Lecture 6: Operations Strategy Flashcards
What is Operations Managment? (OM)
→ OM is about the Management of the processes that produce or deliver goods and services
- not every company has debartmend calles “operations” but everyone untertakes OP AC cause they produce/deliver goods/services
- OP manager has responsbility for managing resources involed in those procesess
What are the three type of transformed ressources in OM?
-
Materials
- can be transformed physically (e.g. manufacturing)
- by location (e.g. transportation)
- ownership (retail)
- storage (warehousing -
Information
- can by transformed by property (e.g. accountants)
- by possesion (e.g. market research)
- by storage (e.g. libraries)
- location (telecommunication) -
Customers
- can be transformed physically (hairdresser)
- by storage (hotels)
- location (airlines)
- physiological state (hospitals)
- psychological state (entertainment)
What is a strategy?
→ Strategy is the direction and the scope of an organisation over the long term
Ideally which matches its ressources to its changing environment, and in particular its markets, customers or clients to meet stakeholder expectations
What are the 3 levels of strategy?
-
Corporate level strategy
- at highest or corporate level the strategy provides long-range guidance for the whole organisation -
Business Level Strategy
- concern is with the products/services that should be offered in the market defined at the corporate level -
Functional Level Strategy
- functions of the business (e.g. operations, marketing, finance) make long range plans which support competitive advantage by the business strategy
What is the Scope of OPS?
→ purpose of an OPS is to interpret the overall business strategy, which will be concerned with goals (e.g. growth/profitability), into goals that direct how operations will be managed
How can Operations Contribute to (Bus.Corp.) Strategy? What are the four stages/levels of Contribution?
- Stage 1: Internal Neutrality (reach minimum standard)
- OP functions has little contribution to competitive success and is seen a barrier to beeter performance (seen not so important)
- Stage 2: External Neutrality (
- OP functions begins to focus on comparing its performance with competitor organisations
- Stage 3: Internally Supportive
- operations function is one of the best in their market area aspires to be the best in market
- Stage 4: Externally Supportive
- OP become central to strategy making and provide foundation for future competitive success
What the perfomance objectives to measure the OP performance in achieving strategic goals?
- Quality
- Speed (Time)
- Dependability (Time)
- Flexibility
- Cost
Describe the Quality as part of measuring OP performance
→ Quality covers both quality of design of product/service itself and quality of process that delivers the product/service
→ from customer side quality includes reliability, performance and astethtics
→ from OP side quality is related how closely the product/service meets the specifications required by desing, termed the quality performance
Describe Speed (Time) as a performance measuring tool
→ speed is the time delay between a customer request for a product or service and then receriving the product/service
→ AC triggered from a customer request of a product/service is dependend whether the is make-to-stock or customer-to-order delivery systems is in place
→ advantage of speed is that it can be used to reduce costs and delivery time leading to better customer service
What is Dependability (Time) as a OP perfomance measurement
Def: refers to consitstently meeting a promised delivery time for a product or service to a customer
→ increase only helps if its produced in a consistent manner
→ measured by the percentage of customers who get their product/service withing the time promised
-sometimes its better to deliver on time (e.g. wet concrete for construction)
→ leads to a better customer service when customer can trust p/s is delivered when expected
What is Flexibility in terms of OP performance measurment?
Def: ability of the organisation to change what it does.
4 types can be identified:
- p/s: ability to quickly act in response to changing customer needs with new p/s designs (e.g changing the assembly line)
- mix: ability to provide a wide range of p/s (e.g. offering different cars on same assembly line)
- volume: ability to decrease/increase output in response to changes in demand
- delivery: ability to react to changes in timing of delivery
→ flexibility can be measured in terms of range (amount of the change from customer) and response (speed of the change of respond from customer)
Discuss the difference between range and response flexibility for the 4 types of flexibility
What is Cost in terms of OP performance measurement?
