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Strategic Reconciliation. Market Requirements. OPERATIONS STRATEGY. Operations Resources. Align resources with requirements. Level 1 - Fit. Develop sustainable competitive advantage. Level 2 - Sustainability . Include impact of uncertainty. Level 3 - Risk. Operations strategy content.

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slide1

Strategic Reconciliation

Market Requirements

OPERATIONS STRATEGY

Operations Resources

Align resources with requirements

Level 1 - Fit

Develop sustainable competitive advantage

Level 2 - Sustainability

Include impact of uncertainty

Level 3 - Risk

Operations strategy content

Operations strategy process

Resource Usage

Market competitiveness

Performance objectives

Decision areas

Topics in operations strategy treated in this chapter

slide2

Hospital

Milestone

Software producer

Awareness of need

Request for information

Receipt of information

Request for product/service

Start of core processing

End of core processing

‘Installed’ product/service fully operational

Presentation of symptoms

Customer decides new software is needed

Enquiry decision time

Visit to doctor for advice and tests

Asks for specification and estimates

Enquiry time

Test information confirms diagnosis

Receives proposal

Customer decision time

Decide on surgery

Places order

Waiting time

Start of design and coding

Enter hospital for surgery

Core processing time

Procedure successfully completed

Software ‘completed’

Installation time

Software fully debugged and working

Patient fully recovered

Significant ‘milestone’ times for the delivery of two products/services

slide3

Economy class

First/Business class

Economy cabin

Services

First/Business-class cabin, airport lounges, pick-up service

Customers

Travellers (friends and family), vacation takers, cost-sensitive business travel

Wealthy people, business people, VIPs

Service range

Wide range, may need to be customised

Standardized cabin

Rate of service innovation

Relatively low

Relatively high

Relatively low volume

Relatively high volume

Volume of activity

Low to medium

Profit margins

Medium to high

Customization, extra service, comfort features, convenience

Main competitive factors

Price, acceptable service

Performance objectives

Quality (specification and conformance), Flexibility, Speed

Cost, Quality (conformance)

Different product groups require different performance objectives

slide4

Quality

Being RIGHT

Being FAST

Speed

Market Competitiveness

Dependability

Being ON TIME

Being ABLE TO CHANGE

Flexibility

Cost

Being PRODUCTIVE

The operations function can provide a competitive advantage through its performance at the five competitive objectives

slide5

Positive

Order-winners

Less important

Competitive benefit

Neutral

Qualifiers

Negative

Low

High

Achieved performance

Order-winners and qualifiers

slide6

Customer Needs

Importance to customers

Priority of performance objectives

Performance against competitors

Competitors’ Actions

The priority of performance objectives is influenced by what is regarded as important by customers and how the operation performs against competitors

slide7

Output

Output

Profit

Output

Profit

Profit

Cost

Total assets

Total assets

Capacity

Total assets

Output

Output

Output

Revenue

Output

Fixed assets

Capacity

Total assets

Fixed assets

x

=

x

=

Average revenue

Average cost

x

x

=

Productivity of fixed assets

Utilization

Working capital

Capacity

Development and organization

Supply network

Process technology

Operations strategy decision areas

Decomposing the ratio profit/total assets

slide8

Resource Deployment

Capacity Structure

Supply Network

Process Technology

Development and Organization

ISSUES-

ISSUES -

  • New product/service development
  • Organization structure
  • Performance measurement
  • Improvement strategy
  • Do it yourself or buy-in?
  • Customer and supplier relationships
  • Supply chain dynamics and integration

ISSUES -

  • Development rate
  • Automation
  • Size
  • Integration
  • In our out-house development

ISSUES -

  • Capacity
  • Location
  • Focus & segmentation
  • L/T forecasts

Operations Decisions are shaped by

COMPETENCIES and CONSTRAINTS

The Elements of an International Operations Strategy

slide9

Resource Usage

  • Issues include:
  • Total capacity
  • Number, size of sites
  • Allocation of tasks to sites
  • Location
  • Issues include:
  • Vertical integration
  • Network behaviour
  • Supplier relationships
  • Supplier development
  • Issues include:
  • Rate of development
  • Automation
  • Integration
  • Implementation
  • Subcontracted development
  • Issues include:
  • Responsibility relationships
  • Performance and control
  • Process development
  • Product and service development

Process Technology

Development and Organization

Capacity

Supply Network

The four categories of operations strategy decision areas

slide10

Process Technology

Development and Organization

Capacity

Supply Network

Structural issues

Infrastructural issues

Operations strategy decision areas are partly structural and partly infrastructural

slide11

Resource Usage

Quality

Speed

Competitive Objectives are prioritized by

CUSTOMERS and COMPETITORS

Market Competitiveness

Dependability

Flexibility

Cost

Development and Organization

Process Technology

Supply Network

Capacity

Operations Decisions shape

COMPETENCIES and CONSTRAINTS

Operations strategy is defined by the intersections of performance objectives and Operations decisions

slide12

Resource Usage

Quality

Speed

Operations strategy

Market Competitiveness

Dependability

Performance objectives

Flexibility

Cost

Development and Organization

Process Technology

Supply Network

Capacity

Decision areas

The operations strategy matrix

slide13

7-Eleven Japan

Largest retailer in Japan

Sells 1.5X as much per store as nearest rival

History of cautious expansion and technical and service innovation

“Field Counsellors” spread operations knowledge (also do distance training)

