Operations Strategy. There’s nothing here to take by storm; to strategy we must conform. Johann Wolfgang von Goethe (Faust,1808). Competitive Strategy. Principle 1 (Value Maximization) The goal of strategy is to maximize the long run NPV of the organization.
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There’s nothing here to take by storm; to strategy we must conform.
Johann Wolfgang von Goethe (Faust,1808)
1. How many resources should we invest in? The capacity, in aggregate and per main resources.
2. When should we increase/reduce resources over time? The availability of capacity and the timing of capacity
3. What kinds of resources? HR or CR? The trade-off between capital and human (unsupervised operations). What degree of flexibility? from single-task (hard- targeted towards producing a specific product) to multi-task (flexible- to produce a continuum of products)?
4. Where should the plants be located and what is their roles in the supply chain – each location is responsible for what parts or products. What is the topology connecting these nodes of supply chain? - FedEx: hub-and-spoke, Car companies: tiered or tree. What are the modes of transportation in the network? T? R? A? W? Are the processes standardized or localized; e.g., should Mercedes Benz processes in be similar to the German processes?
1. Sourcing decisions: make or outsource?, supply network (how many suppliers and how to manage them?), vertical integration.
2. Which technologies ? Four types of technology:
3. How do we match demand and supply? Demand planning and forecasting, tactical capacity allocation and revenue management; airlines and hotels.
4. How and when do we improve and innovate in products and processes? R&D, continuous improvement, learning and knowledge management.
The competency view characterizes the abilities of the organization's resources, processes, and values. Competencies determine the set of outputs that the operation will be particularly good at providing.
1.Cost, including input costs and resource costs. Is important in low margin markets.
2. Flow time. Responsiveness (short flow time) is important due to changes in customer preferences and technologies. Both Flow time and reliability in flow time (standard deviation).
3. Quality. Quality refers to the degree of excellence of the product and process. It has product dimensions such as performance and features and process dimensions such as durability and reliability (retaining high quality over time). Is a key differentiator in luxury and high precision businesses.
4. Flexibility. Ability to change type and volume of the operations.
1. Organization Customer value proposition for each market segment?
2. Operations Prioritize competencies for each market segment?
3. Which resources and processes best provide that competency prioritization? For each targeted customer segment, how the resources (sizing, timing, type, and location) and processes (supply, technology, demand, and innovation management) are configured?
How much capacity to
When increase or reduce resources?
What kinds of resources are best?
Where should resources be located?
When outsource & how manage suppliers?
Coordination, product, process transportation
How match demand to available supply
How and when to improve and innovate?
Cost Efficiency (1/cost)
Competitive Product Space: A representation of the firm’s product portfolio in the four dimensional space: Q, C, Var., Res.
Another firm: expensive and customized products.
One firm: low cost and standardized products
Defines those positions that the firm wants to occupy in its competitive product space. The current position, direction, and goal position.
Corolla: flow shop, decentralized assembly plants close to market, short flow time, low cost
Ferrari: job shop, only a single plant in Italy, longer flow time, high cost
Firms located on the same ray share strategic priorities.
World class firms are on the efficient frontier.
the minimal curve containing all current positions in an industry
Inventory at retail stores
Wal-Mart: twice a week
Industry: once every two weeks.