Def: Cost is the finance required to obtain inputs (e.g. transforming and fransformed resources) to manage the transformation process which produces finished p/s
→ is comany is competing on price, then its essential to keep cost below competion. With that they either make more profit if price is equal or gain market share if price is lower
→ also important to provide p/s to a market niche, which competitor cannot provide. (e.g luxury products)
What are Internal (operations) benefits 1) and External (market) benefits 2) can have form the 5 performance measurements
Quality:
1) Error-free process
2) Satisfying customer needs
Dependability
1) Minimize disruption
2) Meeting delivery commitments
Speed
1) Maximizes throughput
2) Get p/s to customers fast
Flexibilty
1) able to react to change
2) offer frequent new p/s, a wird p/s range and cope with changing volume and delivery requirements
Cost
1) High productivity from low cost
2) Market shar and/or high margin
From what perspectives can OS be seen/aranged from?
-
Market-based approach to OS make decision regarding the market and its customer in the market. The market position is translate to criterias that have to be accomplished to fullfill the need of the market
→ you have to make investement in terms of plants/production -
Ressource-based looks inside-out of the firm, rather then outside-in. A research of the operations tangible and intangible ressources/processes offer a view of the operations capability
→ investments in terms of marketing strategies
What is the OP strategy alignment?
→ Market requirements and OP Capability have to be in alignment to each other (company has to be in Line of fit)
- consquences if you are not on the line.
→ if one side is more apparent then you make investment from the other approach to reach the Line of fit again
What is Hills framework about OP strategy ?
→ Hill proposes that finding the Fit is part of the business level in terms of meeting corporate/strategic goals
- iterativ framewokr linking corporate objectives (organisational direction), the marketing strategy (defines how company competes in certain market) and operations strategy (provides capability to compete in those markets)
5 Steps:
- Define corporate objectives
- Determing marketing strategies to meet corporate objectives
- Asses how different product win orders against competitors
- Establish the most apporpriate mode to deliver these sets of products
- Provide infrastructure required to support operations
→ more on the market side approach
What is step 1 of the OP strategy framework about?
→ invovles establishing corporate objective that provide directions for the organisation and performance indicators that allow progess in achiveving those objectives by measuring
→ objectives depent on the need of external and internal stakeholders, and include financial measure like profit/growth rates and employee practices like skills develpoment and enviromental policies
What is step 2 of the OP strategy framework about?
→ developing of marketing strategy to meet objective from step 1
- involves identifyien target markets and deciding how to compete in those
- requires utilisation of p/s characeritiscs like range, mix and volume that the OP AC will be required to provide
What is step 3 of the OP strategy framework about?
-most important step in the framework
→ mismatches between requirements of organisations stratey and OP capability are revealed. This step provides link between market proposal and operations processes/infrastructure in need for the objectives
→ done by translating marketing strategy into a range of competitve factors (price, quality, delievy speed)
BUT: no one-to-one relationship between competitive factors and performance objectives. (e.g speed is also dependet on cost and dependability
What are the two types of competitive factors which relate to securing customer orders in the marketplace?
-
order winning factors
- key reasons for customers to buy p/s
- rasing their performance may secure more business -
qualifying factors
- performance of those factors must be at a certain level to gain business
- improvment above certain level does no mean further competitive advantage all the time
→ its essential to meet both criteria in order to be a win for customer orders
What are the dimensions Slack uses to help prioritise performance objectives
-
relative importance
- assesed in termin of importance to internal/external customers using a 9 point scale from order winning, to less important -
relative performance
- comparison against competitor achivement. 9 Point scale (from better than B to worse then B)
→ next step to plot rating/performance into a matrix
How do you plot the importance and performance form Slack? and what are the 4 zones?
X-axis: Importance for customer
Y-axis: Performance against competitors
1st Zone: Appropriate:
- are satisfying in short/medium term
- wish to improve towards upper boundry in long term
2nd Zone: Improve:
- performance objective below line of acceptability
- need to be improved
3rd Zone: Urgent Action:
- performance objecitve far to low
- need to be improved “same as” or “better then” competitor performance
4th Zone: Excess?:
- to many ressource used to achieve level of performance
- change resoucres to a less well performing area
What are Step 4 and 5 about in the Framework?
