Session 5-15
Ms.Pooja Patnaik
Operation Strategy:
 Operation strategy is concerned with setting broad policies and plans for
using the resources of a firm to best support its long term competitive
strategy.
Elements of Production/Operations Strategy
Operations strategy comprises six components :
1.
Positioning the production system,
2.
Focus of factories and service facilities,
3.
Product/Service design and development,
4.
Technology selection and process development,
5.
Allocation of resources to strategic alternatives, and
6.
Facility planning.
Operations Strategy
Strategy Process
Example
Customer Needs
More Product
Corporate Strategy
Increase Org. Size
Operations Strategy
Decisions on Processes
and Infrastructure
Increase Production Capacity
Build New Factory
Competitive Dimensions
 Cost or Price
 Make the Product or Deliver the Service Cheap
 Quality
 Make a Great Product or Deliver a Great Service
 Delivery Speed
 Make the Product or Deliver the Service Quickly
 Delivery Reliability
 Deliver It When Promised
 Coping with Changes in Demand
 Change Its Volume
 Flexibility and New Product Introduction Speed
 Change It
 Other Product-Specific Criteria
 Support It
Order Qualifiers and Winners
Order qualifiers are the basic criteria
that permit the firms products to be
considered as candidates for purchase
by customers
Example: A brand name car can be an
“order qualifier.
Order winners are the criteria that
differentiates the products and services
of one firm from another
Repair services can be “order winners”
Examples: Warranty, Roadside Assistance, Leases, etc
Session-6
Strategy Design Process
Strategy Map
What it is about!
Financial Perspective
Improve Shareholder Value
Customer Perspective
Customer Value Proposition
Internal Perspective
Learning and Growth Perspective
Build-Increase-Achieve
A Motivated and Prepared
Workforce
Kaplan and Norton’s Generic Strategy Map
In the Kaplan and Norton’s Generic Strategy Map, under the Financial Perspective, the
Productivity Strategy is generally made up from two components:
1.
Improve cost structure: Lower direct and indirect costs
2.
Increase asset utilization: Reduce working and fixed capital
In the Kaplan and Norton’s Generic Strategy Map, under the Financial Perspective, the
Revenue Growth Strategy is generally made up from two components:
1.
Build the franchise: Develop new sources of revenue
2.
Increase customer value: Work with existing customers to expand
relationships with company
Kaplan and Norton’s Generic Strategy Map (Cont.)
In the Kaplan and Norton’s Generic Strategy Map, under the
Customer Perspective, there are three ways suggested as means
of differentiating a company from others in a marketplace:
1.
2.
3.
Product leadership
Customer intimacy
Operational excellence
In the Kaplan and Norton’s Generic Strategy Map, under the
Learning and Growth Perspective, there are three principle
categories of intangible assets needed for learning:
1.
2.
3.
Strategic competencies
Strategic technologies
Climate for action
Strategic Management Involves Five Steps
Step1 :
Step2:
Select the corporate mission and major corporate goals.
Analyze the opportunities and threats or constraints that exist in the
external environment. Also analyze the strengths and weaknesses that
exist in internal environment.
Step3: Formulate strategies that will match the organization's strengths &
weaknesses with the environment's threats and opportunities.
Step 4: Implement the strategies.
Step5: Evaluate and control activities to ensure that the organization's objectives
are achieved.
Developing a manufacturing strategy Main objectives are To translate required competitive dimension (obtained from marketing) into
specific performance requirements for operation
 To make the plans necessary to ensure that operation capabilities are
sufficient to accomplish them
 Steps in Developing a Manufacturing Strategy 1. Segment the market according to the product group
 2. Identify product requirements, demand patterns, and profit margins of each group
 3. Determine order qualifiers and winners for each group
 4. Convert order winners into specific performance requirements
Service Strategy Capacity Capabilities
 Process-based
Capacities that transforms material or information and provide advantages on
dimensions of cost and quality
 Systems-based
Capacities that are broad-based involving the entire operating system and provide
advantages of short lead times and customize on demand
 Organization-based
Capacities that are difficult to replicate and provide abilities to master new technologies
Productivity:
Productivity is a common measure on how well resources are
being used. In the broadest sense, it can be defined as the
following ratio:
Outputs
Inputs
Session-7
Why a product life cycle?
A company’s positioning and differentiation strategy must change as the
product, market, and competitors change over the product life cycle(PLC)
When we say that a product has a life cycle we assert four things:
i.
Products have a limited life.
ii.
Products sales pass through distinct stages, each posing different challenges,
opportunities and problems to the seller.
iii.
Profits rise and fall at different stages of the product life cycle.
iv.
Products require different marketing, financial, manufacturing, purchasing, and
human resource strategies in each life – cycle stages.
Product Life Cycle
Product life cycle is the course of a product’s sales and profits
over time.
Product life cycle(PLC) deals with the life of a product in
the market with respect to business or commercial costs and
sales measures.
The five stages of each product lifecycle are product
development, introduction, growth, maturity and decline.
Product Life Cycle
Sales and
Profits
Sales
Profits
Product
Development
Introduction
Growth
Maturity
Sales and Profits Over the Product’s Lifetime
Time
Decline
Introduction Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Low
Costs
High cost per customer
Profits
Negative
Marketing Objectives
Create product awareness and trial
Product
Offer a basic product
Price
Use cost-plus formula
Distribution
Build selective distribution
Promotion
Heavy to entice product trial
Growth Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Rapidly rising
Costs
Average cost per customer
Profits
Rising
Marketing Objectives
Maximize market share
Product
Offer extension, service, warranty
Price
Penetration strategy
Distribution
Build intensive distribution
Promotion
Reduce to take advantage of demand
Maturity Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Peak
Costs
Low cost per customer
Profits
High
Marketing Objectives
Maximize profits while defending market share
Product
Diversify brand and models
Price
Match or best competitors
Distribution
Build more intensive distribution
Promotion
Increase to encourage brand switching
Decline Stage of the PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Declining
Costs
Low cost per customer
Profits
Declining
Marketing Objectives
Reduce expenditures and milk the brand
Product
Phase out weak items
Price
Cut price
Distribution
Selective: phase out unprofitable outlets
Promotion
Reduce to minimum level
Product Design and Production Design

