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Chapter 2 Operations Strategy and Competitiveness

Chapter 2 Operations Strategy and Competitiveness. Operations Strategy Competitive Dimensions Order Qualifiers and Winners A Framework for Manufacturing Strategy Distinctive Competencies and Capabilities Productivity Measures. Operations Strategy. Strategy Process. Example.

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Chapter 2 Operations Strategy and Competitiveness

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  1. Chapter 2Operations Strategy and Competitiveness • Operations Strategy • Competitive Dimensions • Order Qualifiers and Winners • A Framework for Manufacturing Strategy • Distinctive Competencies and Capabilities • Productivity Measures

  2. Operations Strategy Strategy Process Example Customer Needs Corporate Strategy Operations Strategy Decisions on Processes and Infrastructure

  3. Competitive Dimensions • Cost - • Product Quality and Reliability - • Delivery Speed - • Delivery Reliability - • Volume Flexibility - • Flexibility and New Product Introduction Speed - • Other Product-Specific Criteria - Technical support, after-sales support

  4. Cost Flexibility Delivery Quality Dealing with Trade-offs For example, if we reduce costs by reducing product quality inspections, we might reduce product quality. Firms must decide how they are going to compete on these dimensions. Who determines the winning combination? Current thinking -

  5. Order Qualifiers and Winners - Terry Hill • Order qualifiers • Order winners • Order losers

  6. Service Breakthroughs • A brand name car can be an “order qualifier” • Repair services can be “order winners” • Examples: Warranty, Roadside Assistance, Leases, etc.

  7. Kaplan and Norton’s Strategy Map Strategy Map What it is about! Financial Perspective Customer Perspective Internal Perspective Learning and Growth Perspective

  8. Kaplan and Norton’s Generic Strategy Map Under the Financial Perspective, there are two generic strategies for driving financial performance • Revenue Growth Strategy is made up of two components • Build the franchise: • Increase customer value: • Productivity Strategy is made up of two components • Improve cost structure: • Increase asset utilization:

  9. Kaplan and Norton’s Strategy Map (Cont.) Under the Customer Perspective, there are three ways suggested as means of differentiating a company from others in a marketplace: • Product leadership - • Customer intimacy - • Operational excellence -

  10. Kaplan and Norton’s Strategy Map (Cont.) The Internal Perspective defines the business processes that the organization will use to support the customer value proposition. Operations management supports these propositions through: • Innovation processes - • Customer management processes - • Operational processes - • Regulatory and environmental processes -

  11. Kaplan and Norton’s Strategy Map (Cont.) In the Learning and Growth Perspective, there are three principle categories of intangible assets needed for learning: • Strategic competencies - • Strategic technologies - • Climate for action -

  12. Operations Strategy Framework

  13. Steps in Developing a Manufacturing Strategy 1. Segment the market according to the product group. 2. Identify product requirements, demand patterns, and profit margins of each group. 3. Determine order qualifiers and winners for each group. 4. Convert order winners into specific performance requirements.

  14. Distinctive Competencies • Organizational strengths (SWOT) possessed by few competing firms • e.g., ability to engineer small-sized products • Exploiting can lead to competitive advantage • Condition that increases chances of achieving strategy • e.g., miniaturization of products to meet customer demands and lower shipping costs • Sometimes referred to as core competencies

  15. (Service) Strategy Capacity Capabilities • Process-based • Systems-based • Organization-based

  16. Total Measure Productivity • Total measure Productivity = Outputs Inputs

  17. or or or or etc. Partial Measure Productivity • Partial measures of productivity =

  18. or or etc. Multifactor Measure Productivity • Multifactor measures of productivity =

  19. Example of Productivity Measurement • You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms. • Which productivity measure should be used? • Answer: • Is productivity increasing or decreasing? • Answer:

  20. Another Example A fast-food restaurant serves hamburgers, cheeseburgers, and chicken sandwiches. The restaurant counts cheeseburgers as equivalent to 1.2 hamburgers and chicken sandwiches as equivalent to 0.8 hamburgers. Five employees work 40 hours/week at the restaurant. If the restaurant sold 500 cheeseburgers, 700 hamburgers, and 1000 chicken sandwiches in one week, what is its productivity? Answer:

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