Strategic Management of Resources

Session 1 Aligning Resources with Strategic Plans

Strategic Management of Resources

Session 1: Session 2: Session 3: Session 4: Aligning Resources with Strategic Plans Choices Affecting Structure Choices Affecting Infrastructure Configuring and Integrating Operating Processes Supply Chain Management Configuring and Integrating Design and Development and Cost Management Processes Project Management Measurement Management Change Management
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Session 5: Session 6:

Session 7: Session 8: Session 9:

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Objectives of Session 1

Recognize the need for integration of the manufacturing process with the company strategy Identify considerations to make in developing the strategy Understand organizational strategy selection Explain how resources can be aligned with strategic market objectives Determine the importance of customer requirements in product design and development Describe the strategic importance of Just-in-Time (JIT) and total quality management (TQM)
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Principle of Competitive Exclusion No two species can coexist that make their living in the identical way.
Professor G.F. Gause

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Strategy (Strategic Plan)

The plan for how to marshal and determine actions to support the mission, goals,and objectives of an organization. Generally includes an organizations explicit mission, goals, and objectives and the specific actions needed to achieve those goals and objectives. APICS Dictionary, 9th ed.
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Considerations in Developing Strategy Components

Development of time horizons Identification of key events Development of distinctive competence Creation of a competitive advantage Flexibility of decision patterns Transformation of inputs into value-added outputs Commitment of necessary resources

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Strategic Planning Model

Facilities Short/Long Term Planning Plan Unit Plan Capability Controls Plan Plan Operations Strategy Critical Skills Plan Financial Strategy Directions Plan Market Segment Plan Market Niches Plan

Corporate and Business Strategy

Product Production Development Generation Strategy Plan

Production Technology Plan

Marketing Strategy

Market Shares Plan

Competitive Analysis Plan

Source:Hayes, Robert H., Steven C. Wheelwright, and Kim B. Clark, Dynamic Manufacturing: Creating the Learning Organization, (The Free Press, 1988). Adapted with permission.

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A Corporate Strategy Model

Vision Mission

Organizational Objectives
Environmental Scanning Internal Strength and Weakness Analysis Corporate Strategy
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Typical Strengths and Weaknesses

Function
Marketing

Strengths
Strong salesforce Excellent distribution Excellent marketing information
Excess cash Large line of credit Excellent cost information Wall Street rating Experienced designers Patent protection

Weaknesses
Insufficient salesforce Poor forecasting

Finance/ Accounting

Using wrong cost system Heavily leveraged No timely reporting

R&D/Design

Insufficient R&D spending

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Business Strategy Approaches

Three possible strategies for competitive distinction

Price leadership
Low-cost operations Effective supply chain management Standardized off-the-shelf products Standardized processes

Product differentiation
High-quality products Easily adaptable processes

Focus toward a particular customer

Responsive delivery, process flow Customized for targeted market segment

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Operations Strategy
The content and process of activities, directed toward distinctive operations competence, that evaluate potential impacts of situations and alternatives in structured time dimensions and integrate a pattern of decisions to balance the resource commitments, output requirements, and risk in various focused transformation efforts

Source: Stonebraker, Peter W. and G.Keong Leong , Operations Strategy, (Prentice-Hall, 1994). Reprinted with permission of Prentice-Hall..

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Four Elements of Operations Strategy

Method for evaluating the impact of activities Definition of time dimensions

Time horizon Time fences

A mechanism for integrating decisions Transformation efforts

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Source: Hayes, Robert H., Wheelwright, Steven C., and Clark, Kim B., Dynamic Manufacturing, (The Free Press, 1988). Reprinted with permission of The Free Press.

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Focus of an Operations Strategy

Process-focused strategy
Wide range of customized products or services at low volumes

Product- or service-focused strategy

Narrow range of standardized products or services at high volumes

Customer-focused strategy
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Strategy Development Approaches

Overview approach
Identify several core strategic focuses Make a checklist Focus on one or two issues

Reductionist approach
Identify root causes Reduce effects

Sequential approach
Address competitive priorities one at a time Build upon foundation priority

Trade-off approach
Identify most important variables and contributing factors Identify interaction and possible impacts

Source: Stonebraker, Peter W. and Leong G.Keong, Operations Strategy, (Allyn and Bacon, 1994). Adapted with permission of Allyn and Bacon.

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Strategic Planning Model

Facilities Short/Long Term Planning Plan Unit Plan Capability Controls Plan Plan Operations Strategy Critical Skills Plan Financial Strategy

Corporate and Business Strategy

Directions Plan
Market Segment Plan Market Niches Plan

Product Production Development Generation Strategy Plan Production Technology Plan

Marketing Strategy

Market Shares Plan

Competitive Analysis Plan

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Source:Hayes, Robert H., Wheelwright, Steven C., and Clark, Kim B., Dynamic Manufacturing: Creating the Learning Organization, (The Free Press, 1988). Adapted with permission of Prentice-Hall.