Product Design: Concerned with form and function of a product. It refers to
the arrangement of elements or parts that collectively form a product.

Production Design: Concept of designing products from the point of view
of producibility.

Objectives of Product Design:
The overall objective is profit generation in the long run.


To achieve the desired product quality.

To reduce the development time and cost to the minimum.

To reduce the cost of the product.

To ensure producibility or manufacturability (design for manufacturing
and assembly).
Factors Influencing Product Design
i.
Customer requirements
ii.
Convenience of the operator or user
iii.
Trade off between function and form
iv.
Types of materials used
v.
Work methods and equipments
vi.
Cost/Price ratio
vii.
Product quality
viii.
Process capability
ix.
Effect on existing products
x.
Packaging
Characteristics of Good Product Design
i.
Function or performance
ii.
Appearance or aesthetics
iii.
Reliability
iv.
Maintainability
v.
Availability
vi.
Producibility
vii. Simplification
viii. Standardisation
ix.
Specification
x.
Safety
6 stages of product development
 Planning
 Concept Development
 System-Level design
 Design Detail
 Testing and Refinement
 Production Ramp-up
Process, Process Planning, Process design?
 Process: A process is a sequence of activities that is intended
to achieve some result, for example, to create added value for
the customers
 Process Planning: Concerned with planning the conversion
processes needed to convert the raw material into finished
products.
 Process Design: Concerned with the overall sequences of
operations required to achieve the product specifications
Types of Processes
Process Performance Metrics
Process performance metrics – defined: Measurement of different process
characteristics that tell us how a process is performing
Process Selection, Process Strategy
 Process selection: refers to the way production of goods or
services is organized.
 Process strategy: An organization's approach to selection of
the process for the conversion of resource inputs into outputs.
Key aspects in process strategy include:
i.
Make or buy decisions
ii. Capital intensity and
iii. Resource flexibility
Process Strategy
 Make or Buy is the 1st step of
process planning.
 Factors considered in make or
 Capital Intensity: is the mix of
equipment and human skills in
a production process.
buy decisions:
 Available capacity
 Expertise
 Quality consideration
 Nature of demand
 Cost
 Resource Flexibility: it is the
ease with which equipment
and works can handle a wide
variety of products , levels of
output, duties and function.
Vertical Integration:
 It is the amount of production and distribution chain, from suppliers
of the components to the delivery of products and services to
customers, which is brought under the ownership of the firm.
 The degree to which a firm needs to be vertically integrated
determines how many production process needs to be planned and
designed to be carried out in-house or by outsourcing.
 Vertical integration is based on make or buy decisions. Where make is
more integration and buy means more outsourcing
cond:
 Types:
 Backward integration: moving towards the sources of raw material.
 Forward integration: the firm acquires the channel of distribution
 Advantage and Disadvantage of Vertical Integration:
Advantages
Disadvantages
Sometimes increases market share and allow
the firm to enter foreign market easily
Not attractive for low volume
Can achieve saving in production cost and
produce higher quality goods
High capital investment and operating cost
Can achieve more delivery time
Less ability to react more quickly to changes in
customer demands, competitive actions and
new technologies
Better utilization of all types of resources
Session-8
Process Flowcharting Defined
 Process flowcharting is the use of a diagram to present
the major elements of a process
 The basic elements can include tasks or operations, flows
of materials or customers, decision points, and storage
areas or queues
 It is an ideal methodology by which to begin analyzing a
process
Flowchart Symbols
Purpose and Examples
Tasks or operations
Decision Points
Examples: Giving an
admission ticket to a
customer, installing a engine
in a car, etc.
Examples: How much change
should be given to a
customer, which wrench
should be used, etc.
Flowchart Symbols
Purpose and Examples
Storage areas or
queues
Flows of materials or
customers
Examples: Sheds, lines of
people waiting for a service,
etc.
Examples: Customers moving
to a seat, mechanic getting a
tool, etc.
Types of Processes
Single-stage Process
Stage 1
Multi-stage Process
Stage 1
Stage 2
