Strategic Operations Management: Optimizing for Competitive Advantage
Unit 4: Strategic Operations Management II
Operations Functions
To achieve competitive objectives and mission, consistent decision-making policies are essential.
Structural Decisions
Internationalization
Influencing factors include emerging markets, geographical diversification, production capacity, product life cycle, and competition. Several internationalization paths exist:
- Export: Selling products directly or through intermediaries. Advantages: No need for plants or extensive logistics facilities. Disadvantages: Tariffs and quotas.
- Licensing: Allowing a foreign company to use specific skills.
- Joint Ventures: Offer better control without establishing a wholly owned plant.
- Direct Ownership: Provides maximum control over international marketing and logistics.
Product Design, Development, and Launch
Functions involved include marketing, sales, and manufacturing. Phases encompass concept development, product launch planning, product engineering, pilot production, and launch. Strategies focus on maintaining or gaining competitive advantage and creating new businesses through continuous innovation.
Open Innovation: Utilizing internal and external knowledge. Advantages: Reduced time to market and risks. Disadvantages: Potential lack of control.
Operations Capacity
Capacity is the maximum output per period. Optimal utilization minimizes unit costs. Capacity considerations include economies of scale, experience curve effects, and the impact of changing facility focus.
Operational and Logistic Facilities
Facility-related policies influence size and location decisions. Large facilities offer economies of scale, while smaller facilities prioritize flexibility and proximity to markets. Location criteria include product and market configuration, process configuration, general-purpose configuration, proximity to customers, infrastructure, and suppliers.
Vertical Integration and Purchases
Integration strategies involve alliances with suppliers to secure supply, competitive discounts, and systems. ABC Item Classification:
- A Items: Represent approximately 10% of items but 90% of investment.
- B Items: Represent approximately 30% of items and 15% of investment.
- C Items: Represent approximately 60% of items and 5% of investment.
Purchase Management: Involves acquiring raw materials, supplies, and components. Warehouses: Storage locations for various materials.
Infrastructural Decisions
Human Resource Management
Includes organizational structure, employee categories, and compensation. Agile Movement: A set of methods and practices originating in software development and now applied across industries.
Quality Management and Control
- Product Quality Control: Focuses on inspecting products/services and reducing defects.
- Process Quality Control: Aims to prevent defects, minimizing errors in operational tasks.
- Quality Management Systems (ISO 9000): An interrelated set of processes responsible for product/service quality and meeting customer requirements.
- Models of Excellence in Business Management (EFQM): A holistic approach to quality encompassing the entire organization.
Operations Planning and Control
Key variables include order lead time and service rate.
- Project Planning and Control: For companies offering a broad range of products/services.
- Order Planning and Control (Integrated Planning): For companies with a specific, limited product/service range.
Technology
Technology adds value to products/services. Strategic decision factors include available technological capabilities and investment. Key aspects include technology life cycle, business focus, adaptability, cohesion, integrity, and culture.