1. 10/16/2010
Operations Strategy in a
2 Global Environment
Outline
Global Company Profile: Boeing
A Global View of Operations
PowerPoint presentation to accompany
Cultural and Ethical Issues
Heizer and Render
Operations Management, 10e Developing Missions And
Principles of Operations Management, 8e Strategies
PowerPoint slides by Jeff Heyl
Mission
Strategy
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Outline – Continued Outline – Continued
Achieving Competitive Advantage Strategy Development and
Through Operations Implementation
Competing On Differentiation
Key Success Factors and Core
Competing On Cost Competencies
Competing On Response Build and Staff the Organization
Ten Strategic OM Decisions Integrate OM with Other Activities
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Outline – Continued Learning Objectives
When you complete this chapter you
Global Operations Strategy should be able to:
Options
International Strategy
gy 1. Define mission and strategy
Multidomestic Strategy 2. Identify and explain three strategic
approaches to competitive
Global Strategy
advantage
Transnational Strategy
3. Identify and define the 10 decisions
of operations management
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2. 10/16/2010
Learning Objectives Some Boeing Suppliers (787)
Firm Country Component
When you complete this chapter you
Latecoere France Passenger doors
should be able to:
Labinel France Wiring
Dassault France Design and
4. Understand the significant key PLM software
success f t
factors and core
d Messier-Bugatti France Electric brakes
competencies Thales France Electrical power
5. Identify and explain four global conversion system
and integrated
operations strategy options standby flight display
Messier-Dowty France Landing gear structure
Diehl Germany Interior lighting
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Some Boeing Suppliers (787) Some Boeing Suppliers (787)
Firm Country Component Firm Country Component
Cobham UK Fuel pumps and valves Fuji Heavy Japan Center wing box
Rolls-Royce UK Engines Industries
Smiths Aerospace UK Central computer Kawasaki Heavy Japan Forward fuselage,
y
system Industries fixed section of wing,
landing
l di gear well ll
BAE SYSTEMS UK Electronics
Teijin Seiki Japan Hydraulic actuators
Alenia Aeronautics Italy Upper center
fuselage & Mitsubishi Heavy Japan Wing box
horizontal stabilizer Industries
Toray Industries Japan Carbon fiber for Chengdu Aircraft China Rudder
wing and tail units Group
Hafei Aviation China Parts
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Some Boeing Suppliers (787) Global Strategies
Firm Country Component
Korean Aviation South Wingtips Boeing – sales and production are
Korea worldwide
Saab Sweden Cargo access doors Benetton – moves inventory to stores
around the world faster than its
competition by building flexibility into
design, production, and distribution
Sony – purchases components from
suppliers in Thailand, Malaysia, and
around the world
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3. 10/16/2010
Global Strategies Growth of World Trade
Volvo – considered a Swedish company 35 –
but until recently was controlled by an 30 – Collapse of the
American company, Ford. The current Berlin Wall
25 –
Volvo S40 is built in Belgium and shares
ent
its platform with the Mazda 3 built in 20 –
Perce
Japan and the Ford Focus built in Europe. 15 –
Haier – A Chinese company, produces 10 –
compact refrigerators (it has one-third of 5–
the US market) and wine cabinets (it has 0 –| | | | | | | | | | |
half of the US market) in South Carolina 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 (est*)
Year
Figure 2.1
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Some Multinational Some Multinational
Corporations Corporations
% Sales % Assets % Sales % Assets
Outside Outside Outside Outside
Home Home Home % Foreign Home Home Home % Foreign
Company Country Country Country Workforce Company Country Country Country Workforce
p
Citicorp USA 34 46 NA ICI Britain 78 50 NA
Colgate- USA 72 63 NA Nestle Switzerland 98 95 97
Palmolive Philips Netherlands 94 85 82
Dow USA 60 50 NA Electronics
Chemical Siemens Germany 51 NA 38
