INTRODUCTION TO

OPERATIONS MANAGEMENT,
COMPETITIVE STRATEGY,
COMPETITIVE ADVANTAGE,
TIME BASED COMPETITION.

AGENDA
INTRODUCTION TO OPERATIONS
MANAGEMENT.
COMPETITIVE STRATEGY
COMPETITIVE ADVANTAGE
TIME BASED COMPETITION
CASE STUDY

HISTORY
Frederick Taylor is known as the father of scientific
management. His shop system employed these steps:
Each workers skill, strength, and learning ability were
determined.
Stopwatch studies were conducted to precisely set
standard output per worker on each task.
Material specifications, work methods, and routing
sequences were used to organize the shop.
Supervisors were carefully selected and trained.
Incentive pay systems were initiated.

HISTORY
Frank B Gilbreth
Founder of Work Study
Envisioned the Motion Study
Classified motion into seventeen divisions.

Operations As A Transformation
Process
INPUT

Material
Machines
Labor
Management
Capital

Transformation
process

Feedback

Change

OUTPUT

Goods
or
Services at
Competitive
Prices and
Value

Differences between Manufacturers and

Service Operations
Services:

Manufacturers:

Intangible product
Service cannot be
inventoried
High customer contact
Short response time
Labor intensive

Tangible product
Product can be
inventoried
Low customer contact
Longer response time
Capital intensive

Operations Management Decisions

Strategic Decisions: Product/Service Design
Process Selection
Capacity Planning
Facility Location
Facility Layout

Operations Management Decisions

Tactical:
Quality Control
Production Planning
Inventory Control

Operating Decisions
These decisions are necessary if the
ongoing production of goods and services
is to satisfy market demands and provide
profits.
Examples include deciding:
how much finished-goods inventory to carry
the amount of overtime to use next week
the details for purchasing raw material next
month

Why OM?
In business today, the emphasis is not so
much on what you make, but on how you
do business. Dell makes computers just
like every other PC manufacturer. Quote:
KT CEO on CNBC 4/99

Business Information Flow

New Challenges in OM
From

To

Local or national focus

Batch shipments
Low bid purchasing

Global focus
Just-in-time
Supply chain partnering

Lengthy product
development

Rapid product
development,
And alliances

Standard products
Job specialization

Mass customization
Empowered employees,
teams

Trends in OM
Service sector growing to
80% of non-farm jobsSee Figure 1-4
Global competitiveness
Demands for higher
quality
Huge technology
changes
Time based competition
Work force diversity

OPERATIONS STRATEGY
Using Quality, Cost, and Service
as Competitive Weapons

OPERATION STRATEGY
What is Strategy?
Strategy formulation is a process by which a firm determines
how it will compete in industry.
Business strategy is a long-range game plan of an
organization and provides a road map of how to achieve the
corporate mission.
Inputs to the business strategy are
Assessment of global business conditions - social,
economic, political, technological, competitive
Distinctive competencies or weaknesses - workers, sales
force, R&D, technology, management

Developing Operations Strategy

Assessment
of Global
Business
Conditions

Corporate Mission
Business Strategy
Product/Service Plans
Competitive Priorities
Operations Strategy

Distinctive
Competencies
or
Weaknesses

Operation Strategy:
Major Components

Positioning the Productive system

Capacity decisions
Product and Process Technology
Work force and Job design
Strategic Implications of operating decisions
Suppliers and Vertical integration

POSITIONING THE PRODUCTIVE SYSTEM

Although all the elements of operation strategy
are important and all need to be woven
together, if positioning the productive system
is wrong, the operation strategy will be
ineffective.

PRODUCT PROCESS STRATEGIES

PRODUCT LIFE CYCLE
INTRODUCTION
GROWTH
MATURITY
SATURATION
DECLINE

Stages of a Products Life Cycle

Automobile
Cell Phone

Compact Disc Player

Color Laser Printer

Color Copier

Introduction

Video Recorder

Growth

Fax Machine

Maturity

B&W TV

Decline

RELATIONSHIP BETWEEN PRODUCT VOLUME

AND THE TYPE OF PRODUCTIVE SYSTEM

HIGH VOLUME

LARGE
VOLUME
(Mixed)
LOW
VOLUME
(intermittent)

PROCESS STRATEGIES

(continuous)

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JOB SHOP
INTRODUCTION

GROWTH

PRODUCT/SERVICE STRATEGIES

MATURITY

DECLINE

CAPACITY DECISIONS
Illustration:
Videotape prices in US and elsewhere began to
decline in 1982 when Fuji Photo Film, Hitachi
Maxwell, and TDK collectively increased capacity to
more than 90%.The massive capacity increase lead to
decrease in sales to relatively 40%. This resulted in
imbalance between demand and supply which created
havoc in industry. It was expected that Overcapacity
would not be absorbed for at least two years.
Thus poor capacity decisions can virtually negate
good operation strategy in other dimensions.

PRODUCT AND PROCESS

TECHNOLOGY
A company can have its production system
positioned just right in relation to market
requirements but strategy can be ineffective if
company uses obsolete technology.

