PRODUCTION AND OPERATION

MANAGEMENT

OPERATION STRATEGY

Easter A. Lumang
MBA, Student
1. Designing of the production system
2. Facilities for production and services
3. Product or service design and
development
4. Technology selection, development, and
process development
5. Allocation of resources
6. Focus on facilities planning
• The designing of the production system
involves the selection of the type of product
design, processing system, inventory plan for
finished goods, etc.

The product design has two varieties.

 Customized product design
 Standard product design
There are two types of production systems.
1. Product focused
2. Process focused.
Product-focused system is adopted where
there is mass production by using a group of
machines. For example, products like
automobiles, computers, etc.
 Certain specialization in production allows the
firm to provide the customers with products of
lower cost, faster delivery, on-time delivery, high
product quality, and flexibility.
 Generating the idea
 Creating the feasibility reports
 Designing the prototype and testing
 Preparing a production model
 Evaluating the economies of scale for production
 Testing the product in the market
 Obtaining feedback
 Creating the final design and starting the production
 A product selected for production will be analyses
for the process and the applicable technology for
optimal production. There are many challenges faced by
the operations managers in this decision as the
alternatives are many. The techno-economic analysis for
each alternative will help to decide the required
technology.
 The production units face continuous problems of
allocating the scarce resources like capital, machines,
equipment, materials, manpower, services, etc.
Allocation at the right time to the right place of
production indicates the efficiency of the production
planners. Optimal use of resources will enable
economical production. Minimizing waste, optimal
utilization of resources, and the best quality product
demand a sound operations strategy.
 The location, layout, and facilities creation for the
production are the key decision areas for the operations
manager. These are critical for achieving the competitiveness.
The decision also influences the future expansion of the
plant. While evaluating the alternatives, the operations
manager will consider the availability of raw materials, access
to market, etc. Enormous capital requirement is required and
the planning is always long range. Here, the production
process adopted and the technology pursued dictates the
volume, quality, and cost of production.
 - The Edge
Four Important Operations Questions:
Will you compete on –
Cost?
Quality?
Time?
Flexibility?
Competing on Cost?
 Offering product at a low price relative to competition
• Typically high volume products
• Often limit product range & offer little
customization
• May invest in automation to reduce unit costs
• Can use lower skill labor
• Probably use product focused layouts
• Low cost does not mean low quality
Competing on Quality?
 Quality is often subjective
 Quality is defined differently depending on who is
defining it
 Two major quality dimensions include
 High performance design:
 Superior features, high durability, & excellent customer
service
 Product & service consistency:
 Meets design specifications
 Close tolerances
 Error free delivery
Competing on Quality?
 Quality needs to address
 Product design quality – product/service meets
requirements
 Process quality – error free products
Competing on Time?
 Time/speed one of most important competition priorities
 First that can deliver often wins the race
 Time related issues involve
 Rapid delivery:
 Focused on shorter time between order placement
and delivery
 On-time delivery:
 Deliver product exactly when needed every time
Competing on Flexibility
 Company environment changes rapidly
 Company must accommodate change by being flexible
 Product flexibility:
 Easily switch production from one item to another
 Easily customize product/service to meet specific
requirements of a customer
 Volume flexibility:
 Ability to ramp production up and down to match
market demands
Technology for Competitive Advantage
 Technology has positive and negative potentials
 Positive
 Improve processes
 Maintain up-to-date standards
 Obtain competitive advantage
 Negative
 Costly
 Promotes dependency
 Risks such as overstating benefits
Technology for Competitive Advantage
 Technology should
 Support competitive priorities
 Can require change to strategic plans
 Can require change to operations strategy

 Technology is an important strategic decision.

 Low Cost Leadership
 Product Differentiation
 Segmentation or Focused Approach
 Low Cost Leadership
 A low-cost leader's basis for
competitive advantage is lower
overall costs than competitors.
Successful low-cost leaders are
exceptionally good at finding
ways to drive costs out of their
businesses.
 Product Differentiation
 Product differentiation is a
marketing process that strives to
identify and communicate the
unique benefits or qualities of a
product compared to its
competitors.
 Segmentation or Focused Approach
 Product differentiation is a
marketing process that strives to
identify and communicate the
unique benefits or qualities of a
product compared to its
competitors.
 7 Steps to Developing a Customer Service Strategy
1. Create a Customer Service Vision

The first step in creating a customer service strategy is communicating the

customer service vision to employees.
Employees need to understand what the vision and organizational goals are
for customer service and understand their responsibility to help achieve that
vision.
An organization that shares a customer service vision, and teaches customer
service skills, will provide a better customer service experience than an
organization that leaves the front-line employees untrained and unprepared for
dealing with customer issues.
 7 Steps to Developing a Customer Service Strategy
2. Assess Customer Needs
Organizations often fail, and waste valuable resources, creating products and services that
they thought the customer wanted, only to find out it was not what the customer wanted at all.
The trick is to find out what it is the customer wants and put together plans to meet those needs.
Organizations can’t meet the needs of their customers without understanding what they want.
The first step in a customer improvement initiative is to talk to the customers to find out their
perception of the services being provided and determining what their needs and expectations
are.
A customer needs assessment is done by soliciting feedback through focus
groups, satisfaction surveys, or customer comment cards, and developing a comprehensive plan
to meet and exceed the customer needs.
Keep in mind that customer needs and expectations are a moving target. What a customer
wants today will be very different from what the customer wants a year or five years down the
road. As things change, expectations and needs change also.
 7 Steps to Developing a Customer Service Strategy
3. Hire the Right Employees
Hiring with the customer in mind is another step in an overall strategy for
strong customer service.
Screen employees to ensure that they possess the disposition and skill set to
help support a strong customer service environment.
Skills can be taught but attitude and personality cannot. It’s a sad fact but not
everyone should interact with customers.
 7 Steps to Developing a Customer Service Strategy
4. Set Goals for Customer Service
Once customer needs and expectations are identified and
customer satisfaction is measured, it is time to create goals for
achieving customer satisfaction.
Employees need to understand what the target is so they can help
the organization reach their corporate objectives.
For example, if you operate a customer call center, a goal might be
to answer all calls within X number of minutes and hold employees
accountable to that standard.
If the standard can’t be met, figure out why and fix it.
 7 Steps to Developing a Customer Service Strategy
5. Train on Service Skills
If you hire right, your employees will have a natural ability to serve your
customers well.
However, everyone can benefit from practical teaching on the organization’s
approach to customer service.
The training should explain how the organization would like the employee to
behave in every situation and should help employees understand how to respond
to their customers. Employees need to know what you want them to do.
For example, teach them how to respond to customer complaints, how to be
responsive to customers, how to meet customer needs, when to perform service
recovery, how to answer the phone and your organizations standards for service.
 7 Steps to Developing a Customer Service Strategy
6. Hold People Accountable
Employees should have a good understanding of how their service
to the customer affects the organization’s overall performance and
need to be held accountable for achieving customer satisfaction goals.
This is part of a comprehensive performance management
system and should be part of the cultural norm.
For example, share customer satisfaction data with your employees
and confront employees when they are not demonstrating the
desired behaviors.
 7 Steps to Developing a Customer Service Strategy
7. Reward and Recognize Good Service
There should be a well thought out system for acknowledging and
rewarding employees for good customer service. Employees need positive
reinforcement and should be rewarded when they demonstrate the desired
behaviors of a strong customer service culture.
Having a strong vision and strategy for customer service is a critical
component to the success of any organization. Organizations need to
identify who their customers are, what they want and develop strategies to
achieve those customer requirements. A strong customer service strategy is
what separates the successful organizations from the rest.
A global strategy is one that a company takes when it wants
to compete and expand in the global market. In other words,
a strategy businesses pursue when they wish to expand
internationally. A global strategy refers to the plans an
organization has developed to target growth beyond its
borders. Specifically, it aims to increase the sales of goods or
services abroad.
‘Global strategy’ is, in fact, a shortened term that covers
three strategies: international, multinational, and global.
Companies must pursue strategies in those three areas if
they wish to expand internationally.
International
An international company is one that imports and exports.
In other words, it sells to customers abroad and has foreign
suppliers.
However, this type of company does not have any
investments, i.e., branches, offices, factories outside its
home country, says New Horizons Global Partners.
Multinational
A multinational company, unlike an international one, has
investments in other countries. It has business, staff, and
premises in more than one country.
However, it does not have coordinated product offerings.
A multinational company focuses more on adapting its
products and services to individual local markets.
Global
A global company has investments and is present in
several countries. It markets its goods or services through the
use of an identical coordinated image/brand in every market.
In most cases, there is one corporate office that is
responsible for worldwide strategy. There is also a strong
emphasis on cost management, efficiency, and volume.