Gillette USA 62 53 NA Unilever Britain & 95 70 64
Honda Japan 63 36 NA Netherlands
IBM USA 57 47 51
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Reasons to Globalize Reduce Costs
Foreign locations with lower wage
Reasons to Globalize rates can lower direct and indirect
Tangible 1. Reduce costs (labor, taxes, tariffs, etc.) costs
Reasons 2. Improve supply chain
Maquiladoras
3. Provide better goods and services
3 P id b tt d d i
4. Understand markets World Trade Organization (WTO)
Intangible 5. Learn to improve operations North American Free Trade
Reasons 6. Attract and retain global talent Agreement (NAFTA)
APEC, SEATO, MERCOSUR, CAFTA
European Union (EU)
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4. 10/16/2010
Improve the Supply Chain Provide Better Goods
and Services
Locating facilities closer to
unique resources Objective and subjective
characteristics of goods and
Auto design to California
services
Athletic shoe production to China
On-time deliveries
Perfume manufacturing in France
Cultural variables
Improved customer service
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Learn to Improve
Understand Markets
Operations
Interacting with foreign customers
and suppliers can lead to new Remain open to the free flow of
opportunities ideas
Cell phone General Motors partnered with a
design from Japanese auto manufacturer t
J t f t to
Europe learn new approaches to
Cell phone production and inventory control
fads from Equipment and layout have been
Japan improved using Scandinavian
Extend the product life cycle ergonomic competence
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Attract and Retain Global Cultural and Ethical Issues
Talent
Cultures can be quite different
Offer better employment Attitudes can be quite different
opportunities towards
Better growth opportunities and Punctuality Thievery
insulation against unemployment
Lunch breaks Bribery
Relocate unneeded personnel to
more prosperous locations Environment Child labor
Intellectual
property
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5. 10/16/2010
Companies Want To Consider Match Product & Parent
National literacy rate Work ethic Braun Household
Appliances 1. Volkswagen
Rate of innovation Tax rates
Firestone Tires 2. Bridgestone
Rate of technology Inflation
change Godiva Chocolate 3. Campbell Soup
Availability of raw
Number
N mber of skilled materials Haagen-Dazs Ice 4.
4 Tata Motors Limited
workers Cream 5. Proctor and Gamble
Interest rates
Political stability Jaguar Autos 6. Nestlé
Population
Product liability laws MGM Movies 7. Pillsbury
Number of miles of
Export restrictions highway Lamborghini Autos 8. Sony
Variations in language Phone system Alpo Petfoods
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Match Product & Parent Match Product & Country
Braun Household Braun Household
Appliances 1. Volkswagen Appliances
Firestone Tires 2. Bridgestone Firestone Tires 1. Great Britain
Godiva Chocolate 3. Campbell Soup Godiva Chocolate 2. Germany
Haagen-Dazs Ice 4.
4 Tata Motors Limited Haagen-Dazs I
H D Ice 3. Japan
Cream 5. Proctor and Gamble Cream
4. United States
Jaguar Autos 6. Nestlé Jaguar Autos
5. Switzerland
MGM Movies 7. Pillsbury MGM Movies
6. India
Lamborghini Autos 8. Sony Lamborghini Autos
Alpo Petfoods Alpo Pet Foods
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Match Product & Country
Developing Missions and
Braun Household
Appliances Strategies
Firestone Tires 1. Great Britain
Godiva Chocolate 2. Germany Mission statements tell an
Haagen-Dazs I
H D Ice 3. Japan organization where it is going
Cream
4. United States
Jaguar Autos The Strategy tells the
5. Switzerland
MGM Movies organization how to get there
6. India
Lamborghini Autos
Alpo Pet Foods
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6. 10/16/2010
Mission Merck
The mission of Merck is to provide
Mission - where are
society with superior products and
you going?
services—innovations and solutions
Organization’s that improve the quality of life and
p q y
purpose for being satisfy customer needs—to provide
Answers ‘What do employees with meaningful work and
we provide society?’ advancement opportunities and
Provides boundaries investors with a superior rate of return.
