The Lee Kong Chian School of Business
Academic Year 2012/13
Term 2
OPIM 319
OPERATIONS STRATEGY, PRINCPLES AND PRACTICE
Instructor
Title
Tel
Email
Office
: Subrata Pal
: Adjunct Faculty of Operations Management
: 93372046
: subratap@smu.edu.sg
: LKCSB Level 5, Adjunct Faculty Office
COURSE DESCRIPTION
How did ZARA become one of the fastest growing and most profitable brands in fashion retailing? How did
Wal-Mart grow to be the world’s largest retailer? To a large extent the answer is that ZARA and Wal-Mart
view their operational capabilities as an important and integral part of their competitive advantage. As do
other successful companies, such as Procter & Gamble, Toyota, and Coca Cola, they invest strategically in
physical plants and facilities, in process and information technology, in employee, supplier, and distributor
relationships, and perhaps most importantly, in organizational practices and know-how. The objective of this
course is to provide students with a set of qualitative frameworks and quantitative tools to analyze and guide
the long-term, strategic decisions for a company’s operations function. The course is recommended for those
interested in consulting, general management, or operations careers, but also for finance specialists interested
in assessing the risks, the opportunities, the competitive advantage, and ultimately the value embedded in a
company’s operations.
LEARNING OBJECTIVES
After taking this course students will be able to analyze and improve a company’s operations strategy.
More specifically, students will be able to:
 List and explain the range of strategic choices to be made in operations strategy
 List and explain the various links between operations and other business functions
 Analyze and describe the internal and external factors that influence strategic operational investments
 Analyze and describe the connection between operations strategy and the firm’s business strategy and
competitive position
 List and describe basic principles that lead to an organization's operational success
 Assess an existing operations strategy by identifying its key elements and by evaluating it qualitatively
and financially
 Understand Operational Strategy realization approaches.
 Improve an operations strategy by analyzing key drivers and decisions for each element and by
developing recommendations and implementation plans
PRE-REQUISITE/ CO-REQUISITE/ MUTUALLY EXCLUSIVE COURSE(S)
Please refer to the Course Catalogue on OASIS for the most updated list of pre-requisites / co-requisites for
this particular course.
Do note that if this course has a co-requisite, it means that the course has to be taken together with another
course. Dropping one course during BOSS bidding would result in both courses being dropped at the same
time.
REQUIRED TEXT AND READINGS
J. Van Mieghem, 2008. Operations Strategy: Principles and Practice. Dynamic Ideas.
Additional cases to be found in the coursepack, available through course services.
ASSESSMENT METHOD
Class Participation:
Group Case Write-Ups:
Group Project:
Group Contribution (peer review):
Final Examination:
15%
20%
25%
10%
30%
ACADEMIC INTEGRITY
All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication, facilitation of acts
of academic dishonesty by others, unauthorized possession of exam questions, or tampering with the
academic work of other students) are serious offences.
All work presented in class must be the student’s own work. Any student caught violating this policy may
result in the student receiving zero marks for the component assessment or a fail grade for the course. This
policy applies to all works (whether oral or written) submitted for purposes of assessment.
Where in doubt, students are encouraged to consult the instructors of the course. Details on the SMU Code
of Academic Integrity may be accessed at http://www.smuscd.org/resources.html.
COURSE METHODS
Each topic will be discussed using a combination of models, exercises, case-discussions, and readings. The
anticipated mix for the course is 50-50 qualitative-quantitative. In a typical week we will cover one major case
in-depth, supplemented by mini-lectures and qualitative discussions of other examples.
CLASS SCHEDULE
Week
1
Topic
Framework for Operations Strategy
Readings
Ch. 1
2
Competition, Competencies and Operations
Ch. 2
3
Capacity Sizing and Investment
Ch. 3, ACC
4
Capacity Timing and Expansion
Ch. 4, Harley Davidson (Ch.11)
5
Capacity Location, Global Networks and Offshoring
Ch. 6, Mini-case 4
6
Capacity Types, Flexibility, and Consolidation
Ch. 5, Eli Lilly
7
Project Progress Discussions
8
Recess
9
Strategic Sourcing and Supply Management
Ch. 7
10
Operations Planning and Strategy Realization
Class notes, Zoom Scoot Case
11
Strategic Information Systems
B&R Ch. 9, Moore Medical
12
Operational Excellence and Continuous Improvement
Ch. 10 and BR Ch 10 ITT
13
Project Presentations
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ASSESSMENT METHOD DETAILS
Class participation (15%):
 Class participation depends on your presence in the classroom, your perceived preparation, and the
contribution you make to the learning experience of others.
