OPERATIONS MANAGEMENT

CONTENT Introduction Chapter 1: Productivity and Operations Manage ent Introduction A. Productivity B. Main Processes of a Company C. Aspects of Productivity

Chapter !: Operations Strategy "or a Co petitive Advantage A. Competitive Strategies B. Operations Strategy& Process

OPERATIONS MANAGMENT

Introduction
Operations Management is the business function that plans, organizes, coordinates, and controls the resources needed to produce a companys goods and services. Operations management is a management function. It involves managing people, equipment, technology, information, and many other resources. Operations management is the central core function of every company. This is true whether the company is large or small, provides a physical good or a service, is for profit or not for profit. very company has an operations management function. !ctually, all the other organizational functions are there primarily to support the operations function. "ithout operations, there would be no goods or services to sell. #onsider a retailer such as $ap that sells casual apparel. The mar%eting function provides promotions for the merchandise, and the finance function provides the needed capital. It is the operations function, however, that plans and coordinates all the resources needed to design, produce, and deliver the merchandise to the various retail locations. "ithout operations, there would be no goods or services to sell to customers. The ro#e o" operations anage ent

The role of operations management is to transform a companys inputs into the finished goods or services. Inputs include human resources &such as wor%ers and managers', facilities and processes &such as buildings and equipment', as well as materials, technology, and information. Outputs are the goods and services a company produces. !t a factory the transformation is the physical change of raw materials into products, such as transforming leather and rubber into snea%ers, denim into (eans, or plastic into toys. !t an airline it is the efficient movement of passengers and their luggage from one location to another. !t a hospital it is organizing resources such as doctors, medical procedures, and medications to transform sic% people into healthy ones. Operations management is responsible for orchestrating all the resources needed to produce the final product. This includes designing the product) deciding what resources are needed) arranging schedules, equipment, and facilities) managing inventory) controlling quality) designing the (obs to ma%e the product) and designing wor% methods. *asically, operations management is responsible for all aspects of the process of transforming inputs into outputs. #ustomer feedbac% and performance information are used to continually ad(ust the inputs, the transformation process, and characteristics of the outputs. The transformation process should be dynamic in order to adapt to changes in the

environment. +roper management of the operations function has led to success for many companies. ,or e-ample, in .//0 1ell Inc. was a second2tier computer ma%er that managed its operations similar to others in the industry. Then 1ell implemented a new business model that completely changed the role of its operations function. 1ell developed new and innovative ways of managing the operations function that have become one of todays best practices. These changes enabled 1ell to provide rapid product delivery of customized products to customers at a lower cost, and thus become an industry leader. 3ust as proper management of operations can lead to company success, improper management of operations can lead to failure. Operations management is the systematic direction and control of the processes that transform inputs into finished goods and services. The operations function comprises a significant percentage of the employees and physical assets in most organizations. Operations managers are concerned with each step in providing a service or product. They determine what equipment, labor, tools, facilities, materials, energy, and information should go into an operating system and how these inputs can best be obtained and used to satisfy the requirements of the mar%et place. Managers are also responsible for critical activities such as quality management and control, capacity planning, materials management, purchasing, and scheduling. The importance of operations management has increased dramatically in recent years. 4ignificant foreign competition, shorter product and service life2cycles, better2educated and quality2 conscious consumers, and the capabilities of new technology have placed increasing pressures on the operations function to improve productivity while providing a broader array of high2quality products and services. "ith the globalization of mar%ets, firms are recognizing that the operations function can be used to strengthen their position in the mar%et place. Managers in operations management play a strategic and tactical role in satisfying customer needs and ma%ing their firms strong international competitors.