and focus
Figure 2.2
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Hard Rock Cafe
Arnold Palmer Hospital
Our Mission: To spread the spirit of
Rock ’n’ Roll by delivering an Arnold Palmer Hospital for
exceptional entertainment and dining Children provides state-of-the-art,
experience. We are committed to being family centered healthcare
y
an important, contributing member of focused on restoring the joy of
our community and offering the Hard childhood in an environment of
Rock family a fun, healthy, and compassion, healing, and hope.
nurturing work environment while
ensuring our long-term success.
Figure 2.2 Figure 2.2
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Factors Affecting Mission Sample Missions
Philosophy
and Values Sample Company Mission
To manufacture and service an innovative, growing, and
Profitability profitable worldwide microwave communications business
Environment
and Growth that exceeds our customers’ expectations.
Mission Sample Operations Management Mission
Customers Public Image To produce products consistent with the company’s mission
as the worldwide low-cost manufacturer.
Benefit to
Society
Figure 2.3
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7. 10/16/2010
Sample Missions Sample Missions
Sample OM Department Missions Sample OM Department Missions
Product design To design and produce products and Location To locate, design, and build efficient and
services with outstanding quality and economical facilities that will yield high
inherent customer value. value to the company, its employees, and the
community.
Quality management To attain the exceptional value that is
consistent with our company mission and Layout design To achieve, through skill, imagination, and
marketing objectives by close attention to resourcefulness in layout and work methods,
design, procurement, production, and field production effectiveness and efficiency
service operations while supporting a high quality of work life.
Process design To determine, design, and produce the Human resources To provide a good quality of work life, with
production process and equipment that will well-designed, safe, rewarding jobs, stable
be compatible with low-cost product, high employment, and equitable pay, in exchange
quality, and good quality of work life at for outstanding individual contribution from
economical cost. employees at all levels.
Figure 2.3 Figure 2.3
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Sample Missions Strategic Process
Sample OM Department Missions Organization’s
Supply-chain To collaborate with suppliers to develop Mission
management innovative products from stable, effective,
and efficient sources of supply.
Inventory To achieve low investment in inventory
consistent with high customer service levels
g
and high facility utilization. Functional
Area Missions
Scheduling To achieve high levels of throughput and
timely customer delivery through effective
scheduling.
Maintenance To achieve high utilization of facilities and
equipment by effective preventive
maintenance and prompt repair of facilities Finance/
Marketing Operations
and equipment. Accounting
Figure 2.3
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Strategy Strategies for Competitive
Advantage
Action plan to
achieve mission
Differentiation – better, or at
Functional areas
have strategies
g least different
Strategies exploit Cost leadership – cheaper
opportunities and Response – rapid response
strengths, neutralize
threats, and avoid
weaknesses
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8. 10/16/2010
Competing on Competing on Cost
Differentiation
Provide the maximum value as
Uniqueness can go beyond both the
perceived by customer. Does not
physical characteristics and service
imply low quality.