 Class participation includes in-class questions to the instructor, insights and/or comments regarding
class content, answers to the instructor’s in-class questions, and reactions to other students’ in-class
contributions.
 The quality of in-class participation will strongly depend on your preparation: reading the case and
assigned articles or book chapters and preparing answers to the preparation questions referred to in
the class schedule (see below).
 Cold-calling (direct questions by the instructor to an individual student during a class session) will be
used to check class preparation and will usually involve the preparation questions. Please leave your
name-card up for the entire duration of each class and keep the same seat for the duration of the
quarter. (Although cold calling may increase anxiety, education experts suggest that ―supportive‖
cold calling encourages you to be better prepared for class and as a result improves the overall class
discussion.) A thorough preparation of the assigned materials is all that is necessary for such leadoff
questions. If you feel uncomfortable with being called on in class please let me know in advance so
that we can agree on an alternative mode of interaction.
 Email your key inputs that you shared in the class to the instructor after the class.
Group Case Write-ups (20%):
 There are three case write-ups to be handed in
 Each group will consist of five students.
 You will receive a group grade but if there is a clear reason to do so I may upgrade or downgrade
certain individuals in the group.
 Case write-ups have to done within your group; collaboration with other groups is not allowed
 HONOR CODE FOR SUBMISSIONS: cases may not be discussed with anyone outside your group
nor may you use other sources without acknowledgment. It is important that everyone has a level
playing field so this also means that materials from previous years or websites cannot be used. I'm
sure you understand.
 To count towards your grade a hard-copy of the case write-up needs to be handed in at the start of
the session in which the case is discussed. E-mails will not be accepted.
 The case write-ups are to be no longer than 2 pages excluding exhibits (tables, charts, figures,
diagrams) and need to contain answers to a set of preparation questions for that case. The
preparation questions for the cases are given in the detailed class schedule below.
 Usually, the case will prompt you to make a recommendation for the company in question. Start
your case write-up with a short summary (less than 250 words) that describes the situation of the
company, the problem it is facing, the question it needs to answer and your recommendations. Then
support this recommendation with a detailed analysis that needs to contain answers to the
preparation questions for the case.
 Grading criteria include: clarity and completeness of summary, quality of the answers to preparations
questions, appropriate and sufficient use of case facts where needed, apparent grasp of course
concepts as well as logic and structure of the write-up.
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Group Project (25%)
 The group project is an opportunity to apply course concepts and to perform an in-depth analysis of
operations strategy issues that are of interest.
 Each group will consist of five students. Your group is the same as for the case write-ups.
 Expected time commitment per team member is 20-30 hours
 You will receive a group grade but if there is a clear reason to do so I may upgrade or downgrade
certain individuals in the group.
 The Project Report will determine 70% of the grade. Grading criteria include:
o Thoroughness and comprehensiveness of investigation
o Quality of the report
 logic, structure, style, clarity, grammar, spelling, layout
o Creativity displayed in study
o Knowledge and insights displayed in work, as related to the area of Operations Strategy
o Usefulness of the project’s guidelines or recommendations
 The remaining 30% of the grade is determined by the Project Presentation. The grading criteria
include:
o Effectiveness of the presentation by team members
o Effectiveness of the presentation slides
o Ability to answer questions effectively
 HONOR CODE FOR GROUP PROJECT: You should make very clear what part of your project
report and presentation is based on your own thinking and what part summarizes pre-existing outside
sources. It is extremely important and part of the honor code that you explicitly identify and cite all
significant external sources that you build on in your report. This applies in particular to papers you
may have written for other SMU classes, to documents you may have received from the company you
are analyzing, interviews with industry experts, etc. Building on external sources is by no means a
―bad thing‖–solid work is typically aware of and builds on what others have done. Ideally though, you
should take this external information and add the filter of your own critical thinking and the concepts
studied in this class to synthesize it, critique it, etc.
