product to the customer’s specific needs
Competitive Priorities Type Priority Low Cost Providing low cost products. Controlling costs across the board. Quality Providing high quality products. Focus is on product and process quality. Delivery Providing products reliably and quickly. Flexibility Providing a wide variety of products(mass customization). How fast a firm can produce a new product line. Service Providing "value-added"service. How products are delivered and supported. Operations Management 2-11 Developing an Operations Strategy from Competitive Priorities Factory Focus and Trade-offs -A factory could not focus on all four competitive priorities (cost,quality,delivery,and flexibility). Focusing performance on one priority limits/eliminates the ability to focus on another priority. Plant-within-a-Plant (PWP)concept(Skinner) -Different locations with a facility would focus on their own competitive priority. Operations Management 2-12 6
6 Operations Management 2–11 Competitive Priorities Competitive Priorities Competitive Priorities Type Priority Low Cost Providing low cost products. Controlling costs across the board. Quality Providing high quality products. Focus is on product and process quality. Delivery Providing products reliably and quickly. Flexibility Providing a wide variety of products (mass customization). How fast a firm can produce a new product line. Service Providing “value-added” service. How products are delivered and supported. Operations Management 2–12 Developing an Operations Strategy from Competitive Priorities Developing an Operations Strategy Developing an Operations Strategy from Competitive Priorities from Competitive Priorities • Factory Focus and Trade-offs –A factory could not focus on all four competitive priorities (cost, quality, delivery, and flexibility). • Focusing performance on one priority limits/eliminates the ability to focus on another priority. • Plant-within-a-Plant (PWP) concept (Skinner) –Different locations with a facility would focus on their own competitive priority
Time Line for Operations Strategies Cost Quality Delivery Flexibility Service Time line:1950s 19603 1970s 19803 1990s 2000s OM Cost Value paradigm: minimization maximization Source of competitive Manutacturing-based Information-based advantage:← technology technology Operations Management 2-13 Order Qualifiers and Order Winners ·Order Qualifiers -The minimum characteristics of a firm or its products that a firm must have to be considered as a source of purchase. ·Order Winners -The characteristics of a firm that distinguish it from its competition so that it is selected as the source of purchase. ·Design(Apple) ·Technology(Intel) ·Core Capabilities -Specific strengths that allow a company to achieve its competitive priorities. -The skill or set of skills that the operations management function develops that allows the firm to differentiate itself from its competitors. Operations Management 2-14 7
7 Operations Management 2–13 Time Line for Operations Strategies Time Line for Operations Strategies Time Line for Operations Strategies Operations Management 2–14 Order Qualifiers and Order Winners Order Qualifiers and Order Winners Order Qualifiers and Order Winners • Order Qualifiers –The minimum characteristics of a firm or its products that a firm must have to be considered as a source of purchase. • Order Winners –The characteristics of a firm that distinguish it from its competition so that it is selected as the source of purchase. • Design (Apple) • Technology (Intel) • Core Capabilities –Specific strengths that allow a company to achieve its competitive priorities. –The skill or set of skills that the operations management function develops that allows the firm to differentiate itself from its competitors
Dialogue with Michael E.Porter What is Strategy? What is the operations effectiveness? How to shape the operations to be competitive? Video:Dialog With Michael E.Porter Operations Management 2-15 8
8 Operations Management 2–15 Dialogue with Michael E. Porter Dialogue with Michael E. Porter Dialogue with Michael E. Porter • What is Strategy? • What is the operations effectiveness? • How to shape the operations to be competitive? • Video: Dialog With Michael E. Porter