Stage 3
Types of Processes (Continued)
A buffer refers to a storage area between stages where the
output of a stage is placed prior to being used in a
downstream stage
Multi-stage Process with Buffer
Buffer
Stage 1
Stage 2
Other Process Terminology
 Blocking
 Occurs when the activities in a stage must stop because
there is no place to deposit the item just completed
 If there is no room for an employee to place a unit of work
down, the employee will hold on to it not able to continue
working on the next unit
 Starving
 Occurs when the activities in a stage must stop because
there is no work
 If an employee is waiting at a work station and no work is
coming to the employee to process, the employee will
remain idle until the next unit of work comes
Other Process Terminology (Continued)
 Bottleneck
 Occurs when the limited capacity of a process causes work to pile
up or become unevenly distributed in the flow of a process
 If an employee works too slow in a multi-stage process, work will
begin to pile up in front of that employee. In this is case the
employee represents the limited capacity causing the bottleneck.
 Pacing
 Refers to the fixed timing of the movement of items through the
process
Other Types of Processes
 Make-to-order
 Only activated in response to an actual order
 Both work-in-process and finished goods inventory kept to a
minimum
 Make-to-stock
 Process activated to meet expected or forecast demand
 Customer orders are served from target stocking level
Process Performance Metrics
 Operation time = Setup time + Run time
 Throughput time = Average time for a unit to move through the system

Cycle time = Average time between completion of units
 Throughput rate =
1
.
Cycle time
 Efficiency = Actual output
Standard Output
 Velocity = Throughput time
Value-added time
Process Throughput Time Reduction
 Perform activities in parallel
 Change the sequence of activities
 Reduce interruptions
Session-9
Design of Services
 Service design is unique in that the service and entire service
concept are being designed
 must define both the service and concept
- Physical elements, aesthetic &
psychological benefits
e.g. promptness, friendliness, ambiance
 Product and service design must match the needs and preferences of
the targeted customer group
The Nature of Services
1. Everyone is an expert on services
2. Services are idiosyncratic
3. Quality of work is not quality of service
4. Most services contain a mix of tangible and intangible attributes
5. High-contact services are experienced, whereas goods are consumed
6. Effective management of services requires an understanding of marketing and personnel,
as well as operations
7. Services often take the form of cycles of encounters involving face-to-face, phone,
Internet, electromechanical, and/or mail interactions
Service Design Matrix
• Service Characteristics
– Pure services
– Quasi-Manufacturing
– Mixed services
• Service Package
– The physical goods
– The sensual benefits
– The psychological benefits
• Differing designs
– Substitute technology for
people
– Get customer involved
– High customer attention
© 2010 Wiley
Service
Strategy:
Performance Priorities
Focus
 Treatment of the customer
 Speed and convenience of service delivery
 Price
 Variety
 Quality of the tangible goods
 Unique skills that constitute the service offering
and
Advantage
Characteristics of a Well-Designed Service
System
 Each element of the service system is consistent with the operating focus of the
firm
 It is robust
 It is structured so that consistent performance by its people and systems is easily
maintained
 It provides effective links between the back office and the front office so that
nothing falls between the cracks
 It manages the evidence of service quality in such a way that customers see the
value of the service provided
 It is cost-effective
Session-10
Design:
 Form design: how a product looks
 Functional design: how a product performs
 Concurrent Design
 Improves quality of early design decisions
 Decentralized -suppliers complete detailed design
 Incorporates production process
 Often uses a price-minus system
 Scheduling and management can be complex as tasks are done in
parallel
Technology in design:
 CAD -Computer Aided Design
 Assists in creating and modifying designs
 CAE -Computer Aided Engineering
 Tests & analyzes designs on computer screen
 CAD/CAM -Design & Manufacturing
 Automatically
converts
instructions for computer
CAD
data
into
processing
Design for Manufacturability
 Traditional Approach
 “We design it, you build it” or “Over the wall”
 Concurrent Engineering
 “Let’s work together simultaneously”
Design for Manufacturing and Assembly

