Operations Management

Operations Strategy for Competitive Advantage in a Global Environment

Reasons to Globalize

 Reduce costs (labor, taxes, tariffs)  Improve supply chain  Provide better goods and services  HLL’s Wheel in response to Nirma  Understand markets  Learn to improve operations  Attract and retain global talent

Vision and Mission



Vision – The ultimate result of action

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What an org. would like to happen as a result of the action that it does.



Mission – What an org. does, its action.

 Provides boundaries & focus  More functional in nature dealing with pricing, quality, market place and other items of the value chain

Vision and Mission of a hospital

 To make the denizens of kathmandu healthier  To provide a healing environment with family-cantered care with compassion, comfort and respect with best possible medical facilities available.

Mission/Strategy

 Strategy how you are going to get there; the action plan to achieve the mission  The answer to the third intrinsic question:  Where are we?

 Where do we want to be?

 How to achieve?

Mission of OM Departments

 Product Design: To Design products with superb quality and inherent customer value.

 Quality: To be consistent with quality in every single aspect of production, right from design, procurement, production etc.

 Process Design: To determine and design production process compatible with low cost, high quality product.

Continued

 Location selection: To locate, design, efficient and economical facilities that will yield high values to the company.  Layout: To achieve production effectiveness and efficiency while supporting a high quality of work.

 Human Resources: To provide a good quality of work atmosphere, well designed, safe rewarding jobs, stable employment, equitable pay in exchange for outstanding individual contribution from employees at all levels.

Continued

 Supply Chain: To collaborate with suppliers to develop innovative products from stable, efficient and effective sources of supply.

 Inventory: To achieve low investments in inventory consistent with high facility utilizations.

 Maintenance: To achieve high utilization of facilities and equipment by effective preventive maintenance and prompt repair of facilities and equipment

Strategies & Competitive Advantage

 Ability of the firm to outperform its industry i.e. to earn a high rate of profit than the industry norm  Competitive advantage: The creation of a unique advantage over others  To achieve a competitive advantage, a firm must create more value than its competitors  Differentiation  Cost leadership  Quick response

Competing on Differentiation

 Create

unique

bundles of products/services that will be highly valued by customers  Differentiation should be thought of going beyond the physical characteristics and service attributes to encompass everything about the product or service that will influence the potential customer.

 Experience Differentiation: selling experience Eg.; Disney does this where people get immersed surrounded by a dynamic visual and sound experience

 Can encompass everything related to product or service that influences value  Broad Product Line  Product features  Product Services  Status Symbol  Technical Innovation

Competing on Cost

 Maximize value as defined by customers  Does not mean low quality  Establishing a low cost position relative to competitors through  Optimum utilization of resources  Economies of scale  Coverage of variable costs and a lesser proportion of fixed costs (Dumping by the Chinese)

Competing on Response

 Including the values related to timely product development and delivery, as well as reliable scheduling and flexible performance.

 Flexibility – ability to match changes in marketplace. Volumes and Designs changes  Reliability – scheduling. Communicated to the customer so that he/she can rely on.  Timeliness – design, production, delivery

OM’s Contribution to Strategy

Operations Decisions Quality Examples Specific Strategy Used Product Process Sony’s constant innovation of new products HP’s ability to follow the laptop market Southwest Airlines No-frills service FLEXIBILITY

Design Volume

LOW COST

Location Layout Pizza Hut’s five-minute guarantee at lunchtime Federal Express’s “absolutely, positively on time” DELIVERY

Speed Dependability

Human Resource Supply Chain Motorola’s automotive products ignition systems Spice Nepal’s network Inventory IBM’s after-sale service on mainframe computers Scheduling Maintenance Fidelity Security’s broad line of mutual funds QUALITY

Conformance Performance

AFTER-SALE SERVICE BROAD PRODUCT LINE Competitive Advantage Differentiation (Better) Cost leadership (Cheaper) Response (Faster)