Chapter 1: Productivity and Operations Manage ent Introduction

+roduction is a process or procedure developed to transform a set of input elements into a specified set of output elements in the form of finished products or services, whereas productivity is an efficiency concept that gauges the ratio of outputs relative to inputs in a productive process. +roductivity is one of the ma(or concerns of managers as high productivity is essential to survive in a competitive environment. +roductivity is of two types 2 total productivity and partial productivity. The problems in measuring productivity, especially that of the %nowledge wor%ers were also discussed. Operations management is the application of concepts, procedures and technologies by managers to improve the process of transformation of resource inputs into outputs. The effectiveness and efficiency of an organization depends on how effectively and efficiently operations are managed. The tools of operations research are of special interest to managers of production and operations, as they help the managers increase efficiency and profitability of the organization. Operations research and linear programming are two mathematical approaches used for optimizing operations. The applications of operations research techniques to comple- problems of an organization ta%e into account the total system that influences the decision2ma%ing process. The data is presented in a quantified form to the e-tent possible, and this helps managers to arrive at the best means of achieving the goals. The operations research procedure comprises si- steps 2 formulating the problem, constructing a mathematical model, deriving a solution from the model, testing the model, providing controls for the model and the solution, and putting the solution into effect. 5inear programming is a technique for selecting an optimum combination of factors from a series of inter2related alternatives, each sub(ected to certain limitations, in order to achieve a desired goal. Maintaining inventory helps organizations deal with uncertainties in mar%et supply and prevent stoc%outs during periods of pea% demand. 1ifferent types of inventory control used in organizations are O6, 3IT and 7anban. 1istribution logistics is a logistics system that helps in optimizing inventory procurement as well as product distribution.

Though operations research offers many advantages, it has its own limitations. The high magnitude of computation and the inability to accommodate qualitative factors prevent O8 from being applied in many management decisions. Other techniques that help to improve productivity are time2 event networ%s, value engineering, wor% simplification, quality circles and total quality management.

A. Productivity
+roductivity in economics refers to metrics and measures of output from production processes, per unit of input. Labor productivity, for e-ample, is typically measured as a ratio of output per labor2hour, an input. +roductivity may be conceived of as a metrics of the technical or engineering efficiency of production. !s such quantitative metrics of input, and sometimes output, are emphasized. +roductivity is distinct from metrics of allocative efficiency, which ta%e into account both the value of what is produced and the cost of inputs used, and also distinct from metrics of profitability, which address the difference between the revenues obtained from output and the e-pense associated with consumption of inputs. conomic gro!t" and productivity !ctivity can be identified with production and consumption. +roduction is a process of combining various immaterial and material inputs of production so as to produce tools for consumption. The methods of combining the inputs of production in the process of ma%ing output are called technology. Technology can be depicted mathematically by the production function which describes the function between input and output. The production function depicts production performance and productivity is the metrics for it. Measures may be applied with, for e-ample, different technology to improve productivity and to raise production output. "ith the help of the production function, it is possible to describe simply the mechanism of economic growth. conomic growth is a production increase achieved by an economic entity or nation. It is usually e-pressed as an annual growth percentage depicting &real' growth of the company output &per entity' or the national product &per nation'. conomic growth is created by two factors so that it is appropriate to tal% about the components of growth. These components are an increase in production input and an increase in productivity. *oth years can be described by a graph of production functions, each function being named after the respective number of the year, i.e., one and two. Two components are distinguishable in the output increase9 the growth caused by an increase in production input and the growth caused by an increase in productivity. #haracteristic of the growth effected by an input increase is that the relation

between output and input remains unchanged. The output growth corresponding to a shift of the production function is generated by the increase in productivity. !ccordingly, an increase in productivity is characterised by a shift of the production function and a consequent change to the output:input relation. The formula of total productivity is normally written as follows9

Total productivity = Output quantity / Input quantity

!ccording to this formula, changes in input and output have to be measured inclusive of both quantitative and qualitative changes. In practice, quantitative and qualitative changes ta%e place when relative quantities and relative prices of different input and output factors alter. In order to accentuate qualitative changes in output and input, the formula of total productivity shall be written as follows9

