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CHAPTER 2
OPERATIONS STRATEGY
OPERATIONS STRATEGIES
Best cost (cost driven)
Competitive
Differentiation advantages
Fast response
PRODUCTION STRATEGIES
Best cost (cost Lowest cost lowest
driven)
price
Maximum customer
value
Differentiation
Lowest cost does not
mean low value or low
Fast response quality
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Southwest Airlines is a cheap airline of US who
is very successful while others get loss of billion
dollars:
Exploit cheap and short flights.
Use secondary airport or terminal.
No seat booking.
Aircrew with few people but more working
time.
No meal serving
Online ticket
Only Boeing 737
PRODUCTION STRATEGIES
Best cost (cost Provide unique values.
driven)
Identify all
characteristics of products/
services impacting the
Differentiation
potential customer values:
Convenience.
Fast response Customer services.
After-sales support.
Hard Rock Café attracts customers with:
classical Rock music, Rock video on large screen,
souvenir with story-tellers, staff tells about the
exhibits, a store for selling souvenirs for customers
as a tangible value of their experience.
Hard Rock Café make the differentiation by
providing customers with a dinner experience
rather than purely a meal.
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Electronic products “Made in Japan” from Sony,
Toshiba… make the differentiation through?
QUALITY
PRODUCTION STRATEGIES
Flexibility: respond to
Best cost (cost
driven) changes (forms, quantity,
quality)
Fast and reliable response:
Differentiation Ontime product
development and delivery.
Reliable plan.
Quickness: Speed in design,
Fast response
production and delivery.
KFC delivery to home in 30 minutes.
Dell – Customized design and production of
PCs in 18 hours
Mechanical industry in Germany with highest
labor cost still maintains its competitive ability
through quick response
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PLANNING AND CONTROL
Planning
• - Long-term planning (> 12 months)
• - Medium-term (1 month to 12 month)
• - Short-term (< 1 month) daily/weekly operations.
• Long-term (or strategic planning): the important decisions such as production
lines, new machines investment or equipment replacement.
• Medium-term: focus on purchasing raw materials or using human resource.
• Short-term: focus on specific operations (daily or weekly) in scheduling and
sequencing.
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PLANNING AND CONTROL
Control
• Two essential responsibilities for POM managers: planning & control.
• Control is measurable way that the POM managers can manage the
efficiency of operational planning.
• Control volume & quality of output some necessary data in MIS such
as: revenue, Sales, Costs, Volume, No. of served customers, Product
quality, & No. of returned customers.
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POM DECISIONS
1. Quality
• Q is the most important decision in operations
2. Product/service design
• Beginning of production process.
3. Process & technology planning
• Based on product design.
4. Facility layout
• Assign & locate machines and tools for efficient
operations.
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POM DECISIONS
5. Material handling and work-in-process
• Meet production requirements.
6. Job design
• More productivity & quality
7. Demand forecasting
• Quantity & time for production
8. Scheduling and sequencing
• Using and arranging production resources to meet
customers’ demand.
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THE END
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