 Please read the Guidelines for Group Project later in this syllabus.
Group Contribution (10%)
 The group contribution component will be evaluated by peers in your group.
 Your peers will assess your contribution to the group case write-ups and the group project.
 The assessment criteria will include effort, team spirit, initiative, work quality, knowledge and ideas.
Final Examination (30%)
 The final exam is to be done individually, in class, closed-book.
 The questions will relate to the class readings and the materials presented by the instructor in the
class sessions.
 The primary objective of the exam is so that you will review and synthesize the content of the course.
 The final exam will be administered during the regular exam period.
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GUIDELINES FOR GROUP PROJECT
You can choose from two possible types for your group project (see sample outlines below):
1. ―Case study‖: Identify an organization (one familiar to you or your group would work well) whose
operations strategy you can analyze and improve, or
2. ―White paper‖: A research-oriented paper on a specific topic in operations strategy or a novel practice in
industry that directly relates to operations strategy. The paper describes risks, benefits and best practices
along with industry examples of each.
KEY EXPECTATIONS:
 The project has a strong operational component
 The project is interesting and has a general learning point. Aim for a project in which not only
you, but also your audience, will learn something new.
 The analysis uses or extends concepts discussed in class
Option 1: case study of specific organization
Identify an organization (one familiar to your group would work well) where you can test and extend issues in
operations strategy. Examples of such projects include:





capacity expansion at a local service or manufacturing company,
improving customer service at a Hospitals’s specialized clinic,
sourcing and production planning at a high-speed garage door manufacturing plant,
customer service strategy at a high-end hotel chain
investment in information technology at a logistics company
FORMAT: The maximum length is 8 pages of text, and maximally 4 pages of supporting exhibits. Your Project
Report should be in the form of a mini case, consisting of three parts:
1.
Executive Summary (no longer than 250 words); use the following structure:
 Situation (what is the background situation/context for your report)
 Complication (what in this situation/context leads you to do your investigation)
 Question (what is the question you will try to answer in your report)
 Answer (a summary of the answer you have come up with in your investigation, i.e. your main
findings and recommendations)
2.
The actual case (similar to the cases you typically read; max 4 pages):
 Describe your unit and its competitive identity and environment.
 Describe the organization’s current business strategy.
 Describe the operating strategy, its competencies (in terms of cost, time, quality, and flexibility),
activity network (process view) and asset bundle (resource view).
 Describe the strategic issues and challenges.
 Provide data (the best cases stand out because they support their recommendations both
qualitatively and quantitatively)
3.
Your analysis and recommendation (similar to the write-up you typically do; 4 pages max). This
should not be a detailed description of everything you have done but a specific set of observations and
recommendations.
 Evaluate the strengths and weaknesses of the current operations strategy using course concepts
 Identify + analyze potential improvements
 Recommend an improved strategy that addresses the issues and challenges.
 Discuss implementation steps.
Option 2: white-paper on a specific issue or practice in operations strategy
Identify and analyze a current issue or novel practice in operations strategy. Imagine you work for a consulting
company and you need to inform your clients about this current issue or novel practice. Examples of such
projects include:
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



Survey of contemporary approaches to build flexible capability: use of modular facilities in
pharmaceutical industry, platform strategies in the automobile industry,
a study of the operations strategy for retail banking,
capacity options in the airline freight industry,
operations strategy issues in a specific industry.
FORMAT: The maximum length is 8 pages of text, and maximally 4 pages of supporting exhibits. Your Project
Report should contain:
1. Executive Summary (no longer than 250 words); use the following structure:
 Situation (what is the background situation/context for your report)
 Complication (what in this situation/context leads you to do your investigation)
 Question (what is the question you will try to answer in your report)
 Answer (a summary of the answer you have come up with in your investigation, i.e. your main
findings and recommendations)
2. A description of the operations strategy issue or practice
3. Major benefits of the practice.
4. Major risks/cost of the practice
5. Key issues in designing and implementing the practice
6. Which companies is this practice ideally suited for? Which companies may it not be suitable for?
7. Examples of companies that are successfully using the practice.
8. Examples of companies that have been unsuccessful in their implementation of the practice and
possible reasons (if you can find examples).