- delivery system choice (structural decision)
structural decisions are about the physical ressources of the organisation
→ production capability, level of automation (plants, mashinery)
- infrastructure choice (infrastructural decisions)
→ describes the system, policies and pratices that determines how the structual elements of step 4 are managed
What are the dimeonsion of Structual decision?
- choice of process type implemented in manufacturing (project jobbing, batch, line or continous) or services (professional, shop or mass)
- assiociated layout type
- capacity issues including the volume, timing and location of capacity provision
What do Infrastructural decisions include?
- management of the product and service design process
- management of organizational processes
- design of jobs
- management of capacity
- scheduling of operations
- inventory management
- planning and control systems such as JIT and ERP
- supply chain management
- project management
What are the process types?
- Project
- Jobbing
- Batch
- Mass
- Continous
What is a Project?
- processes that produces products of high variety and low volume
- PJ processes are used to make a one-off prodcut to a customer specification
- feature can be that location of the product is stationary
What are Jobbing Processes?
- high variety and low volume products
- mostly one-off (or low volume) product for customer specification
- product moves to the location of transforming resources, like equipment
→ precision engineering as an example
What are Batch processes?
- medium variety and medium volume
- size can range from one to hundreds
- feature is that its difficult to predict when a batch of work will arrive at a mashine, lack of coordination can lead to many products waiting for the mashine at one time
→ bakery that produces 100+ bread rolls
What are Mass processes?
- high volume and low variety products
- production process is similar for all products, despite small varients
- cost effecitve produciton with specialied labour and euqipment is key, because of high variety
→ car manufacturing on an assembly line
What are Continous processes?
-very high volume of a low variety standart product
-most of the times gas/oil are produced
→ low cost products
- Continous processes use large amout of equipment to produce one single product (e.g oil raffinery)
- to change the process you need a high investment
What are Service Process Types?
- Proffesional Service
- Service Shop
- Mass Service
What are Professional service?
- operate with high variety and low volume
- high level of customisation, where each service delivery is tailored to meet individual customer needs
- require high level of customer communication
→ focus is on delivering a process rather than a tangible product associated with a process
Example: Surgery
What are Service Shops processes?
- operate with medium amount of variety and volume
- certain amount of customization but not as much as in professional services
- mix of staff and equipment used to deliver service
→ emphasis both on service delivery process and tangible items thar are associated with the service
Example: Luxury supermarket
What are Mass services?
- operate with low variety and high volume
- little customaization to individual customer needs and limited contact between customer and people providing the service
→ cause of standardisation of service, equipment will be used to improved efficiency of service delivery process - → emphasis on mass serivce on tangivle item that is associated with product
- Example: Airport
What is the Service Process Types classification from Lovelock (1992)
→ degree of labour intensity against the degree of interaction and customization
-labour intensity ratio of labour cost incurred in relation to the value of plant and equipment used to deliver the service
-
why is inventory necessary?
- necessary for customer service
- can be a major cost to the organization (30 % of current and about 90% of working capital in inventory)
where is inventory present ?
→ inventory present in all service an manufacturing processes
- in manufacturing inventory consists od the components tha tgo to make up the product being manufactured
- in services, inventory amy be used as part of the service delivery system
how can Inventroy be classified?
- by location
- by type
- ABC Classification system
managing inventory by location
- raw materials (goods received from supplier)
- work in progress(within operations progress)
- finished goods(ready to be dispatched to the customer )
managing inventory by type
- Buffer / safety(uncertainities from supplier)
- cycle (multiple products from one operations)
- De-Coupling(perfomance independent)
- anticipation(anticipate an increase in demand )
- pipline/ movement (compansate for lack of stock)
what is the ABC classification
= sorts inventory items into groups depending on the amount of annual expenditure
- A items : (10-20 % accounting 60-80% of expenditure → close controlled to reduce cost)
- B items: (20-30% accountant for a similar percantage of total expenditure)
- C items:(50-70% accounting less than 25% of expanditure → less control )
what are the inventroy models ? in genaral and 2 kind of
= used to assess when inventroy requires ordering ad what quantity should be orderes at that point in time
- fixed order quantity inventory system(response to an event)
- fixed order period inventory system (fixed point of time)
- or outsourced
