Forecasting/MAD/Exponential Smoothing problem solving homework (Operations Management)
MDNAQ
w02_om_strategy.pptxWeek 2: Operations Strategy
MGMT19126:: OPERATIONS MANAGEMENT
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Outline
Global view of operations
Mission and strategy
Strategies for competitive advantages
Operations management (OM) strategy
Reasons to Globalize
Improve the supply chain
Reduce costs (labor, taxes, tariffs, etc.)
Improve operations
Understand markets
Improve products
Attract and retain global talent
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Developing Missions and Strategies
Mission statements tell an organization where it is going.
The Strategy tells the organization how to get there.
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Mission
Mission - where are you going?
Organization’s purpose for being
Answers ‘What do we provide society?
Provides boundaries and focus
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Example- Google’s mission
Google’s mission is to organize the world’s information and make it universally accessible and useful.
Hard Rock Cafe
Our Mission: To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success.
Figure 2.2
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Benefit to Society
Mission
Factors Affecting Mission
Philosophy and Values
Profitability and Growth
Environment
Customers
Public Image
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© 2011 Pearson Education, Inc. publishing as Prentice Hall
Sample Missions
| Sample Company Mission |
| To manufacture and service an innovative, growing, and profitable worldwide microwave communications business that exceeds our customers’ expectations. |
| Sample Operations Management Mission |
| To produce products consistent with the company’s mission as the worldwide low-cost manufacturer. |
Figure 2.3
Sample Missions
Figure 2.3
| Sample OM Department Missions | |
| Product design | To design and produce products and services with outstanding quality and inherent customer value. |
| Quality management | To attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production, and field service operations |
| Process design | To determine and design or produce the production process and equipment that will be compatible with low-cost product, high quality, and good quality of work life at economical cost. |
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Strategy
Action plan to achieve mission-purpose
Functional areas have strategies- action plan
Strategies exploit opportunities and strengths, avoid threats, and overcome weaknesses
Strategy
Analysis
Strategy Development: SWOT Analysis
Internal Strengths
Internal Weaknesses
External Opportunities
External Threats
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Top-down perspective
What the business wants operations to do- corporate and business strategy
Operations resources perspective
What operations resources can do
What day-to-day experience suggests operations should do
Bottom-up perspective
Market requirement perspective
What the market position requires operations to do
Operations strategy
The four perspectives on operations strategy
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1
Broad strategic objectives for an operation applied to stakeholder groups
Society
Increase employment
Enhance community well-being
Produce sustainable products
Ensure clean environment
Customers
Appropriate product or
service specification
Consistent quality
Fast delivery
Dependable delivery
Acceptable price
Suppliers
Continue business
Develop supplier
capability
Provide transparent
information
Shareholders
Economic value from
investment
Ethical value from investment
Employees
Continuous employment
Fair pay
Good working conditions
Personal development
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2
Operations strategy is different from operations management
Example: capacity decisions
Time scale
Short-term
capacity decisions
1–12 months
Demand
Long-term
capacity decisions
1–-10 years
Demand
Operations management
Operations strategy
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Examples of Global Operations Strategies
Operations
Strategy
GM: GM, USA is extending
their business in Poland,
Argentina, China, and Thailand
Sony: purchases components
from suppliers in Thailand,
Malaysia and around the world
Boeing: worldwide
sales and production
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Strategies for Competitive Advantage
Differentiation – better, or at least different
Cost leadership – cheaper
Response – rapid response
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Competing on Differentiation
Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value
Walt Disney Magic Kingdom – experience differentiation
Hard Rock Cafe – dining experience
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Competing on Cost
Provide the maximum value as perceived by customer. Does not imply low quality.
Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment
Wal-Mart – small overheads, shrinkage, distribution costs
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Competing on Response
Flexibility is matching market changes in design innovation and volumes
Institutionalization at Hewlett-Packard
Reliability is meeting schedules
German machine industry
Timeliness is quickness in design, production, and delivery
Johnson Electric, Motorola
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Issues In Operations Strategy
Resources view
Value-chain analysis
Porter’s Five Forces model
Operating in a system with many external factors
Constant change
Product Life Cycle
Product design and development critical
Frequent product and process design changes
Short production runs
High production costs
Limited models
Attention to quality
Introduction Growth Maturity Decline
OM Strategy/Issues
Forecasting critical
Product and process reliability
Competitive product improvements and options
Increase capacity
Shift toward product focus
Enhance distribution
Standardization
Fewer product changes, more minor changes
Optimum capacity
Increasing stability of process
Long production runs
Product improvement and cost cutting
Little product differentiation
Cost minimization
Overcapacity in the industry
Prune line to eliminate items not returning good margin
Reduce capacity
Figure 2.5
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Tutorial #2
Discuss with example: what are the three main ways to achieve competitive advantage.
OM strategies of two drug companies (from text)
Aldi case
Example of OM strategy
© 2011 Pearson Education, Inc. publishing as Prentice Hall
Operations Strategies of Two Drug Companies
| Brand Name Drugs, Inc. | Generic Drug Corp. | |
| Competitive Advantage | Product Differentiation | Low Cost |
| Product Selection and Design | Heavy R&D investment; extensive labs; focus on development in a broad range of drug categories | Low R&D investment; focus on development of generic drugs |
| Quality | Major priority, exceed regulatory requirements | Meets regulatory requirements on a country by country basis |
Table 2.2
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© 2011 Pearson Education, Inc. publishing as Prentice Hall
Operations Strategies of Two Drug Companies
| Brand Name Drugs, Inc. | Generic Drug Corp. | |
| Competitive Advantage | Product Differentiation | Low Cost |
| Process | Product and modular process; long production runs in specialized facilities; build capacity ahead of demand | Process focused; general processes; “job shop” approach, short-run production; focus on high utilization |
| Location | Still located in the city where it was founded | Recently moved to low-tax, low-labor-cost environment |
Table 2.2
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© 2011 Pearson Education, Inc. publishing as Prentice Hall
Operations Strategies of Two Drug Companies
| Brand Name Drugs, Inc. | Generic Drug Corp. | |
| Competitive Advantage | Product Differentiation | Low Cost |
| Scheduling | Centralized production planning | Many short-run products complicate scheduling |
| Layout | Layout supports automated product-focused production | Layout supports process-focused “job shop” practices |
Table 2.2
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© 2011 Pearson Education, Inc. publishing as Prentice Hall
Operations Strategies of Two Drug Companies
| Brand Name Drugs, Inc. | Generic Drug Corp. | |
| Competitive Advantage | Product Differentiation | Low Cost |
| Human Resources | Hire the best; nationwide searches | Very experienced top executives; other personnel paid below industry average |
| Supply Chain | Long-term supplier relationships | Tends to purchase competitively to find bargains |
Table 2.2
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© 2011 Pearson Education, Inc. publishing as Prentice Hall
Operations Strategies of Two Drug Companies
| Brand Name Drugs, Inc. | Generic Drug Corp. | |
| Competitive Advantage | Product Differentiation | Low Cost |
| Inventory | High finished goods inventory to ensure all demands are met | Process focus drives up work-in-process inventory; finished goods inventory tends to be low |
| Maintenance | Highly trained staff; extensive parts inventory | Highly trained staff to meet changing demand |
Table 2.2
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Aldi case
Operations Strategy
ExampleStrategy Process
Customer NeedsCorporate StrategyOperations StrategyDecisions on Processes
and Infrastructure
More ProductIncrease Org. SizeIncrease Production CapacityBuild New Factory
Operations Strategy
Example
Strategy Process
Customer Needs
Corporate Strategy
Operations Strategy
Decisions on Processes
and Infrastructure
More Product
Increase Org. Size
Increase Production Capacity
Build New Factory
*
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