Total productivity = Output quality and quantity / Input quality and quantity

B. Main processes of a company

! company can be divided into sub2processes in different ways) yet, the following five are identified as main processes, each with a logic, ob(ectives, theory and %ey figures of its own. It is important to e-amine each of them individually, yet, as a part of the whole, in order to be able to measure and understand them. The main processes of a company are as follows9

real process income distribution process production process monetary process mar%et value process

+roductivity is created in the real process, productivity gains are distributed in the income distribution process and these two processes constitute the production process. The production process and its sub2processes, the real process and income distribution process occur simultaneously, and only the production process is identifiable and measurable by the traditional accounting practices. The real process and income distribution process can be identified and measured by e-tra calculation, and this is why they need to be analysed separately in order to understand the logic of production performance.

8eal process generates the production output from input, and it can be described by means of the production function. It refers to a series of events in production in which production inputs of different quality and quantity are combined into products of different quality and quantity. +roducts can be physical goods, immaterial services and most often combinations of both. The characteristics created into the product by the manufacturer imply surplus value to the consumer, and on the basis of the price this value is shared by the consumer and the producer in the mar%etplace. This is the mechanism through which surplus value originates to the consumer and the producer li%ewise. 4urplus value to the producer is a result of the real process, and measured proportionally it means productivity. Income distribution process of the production refers to a series of events in which the unit prices of constant2quality products and inputs alter causing a change in income distribution among those participating in the e-change. The magnitude of the change in income distribution is directly proportionate to the change in prices of the output and inputs and to their quantities. +roductivity gains are distributed, for e-ample, to customers as lower product sales prices or to staff as higher income pay. 1avis has deliberated &1avis ./;;' the phenomenon of productivity, measurement of productivity, distribution of productivity gains, and how to measure such gains. <e refers to an article &./0=, 3ournal of !ccountancy, ,eb. p. /0' suggesting that the measurement of productivity shall be developed so that it >will indicate increases or decreases in the productivity of the company and also the distribution of the fruits of production among all parties at interest>. !ccording to 1avis, the price system is a mechanism through which productivity gains are distributed, and besides the business enterprise, receiving parties may consist of its customers, staff and the suppliers of production inputs. In this article, the concept of>distribution of the fruits of production> by 1avis is simply referred to as production income distribution or shorter still as distribution. The production process consists of the real process and the income distribution process. ! result and a criterion of success of the production process is profitability. The profitability of production is the share of the real process result the producer has been able to %eep to himself in the income distribution process. ,actors describing the production process are the components of profitability, i.e., returns and costs. They differ from the factors of the real process in that the components of profitability are given at nominal prices whereas in the real process the factors are at periodically fi-ed prices. Monetary process refers to events related to financing the business. Mar%et value process refers to a series of events in which investors determine the mar%et value of the company in the investment mar%ets.

Surplus value as a measure of production profitability The scale of success run by a going concern is manifold, and there are no criteria that might be universally applicable to success. ?evertheless, there is one criterion by which we can generalize the rate of success in production. This criterion is the ability to produce surplus value. !s a criterion of profitability, surplus value refers to the difference between returns and costs, ta%ing into consideration the costs of equity in addition to the costs included in the profit and loss statement as usual. 4urplus value indicates that the output has more value than the sacrifice made for it, in other words, the output value is higher than the value &production costs' of the used inputs. If the surplus value is positive, the owners profit e-pectation has been surpassed. The table presents a surplus value calculation. This basic e-ample is a simplified profitability calculation used for illustration and modeling. ven as reduced, it comprises all phenomena of a real measuring situation and most importantly the change in the output2input mi- between two periods. <ence, the basic e-ample wor%s as an illustrative @scale model> of production without any features of a real measuring situation being lost. In practice, there may be hundreds of products and inputs but the logic of measuring does not differ from that presented in the basic e-ample. *oth the absolute and relative surplus value have been calculated in the e-ample. !bsolute value is the difference of the output and input values and the relative value is their relation, respectively. The surplus value calculation in the e-ample is at a nominal price, calculated at the mar%et price of each period. Productivity model The ne-t step is to describe a productivity model by help of which it is possible to calculate the results of the real process, income distribution process and production process. The starting point is a profitability calculation using surplus value as a criterion of profitability. The surplus value calculation is the only valid measure for understanding the connection between profitability and productivity or understanding the connection between real process and production process. ! valid measurement of total productivity necessitates considering all production inputs, and the surplus value calculation is the only calculation to conform to the requirement. The process of calculating is best understood by applying the clause of #eteris paribus, i.e. Aall other things being the same,A stating that at a time only the impact of one changing factor be introduced to the phenomenon being e-amined. Therefore, the calculation can be presented as a

