Friday, March 8, 2013

OPERATIONS AND STRATEGY (5 Dimensions Of Competitiveness )


OPERATIONS AND STRATEGY (5 Dimensions Of Competitiveness )

Strategy in a business organization is essentially about how the organization seeks to
survive and prosper within its environment over the long-term. The decisions and
actions taken within its operations have a direct impact on the basis on which an
organization is able to do this. The way in which an organization secures, deploys
and utilizes its resources will determine the extent to which it can successfully pursue
specific performance objectives.

1.     Cost: The ability to produce at low cost.
2.     Quality: The ability to produce in accordance with specification and without
error.
3.     Speed: The ability to do things quickly in response to customer demands and
thereby offer short lead times between when a customer orders a product or
service and when they receive it.
4.     Dependability: The ability to deliver products and services in accordance with
promises made to customers (e.g. in a quotation or other published information).
5.     Flexibility: The ability to change operations. Flexibility can comprise up to
four aspects:
i. The ability to change the volume of production.
ii. The ability to change the time taken to produce.
iii. The ability to change the mix of different products or services produced.
iv. The ability to innovate and introduce new products and services.
Excelling at one or more of these operations performance objectives can enable an
organization to pursue a business strategy based on a corresponding competitive factor.
it is important to note that the success of any particular business strategy depends not only on the ability of operations to achieve excellence in the appropriate performance objectives, but crucially on customers valuing the chosen competitive factors on which the business strategy is based. Matching operations excellence to customer requirements lies at the heart of any operations based strategy. How this might be done is discussed later in the chapter. It is unlikely that any single organization can excel simultaneously at all of the five operations performance objectives. Trying to do so is likely to lead to confusion if operations mangers pursue different objectives at different times. This lack of clarity is likely to lead to suboptimal performance and result in a failure to excel in any of the operations performance objectives. Consequently, organizations need to choose which performance objectives they will give priority to. This may result in having to 'trade-off' less than excellent performance in one aspect of operations in order to
achieve excellence in another.

EXCELLENT OPERATIONS GIVES THE ABILITY TO

EXCELLENT OPERATIONS
PERFORMANCE IN . . .
GIVES THE ABILITY TO
COMPETE ON . . .
Cost
Low price
Quality
High quality
Speed
Fast delivery
Dependability
Reliable delivery
Flexibility
Frequent new products/services
Wide range of products/services
Changing the volume of product/service
deliveries
Changing the timing of product/service
deliveries


TRADE-OFF

The concept based on the premise that it is impossible to excel simultaneously at all aspects of operations. This means that an operations strategy can be successful only if it is based upon a single clear goal, determined by a prioritization of operations performance objectives (e.g. cost, quality,
speed, dependability and flexibility).


The conventional trade-off model states that unless there is some slack in the system, improving any one of the four basic manufacturing capabilities - Quality, Dependability, Speed and Cost - must necessarily be at the expense of one or more of the other three. In the short term this seems to be the case. The picture often used is of a balance or a see-saw (above).

Professor Nigel Slack (of Warwick Business School) has pointed out that there is an alternative to disturbing the balance and that is to raise the fulcrum or balance point, thus (in the example above) simultaneously reducing cost and increasing speed. In this example the fulcrum would be either Quality or Dependability. This ties in well with Ferdows and De Meyer's "Sand Cone" model described below.


SAND CORN MODLE
The Sand Cone model suggests that although in the short term it is possible to trade off capabilities one against the other, there is actually a hierarchy amongst the four capabilities.
To build cumulative and lasting manufacturing capability, management attention and resources should go first towards enhancing quality, then - while the efforts to enhance quality are further expanded - attention should be paid to improve also the dependability of the production system, then - and again while efforts on the previous two are further enhanced - production flexibility (or reaction speed) should also be improved, and finally, while all these efforts are further enlarged, direct attention can be paid to cost efficiency.
Most of the traditional management approaches for improving manufacturing performance are built on the trade-off theory. Ferdows and de Meyer suggest the trade-off theory does not apply in all cases. Rather, certain approaches change the trade-off relationship into a cumulative one - i.e., one capability is built upon another, not in its place.
Applying this model requires a long term approach, tolerance and patience. It requires believing that costs will eventually come down.


The conventional illustration is shown above, however a representation that more accurately reflects the model, which implies that each lower layer must be extended in order to support any increase in any higher layer, is shown below.


Reference



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