attributes to encompass everything
that impacts customer s perception
customer’s Southwest Airlines – secondary
S th t Ai li d
of value airports, no frills service, efficient
utilization of equipment
Safeskin gloves – leading edge products Wal-Mart – small overhead, shrinkage,
Walt Disney Magic Kingdom – distribution costs
experience differentiation Franz Colruyt – no bags, low light, no
Hard Rock Cafe – dining experience music, doors on freezers
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OM’s Contribution to Strategy
Competing on Response 10 Operations Competitive
Decisions Approach Example Advantage
Product DIFFERENTIATION
Flexibility is matching market changes in Innovative design … Safeskin’s innovative gloves
Broad product line … Fidelity Security’s mutual funds
design innovation and volumes Quality After-sales service … Caterpillar’s heavy equipment
service
Experience … Hard Rock Café’s dining
A way of life at Hewlett-Packard Process
experience
Location COST LEADERSHIP
Reliability is meeting schedules Low overhead … Franz-Colruyt’s warehouse-type Differentiation
stores
t
Layout (better)
Effective capacity
German machine industry use … Southwest Airline’s
Human aircraft utilization
Timeliness is quickness resource Inventory
management … Wal Mart’s sophisticated
Response
(faster)
in design, production, Supply chain
distribution system
Cost
RESPONSE leadership
and delivery Inventory Flexibility … Hewlett-Packard’s response to (cheaper)
volatile world market
Reliability … FedEx’s “absolutely, positively,
Johnson Electric, Scheduling on time”
Pizza Hut, Motorola Quickness … Pizza Hut’s 5-minute guarantee
at lunchtime
Maintenance Figure 2.4
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10 Strategic OM Decisions Goods and Services and
the 10 OM Decisions
Operations
1. Goods and 6. Human resources Decisions Goods Services
service design and job design Goods and Product is usually Product is not
2. Quality service tangible tangible
7. Supply-chain des g
design
3. Process and management
capacity design Quality Many objective Many subjective
8. Inventory standards standards
4. Location
selection 9. Scheduling Process Customers not Customer may be
and involved directly involved
5. Layout design 10. Maintenance capacity Capacity must
design match demand
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Table 2.1 2 - 48
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9. 10/16/2010
Goods and Services and Goods and Services and
the 10 OM Decisions the 10 OM Decisions
Operations Operations
Decisions Goods Services Decisions Goods Services
Location Near raw Near customers Supply Relationship Important, but
selection materials and chain critical to final may not be
labor product critical
Layout Production Enhances product Inventory Raw materials, Cannot be stored
design efficiency and production work-in-process,
and finished
Human Technical skills, Interact with goods may be
resources consistent labor customers, labor held
and job standards, output standards vary
design based wages Scheduling Level schedules Meet immediate
possible customer demand
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Table 2.1 2 - 49 © 2011 Pearson Education, Inc. publishing as Prentice Hall
Table 2.1 2 - 50
Goods and Services and
the 10 OM Decisions Managing Global Service
Operations
Operations
Decisions Goods Services
Maintenance Often preventive Often “repair” and Requires a different perspective on:
and takes place takes place at
at p oduct o site customer’s s te
production s te custo e s site
Capacity planning
Location planning
Facilities design and layout
Scheduling
Table 2.1
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Process Design Operations Strategies of
Two Drug Companies
High Process-focused Mass Customization
JOB SHOPS Customization at high Brand Name Drugs, Inc. Generic Drug Corp.
(Print shop, emergency Volume
room, machine shop, (Dell Computer’s PC, Competitive
Product Differentiation Low Cost
oducts
fine-dining Repetitive (modular) cafeteria) Advantage
restaurant) focus
Product Heavy R&D investment; Low R&D investment;
Variety of Pro
ASSEMBLY LINE
Moderate (Cars, appliances, Selection and extensive labs; focus on focus on development
TVs, fast-food Design development in a broad of generic drugs
restaurants) Product focused
range of drug
CONTINUOUS
categories
(Steel, beer, paper,
bread, institutional Quality Major priority, exceed Meets regulatory
kitchen) regulatory requirements requirements on a
Low country by country
basis
Low Moderate High
Volume
Table 2.2
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10. 10/16/2010
Operations Strategies of Operations Strategies of
Two Drug Companies Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp. Brand Name Drugs, Inc. Generic Drug Corp.
Competitive Competitive
Product Differentiation Low Cost Product Differentiation Low Cost
Advantage Advantage
Process Product and modular Process focused; Scheduling Centralized production Many short run
short-run
process; long general processes; “job planning products complicate
production runs in shop” approach, short- scheduling
specialized facilities; run production; focus
build capacity ahead of on high utilization
demand Layout Layout supports Layout supports
Location Still located in the city Recently moved to low- automated product- process-focused “job
where it was founded tax, low-labor-cost focused production shop” practices
environment
Table 2.2 Table 2.2
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Operations Strategies of Operations Strategies of
Two Drug Companies Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp. Brand Name Drugs, Inc. Generic Drug Corp.