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Operations Strategy
Corporate Strategy Focus: Survival Business Strategy Focus: Distinctive competence in the field Cost leadership Product differentiation Focus (cost or differentiation)

Manufacturing Operations Strategy Focus: Competitive Strategies Cost Flexibility Quality Delivery

Other Operations Strategies Marketing Finance Human Resource Engineering

Policy
Service-enhanced product or delivered service Satisfied customer

Source: Stonebraker, Peter W. and Keong Leong, G., Operations Strategy (Boston: Allyn and Bacon, 1994). Adapted with permission of Allyn and Bacon.

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A Firm Can Compete On

Price

Quality

Delivery

Flexibility
Time

Product Design
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Service
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Competitive Advantage Categories

Order Winners
Characteristics that make your customers prefer you over competitors

Qualifiers
Characteristics you need to get into the game

Nonissues
Characteristics that do not enter into the competitive picture for that market niche

Source: Hill, Terry, Manufacturing Strategy, (Irwin McGraw-Hill, 1994). Reprinted with permission of Irwin McGraw-Hill.

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Determinants of Industry Attractiveness

Threat of new entrants

Bargaining power of suppliers

Rivalry among existing competitors

Bargaining power of buyers

Threat of substitute products or services

Source: Porter, Michael E., and Victor E. Millar, How Information Gives You Competitive Advantage (Harvard Business Review Strategic Management of Resources APICS Readings APICS, 2000.

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Total Quality Management

An effective system for integrating the quality development, quality maintenance, and quality improvement efforts of the various groups in an organization so as to enable production and service at the most economical levels which allow for full customer satisfaction Armand Fiegenbaum
Quality

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Approaches to Quality

Transcendent quality is an ideal, a condition of excellence Product-based quality is based on a product attribute User-based quality is fitness for use Manufacturing-based quality is conformance to requirements Value-based quality is the degree of excellence at an acceptable price
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Quality Function Deployment

A methodology designed to ensure that all the major requirements of the customer are identified and subsequently met or exceeded through the resulting product design process and the design and operation of the supporting production management system.
Source: APICS Dictionary, 9th Ed. 1998

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This visual has been deleted. The numbering sequence has not been changed. --The Committee
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Internal and External Customers

Organization
Process
Output

Internal Customer Process

Output

Internal Customer

External Customer
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Quality Costs
Internal failure costs External failure costs Appraisal costs Prevention costs

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Quality at the Source

Companywide involvement Employee empowerment Development of world-class suppliers Prevention orientation Employee morale/attitudes

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Strategic Importance

One way to achieve competitive advantage Customer focused and customer driven Necessary for survival and competitive advantage Customer

Overall Business Strategy JIT

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TQM
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Definition of JIT
JIT is a philosophy of operations based on planned elimination of all waste and on continuous improvement of productivity. It encompasses the successful execution of all manufacturing activities required to produce a final product or service, from design engineering to delivery, including all stages of conversion from raw material onward.
Source: APICS Dictionary, 9th Ed. 1998

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Important Concepts of JIT

Elimination of Waste

Respect for People

Customer

Continuous Improvement
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Focus on Customer
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Lean and JIT Similarities

Based on the Toyota production system Focus on value as defined by the customer Focus on eliminating all forms of waste Employ total quality management tools Employ continuous improvement

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This visual has been deleted. The numbering sequence has not been changed. --The Committee
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This visual has been deleted. The numbering sequence has not been changed. --The Committee
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This visual has been deleted. The numbering sequence has not been changed. --The Committee
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Benefits of JIT

50-90% reduction in throughput times 50-90% reduction in work in process 60-80% reduction in scrap and rework 50-90% reduction in setup times 30-60% reduction in manufacturing space required

Source: Sandras, W. A. Jr., Just-in-Time: Making It Happen (Unleashing the Power of Continuous Improvement.), (John Wiley and Sons, 1989.) Adapted with permission of John Wiley and Sons.

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Benefits of JIT (cont.)

20% increase in shipments 40% reduction in space utilization 33% reduction in labor standards

Source: Hall, Robert W., Attaining Manufacturing Excellence, (Dow Jones-Irwin, 1987). Adapted with permission of Dow Jones-Irwin.

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Benefits of JIT (cont.)

Improved
Quality Productivity Service Capacity Standardization Transport Systems Flexibility
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Reduced
Inventory Lot sizes Lead times Unit costs Design time Space Energy
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Source: Wantuck, K.A., Just in Time for America, (KWA Media, 1989). Adapted with permission of KWA Media.

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Objectives of JIT

To gain a competitive advantage To improve responsiveness to customers To achieve perfect quality To improve quality of work life To improve flexibility To improve resource productivity To use time-based management To reduce product cost
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