process advancing step by step. ,irst, the impacts of the income distribution process are calculated, and then, the impacts of the real process on the profitability of the production. #epicting t"e development by time series 1evelopment in the real process, income distribution process and production process can be illustrated by means of time series. &7endric% ./B0, 4aari CDDE' The principle of a time series is to describe, for e-ample, the profitability of production annually by means of a relative surplus value and also to e-plain how profitability was produced as a consequence of productivity development and income distribution. ! time series can be composed using the chain inde-es as seen in the following. ?ow the intention is to draw up the time series for the ten periods in order to e-press the annual profitability of production by help of productivity and income distribution development. "ith the time series it is possible to prove that productivity of the real process is the distributable result of production, and profitability is the share remaining in the company after income distribution between the company and interested parties participating in the e-change. The graph shows how profitability depends on the development of productivity and income distribution. +roductivity figures are fictional but in practice they are perfectly feasible indicating an annual growth of ..; per cent on average. $rowth potentials in productivity vary greatly by industry, and as a whole, they are directly proportionate to the technical development in the branch. ,ast2 developing industries attain stronger growth in productivity. This is a traditional way of thin%ing. Today we understand that human and social capitals together with competition have a significant impact on productivity growth. In any case, productivity grows in small steps. *y the accurate measurement of productivity, it is possible to appreciate these small changes and create an organisation culture where continuous improvement is a common value. Measuring and interpreting partial productivity Measurement of partial productivity refers to the measurement solutions which do not meet the requirements of total productivity measurement, yet, being practicable as indicators of total productivity. In practice, measurement in production means measures of partial productivity. In that case, the ob(ects of measurement are components of total productivity, and interpreted correctly, these components are indicative of productivity development. The term of partial productivity illustrates well the fact that total productivity is only measured partially F or appro-imately. In a way, measurements are defective but, by understanding the logic of total productivity, it is possible to interpret correctly the results of partial productivity and to benefit from them in practical situations.

Typica# so#utions o" partia# productivity are: .. 4ingle2factor productivity C. Galue2added productivity H. Init cost accounting 0. fficiency ratios ;. Managerial control ratio system 4ingle2factor productivity refers to the measurement of productivity that is a ratio of output and one input factor. ! most well2%nown measure of single2factor productivity is the measure of output per wor% input, describing wor% productivity. 4ometimes it is practical to employ the value added as output. +roductivity measured in this way is called Galue2added productivity. !lso, productivity can be e-amined in cost accounting using Init costs. Then it is mostly a question of e-ploiting data from standard cost accounting for productivity measurements. fficiency ratios, which tell something about the ratio between the values produced and the sacrifices made for it, are available in large numbers. Managerial control ratio systems are composed of single measures which are interpreted in parallel with other measures related to the sub(ect. 8atios may be related to any success factor of the area of responsibility, such as profitability, quality, position on the mar%et, etc. 8atios may be combined to form one whole using simple rules, hence, creating a %ey figure system. The measures of partial productivity are physical measures, nominal price value measures and fi-ed price value measures. These measures differ from one another by the variables they measure and by the variables e-cluded from measurements. *y e-cluding variables from measurement ma%es it possible to better focus the measurement on a given variable, yet, this means a more narrow approach. The table below was compiled to compare the basic types of measurement. The first column presents the measure types, the second the variables being measured, and the third column gives the variables e-cluded from measurement.