OVERALL FINAL PROJECT REQUIREMENTS
1.
Week 4: Submit Project Proposal in class. The project proposal is a one page document that outlines
 Project title + indicate whether case study or white paper
 A preliminary version of the executive summary of the project (use placeholders/boilerplates
where you do not yet have findings)
 Relationship to class topics: specify which operations strategy topics your project will relate to
 Contact person at related organization who has agreed to cooperate with project (for case
study)
 Timeline of project activities (this will be your project plan)
 Team member roles
2.
Week 7: 2 days prior to class, email a Preliminary Project Report to the instructor. A preliminary
project report will use the structure of the final report but will obviously still have some ―holes‖ in it,
areas where more work needs to be done. Be sure to include an updated version of your executive
summary, and right after that a project update section that includes:
 Progress assessment on the timeline of project activities – show where you are on track and
where you have delays
 Description of project difficulties and how you plan to tackle them.
The class session for week 7 will be dedicated to a discussion of your Preliminary Project Report. Each
group will be scheduled for a 15 minute in class conference.
3.
Week 13: Hand in a hard-copy of your group’s Project Report in class and be prepared for a 15 minute
in-class Project Presentation (10 minutes to present, 5 minutes for questions and answers). At least
two group members need to present. There is no limit on how many group members present. Dress
code for the presentation is business attire.
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DETAILED CLASS SCHEDULE
Week 1: A Framework for Operations Strategy
Content:
What is operations strategy? Introduce a framework to describe a company’s operations
strategy. The key premise is that an operations strategy must be evaluated in terms of the
performance it delivers. This performance depends on the activity network and the asset bundle
that operations puts in place. We will discuss the goal of operations strategy and a framework
to think about operations strategy.
We will use the Swiss Watch Industry short case as the main vehicle to introduce the
framework.
Read:


Chapter 1: ―Operations Strategy: Concept and Framework‖
Swiss Watch Industry, mini-case 1 in Chapter 1. Be prepared to discuss the accompanying questions.
Week 2: Competition, Competencies and Operations
Content:
Read:

Discuss how the concepts of operational trade-offs and competency focus relate to strategic
positioning and operational efficiency and how they can be used--qualitatively and
quantitatively—to evaluate a firm’s operations strategy in a competitive setting.
Chapter 2: ―Competition, Competencies and Operations‖
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Week 3: Capacity Sizing and Investment
Content:
Read:

In the first part of this class we will apply the content of classes 1-2 to a specific case. We will
describe and contrast two firms’ operations strategies. That analysis then guides the design of a
defensive strategic response based on process and resource capabilities.
In the second part of this class we will introduce capacity strategy, a major part of operations
strategy. Capacity strategy includes deciding on the sizing, timing, type, and location of each
asset change. This class will discuss and contrast various approaches to changing capacity.
Chapter 3: ―Capacity Sizing and Investment‖
Prepare:
 American Connector Company (A), Case (No. 9-963-035)
Hand in write-up of American Connector. The objective of this case is to integrate and apply the ideas of
classes 1-2 and operationalize the concepts of strategic positioning and operational efficiency to evaluate
current strategy and design a competitive response.
This case requires some detective work and estimation, given that not all data is available. The idea is to do
your best in estimating financial performance, using case data where possible and supplement it with justified
estimates where needed.
Preparation questions:
1. Describe ACC’s operations strategy (using the framework of Chapter 1) and contrast it with DJC’s.
2. How serious is the threat of DJC to American Connector Company? To help in that assessment,
consider questions 3 and 4:
3. Calculate the overall cost difference between DJC’s plant and ACC’s Sunnyvale plant. Consider both
DJC’s performance in Kawasaki and its potential in the United States.
4. What accounts for these differences? How much of the difference is inherent in the way each of the two
5.
companies competes; that is, how much is a function of the strategic competitive positioning decision?
How much is due strictly to the differences in the operational efficiency; that is, how much can cost be
improved without impacting the ability to offer its strategically chosen value proposition? Break up the
cost differential between DJC and ACC for each line in the COGS and determine what amount is due to
(i) volume being different from targeted volumes, (ii) operational inefficiency, and (iii) strategic positioning.
