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Manufacturing Strategy & Operations
Saad Ahmed JavedNational College of Business Administration & Economics
Chapter 3 (Part-I)
Operations Strategy and Competitiveness• Operations Strategy
• Competitive Dimensions
• Order Qualifiers and Winners
• A Framework for Manufacturing Strategy
• Distinctive Competencies and Capabilities
• Productivity Measures
Operations StrategyExampleStrategy Process
Customer Needs
Corporate Strategy
Operations Strategy
Decisions on Processes and Infrastructure
Competitive Dimensions• Cost - • Product Quality and Reliability - • Delivery Speed - • Flexibility & Innovation -• New Product Introduction Speed - • Other Product-Specific Criteria - Technical
support, after-sales support
Dealing with Trade-offs
Cost
Quality
DeliveryFlexibility
For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.
For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.
Firms must decide how they are going to compete on these dimensions.Who determines the winning combination?
Current thinking -
Order Qualifiers and Winners - Terry Hill•Order qualifiers–
•Order winners–
•Order losers–
Service Breakthroughs• A brand name car
can be an “order qualifier”
· Repair services can be “order winners”
Examples: Warranty, Roadside Assistance, Leases, etc.
Kaplan and Norton’s Strategy Map
Strategy Map
Financial Perspective
Customer Perspective
Internal Perspective
Learning and Growth Perspective
What it is about!
Kaplan and Norton’s Generic Strategy MapUnder the Financial Perspective, there are two generic strategies for driving financial performance
· Revenue Growth Strategy is made up of two
components
– Build the franchise:
– Increase customer value:
· Productivity Strategy is made up of two components
– Improve cost structure:
– Increase asset utilization:
Kaplan and Norton’s Strategy Map (Cont.)Under the Customer Perspective, there are three ways suggested as means of differentiating a company from others in a marketplace:
1. Product leadership -
2. Customer intimacy -
3. Operational excellence -
Kaplan and Norton’s Strategy Map (Cont.)The Internal Perspective defines the business processes that the organization will use to support the customer value proposition. Operations management supports these propositions through:
1. Innovation processes -
2. Customer management processes -
3. Operational processes -
4. Regulatory and environmental processes -
Kaplan and Norton’s Strategy Map (Cont.)
In the Learning and Growth Perspective, there are three principle categories of intangible assets needed for learning:
1. Strategic competencies -
2. Strategic technologies -
3. Climate for action -
Operations Strategy Framework
Steps in Developing a Manufacturing Strategy
1. Segment the market according to the product group.
2. Identify product requirements, demand patterns, and profit margins of each group.
3. Determine order qualifiers and winners for each group.
4. Convert order winners into specific performance requirements.
Distinctive CompetenciesDistinctive Competencies• Organizational strengths (SWOT) possessed by
few competing firms– e.g., ability to engineer small-sized products
• Exploiting can lead to competitive advantage– Condition that increases chances of achieving
strategy– e.g., miniaturization of products to meet customer
demands and lower shipping costs• Sometimes referred to as core competencies
Strategy Capacity Capabilities• Process-based
–
• Systems-based –
• Organization-based–
Total Measure Productivity
• Total measure Productivity = Outputs Inputs
Partial Measure Productivity
• Partial measures of productivity =
Labor
OutputCapital
Output
Materials
OutputEnergy
Outputor or or etc.or
Multifactor Measure Productivity
• Multifactor measures of productivity =
EnergyCapitalLabor
Output
MaterialsCapitalLabor
Output
or
or etc.
Example of Productivity Measurement• You have just determined that your service employees
have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms.
• Which productivity measure should be used?• Answer:
• Is productivity increasing or decreasing?• Answer:
Another ExampleA factory manufactures three industrial components, H, C, and S. The factory counts C as equivalent to 1.2 H and S as equivalent to 0.8 H. Five employees work 40 hours/week at the factory. If the factory sold 500 C, 700 H, and 1000 S in one week, what is its productivity?
Answer: