Chapter 2. Customers, Products, and OM:
Strategy
Outline
Product Characteristics and the Customer
Corporate and Operations Strategy
Hierarchy of strategies
Order Winners and Qualifiers
Operations Strategy: Service vs. Manufacturing
Operations Strategy: Product Life Cycle
Product Design/Redesign Process/ QFD
MAN 3504 - Chapter 2
1
Product Characteristics and the Customer
Customer are classified by their product characteristic
preferences. Done through surveys and focus groups
Product Characteristics:
Aesthetics
Quality
Speed of Service/Delivery
Bundled Services
Cost
Variety/Customization
Warranties/Guarantees
MAN 3504 - Chapter 2
2
Corporate and Operations Strategy
One product can seldom satisfy all customer types
Companies recognize they must design products for a
specific market segment, leading to strategies
Strategy is a plan of attack (including which customers will
be “attacked”)
From the corporate strategy, functional strategies are
derived
MAN 3504 - Chapter 2
3
Hierarchy
of Strategies
MARKET
Functional Strategies
drive decision making
at multiple levels:
Strategic DM
Tactical DM
Operational/Day-today DM
CORPORATE
STRATEGY
MARKETING
STRATEGY
OPERATIONS
STRATEGY
Strategic Decision
Making
Tactical Decision
Making
FINANCE
STRATEGY
Products
Operation Priorities
Training Programs
Technology
Facilities
Procedures
Quality Programs
Operational Decision
Making
People and equipment schedules
Day-to-day inventory management
MAN 3504 - Chapter 2
4
Order Winners and Order Qualifiers
Order Qualifier: The level of a product characteristic(s) that
allow a product to be considered for selection
Order Winner: The level of a product characteristic(s) that
drive the customer decision to select a product
Order winners/qualifiers are dynamic
Changes as customer requirements change
Changes as competitive products change
MAN 3504 - Chapter 2
5
Order Winners and Order Qualifiers
Order winners become drivers for operations strategy
COST
QUALOITY/RELIABILITY
VARIETY/CUSTOMIZATION
SPEED OF SERVICE/DELIVERY
Operations Efficiency
Quality at Design/Zero Defects
Recognition of customer needs
Supply Chain Coordination
Focused Operations - few order winning characteristics
Operations as a driver for corporate strategy
MAN 3504 - Chapter 2
6
Operations Strategy: Services vs.
Manufacturing
Operational Strategies differ in implementation
Cost Strategy: Cost may be reduced in materials or
manufacturing locations versus in services is based on process
standardization and the level of resources
Manufacturing: tangible product, versus Service: “it falls on
your foot and it does not hurt”
Difficult to differentiate between services and products as
products are bundled with services
MAN 3504 - Chapter 2
7
Operations Strategy: Product Life Cycles
The life cycle of a product has an effect on the operations
strategy
Birth Stage: Product Design
Growth Stage: Capacity Management
Mature Stage: Increasing Efficiency and Quality
Decline Stage: Cost minimization and resource relocation
MAN 3504 - Chapter 2
8
Product Design/ Redesign Process
Product Design is
critical
Must match critical
customer
requirements
Design Steps
marketing
Determine Customer Requirements
engineering design
Idea Generation/Solutions
Initial Design/Prototypes
Design Review
Complete Functional Specifications
production/
manufacturing/
supply chain/
quality
MAN 3504 - Chapter 2
Initial Production and Market Test
Full Production
9
Product Design/ Redesign Process
Past: “Over the wall design” vs. Today: Concurrent
Engineering - multi functional teams
Value Analysis: Analyzing process and products to eliminate
waste and simply products
Evaluating Designs: Quality Functional Deployment
MAN 3504 - Chapter 2
10
Quality Functional Deployment
Positive Relationship
COMPETITIVE EVALUATION
Negative Relationship
Number and Training
and Serving Staff
Transportation
Equipment
Serving Equipment
CUSTOMER REQUIREMENTS
Kitchen Space
and Equipment
PRODUCT ATTRIBUTES
Cooking Staff Skills
/Recipes Used
Used
extensiv
ely at
NASA
(simple
version)
The
House of
Quality
Strong Positive Relationship
DC= Distinct Catering
T= To your door Catering
M = Mama’s food Catering
Rank by Local Customers
(10=Best)
1
10
Variety in the Menu
6
On time Service
4
Aesthetic Pleasing
3
Food Taste
4
Competitive Price
5
T DC M
Pleasant Service
2
DC M
Importance Weighting
Modified Weighting
M
M
T
DC
DC
T
T M DC
T
35
17
33
33
28
19
MAN 3504 - Chapter 2
27
27
DC
M
T
24
21
11
Next Chapter
How to forecast product demand
MAN 3504 - Chapter 2
12