Operations Strategy Final Exam

1. What is the corporate view of Nolan and Warner's strengths?

The corporate view of Nolan and Warner’s strengths are:

I. Position in the market,
II. The inherent product design,
III. The company’s manufacturing capability,
IV. Available plant, and
V. Process capacity.

2. What is Nolan and Warner's current marketing strategy? What is the rationale behind it?

The marketing strategy of Nolan and Warner’s is “to minimize the reduction in sales revenue
in real terms and then build on the European and U.S. demand improvements as the world
economy picks up”. In order to achieve this, marketing intends to increase the product range
and smaller volume product. The rationale behind this is increasing competition and excess
capacity which had put much pressure on the company’s markets and sales. The excess
capacity has been due to the leading capacity strategy adopted by the company. The smaller
volume product represents good revenue.

3. What is Nolan and Warner's current operations strategy? Is it well aligned with its
marketing and corporate strategy? Why or why not?

Decision Area
Order Winner Product design
Order Qualifier
Capacity Strategy:
Leading vs lagging? Leading capacity strategy with cushion
Cushion?
Facilities Strategy
Location Currently have 2 facilities
Specialized vs General Purpose Combination of general purpose and specialized equipment
Number of locations Non-focused strategy
New vs revamped
Focus
Process Technology Strategy
Extent of Automation Mid-level automation for the assembly line
Specialized vs General Purpose Equipment Combination of specialized and general-purpose equipment
Age of equipment Old equipment until year 3 when assembly line capital
investment was made
Layout (cells, lines…)
Process choice

Vertical Integration and Sourcing Strategy
Horizontal vs Vertical
Extent of Vertical Integration
Sourcing
Partnership and Alliances
Relationships with Suppliers
Combination of cell layout for low volume product and
assembly line for high volume products
Functional
Minimal sourcing – manufacturing internally is highly
encouraged
Transactional

Decision Area Actual

Order Winner
Order Qualifier
Workforce Strategy
Percent direct vs Indirect 47% direct sand 22 indirect
Production Planning and Control Strategy
Lot Size
Inventory Strategy
MTO vs MTS, ATO Made to stock
Organization Strategy
Profit Center vs Cost Center Profit center
Structure of organization Functional
Centralized vs Decentralized Centralized
Driver: Marketing/ Finance/ Engineering? Marketing
Role of Operations
Ownership Structure

The current operational strategy is a leading capacity strategy which is more of a low-cost
order winner. Analysis of the company’s emergent operation strategy show the company’s
operation as a combination of product design order winner (low volume products) and price
(high volume product). This is not aligned with the company’s corporate strategy of
“inherent product design” but aligned with marketing strategy of minimizing declining
revenue by venturing into both low-volume and high-volume products.

4. What are the implications for Nolan and Warner's operations of its marketing strategy?

Due to the excess operating capacity, operation is producing more than needed and putting
much strain on the marketing strategy. In order to align with marketing strategy, operations
need to cut down on excess inventory in order to increase cash flow. Both operation and
marketing need to revisit their strategies in order to align with the corporate strategy of
inherent product design.
5. What actions (if any) do you recommend that Nolan and Warner take? Please be specific.

Process Choice
Relevant Aspects
Job Shop Batch Line
Product Range Wide Narrow
Products

Markets

Customer Order size Small Large

and

Rate of new Product introduction Fast Slow

Order winner Product design Price
Process technology General Purpose Dedicated
Manufacturing

Ability to cope with product change High Low

Ability to cope with schedule change Low high
Infastructure

Number of setup high low

Expense of setup inexpensive expensive
Level of Capital investment Low High
Engineering orientation Product introduction Product improvement
RM Inventory As required planned with buffer
WIP inventory High Low
% of total cost

FG Inventory Low High

% Direct labor cost high low
% direct materials cost Low high
% overhead cost low high
Analysis of the Nolan and Warner’s stages of product and process life cycle and product
profiling shows a combination of both job shop and assembly line. This is also illustrated by
exhibit 5 which shows the machine categories as a combination of general purpose and
specialized equipment. I would recommend that the company combine both the job-shop and
assembly line to batch production technique and live with the mismatch. This would involve
moving the sub-assembly, assembly and test facility to the job-shop. This could help reduce
the inventory level and ability to respond quickly to customer changes. It could also help
reduce the percent direct labor cost.