Expansion by territory to reduce disn costs

Early use of TIS (total information system)

TIS controls stock replenishment twice a day delivery (sales analysed twice a day)

New system not internet-based

New services include,

Banking terminals

Downloading games

Downloading music to MD

Internet ordering and collection

slide14

Information sharing and parenting system spreads service ideas

Distribution center grouping by temperature



Distribution centers and inventory management systems give fast stock replenishment 

TIS gives comprehensive and sophisticated analysis of sales & supply patterns daily



TIS allows trends to be forecast and supply adjustments made

Area dominance reduces distribution and advertising costs

Common distribution centers give small frequent deliveries from fewer sources



Field counselors with sales data help stores to minimize waste and increase sales



  • Number and type of distribution centers
  • Order and stock replenishment
  • Franchisee relationships
  • New product/service development
  • Approach to operations improvement
  • The Total Information System (TIS)
  • Location of stores
  • Size of stores

DEVELOPMENT AND ORGANIZATION

PROCESS TECHNOLOGY

SUPPLY NETWORKS

CAPACITY

Resource Deployment

QUALITY of products and services

Speed and dependability combined to indicate AVAILABILITY

Market Competitiveness

FLEXIBILITY of response to sales and customer trends

  • COST in terms of minimizing…
  • operating cost
  • capital cost
  • working capital

7-11 JAPAN

pivotal

 critical

 secondary

slide15

Align resources with requirements

Level 1 - Fit

Develop sustainable competitive advantage

Increasing complexity

Level 2 - Sustainability

Include impact of uncertainty

Level 3 - Risk

The practice of operations strategy involves considering fit, sustainability and risk

slide16

Market requirements

Line of fit

Alignment between market and operations capability

X

Y

Level of operations resource capability

In operations strategy ‘fit’ is the alignment between market and operations capability

slide17

Market requirements

Extension of market requirements

Sustainable improvement

Improvements in operations capabilities

Level of operations resource capability

Sustainable improvement implies simultaneous extension/improvement of market requirements and operations capabilities

slide18

Virgin Trains

Market requirements

Line of fit

Nissan

Level of operations resource capability

Virgin Trains and Nissan positioned in relation to market requirements and operations capabilities

slide19

Quality (specification)

Quality (conformance)

Cost

X

X

X

Delivery flexibility

X

X

Speed

X

X

X

Volume flexibility

Dependability

Customization

Current products

New products

Dresding Medical - Polar diagram illustrating the relative importance of the performance objectives for the current and new products

slide20

Resource Usage

*

*

*

*

Quality (spec)

*

*

*

*

*

*

Quality (conform)

*

*

*

*

*

Speed

*

*

Dependability

*

*

*

Performance objectives

Market Competitiveness

*

*

Delivery flex

*

Volume flex

*

*

*

*

*

*

Customization

*

*

*

*

*

Cost

*

Capacity

Supply Network

Process Technology

Development and Organization

*

*

*

very important

R&D, Mfg. and Sales all share common knowledge base. Incremental new product development

Lab style manufacture easy to change capacity incrementally

50% of activities in-house

Low process technology (but high product technology)

*

*

medium importance

*

some importance

Decision areas

Dresding Medical - Current product range

Slide 2.17

slide21

Resource Usage

*

*

*

*

Quality (spec)

*

*

*

*

*

*

*

*

Quality (conform)

*

*

*

*

*

*

Speed

*

*

*

*

Dependability

*

*

Performance objectives

Market Competitiveness

*

Delivery flex

*

*

*

*

*

Volume flex

*

*

Customization

*

*

*

*

*

Cost

*

*

*

*

Capacity

Supply Network

Process Technology

Development and Organization

*

*

*

very important

R&D, Mfg. and Sales less interdependent. Faster time-to-market needed

May need to adjust quickly depending on demand

New supplies will be needed / developed

Needs investment in volume processes

*

*

medium importance

*

some importance

Decision areas

Dresding Medical - New product range

Slide 2.18

slide22

Critical

Critical

Critical

Critical

Coherence

Correspondence

Critical

Comprehensive?

‘Fit’ is concerned with ensuring comprehensiveness, correspondence, coherence and criticality

Resource Usage

Quality

Speed

Market Competitiveness

Dependability

Performance objectives

Flexibility

Cost

Development and Organization

Process Technology

Supply Network

Capacity

Decision areas