Operation management 10e heizer render chapter 02

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

Strategies

Learning Objectives

approaches to competitive advantage

When you complete this chapter you

should be able to:

Learning Objectives

provided by PIMS research

operations strategy options

When you complete this chapter you

should be able to:

Global Strategies

worldwide

around the world faster than its competition by building flexibility into design, production, and distribution

suppliers in Thailand, Malaysia, and

Global Strategies

but it is controlled by an American company, Ford The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe.

compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina

Some Multinational

Corporations

Some Multinational

Corporations

Some Boeing Suppliers (787)

PLM software

conversion system and integrated

standby flight display

Some Boeing Suppliers (787)

system

fuselage &

horizontal stabilizer

wing and tail units

Some Boeing Suppliers (787)

Industries

landing gear well

Industries

Some Boeing Suppliers (787)

Korea

Reasons to Globalize

Reasons to Globalize

Tangible

Reasons

Intangible

Reasons

Reduce Costs

lower direct and indirect costs

Agreement (NAFTA)

Improve the Supply Chain

Provide Better Goods

and Services

goods and services

Understand Markets

suppliers can lead to new opportunities

design from Europe

fads from Japan

Learn to Improve Operations

Japanese auto manufacturer to learn

improved using Scandinavian ergonomic competence

Attract and Retain Global

Talent

insulation against unemployment

more prosperous locations

travel

Cultural and Ethical Issues

You May Wish To Consider

Match Product & Parent

Match Product & Parent

Match Product & Country

Match Product & Country

Developing Missions and

Strategies

Mission statements tell an organization where it is going

The

The Strategy Strategy tells the

organization how to get there

complete record of each shipment and delivery will

be presented with our request for payment We will

be helpful, courteous, and professional to each other

and the public We will strive to have a completely

satisfied customer at the end of each transaction.

The mission of Merck is to provide society with superior products and services - innovations and solutions that improve the quality of life and satisfy

customer needs - to provide employees with meaningful work and advancement opportunities

and investors with a superior rate of return

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.

Arnold Palmer Hospital

Arnold Palmer Hospital is a healing environment providing family-centered care with compassion, comfort and respect… when it matters the most.

Benefit to Society

Mission

Factors Affecting Mission

Philosophy and Values

Profitability and Growth Environment

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.

Sample Missions

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.

Sample Missions

Sample OM Department Missions

Location To locate, design, and build efficient and

economical facilities that will yield high value to the company, its employees, and the community.

Layout design To achieve, through skill, imagination, and

resourcefulness in layout and work methods, production effectiveness and efficiency while supporting a high quality of work life.

Human resources To provide a good quality of work life, with

well-designed, safe, rewarding jobs, stable employment, and equitable pay, in exchange

Sample Missions

Sample OM Department Missions

Supply chain

management To collaborate with suppliers to develop innovative products from stable, effective,

and efficient sources of supply.

Inventory To achieve low investment in inventory

consistent with high customer service levels and high facility utilization.

Scheduling To achieve high levels of throughput and

timely customer delivery through effective scheduling.

Maintenance To achieve high utilization of facilities and

equipment by effective preventive maintenance and prompt repair of facilities and equipment.

Strategic Process

Functional Area Missions

Organization’s

Mission

Strategies for Competitive

Advantage

Competing on Differentiation

Uniqueness can go beyond both the physical characteristics and service attributes to encompass

everything that impacts customer’s perception of

value

experience differentiation

Competing on Cost

Provide the maximum value as perceived by

customer Does not imply low quality.

airports, no frills service, efficient utilization of equipment

distribution costs

Competing on Response

design innovation and volumes

in design, production, and delivery

Bennigan’s, Motorola

OM’s Contribution to Strategy

Sony’s constant innovation

of new products……… Design

HP’s ability to lead the printer market……… Volume

Southwest Airlines No-frills service…… … LOW COST

Motorola’s HDTV converters….…… Conformance

Motorola’s pagers……… … Performance

Caterpillar’s after-sale service

Decisions Examples Strategy Used Advantage

Response (Faster) Cost

leadership (Cheaper) Differentiation (Better)

Goods and Services and

Process

Goods and Services and

Interact with customers, labor standards vary

Goods and Services and

critical

work-in-process, and finished

goods may be held

Cannot be stored

Goods and Services and

the 10 OM Decisions

Operations

and takes place

at production site

Often “repair” and takes place at

customer’s site

Managing Global Service

Operations

Requires a different perspective

on:

fine-dining restaurant) Repetitive (modular) focus

ASSEMBLY LINE (Cars, appliances, TVs, fast-food restaurants) Product focused

CONTINUOUS (steel, beer, paper, bread, institutional

kitchen)

Mass Customization Customization at high

Volume (Dell Computer’s PC,

cafeteria)

Operations Strategies for

Two Drug Companies

Brand Name Drugs, Inc Generic Drug Corp.

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

regulatory requirements Meets regulatory requirements on a

country by country

Operations Strategies for

Two Drug Companies

Brand Name Drugs, Inc Generic Drug Corp.