1.
2.
3.
Greatest improvements related to DFMA arise from
simplification of the product by reducing the number of
separate parts:
During the operation of the product, does the part move
relative to all other parts already assembled?
Must the part be of a different material or be isolated
from other parts already assembled?
Must the part be separate from all other parts to allow the
disassembly of the product for adjustment or
maintenance?
Designing for the Customer
House of Quality
Quality Function
Deployment
Ideal Customer
Product
Value Analysis/
Value Engineering
Definition:
1. QFD- a process that helps a company determine the
products characteristics important to the customer
and to evaluate its own products in relation to others.
2. HOUSE OF QUALITY- a matrix that helps a product
design team translate customer requirement into
operating and engineering goals.
3. VALUE ANALYSIS- analysis with the purpose of
simplifying products and process by achieving a
equivalent or better performance at a lower cost.
Measuring Product Development Performance
Performance
Dimension
Time-to-market
Productivity
Quality
Measures
•Freq. Of new products introduced
•Time to market introduction
•Number stated and number completed
•Actual versus plan
•Engineering hours per project
•Cost of materials and tooling per project
•Actual versus plan
•Conformance-reliability in use
•Design-performance and customer
satisfaction
Session-11
Key Term
• PLANT WITHIN A PLANT- a concept in which different locations
within a facility are dedicated to different product lines. each
location is operated according to its own strategy to minimize the
confusion associated with shifting from one type of strategy to
another.
• STRADDLING- occurs when a company seeks to match what a
competitor is doing by adding new features , services, or
technologies to existing activities
 CORE- CAPABILITIESskills that differentiate a manufacturing of a service firm from its
competitors
Key Terms Job shop- a process structure suited for low volume production of a great







variety of non-standard products.
Eg- airplane manufacturers, plants that make custom designed printed
circuit boards etc.
Batch shop-a process structure that produces a variety of standard
products at relatively low volume. Helps in reducing the impact of set up
time on equipment.
Eg- heavy equipment, electronic devices etc
Assembly Line- a process structure designed to make discrete parts. Parts
are moved through a set of specially designed workstation at a controlled
rate
Eg- manual assembly of toy and appliances
Continuous Flow-an often automated process structure that converts the
raw material into finished goods in one continuous process.
Eg.- petroleum, chemicals
Key terms to remember1. CONTRACT MANUFACTURERSCompanies that specialize in manufacturing products for other
companies and have become successful . These companies are
called contract manufacturers. Thus simply we can put that as a
contract manufacturer
is an organization capable of
manufacturing or purchasing all the components needed to
produce a finished product or services.
1. CORE COMPETENCYa company’s core competency is the one thing that it can do
better than its competitors. Core competency gives a long term
competitive Advantage to the company
1. Concurrent engineeringemphasizes cross functional integration and concurrent
development of a product and its associated processes
Project Assignment
 Visit a nearby branch of a bank and observe the various inputs and
outputs in the transformation process. Make a schematic diagram
to represent the transformation process including the random
disturbances and the feedback mechanism. Find out the quality
monitors for monitoring the quality of inputs to the process.
What type of process design is followed by the bank.