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Operations Strategy What is Operations Strategy ?
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| Date | 11.09.2018 | | Size | 244.5 Kb. | | #63695 |
| What is Operations Strategy ? - Operations Strategy is concerned with setting broad policies and plans for using firm resources to best support long-term competitive strategy.
- Operations strategy needs to support overall corporate strategy.
Competitive Dimensions - Cost
- Quality (product & process)
- Delivery Speed
- Delivery Reliability
- Demand Management
- Variety
- Innovation
- Make it cheap
- Make it good
- Make it fast
- Deliver as promised
- Handle Changes in Demand
- Make more than one type
- First mover advantage
Competitive Dimensions - All of the competitive dimensions are important…
- why not try to excel along every one?
Competitive Dimensions and Trade-offs - Trade-offs: Decisions that arise because of the inability of processes to excel simultaneously across all competitive dimensions.
Which Dimensions Should Be the Focus? - Order winners: Criterion that differentiates one firm from another.
- Examples: Cost (Southwest Airlines), service quality (Ritz-Carlton Hotels), Flexibility (Dell)
- Order qualifier: Criterion that permits the firm’s products to even be considered for purchase.
- Example: basic quality necessary to be considered a good car (consumer reports).
Example Developing an Operations Strategy - Segment the market according to the product group. Example: High-end vs. low-end consumers
- Identify (a) product requirements, (b) demand patterns, (c) profit margins. Example: many components, seasonal, low demand, high profit margin.
- Determine the order winners and order qualifiers. Example: delivery speed (winner), cost (qualifier)
- Convert order winners into specific performance requirements. Example: Must sell at or below $600
Developing an Operations Strategy - The next step is to analyze the process level…
- Define the complexity and volume of your product/service.
- Define whether you offer few specific products/services or highly customized products/services.
- Determine product design, process design, supply chain design, supplier relations, capacity management plan & technology choice
Examples Examples - Southwest Operations – low cost
- Point-to-point between midsize cities & secondary airports in large cities
- 15-min gate turnaround
- No meals
- No assigned seats
- No interline baggage checking
- No premium classes of service
- Automated gate ticketing
- Standardized fleet of aircraft
Measuring whether the strategy is working - Productivity is a common measure for how well a company is utilizing its resources
- Productivity measurement shows how well the company performs for a given level of inputs.
- Partial measures may give more specific details about performance.
Productivity Measurement - Example: Consider the following case. A bank has net output (income) of $500,000. The bank employs 40,000 people.
- The partial labor productivity is 500,000 / 40,000 = 12.5
Productivity Measurement - The productivity index is a relative measure.
- It has to be compared with something else:
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- Benchmarking.
- Changes over time.
- The important thing is to be consistent in measurement!
Examples Examples - Walmart – low cost
- High investment into IT to manage inventory, analyze point of sales data, track shipments, etc.
- Management by data
- Scale
- Negotiation power with suppliers
Summary and Conclusions - Firms must trade-off competitive dimensions when defining operations strategy.
- This can be done by defining order winners and order qualifiers.
- A Productivity Index can measure the relative performance between firms (or products, SBU’s, etc)
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