Competitive Competitive
Product Differentiation Low Cost Product Differentiation Low Cost
Advantage Advantage
Human Hire the best; Very experienced top Inventory High finished goods Process focus drives up
Resources nationwide searches executives; other inventory to ensure all work-in-process
personnel paid below demands are met inventory; finished
industry average goods inventory tends
to be low
Supply Chain Long-term supplier Tends to purchase Maintenance Highly trained staff; Highly trained staff to
relationships competitively to find extensive parts meet changing demand
bargains inventory
Table 2.2 Table 2.2
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Issues In Operations Strategy Product Life Cycle
Introduction Growth Maturity Decline
Best period to Practical to change Poor time to Cost control
Resources view
egy/Issues
increase market price or quality change image, critical
share image price, or quality
Value Chain analysis R&D engineering is Strengthen niche Competitive costs
critical become critical
Defend market
Porter s
Porter’s Five Forces model
Company Strate
position Drive-through
Internet search engines restaurants
Operating in a system with many iPods LCD &
CD-ROMs
external factors Xbox 360 plasma TVs
Sales
Avatars
Constant change Analog
Boeing 787
TVs
Twitter
Figure 2.5
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11. 10/16/2010
Product Life Cycle SWOT Analysis
Introduction Growth Maturity Decline
Product design Forecasting Standardization Little product
and critical Fewer product differentiation
development Product and changes, more Cost Mission
y/Issues
critical process minor changes minimization
Frequent reliability Optimum Overcapacity
product and Internal
process design
Competitive capacity in the External
OM Strategy
product
d t industry
i d t
changes improvements
Increasing
stability of Prune line to
Strengths Opportunities
Short production and options process eliminate
runs Increase capacity items not Analysis
Long production
High production Shift toward runs returning
costs product focus good margin
Limited models
Product
Reduce
Internal External
Enhance improvement
Attention to distribution and cost cutting capacity Weaknesses Threats
quality
Strategy
Figure 2.5
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Strategy Development Process Strategy Development and
Analyze the Environment Implementation
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.
Identify key success factors
Build and staff the organization
Determine the Corporate Mission
State the reason for the firm’s existence and identify the
value it wishes to create.
Integrate OM with other activities
Form a Strategy
The operations manager’s job is to implement
Build a competitive advantage, such as low price, design, or
an OM strategy, provide competitive
volume flexibility, quality, quick delivery, dependability, after- advantage, and increase productivity
sale service, broad product lines.
Figure 2.6
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Activity Mapping at
Key Success Factors Southwest Airlines
Support a Core Competence and Implement Strategy by
Identifying and Executing the Key Success Factors in the Functional Areas
Courteous, but
Marketing Finance/Accounting Production/Operations Limited Passenger
Service
Service Leverage
Distribution Cost of capital
Promotion
Channels of distribution
Working capital
Receivables
Lean, Short Haul, Point-to-
Product positioning Payables Productive Point Routes, Often to
(
(image, functions)
g ) Financial control
Lines of credit Employees Secondary Airports
Competitive Advantage:
Decisions Sample Options Chapter Low Cost
Product Customized, or standardized 5
Quality Define customer expectations and how to achieve them 6, S6
Process Facility size, technology, capacity 7, S7 High Frequent,
Location
Layout
Near supplier or near customer
Work cells or assembly line
8
9
Aircraft Reliable
Human resource Specialized or enriched jobs 10 Utilization Standardized Schedules
Supply chain Single or multiple suppliers 11, S11
Inventory When to reorder, how much to keep on hand 12, 14, 16 Fleet of Boeing
Schedule Stable or fluctuating production rate 13, 15
Maintenance Repair as required or preventive maintenance 17 737 Aircraft
Figure 2.8
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