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-Operations Strategy-ERP ± The Power of Information
COB 300C
Dr. Mike BusingFall 2002
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COB 300C
Operations Strategy
Dr. BusingFall 2002
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StrategyDefinition: the science or art of militarycommand as applied to the overall planningand conduct of large-scale combatoperations. ( Th e American H eritage
D ictionary)
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El ements of Strategy from a
Bu siness U nit P erspective
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C orporate M issionis a set of long-range goals unique to eachorganization.I ncludes statements about: ± kind of business the company wants to be in ± who its customers are ± its beliefs about business ± its goals of survival, growth, and profitability
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Bu siness Strategylong-range game plan for the theorganization.
provides road-map of how to achieve thecorporate mission given: ± global business conditions ± distinctive competencies/weaknesses (anything
that helps the firm to capture market share)
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C om petitive P rioritiesL ow production costsH
igh qual ity products and services
Fast/on-time de l iveryCustomer service and f l exibi l ity
Speed
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O perations Strategylong-range game plan for the production of a company¶s products and services. I t
provides a road map for what operationsmust do if business strategies are to beachieved.
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El ements of O perations Strategy I. P ositioning t h e O perations System
T ype of product design ± custom products ± standardized products
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El ements of O perations Strategy I. P ositioning t
he O perations System
T ype of product design ± custom products ± standardized productsT ype of production processing system ± product focused or line flow (good for low
variety high volume) ± process focused (good for high variety
(custom), low volume)
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El ements of O perations Strategy I. P ositioning t h e O perations System
T ype of finished-goods inventory policy ± produce to stock (aka: make to stock) ± produce to order (aka: make to order)
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El ements of O perations Strategy I. P ositioning t h e O perations System
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El ements of O perations Strategy II. F ocu s of P rod uction
Without economies of scale, it may be beneficial to focus on a narrow product mixfor a particular niche. Otherwise thefactory/service facility may becomevulnerable to smaller and more specialized
competitors who can provide better cost,delivery, quality, and/or service.
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El ements of O perations Strategy III. P rod uct/Service P
l ans
I ntroduction: production and marketingdeveloping and profit is negative.Growth: sales grow dramatically,marketing efforts intensify, productionconcentrates on expanding capacity fastenough to keep up with demand and profits
begin.
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El ements of O perations Strategy III. P rod uct/Service P
l ans
Ma turity: production concentrates on highvolume, efficiency, and low costs;marketing uses competitive sales promotionaimed at increasing or maintaining marketshare. Profits at peak
Decline: product may be dropped by thefirm or replaced by improved products dueto declining profits and sales.
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El ements of O perations Strategy IV. P rod uction P rocess and
T ec
hno
l ogy P
l ans
Matching high volume/low variety productline with product focused productiontechnologyMatching low volume/high variety productline with process focused productiontechnologyI ntermediate case??
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El ements of O perations StrategyV. A
ll ocation of Reso urces to Strategic A
l ternatives
R esources are scarce ± e.g., product mix problem and other
optimization problems
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El ements of O perations StrategyVI. F aci
l ity P
l ans
Capacity, location, and layout decisions ± T he internal arrangement of workers,
production processes, and departments withinthe facilities can affect the ability to providedesired volume, quality, and cost of products.
± Walker manufacturing example.
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P ositioning Strategies for
ServicesT ype of Service Design: (i.e., standard or custom product, amount of customer contact, mix of physical goods andintangible services)T ype of Production Process: (i.e., quasimanufacturing, customer as participant,customer as product)
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C o m
e t i t i v e ¡ r i o r i t y
L o ¢ p r o d u c t i o n c o s t s
£
e l i v e r y p e r ¤ o r m a n c e
H i g h - q u a l i t y p r o d u c t s / s e r v i c e s
¥ u s t o m e r s e r v i c ea n d ¤ l e x i b i l i t y
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E RP
E nterpriseR
esourcePlanning
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E RP ± K ey P oint
Common Database
benefits?
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E RP B enefits
I ntegration of Financial Data
Standardization of Manufacturing ProcessStandardization of HR I nformation
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Issues to C onsider ER P package will most likely not match current
business process.Cost is significant (average T CO = $15MM).I mplementation T ime can be long (1-3 years istypical).
No payback is typical until 8 months after installation is complete.A verage payback is $1.6MM/yr.
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P robl em s and Budget Overr uns
T raining (including business process)I ntegration/ T esting (add-on packages)Data ConversionData A nalysis (data warehousing)Consultants (staff training)R
eplacing your best and brightestI mplementation teams never stopWaiting for R OI
Post ER P Depression (productivity drop)
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