pm lecture 2_ftui.pdf

8/14/2019 PM lecture 2_FTUI.pdf

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Chapter 2 The Strategic Role and

Objectives of Operations

the roles of the operations function include:

as implementer of business strategy

as a support to business strategy

developing resources to achieve organisational goals

as the driver of business strategy

by ensuring long term competitive edge

there are 5 performance objectives:

quality:

do things right

good quality products mean high customer satisfaction and their return

fewer internal errors reduces costs

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2 The Strategic Role and Objectives of Operations

speed:

do things fast

time that customers wait to receive products

faster the customer receives product, more likely they will buy it

internally, waiting time creates large stocks (inventories) of products

dependability:

do things on time

deliver goods and service when they were promised

reduces disruption to production internally

reduces cost by eliminating ineffective use of time

establishes stability through trust

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2 The Strategic Role and Objectives of Operations

flexibility:

change what you do

product/service flexibility (new products)

mix flexibility (wide range of products)

volume flexibility (level of output)

delivery flexibility (timing of delivery)

internal flexibility gives fast service, saves time, and maintains dependability

cost:

do things cheaply

reducing costs can give competitive advantage to companies competing on price

costs are incurred generally for:

staff

facilities, technology, equipment

materials

costs are also reduced by improving upon other 4 objectives

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3 Operations Strategy

top-down perspective:

corporate strategy is concerned with the corporations position globally,economically, politically and in the social environment gives direction to total

business: where to invest

priorities in terms of sales revenue growth

allocation of investment funds, in line with priorities

Corporate strategy

Business strategy

Functional strategy

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each business unit within the corporate group has its own strategy, withindividual mission and objectives this is called business strategy:

ie. business units of a bank: corporate banking, retail banking, financial markets,

mortgages, insurance

for each, identify markets to compete in, grow in

identify in which functinal tasks to invest in

within the business, functional strategies consider what part each functionshould play in contributing to the strategic objectives of the business:

functions include operations, marketing, product development

eg. support competing in markets

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market requirements perspective:

competitive factors define customers requirements, which implies differentperformance objectives:

low price (cost)

high quality (quality)

fast delivery (speed)

reliable delivery (dependability)

innovative products and services (flexibility p/s)

wide range of products and services (flexibility mix)

ability to change timing/quantity (flexibility volume/delivery)

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competitive factors may be split into 2 categories:

order-winning factors

directly contribute to winning business

are key reasons for purchasing a product and service

qualifying factors

are those aspects of competitiveness where the operations performance has to beabove a particular level just to be considered by the customer

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the product/service life cycle can be used to understand behaviour ofcustomers and competitors:

introduction: flexibility required, due to uncertainty in the market

quality to maintain product performance

growth:

speed and dependability in responding to demand

maturity:

costs to be reduced and dependability in supply achieved

decline: cost reduction required

Introduction Growth Maturity Decline

t

Salesvolume

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operations resources perspective:

structural decisions are those which primarily influence design activities:

new product development strategy (leader?, follower?)

vertical integration strategy

facilities strategy (location, capacity)

technology strategy

infrastructural decisions influence the workforce, planning and control, andimprovement activities:

workforce strategy (roles, skills)

capacity adjustment strategy (demand forecast)

supplier development strategy (choosing, relationship)

inventory strategy (quantity, location)

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operations strategy is about the reconciliation between the marketrequirements and developing operations resources:

Structural andinfrastructural

decisions

Operationsresources

Operationscapabilities

Operationsprocesses

Performaobjectives

nce

Competitorsactions

Stage inproduct/service

life cycle

Customersneeds

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operations strategy matrix combines the last 2 perspectives:

quality

speed

dependability

flexibility

cost

Structural decisions Infrastructural decisions

Resource

usage

Marketcompetitiveness

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Strategy Formulation

Strategy depends on internal and external

conditions and performance objectives


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Strategic Planning - FormulationMission &

Vision

BusinessStrategy

Marketing

Strategy

Operations

Strategy

Financial

Strategy

Voice of theBusiness

Voice of theCustomer


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External Conditions

Economic conditions

interest rates unemployment rates

Political conditions tariffs and trade restrictions

political stability

Market conditions needs and desires of customers


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External Conditions

Social conditions

social trends changing demographics

Technological conditions new products

new processes

information technology


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Internal Conditions

(measuring current performance) Current strengths and weaknesses

Existing products Existing customers

Existing distribution or delivery systems Human resources


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Internal Conditions

Current facilities

Technological capabilities Patents

Availability of capital


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Policy Deployment

Focuses employees on common goals &

priorities Translates strategy into measurable

objectives Aligns day-to-day decisions with strategic

plan


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Vision: Total customer satisfaction

Strategic goal: Improve customer retention

Customer complaint: It takes too long to repairthe copier

Functional performance goal: Reduce downtime oncopier

Policy Deployment Example:

Copyplus


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Specific Action

What

Improve

stocking

of parts

Who

Gladys

Wray

WhenJune 1

MeasureNumber of

repeatvisits due topart not onhand

Resources

$500*


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Strategies for cost ...

Traditional:

low overhead dedicated equipment

(hard automation)

high utilization large volumes

(economy of scale)

low wages

Lean:

reduced scrap andrework

reduced WIP

reduced wastereduced inspection

product

standardization andsimplification


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Strategies for quality...

Traditional:

increased inspection more expensive

processes

Lean:skilled, trained workers

continuous improvement

poka-yoke

statistical process control

rapid discovery andcorrection of problems(effective measuringmethod)

product standardizationand simplification


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Strategies for dependability...

Traditional:

large inventory complex scheduling

systems

Lean (measurable):

low equipmentfailures

high quality - no scrapor rework

low WIP

low lead times

small batch sizesflexible manufacturing

Strategies for flexibility and


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Strategies for flexibility and

speed... Traditional:

general purposeequipment (e.g. jobshop)

reserve capacity

flexible automation

Lean:

low setup timesmall batch size

multi-skilled

workersconcurrentengineering

short lead timeslow WIP

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