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Chapter 2
Operations
Strategy
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Strategic Planning
Mission and
Vision
Corporate
Strategy
Voice of the
Business
Voice of the
Customer
Marketing
Strategy
Operations
Strategy
Financial
Strategy
Figure 2.5
To Accompany Russell and Taylor, Operations Management, 4th Edition, 2003 Prentice-Hall, Inc. All rights reserved.
Operations Role in
Corporate Strategy
Provide support for overall
strategy of a firm
Serve as firms distinctive
competence
Must be consistent
Must be consistent with overall
strategy
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Strategy Formulation
1. Define a primary task
2. Assess core
competencies
3. Determine order
winners & order qualifiers
4. Positioning the firm
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Competing on Cost
Eliminate all waste
Invest in
Updated facilities & equipment
Streamlining operations
Training & development
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Competing on Quality
Please the customer
Understand customer
attitudes toward and
expectations of
quality
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Competing on
Flexibility
Produce wide variety
of products
Introduce new
products
Modify existing
products quickly
Respond to customer
needs
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Competing on Speed
Fast moves
Fast adaptations
Tight linkages
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Strategic Decisions in
Operations
Products
Processes and
Technology
Capacity
Human
Resources Quality
Facilities
Sourcing
Services
Operating
Systems
Figure 2.2
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Operations
Strategy at
Wal-Mart

Provide value for our customers


Low prices, everyday


Low inventory levels

Linked communications
between stores

Short flow times

Fast transportation
system

Cross-docking

Focused
locations
satellites

Wal-Mart
Mission
Competitive
Priority
Operations
Strategy
Operations
Structure
Enabling Process
and Technologies
Figure 2.1
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Products & Services
Make-to-order
Made to customer specifications
after order received
Make-to-stock
Made in anticipation of demand
Assemble-to-order
Add options according to
customer specification
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Processes & Technology
Project
One-time production of product to
customer order
Batch production
Process many jobs at same time in batch
Mass production
Produce large volumes of standard
product for mass market
Continuous production
Very high volume commodity product
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Product-Process Matrix
V
o
l
u
m
e

Low
Low High
High
Projects
Batch
Production
Mass
Production
Continuous
Production
Standardization
Figure 2.3
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Service-Process Matrix
L
a
b
o
r

I
n
t
e
n
s
i
t
y

High
High Low
Low
Professional
Service
Service
Shop
Mass
Service
Service
Factory
Customization

Figure 2.4
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Capacity & Facilities
How much capacity to provide
Size of capacity changes
Handling excess demand
Hiring/firing
workers
Need for new
facilities
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Capacity Expansion Strategies
(a) Capacity lead strategy (b) Capacity lag strategy
(c) Average capacity strategy (d) Incremental vs. one-step expansion
Units
Capacity
Time
Demand
Units
Capacity
Time
Demand
Units
Capacity
Time
Demand
Units
Incremental
expansion
Time
Demand
One-step expansion
Figure 9.1
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Facilities
Best size for facility?
Large or small facilities
Facility focus
Facility location
Global facility
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Human Resources
Skill levels required
Degree of autonomy
Policies
Profit sharing
Individual or team
work
Supervision methods
Levels of
management
Training
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Quality
Target level
Measurement
Employee involvement
Training
Systems needed to ensure quality
Maintaining quality awareness
Evaluating quality efforts
Determining customer perceptions
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Sourcing
Degree of vertical
integration
Supplier selection
Supplier
relationship
Supplier quality
Supplier
cooperation