Competitive

Advantage Product Differentiation Low Cost

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

Operations Strategies for

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

automated focused production

product-Layout supports process-focused “job shop” practices

Operations Strategies for

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

Operations Strategies for

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

Issues In Operations Strategy

Characteristics of High ROI Firms

Strategic Options to Gain a

Competitive Advantage

28% - Operations Management 18% - Marketing/distribution 17% - Momentum/name recognition 16% - Quality/service

14% - Good management 4% - Financial resources 3% - Other

Elements of Operations Management Strategy

possible new entrants into the market

technological, legal, and economic issues

the OM function

strategy and with other functional areas

One must understand:

Dynamics of Strategic Change

Product Life Cycle

Best period to increase market share

R&D engineering is critical

Practical to change price or quality image

Strengthen niche

Poor time to change image, price, or quality

Competitive costs become critical Defend market position

Cost control critical

Introduction Growth Maturity Decline

CD-ROMs

3 1/2”

Floppy disks

iPods

Product Life Cycle

Product design and

development critical

Frequent product and process design changes

Short production runs

High production costs

Product and process reliability Competitive product improvements and options Increase capacity Shift toward

product focus Enhance

Standardization Less rapid

product changes – more minor changes

Optimum capacity Increasing stability of process Long production runs

Product

Little product differentiation Cost

minimization Overcapacity

in the industry Prune line to eliminate items not returning good margin Reduce

Strategy Development Process

Determine Corporate Mission

State the reason for the firm’s existence and identify the

value it wishes to create.

Environmental Analysis

Identify the strengths, weaknesses, opportunities, and threats

Understand the environment, customers, industry, and competitors.

Strategy Development and

Implementation

The operations manager’s job is to implement

an OM strategy, provide competitive advantage, and increase productivity

Critical Success Factors

Production/Operations

Activity Mapping

Courteous, but Limited Passenger

Service

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:

Low Cost

Lean, Productive

Employees

Short Haul, Point Routes, Often to Secondary Airports

Point-to-High Aircraft

Utilization

Frequent, Reliable Schedules

Activity Mapping

Courteous, but Limited Passenger

Service

Competitive Advantage:

Low Cost

Lean, Productive

Employees

Short Haul, Point Routes, Often to Secondary Airports

Point-to-High Aircraft

Utilization

Frequent, Reliable Schedules

Automated ticketing machines

No seat assignments

No baggage transfers

No meals (peanuts)

Activity Mapping

Courteous, but Limited Passenger

Service

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:

Low Cost

Lean, Productive

Employees

Short Haul, Point Routes, Often to Secondary Airports

Point-to-High Aircraft

Utilization

Frequent, Reliable Schedules

No meals (peanuts) Lower gate costs at secondary airports High number of flights reduces employee idle time

between flights

Activity Mapping

Courteous, but Limited Passenger

Service

Competitive Advantage:

Low Cost

Lean, Productive

Employees

Short Haul, Point Routes, Often to Secondary Airports

Point-to-High Aircraft

Utilization

Frequent, Reliable Schedules

High number of flights reduces employee idle time

between flights Saturate a city with flights, lowering administrative costs (advertising, HR, etc.) per passenger for that city Pilot training required on only one type of aircraft Reduced maintenance

Activity Mapping

Courteous, but Limited Passenger

Service

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:

Low Cost

Lean, Productive

Employees

Short Haul, Point Routes, Often to Secondary Airports

Point-to-High Aircraft

Utilization

Frequent, Reliable Schedules

Pilot training required on only one type of aircraft Reduced maintenance inventory required because

of only one type of aircraft Excellent supplier relations with Boeing has aided

financing

Activity Mapping

Courteous, but Limited Passenger

Service

Competitive Advantage:

Low Cost

Lean, Productive

Employees

Short Haul, Point Routes, Often to Secondary Airports

Point-to-High Aircraft

Utilization

Frequent, Reliable Schedules

Reduced maintenance inventory required because

of only one type of aircraft Flexible employees and standard planes aid

scheduling Maintenance personnel trained only one type of

aircraft

Flexible union

contracts

Activity Mapping

Courteous, but Limited Passenger

Service

Standardized Fleet of Boeing

737 Aircraft

Competitive Advantage:

Low Cost

Lean, Productive

Employees

Short Haul, Point Routes, Often to Secondary Airports

Point-to-High Aircraft

Utilization

Frequent, Reliable Schedules

Automated ticketing

machines Empowered employees

High employee compensation Hire for attitude, then train

High level of stock

ownership High number of flights reduces employee idle time

between flights

Four International Operations Strategies

Examples

U.S Steel Harley Davidson International Strategy

Four International Operations Strategies

International Strategy

license existing product

Examples U.S Steel Harley Davidson

International Strategy

license existing product

Examples U.S Steel Harley Davidson

Four International Operations Strategies

Texas Instruments Caterpillar

Otis Elevator

Global Strategy

Four International Operations Strategies

Examples Texas Instruments Caterpillar

Otis Elevator Global Strategy

International Strategy

license existing product

Examples U.S Steel Harley Davidson

Standardized product

Examples Texas Instruments Caterpillar

Examples U.S Steel Harley Davidson

Four International Operations Strategies

 Franchise, joint

ventures, subsidiaries Examples

Heinz McDonald’s The Body Shop Multidomestic

Strategy

Four International Operations Strategies

Examples Texas Instruments Caterpillar

Otis Elevator Global Strategy

International Strategy

license existing product

Examples U.S Steel Harley Davidson

Multidomestic Strategy

domestic model globally

subsidiaries Examples

McDonald’s Hard Rock Cafe

International Strategy

license existing product

Examples U.S Steel Harley Davidson

Multidomestic Strategy

domestic model globally

subsidiaries Examples

Examples Texas Instruments Caterpillar

Otis Elevator

Global Strategy

Four International Operations Strategies

 Economies of scale

 Cross-cultural

learning Examples

Coca-Cola Transnational

Strategy