D.

Anthony Chevers
SBCO 6240 - Production and Operations Management
 Lecture #1b –
Operations Strategy
• Strategic Planning
• Strategy Formulation
• Positioning of the Firm
• Strategic Moves
• Strategic Group Map
• Performance Dimensions (Measures)
• Exercises
Macro-environmental & Industry
Forces – M. Porter
Three (3) Levels of Analysis

Macro-environmental Forces

Political-legal Economic

forces Indusry Forces forces

New entrants Buyers

FIRM

Suppliers Substitutes

Rivalry among firms

Social Technological

forces forces
Strategic Planning
Mission &
Vision

Voice of the Business Voice of the

Business Strategy Customer

Marketing Operations Financial

Strategy Strategy Strategy
 Operations Strategy

Customer Needs Corporate Strategy

Alignment

Operations Strategy Core

Competencies

Decisions

Processes, Infrastructure, and Capabilities

 A Framework
 MISSION
OBJECTIVES
 Cost: Minimization, as competitive weapon, eliminate
waste
 Quality: Seeks to amaze customers, profitability &quality
 Delivery: Speed, Reliability … fast response time
 Flexibility: Volume, New product, Variety is a password,
Innovation is the norm, Customization is key
MANAGEMENT LEVERS – Controllable elements
 Facilities, Capacity, Vertical Integration,
 Quality Management, Supply Chain Relationships,
 New products, Process and Technology,
 Human Resources, Operating Systems - Inventory
Management, Product planning and control
Operations Strategy at Wal-Mart
 Strategy Formulation
1. Define primary task/mission…The purpose of
the firm.
2. Assess core competency…distinctive (core)
competencies
3. Determine order qualifiers & order winners
 Qualifiers: Characteristics that potential customers
perceive as minimum standards of acceptability for purchase.
 Winners: Characteristics of product/service that win orders
in the market place (perceived as better than the competition).
1. Position the firm
World-class manufactures no longer view cost,
quality, speed of delivery, and flexibility as
tradeoffs!!!!!?????
 Positioning The Firm
Positioning to compete (while meeting
objectives) can be based on the nine
competitive priorities:
 Cost: Low-cost operations
 Quality: Top quality; Consistent quality;
 Time: Delivery speed; On-time delivery;
Development speed
 Flexibility: Customization; Variety &
Volume flexibility
 Configuration of Process
[Production & Inventory Strategy]
● Make-to-stock
A strategy that involves holding items in stock for immediate delivery,
thereby minimizing customer delivery times (Ritzman et al., 2007)
Process activated to meet expected or forecast demand
Customer orders are served from target stocking level
Mass production – A line process that uses the make-to-stock
strategy
● Make-to-order
A strategy used by manufacturers that make products to customer
specifications in low volumes (Ritzman et al., 2007)
Only activated in response to an actual order
Both work-in-process and finished goods inventory kept to a
minimum
 Assemble-to-order
add options according to customer specification
 Strategic Moves
Locking suppliers R educing cost C reating barriers
or buyers to entrants

Th e Firm

E stablishing E nhancing products D ifferentiating products

alliances or services and services
 Strategic Moves - Jamaica
● Acquisitions – Lotto & Supreme Ventures?
● Mergers–MMB & Sigma;IMP & IMS;Barclay &
CIBC [2 + 2 = 5]
● Alliance – Kool FM & Nationwide Network
● Vertical Integration – Grace & Red Stripe
● Diversification – Butch Stewart
● Collaborative effort – AMV Mines for Alpart &
Alcoa
● Outsourcing – UWI Canteen & Security
● Re-engineering/Re-tooling – Most firms –IBM, NCB, BNS,
+++
● Downsizing – Most firms (Air Ja. ++++)
Assignment: Give other examples of strategic moves in
Jamaica.
 Vertical Integration

The Product
 Strategic Group Map
● It is a management tool that assist operations
managers in determining the best strategic moves
to gain competitive advantage
● It outlines the strategic moves firms should
employ to be the dominate player in the industry
● It guides operations managers in determining
which firms to attack, merge and acquire in the
industry
 Performance Dimensions
Key Performance Indicators (KPIs)
● Quality
Performance; Conformance; Reliability
● Time
Speed and Reliability
● Flexibility
Mix – Ability to produce a wide range of
products/services
Changeover – Ability to provide a new
product with minimal delay
Volume – Ability to produce whatever
volume customer needs
● Cost
Labor; Materials; Engineering; Quality-
related
 Exercise
● When a customer calls Dell Computers to order a PC, Dell builds a
PC based on the customer’s unique requirements and ship it directly
to the customer – all in a matter of hours. What do you think Dell
Computers’ supply chain looks like? How important are Dell’s
suppliers and transportation partners to the success of the supply
chain? Can you think of any local examples?
● One of your friends states that “operations management and supply
chain management are primarily of interest to manufacturing firms.” Is
this true or false? Give some examples to support your answer.
● We have talked about how operations and supply chain strategies
should be based on the business strategy. But can strategy flow the
other way? That is, can operations and supply chain capabilities drive
the business strategy? Can you think of any examples in our local
industry?
● Is it enough to just write down the business strategy of a firm? Why or
why not? Conversely, what are the limitations of not writing down the
strategy, but rather depending on the firm’s actions to define the
strategy.
 Discussion Questions
● The onset of exponential growth in the development of information
technologies has encouraged the birth of many “dot-com” companies. The
Internet has enabled these companies to reach customers in very effective
ways. Consider Amazon.com, whose Web site enjoys millions of “hits” each
day and puts customers in touch with more than 18 million services and
products. What are Amazon.com’s competitive priorities and what should its
operations strategy focus on?
● A local hospital declares that it is committed to provide care to patients
arriving at the emergency unit in less than 15 minutes and that it will never
turn away patients who need to be hospitalized for further medical care. What
implications does this commitment have for strategic operations management
decisions (e.g. decisions relating to capacity and workforce)?
● FedEx has built its business on quick, dependable delivery of items being
shipped by air from one business to another. Its early advantages included
global tracking of shipments using Web technology. The advancement of
Internet technology has enabled competitors to become much more
sophisticated in order tracking. In addition, the advent of dot.com business has
put pressure on increased ground transportation deliveries. Explain how this
change in the environment could affect FedEx’s operations strategy,
especially relative to UPS, which has a strong hold on the business-to-
consumer ground delivery business.
● Outline two (2) local strategic moves and explain the rationale for such moves
and the benefits gained
Operations Strategy
 NEXT LECTURE:
Quality Management & Control

D. Anthony Chevers
delroy.chevers@uwimona.edu.jm
DOMS, Room #28

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