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Performance and Operations Strategy

Performance and Operations Strategy. Objective of Lecture: Describe the strategic role of operations. Define operations strategy and its scope. Illustrate how operations strategy pertains to adding value for the customer. Identify the key performance dimensions of an operations system.

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Performance and Operations Strategy

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  1. Performance and Operations Strategy • Objective of Lecture: • Describe the strategic role of operations. • Define operations strategy and its scope. • Illustrate how operations strategy pertains to adding value for the customer. • Identify the key performance dimensions of an operations system. • 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.

  2. Corporate Strategy • Corporate strategy • Overall strategy adopted by the firm that defines the specific businesses in which the firm will compete and the way in which resources areacquired and allocated. • One objective: • Align resources with market requirements • Two key sets of decisions: • Positioning decisions • Resource decisions Komatsu: Famous for its “circle the cat” strategy

  3. Types of Business Strategies These are “positioning” decisions. They imply certain “resource decisions” Example: Low cost  Economies of scale  Invest in automation

  4. Focusing on Core Capabilities • Core Capabilities (Resources) • 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. • Example: OCP • Focusing is achieved by: • Divesting non-critical activities. • Subcontracting ancillary activities and services.

  5. Operations Strategy • Operations Strategy • Determining how to best utilize the firm’s resources to achieve corporate objectives • How the operations function “fits” within the overall organisation • Making sure resources are available when needed • Competitive Priorities • The performance objectives of an operations strategy • Set by the operations strategy • How the operations function provides a firm with a competitive advantage.

  6. Performance Dimension • Cost • Quality • Time • Speed (throughput, leadtime) • Dependability of delivery • Flexibility

  7. Operations Strategy Means Adding Value for the Customer If benefits exceed costs, the customer perceives value for the product or service. “Value is in the eye of the beholder”What affects customer perceptions of value?

  8. 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. • Evolution of winners/qualifiers • Example of ISO-9000

  9. Operations Strategy Means 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.

  10. 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.

  11. The Controversy • Questioning the Trade-Offs • World-class operations led to the establishment of a hierarchy among the competitive priorities. • Increased competitive capabilities led to increased performance on all priorities by all competitors. • Focus shifted from cost minimization to maximizing the value added. • Customer value is enhanced by the focus on multiple priorities.

  12. Trade-offs & Technology

  13. Resource Decisions • Decision made focus on long term long-term structural issues • How big do we make the facilities? • Capacity planning • Where do we locate them? • When do we build them? • What type of process(es) do we install to make the products?

  14. Strategy Maps • A graphical tool developed at the University of Cambridge to map out the implementation of a strategy Different From textbook!

  15. Example

  16. Summary • Identify customers’ long term needs • Understand what create value • Use order winning/order qualifying criteria to model customer preferences • Identify matching strategic priority • Cost, quality, time, flexibility • Align resources accordingly • Deal with impossible trade-offs through investment in technology • Summarise Implementation with a strategy map

  17. Suggested Homework • Take a Moroccan business/organisation of your choice. Give an example of a positioning decision and an example of a resource decision • Question 2-3, p. 54 • Question 2-5, p. 54 • Differentiate clearly the strategy map of the textbook and the strategy map of the lecture

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