What do you learn from the cost-decomposition analysis? Based on your analysis, what do you
recommend ACC do?
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Week 4: Capacity Timing and Expansion
Content:
In the first part of this class we will discuss the Harley Davidson case, which you can prepare
individually or in group prior to class. In the second part of the class we will discuss which
strategies a company can use to decide when to expand or contract capacity, and what key
drivers influence that decision?
Hand in your group’s Project Proposal according to guidelines earlier in syllabus.
Read:

Chapter 4: ―Capacity Timing and Expansion‖
Prepare:
 Harley-Davidson Motor Company, Case in textbook.
The objective of this case is to investigate various approaches to change capacity and to distill the key drivers
that guide the appropriate capacity strategy. You should complement your qualitative analysis with an NPV
analysis. (This is a very realistic case and to capture some issues you will have to make some extensions to the
basic NPV analysis.)
Preparation questions:
1.
2.
3.
4.
Describe and evaluate Harley’s operations strategy (using the concepts discussed so far).
Demand uncertainty is a major factor in strategic capacity decisions. How does Harley-Davidson take
uncertainty into account in their planning processes? How does HD’s history affect its decision-making
process?
What are the factors that HD should consider when analyzing the alternatives?
What is your recommendation to Harley-Davidson? Assess your plan’s fit with HD’s strategy and assess
its financial attractiveness: complement your qualitative analysis with an NPV analysis. (Use a discount
factor of 12%; marginal tax rate is 37%.)
Week 5: Capacity Location, Global Networks and Offshoring
Content:
Read:
In this class we will introduce capacity location decisions and describe how location strategy is
part of operations strategy.
Chapter 6: ―Capacity Location, Global Networks and Offshoring‖
Hand in a write-up of Mini-Case 4: Timing of IT Expansions. The case allows analysis of a capacity timing
problem as discussed in the previous class. Answer the four questions on page 148 of the textbook and also
include a summary of the case and your solutions.
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Week 6: Capacity Types, Flexibility and Consolidation
Content:
Read:
Once a company decides it needs to build new capacity, it must decide on what type of capacity.
This involves deciding on the type of technology and facility. This class will discuss when and
why product-dedicated or product-flexible technology is more appropriate. We also will
explore what flexibility means and the various approaches to achieve it and be better positioned
to respond to changes in demand, supply or processing.
Chapter 5
Prepare: Eli Lilly & Co: The Flexible Factory Decision (1993), HBS Case (in course pack)
Use Kellogg Addendum for additional data on the case and to get some hints on how to answer
the questions (Kellog Addendum available on SMUVista in lesson plan/ week 6 folder)
Hand in a write-up of Eli Lilly. The objective of this case is to value flexibility and investigate when and why
dedicated or flexible capacity is more appropriate and to connect the technology & facility strategy with new
product introduction plans. Preparation questions:
1.
2.
3.
4.
5.
Describe and evaluate Lilly’s operations strategy (using concepts discussed so far)
What type of flexibility does the ―flexible facility‖ provide?
From a qualitative perspective: What is the value of this flexibility to Lilly? How much is Lilly paying for
the flexibility? What are the strengths of the specialized facility?
Quantify the financial value of flexibility, incorporating technical risk (i.e., likelihood of NDA approval of
technology) and other relevant factors and options as outlined in the case and the Kellogg addendum. Let
your analysis drive your recommendation: What facility strategy do you recommend for Eli Lilly’s new
product plans?
Looking forward, how does each facility option affect Lilly’s competitive strategy? Also, which additional
resources or capabilities should Lilly develop to take best advantage of the different facility types?
A few guidelines for your analysis:
1. The focus of the case is on valuation (=quantification of benefits) of capacity strategies for technical risk, for
which you can limit yourself to performing a PV of cost analysis. Do clearly discuss your approach in the main
text. Discuss qualitatively how your recommendation would impact the revenue side.
2. Product line and flexible plant costs implications: you can assume that there is a broad product line of
existing and future products besides the A, B, and C which will be the focus of our financial analysis. You don't
need to model those other products explicitly; rather, the cost assumptions in the Kellogg addendum implicitly
assume that there are other products in the portfolio.
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Week 7: Project Progress Discussions
Two days prior to class, email your Preliminary Project Report to the instructor according to guidelines
earlier in syllabus.
