D08540000120114003Session 3_Inventory Control Systems

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Session 02The Role of Operations Management 2

D 0 8 5 4Supply Chain : Manufacturing and Warehousing


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Bina Nusantara University

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The Role of

Operations Managementand its connection to

Corporate strategy


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Classical View of Operations StrategyThe traditional view treats most strategic issues in the

context of a single plant rather than the entire firm.

The broad issues in A Framework for Operations Strategy

relate to operations strategy on the firm level.

The classical view of Operations Strategy relates to the

following issues :

Time Horizon

Focus

Evaluation

Consistency


4Source : Production and Operations Analysis 4th

Edition, Steven NahmiasMcGraw Hill International Edition


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Time Horizon Time Horizon refers to the length of time required for the

strategy to have an effect.Time horizons affect the impact of decisions, the uncertainties surrounding

those decisions, and the penalty for wrong decisions.

A natural classification here is to separate strategydecisions into

o Short-term operations decisions,

may have an impact that can be measured in days or even hours.

o Medium-term operations decisions,may have an impact that can be measured in weeks and months.

o Long-range operations decisions

may have an impact that can be measured in years.





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Example of Strategy Decisions :

o Short-term operations decisions,

Purchasing, Production and personal scheduling, policies for control of quality

and maintenance functions, short-term in inventory control issues, production

schedules and so forth.

It is the type that concern the operations manager.

o Medium-term operations decisions,

Demand and requirements forecasting, employment-planning decisions ,

distribution of goods in existing distribution channels, and setting of company

targets for inventory and service levels.

o

Long-range operations decisionsStrategy is generally associated with long-term decisions.

Choosing the timing, location and scale of construction of new manufacturing

facilities are typical long-term manufacturing and operations strategy decision.





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Focus Focus and its notion of focus in manufacturing strategy

was first considered by Skinner ( 1974 ).

He defined the five key characteristics of the focused

factory :

1. Process Technologies

2. Market Demands

including Price, Lead Time, Reliability.3. Product volumes

4. Quality Level

5. Manufacturing TasksBina Nusantara University




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Evaluation Evaluation refers to several dimensions along which one

can evaluate production/operations strategy.

The most significant dimensions are :1. Cost

2. Quality

3. Profitability

4. Customer Satisfaction





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Consistency Consistencyis needed in strategy for manufacturing.

It is often mentioned that rather than having a single

consistent strategy for manufacturing, the strategy is

simply the composite of all company policies that affect

manufacturing.

Skinner (1974 ) cites a number of causes for the

common inconsistencies that are observed in most firms:

1. Professionalism in the plant

2. Product Proliferation

3. Changes in the manufacturing task

4. The manufacturing task was never made explicit.Bina Nusantara University




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Competing in a Global Marketplace International competitiveness has become a nationalobsession. Each country is trying to enhance their

standard of living is eroding while it seems to improve

elsewhere.

In his excellence study of international competitiveness,Porter ( 1990) poses the following questions :

Why does one country become the home base for

successful international competitors in an industry ?





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Competing in a Global Marketplace (2)

Porter ( 1990 ) argues that the appropriate measure to

compare national performance is the rate of productivity

growth. Productivity is the value of output per unit of

input of labor or capital. Porter argues that productivity

growth in some industries appears to be stronger incertain countries, and that there are reason for this.

The factor theory says all countries have access to the

same technology ( an assumption tat is not strictly true )and that national advantages accrue from endowments

of production factors such as

Land, labor, natural resources and capital.Bina Nusantara University




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Competing in a Global Marketplace (3)

There are both compelling and counterexamples to the

factor endowment theory as well. Also, many countries

have similar factor endowments, but some seem to

excel in certain industries, nonetheless.

Porter ( 1990 ) suggests the following four determinants

of national advantages :

1. Factor conditions

2. Demand conditions

3. Related and supporting industries

4. Firm Strategy, structure and rivalry.




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D08540000120114003Session 3_Inventory Control Systems