C. Aspects of productivity
Productivity studies +roductivity studies analyze technical processes and engineering relationships such as how much of an output can be produced in a specified period of time. It is related to the concept of efficiency. "hile productivity is the amount of output produced relative to the amount of resources &time and money' that go into the production, efficiency is the value of output relative to the cost of

inputs used. +roductivity improves when the quantity of output increases relative to the quantity of input. fficiency improves, when the cost of inputs used is reduced relative the value of output. ! change in the price of inputs might lead a firm to change the mi- of inputs used, in order to reduce the cost of inputs used, and improve efficiency, without actually increasing the quantity of output relative the quantity of inputs. ! change in technology, however, might allow a firm to increase output with a given quantity of inputs) such an increase in productivity would be more technically efficient, but might not reflect any change in allocative efficiency. Increases in productivity #ompanies can increase productivity in a variety of ways. The most obvious methods involve automation and computerization which minimize the tas%s that must be performed by employees. 8ecently, less obvious techniques are being employed that involve ergonomic design and wor%er comfort. ! comfortable employee, the theory maintains, can produce more than a counterpart who struggles through the day. In fact, some studies claim that measures such as raising wor%place temperature can have a drastic effect on office productivity. -periments done by the 3apanese 4hiseido corporation also suggested that productivity could be increased by means of perfuming or deodorizing the air conditioning system of wor%places. Increases in productivity also can influence society more broadly, by improving living standards, and creating income. They are central to the process generating economic growth and capital accumulation. ! new theory suggests that the increased contribution that productivity has on economic growth is largely due to the relatively high price of technology and its e-portation via trade, as well as domestic use due to high demand, rather than attributing it to micro economic efficiency theories which tend to downsize economic growth and reduce labor productivity for the most part. Many economists see the economic e-pansion of the later .//Ds in the Inited 4tates as being allowed by the massive increase in wor%er productivity that occurred during that period. The growth in aggregate supply allowed increases in aggregate demand and decreases in unemployment at the same time that inflation remained stable. Others emphasize drastic changes in patterns of social behaviour resulting from new communication technologies and changed male2female relationships. $a%or productivity 5abour productivity is generally spea%ing held to be the same as the Aaverage product of laborA &average output per wor%er or per wor%er2hour, an output which could be measured in physical terms or in price terms'. It is not the same as the marginal product of labor, which refers to the increase in output that results from a corresponding increase in labor input. The qualitative aspects of labor

productivity such as creativity, innovation, teamwor%, improved quality of wor% and the effects on other areas in a company are more difficult to measure. Mar& on productivity In 7arl Mar-Js labor theory of value, the concept of capital productivity is re(ected as an instance of reification, and replaced with the concepts of the organic composition of capital and the value product of labor. ! sharp distinction is drawn by Mar- for the productivity of labor in terms of physical outputs produced, and the value or price of those outputs. ! small physical output might create a large value, while a large physical output might create only a small value 2 with obvious consequences for the way the labor producing it would be rewarded in the mar%etplace. Moreover if a large output value was created by people, this did not necessarily have anything to do with their physical productivity) it could be (ust due to the favorable valuation of that output when traded in mar%ets. Therefore, merely focusing on an output value realised, to assess productivity, might lead to mista%en conclusions. In general, Mar- re(ected the possibility of a concept of productivity that would be completely neutral and unbiased by the interests or norms of different social classes. !t best, one could say that ob(ectively, some practices in a society were generally regarded as more or less productive, or as improving productivity 2 irrespective of whether this was really true. In other words, productivity was always interpreted from some definite point of view. Typically, Mar- suggested in his critique of political economy, only the benefits of raising productivity were focused on, rather than the human &or environmental' costs involved. Thus, Mar- could even find some sympathy for the 5uddites, and he introduced the critical concept of the rate of e-ploitation of human labour power to balance the obvious economic progress resulting from an increase in the productive forces of labor. Productivity parado& 1espite the proliferation of computers, there have not been any observable increases in productivity as a result.K.L One hypothesis to e-plain this is that computers are productive, yet their productive gains are realized only after a lag period, during which complementary capital investments must be developed to allow for the use of computers to their full potential. !nother hypothesis states that computers are simply not very productivity enhancing because they require time, a scarce complementary human input. This theory holds that although computers perform a variety of tas%s, these tas%s are not done in any particularly new or efficient manner, but rather they are only done faster. It has also been argued that computer automation (ust facilitates ever more complebureaucracies and regulation, and therefore produces a net reduction in real productivity. !nother

