Operations As A

Competitive Weapon

Operations As A Basic
Function

Operations

Marketing Finance

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 Definition of Operations
Management

Operations Management is the process

of planning, organising and controlling
value added transformation process to
meet the goals of an organisation.

General Model of Managing

Operations

Planning Organising

Controlling

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 Managing Transformation
External environment

Customer or client
participation
Inputs
• Man Processes
• Machine
• Materials Outputs
• Energy 1 3 • Goods
• Services 5 • Services
• Land
2 4

Information on
performance

Transformation Processes
• Physical (manufacturing)
• Locational (transport/storage)
• Exchange (retail)
• Physiological (healthcare)
• Psychological (entertainment)
• Informational (communications)

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 Manufacturing Strategies

• Make to Stock (MTS)

• Assemble to Order (ATO)
• Make to Order (MTO)
• Engineer to Order (ETO)

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Manufacturing Strategies
Components Semi- Finished
Raw
Finished
Matl.
MTS

ATO

MTO

ETO

CODP: Customer Order De-coupling Point

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 Skill needed by Operations
Managers
• Technical Competence
• Behavioural Competence

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Activities of Operations Managers

to Support Company Success

• To Company
- higher profitability
- higher productivity
- higher quality, safety & environment care

• To Customer
- cost, quality, delivery and flexibility
(service)

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 Challenges of Service
Operations
• Productivity Measurement- easy in
manufacturing operations
• Quality Standards- difficult to establish
in service operations
• Service- contact with customers
(generally)
• Manufacturing- seldom see the
customer of the product
• manufacturing Operation can
accumulate or decrease inventory
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Current Issues
• Speeding up the time it takes to get new
products into production.

• Developing flexible production systems to

enable mass customisation of products and
services.

• Managing global production networks.

• Developing and integrating new production

technologies into existing production
systems.
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 Current Issues
• Achieving high quality quickly and keeping it
up in the face of restructuring.
• Managing a diverse workforce.
• Conforming to environmental constraints,
ethical standards, and government
regulations.

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Operations Strategy

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

18
 Operations Strategy

“A consistent pattern of business

decisions for operations and the
associated supply chain …

… that are linked to the business

strategy and other functional
strategies, leading to a competitive
advantage for the firm.”
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

19

Corporate strategy

Business strategy

Operations Strategy
Internal Functional strategies in
analysis Mission marketing, finance,
engineering,
Objectives human resources,
(cost, quality, flexibility, delivery) and
External information systems
Strategic Decisions (process,
analysis
quality system, capacity, and inventory)

Distinctive
Competence

Consistent pattern of decisions

Results
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

20
 Operations Strategic
Objectives
• Cost – resources used
• Quality – conformance to customer
expectations
• Delivery – quickly and on time
• Flexibility – ability to rapidly change operations

How does a firm use these objectives to gain a

competitive advantage?
What trade-offs exist among the objectives?

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

21

Distinctive Competence

• Something an organization does better than any

competing organization that adds value for the
customer.

• Examples: patents, proprietary technology,

operations innovations

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

22
 McDonald’s Operations Strategy

• First restaurant started in 1955 by Ray Kroc in Des Plaines,

Illinois, USA

• Mission: fast product/service, consistent quality, low cost,

clean/friendly environment

• Operations Objectives: cost, quality, delivery and service

• Strategic decisions: process, quality, capacity, inventory

• Distinctive Competence: today - continuous improvement of the
transformation system, and brand (originally: unique service/supply
chain)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

23

McDonald’s Operations Strategy

• Service system was designed on the idea of a very limited menu

and fast production of standardized food and service with
convenience and low price

• Operation strategy:

“to provide a unique service operation and a supply

chain that would provide fast food to customers in
clean environment at low prices”

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

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 Characteristics of “Global
Corporations”
• Facilities & plants located worldwide, not country
by country.
• Products & services can be shifted among
countries.
• Sourcing on a global basis.
• Supply chain is global in nature.
• Product design & process technology are global.
• Products/service fit global tastes.
• Demand is considered on worldwide basis.
• Logistics & inventory control is on worldwide
basis.
• Divisions have world-wide responsibility.
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

25

Supply Chain Strategy

• To achieve competitive advantage for the
entire supply chain, rather than individual
entities.
• Two supply chain strategies:
– Imitative Products (e.g. commodities)
• Predictable demand
• Efficient, low-cost supply chain
– Innovative Products (e.g. new technologies)
• Unpredictable demand
• Flexible, fast supply chain
• Firms must design the right supply chain for
each product or group of products, and
avoid a “one size fits all” strategy.
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

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 Environment & Sustainable
Operations
Sustainability: minimizing or eliminating
environmental impact of operations.
The ‘greening’ of operations:
– Product development
– Sourcing
– Manufacturing
– Packaging
– Distribution
– Transportation
– Services
– End-of-life management (e.g. recycling)

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

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