OPERATIONS STRATEGY
Chapter 2
Irwin/McGraw-Hill
 The McGraw-Hill Companies, Inc. 2004
1
Outline
1. Operations Strategy Model
2. Emphasis on Operations Objectives
3. Linking Strategies
4. Focused Operations
5. Global Scope of Operations
McGraw-Hill/Irwin
 The McGraw-Hill Companies, Inc. 2004
2
Operations Strategy Model (Figure 2.1)
Corporate and
business strategy
Internal
analysis
Operations Strategy
Mission
Distinctive
Competence
External
analysis
Functional strategies in
marketing, finance,
engineering, human
resources, and
information systems
Objectives
(cost, quality, flexibility, delivery)
Policies
(process, quality systems, capacity,
and inventory)
Consistent pattern of decisions
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Results
 The McGraw-Hill Companies, Inc. 2004
3
Operations Strategic Objectives
Quality
Flexibility
Delivery
Cost efficiency
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 The McGraw-Hill Companies, Inc. 2004
4
Examples of Important Policies in Operations (Table
2.2)
Policy Type
Process
Qualit y Syst ems
Capacit y
Invent ory
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Policy Area
Span of process
Aut omat ion
Process flow
Job specializat ion
Supervision
Approach
Training
Suppliers
Facilit y size
Locat ion
Invest ment
Amount
Dist ribut ion
Cont rol Syst ems
Strategic Choices
M ake or by
Handmade or machine –made
Flexible or hard aut omat ion
Project , bat ch, line, or cont inuous
Highly decent ralized or cent ralized
Prevent ion or inspect ion
Technical or managerial t raining
Select ed on qualit y or cost
One large or several small facilit ies
Near market s, low cost , or foreign
Permanent or t emporary
High levels or low levels of
invent ory
Cent ralized or decent ralized
warehouses
Cont rol in great det ail or less
det ail
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5
Linking Strategies
Linking operations strategy to business
strategy
Strategic alternatives (See Table 2.3)
– Product imitator
– Product innovator
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Mass Customization and Strategic Process Choices
HIGH/
LONG
Make to
Order (MTO)
Psychiatric
Counseling
Assemble to
Order (ATO)
Subway
Dell
Computers
Make to Stock
(MTS)
LOW
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Volume
Prefabricated
homes
TV
producer
COST/
Lead Time
Internetbased
Education
MASS
CUSTOMIZATION
Customization
LOW/
SHORT
Degree of
Customization
HIGH
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Focused Factory - Figure 2.2A
Before PWP
Process A
A
Process C
A
C
C
A
Process B
B
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High
Volume
Process D
D
B
D
Low
Volume
 The McGraw-Hill Companies, Inc. 2004
8
Focused Factory - Figure 2.2B
After PWP
PWP # 1
AA
B
D
C
High
Volume
PWP # 2
B
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A
C
D
Low
Volume
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Types of Focus
Product focus
Process type
Technology
Volume of sales
Make-to-stock and make-to-order
New products and mature products
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10
Global Scope of Operations
“Traditional” versus “Global” company
Characteristics of “Global Corporation”
Implications of “global”corporation for
operations management
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 The McGraw-Hill Companies, Inc. 2004
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