D 0854

Supply Chain : Manufacturing and Warehousing

Session 01 The Role of Operations Management 1

The Role of Operations Management and its connection to Corporate strategy

Bina Nusantara University

Bina Nusantara University

Manufacturing Matters
A question that is being debated and has been debated by economist for the past 20 years is the importance of a strong manufacturing base.

Precisely, the shift in jobs from the manufacturing sector to service sector.
Is a strong manufacturing based important for the health of company ?
Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

A Framework for Operations Strategy

( Porter, 1990 ) indicated the two dimensions of a. Lower Cost b. Product Differentiation
Reference is the classical literature on competitiveness claims that firms position themselves strategically in the marketplace along one of the mentioned two dimensions.

Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

A Framework for Operations Strategy (3)

Most firms that have along record of success in the marketplace have differentiated themselves from their competitors. By providing the uniqueness to buyers, they are ab le to sustain a high profit margin over time.

One example is BMW, one of the most profitable auto firms in the world. BMW continues to produce high-performance, well made cars that are often substantially more expensive than those of competitors in their class.
Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

A Framework for Operations Strategy ( 4 )

Often new entrants to a market position themselves as the low-cost providers. Firms that have adopted this approach include the
o Korean automakers ( Hyunday, Daewoo, KIA), o Discount outlets ( Costco ) o Retailers ( Waltmart )

While being the low-cost provider can be successful over the near term, it is a risky strategy. Consumers ultimately will abandon products that they perceive as poor quality regardless of cost.
Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

A Framework for Operations Strategy ( 5 )

Strategic Dimensions : Cost and product differentiation are not the only dimensions along which firm distinguish themselves.

The following additional factors relate directly to the operations function :

Quality Delivery Speed Delivery Reliability Flexibility

Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

A Framework for Operations Strategy ( 6 )

One way to think Operations Strategy is the strategic positioning the firm chooses along one of the dimensions of cost, quality, delivery speed, delivery reliability and flexibility.
Operations Management is concerned with implementing the strategy to achieve leadership along one of these dimensions.

Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

Quality
What does Quality mean ? It is a word often bandied about, but one that means different things in different context. Consider the following hypothetical remarks.
1. That hair dryer was a real disappointment. It really didnt dry my hair as well as I expected. 2. I was thrilled with my last car. I sold it with 150,000 miles and hardly had any repairs. 3. I love buying from that catalogue. I always get what I order within two days. 4. The refrigerator works fine, but I think the shelves could have been laid out better.

Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

10

Delivery Speed
Delivery Speed can be an important competitive weapon in some contexts. Some firms base their primary competitive position on delivery speed, such as
o UPS and Federal Express. o Mail-order and web-based retailers
must be able to deliver products reliably and quickly to remain competitive

o Building contractors
must be able to complete projects on time

Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

11

Delivery Reliability
Delivery Reliability means being able to deliver products or services when promised. Some firms base their primary competitive position on delivery reliability, such as
o Online Brokerage
that execute trades reliably and quickly will retain customers.

o Contract manufacturers
are measured on several dimensions, one being whether they can deliver on time.

As third party sourcing of manufacturing continues to grow, the successful contract manufacturers will be the ones that put customers first and maintain a record of delivering high quality products in a reliable fashion.
Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

12

Flexibility
Flexibility means offering a wide range of products and being able to adjust to an unexpected changes in the demand of the product mix offered.

Successful manufacturers in the 21s century will be those that can respond the fastest to unpredictable changes in customer tastes. The flexibility of Toyota allow to adjust the product mix on a real-time basis and to embark on a system in which customers could order custom-configured cars directly from terminals located in dealer showrooms . ( Port, 1999 )
Bina Nusantara University

Source : Production and Operations Analysis 4th Edition, Steven Nahmias McGraw Hill International Edition

13