WORK FORCE AND JOB DESIGN

In spite of fact that advanced process
technologies is reducing number of workers in
manufacturing process, labor will still continue
to be an important input.
Therefore work rules, job design , wage rates
and entire labor-management relationship
becomes extremely important element in
operations strategy.

STRATEGIC IMPLICATIONS OF
OPERATING DECISIONS
Not only capacity, process costs and labor
costs have strategic importance but also
quality, costs and on-time delivery can be
extremely important in basic strategy of firm.
A successful way of making strategic impact
on operating decisions is by reducing costs and
controlling quality

SUPPLIERS AND VERTICAL

INTEGRATION
Purchasing and relationships with suppliers
must be consciously formulated to be part of
operations strategy.
Suppliers performance is often important in
plant-processes in achieving objectives.

WHAT IS
COMPETITIVENESS?
How effectively an organization meets the
wants and needs of customers relative to others
that offer similar goods or services.

COST
Cost is the variable that can allow lower prices
that may be profitable.
To compete on the basis of price requires an
operations function capable of producing at low
cost.
Therefore, the effects of location, product design,
equipment use and replacement, labour
productivity, good inventory
Management, employment of process technology,
and so on all contribute to the resulting costs.

Quality
The effectiveness of this factor has been highlighted
by Japanese market dominance in consumer
electronics, steel, automobiles, machine tools,
where product quality has often been cited as a
reason for preferring the products purchased

DEPENDABILITY AS A SUPPLIER
Customers may compromise on cost or even
quality in order to obtain on-time delivery
when they need an item.

FLEXIBILITY/SERVICE
How standard is a product or service?
Can variations in the product or service be
accommodated?
The ability to be flexible will depend a great
deal on the design of the productive system
and the process technology employed.
It is probably not worthwhile for a producer of
a standardized item in large volume to offer
this kind of flexibility.

EXAMPLES OF DISTINCTIVE
COMPETENCIES
Price

Low Cost

U.S. first-class postage

Quality

High-performance design
or high quality
Consistent quality

Sony TV
Lexus, Cadillac
Pepsi, Kodak, Motorola

Time

Rapid delivery
On-time delivery

Express Mail, Fedex,

One-hour photo, UPS

Flexibility

Variety
Volume

Burger King
Supermarkets

Generic Enterprise strategies and

the Operations Function
Overall Cost Leadership
Low cost
High product availability
Usually off-the shelf
Risks involved is inflexibility

Continued
Differentiation
High quality
Innovative in product design
Flexible
Risks involved are that customers will tolerate
only some maximum premium for uniqueness

Time Based Competition

Definition

: Time based competition is an

operational strategy focusing on compressing
total throughput time in an organization
A fifty percent reduction in cycle time and a
doubling in work-in-process inventory turns
causes productivity to increase from 20-70
percent
Two things happen: costs decline, and the
organization becomes capable of producing
significantly more output with less resources:

How to Reduce Total Cycle Time

Understanding the way an organization functions is
key to the redesign for time-based competition.
Every business has basic cycles that govern the way
that paper is processed, parts are manufactured, and
decisions are made.
Examples of business cycles are customer order,
product development, production, and procurement.

CONTINUED
Customer order cycle begins with the placement of an order by a
customer and it ends when you are finally paid for goods or
services rendered.
But there are activities in between the two events that consume
time.
Some add value, such as packing and shipping, and some are nonvalue adding and delay time, such as moving the order around the
building from mailbox to mailbox, sitting on a desk, or repetitive
motions.
When a cycle ends, a lot of non-value adding time has been
consumed that may constitute 90-95 percent of total time.
If you can identify the non-value added time in the cycle, you can
devise ways to eliminate the causes.

TECHNIQUES FOR REDUCING

TIME
Just-In-Time (JIT)
Kanban
Stream of variation analysis (SOVA)

JUST-IN-TIME
A philosophy of manufacturing based on planned
elimination of waste and continuous improvement of
productivity.
The primary elements of Just-in-Time are to:
have only the required inventory when needed,
improve quality to zero defects,
reduce lead times by reducing setup times, queue
lengths, and lot sizes,
accomplish these things at minimum cost.

JIT MANUFACTURING
PHILOSOPHY
The main objective of JIT manufacturing is to
reduce manufacturing lead times.
This is primarily achieved by drastic
reductions in work-in-process (WIP).
The result is a smooth, uninterrupted flow of
small lots of products throughout production.

KANBAN
Kanban system is a simple information system
used by a work center to single its supplier
work center to request a replacement container
and to authorize production of another
container of that particular item.

KANBAN SYSTEM
Kanban is based on the simple idea of replacement of
containers of parts, one at a time.
Containers are reserved for specific parts, are
purposely kept small, and always contain the same
standard number of parts for each part number.
There is a minimum of two containers for each part
number, one at the upstream producing work center
and one at the downstream using work center.

STREAM-OF-VARIATIONANALYSIS (SOVA)
The SOVA methodology focuses on the development
of modeling, analysis, and control of dimensional
variation in complex multistage assembly processes
(MAP) such as the automotive, aerospace, appliance,
and electronics industries.
The presented methodology can help in eliminating
costly trial-and-error fine-tuning of new-product
assembly processes attributable to unforeseen
dimensional errors throughout the assembly process
from design through ramp-up and production.