Come to class for your group project discussion in the allotted time.
Week 8: Mid-term Break
Week 9: Strategic Sourcing
Content:
Read:
A key operations strategy decision is whether to make or buy. This class will discuss how to
make such decisions by comparing the best sourcing strategy with the best internal processing
strategy. Deciding on which suppliers to use for particular goods or services and on how to
manage the supplier relationship over time is called strategic sourcing.
Chapter 7:‖Strategic Sourcing, Supply Management and Outsourcing‖
Week 10: Operations Planning and Strategy Realization
Content:
Read:
Strategic Planning helps organizations to translate operations strategy into long term and short
term strategy road map. The realization of strategic road map depends on thorough operations
planning. Operations planning is also driven by the business metrics that the business has set to
achieve therefore it is important to understand how to align resources, and capacity with
aggregate planning to achieve the business KPIs. In this session we will focus on developing
strategic road map, aggregate production planning (supply planning) and initiative planning.
Refer to class notes
Prepare: Zoom Scoot Corporation Case Study
Preparation Questions :
1.
2.
3.
4.
5.
What are the strategic priorities of the Zoom Scoot Company? 1 Slide
Create a portfolio of projects. Objective of each project, who will Lead the project. 1 Slide
How can you make sure that the project are aligned to the strategic priority.1slide
How will you make sure that all projects deliver on its objective? (Hint : Portfolio Review) 1 slide
Create an A3 for 1 projects ( 1 slide)
Be ready with the 10 min presentation ( 5 slides only)
2 random groups will be asked to present.
Week 11: Strategic Information Systems
Content:
In this class we will discuss the strategic role of information systems in business operations.
Clearly, information systems offer excellent opportunities to improve the performance of an
operation but in order to be good ―customers‖ of information systems, operations managers
need to think strategically about which IS investments they should make. The Beckman &
Rosenfield Chapter provides an excellent overview of strategic information system issues and as
you prepare to discuss the Moore Medical case you will need to apply strategic thinking to
information systems investment decisions.
OPIM 319 Operations Strategy
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Read:
B&R Chapter 9 (available on SMUVista lesson plan/week 10)
Prepare: Moore Medical Corporation, HBS Case (in course pack)
Preparation questions:
1.
2.
3.
4.
5.
Which new information systems, if any, should Moore purchase and why?
Can the likely financial benefits of any of the proposed new information technologies be assessed? If
so, which ones? What are the benefits?
Why is Moore considering purchasing CRM? What are the various business needs they’re hoping to
address with this information technology?
What are the most important things that Moore does not know about its customers at the time of
the case? What are the best ways for the company to obtain this knowledge?
What are the pros and cons of Moore’s move into eCommerce / online ordering? Do you agree this
was a good move for the company?
Week 12: Operational Excellence and Continuous Improvement
Content:
Read:
Every organization must build capabilities for future growth. Such capabilities include processes
for new product and process development, for learning, and for building a global culture. The
ITT case is our vehicle to discuss how organizations use their total process skills in bringing
products to market strategically. The second part of the class studies learning and ―the learning
curve.‖ We end by investigating the role of learning and innovations in competition. At the end
of the session we will summarize the course.
Chapter 10 ―Innovation and Improvement‖, not 10.4, 10.5, 10.6, 10.7
Prepare: ITT Automotive, HBS case.
Preparations questions:
1. What are the implications for both cost and flexibility of automation? Do you agree with the assertion
made by one of the managers in the case: "If you automate, you stagnate?" What are your
recommendations regarding automation?
2. What are your recommendations regarding the issue of standardizing process technology across all plants?
Are there motives behind this proposal other than those stated in the case?
3. As Juergen Geissenger, how would you go about implementing your recommendations? How would you
overcome resistance from the plants? As Steve Dickerson, the plant manager of Asheville, North Carolina,
what line of reasoning would you use to convince senior managers that full automation is the less desirable
alternative?
4. As Klaus Lederer, what option would you like to see pursued? How do various options fit into the
broader corporate strategy of ITT Automotive?
Week 13: Project Presentations and Course Summary
Content:
Group Project presentations.
Hand-in your project report and are be prepared for a 15 minute presentation.
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