e-planation is that %nowledge wor% productivity and IT productivity are lin%ed, and that without improving %nowledge wor% productivity, IT productivity does not have a governing mechanism

Chapter !: Operations Strategy "or a Co petitive Advantage

A. COMP $I$I% S$&A$ 'I S

'e"inition ! competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that (ustifies higher prices. ,ollowing on from his wor% analysing the competitive forces in an industry, Michael +orter suggested four AgenericA business strategies that could be adopted in order to gain competitive advantage. The four strategies relate to the e-tent to which the scope of businessesJ activities are narrow versus broad and the e-tent to which a business see%s to differentiate its products. The four strategies are summarized in the figure below9

The differentiation and cost leadership strategies see% competitive advantage in a broad range of mar%et or industry segments. *y contrast, the differentiation focus and cost focus strategies are adopted in a narrow mar%et or industry.

Strategy ( 'i""erentiation This strategy involves selecting one or more criteria used by buyers in a mar%et 2 and then positioning the business uniquely to meet those criteria. This strategy is usually associated with charging a pre iu price for the product 2 often to reflect the higher production costs and e-tra value2added features provided for the consumer. 1ifferentiation is about charging a premium price that more than covers the additional production costs, and about giving customers clear reasons to prefer the product over other, less differentiated products. Strategy ( Cost $eadership "ith this strategy, the ob(ective is to become the lowest2cost producer in the industry. Many &perhaps all' mar%et segments in the industry are supplied with the emphasis placed minimising costs. If the achieved selling price can at least equal &or near'the average for the mar%et, then the lowest2cost producer will &in theory' en(oy the best profits. This strategy is usually associated with large2scale businesses offering AstandardA products with relatively little differentiation that are perfectly acceptable to the ma(ority of customers. Occasionally, a low2cost leader will also discount its product to ma-imise sales, particularly if it has a significant cost advantage over the competition and, in doing so, it can further increase its mar%et share. Strategy ( 'i""erentiation )ocus In the differentiation focus strategy, a business aims to differentiate within (ust one or a small number of target mar%et segments. The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants 2 in other words that there is a va#id %asis "or di""erentiation 2 and that e-isting competitor products are not meeting those needs and wants. Strategy ( Cost )ocus <ere a business see%s a lower2cost advantage in (ust on or a small number of mar%et segments. The product will be basic 2 perhaps a similar product to the higher2priced and featured mar%et leader, but acceptable to sufficient consumers. 4uch products are often called Ame2tooJsA.

B. Operations Strategy& Process

.. To understand the competitive priorities available to an organization and their relationships C. To consider the impact of strategy on operations also of operations on strategy Organi*ation Strategy #orporate strategy focuses on the questions9

"here are we goingM <ow are we going to competeM <ow are we going to meet customer needs in order to accomplish our ob(ectivesM

Typical steps in setting an organizationJs strategy9 .. stablishing $oals C. Mar%et and #ompetitive !nalysis 2 4ee the 4ociety of #ompetitive Intelligence for information H. Identification of +roducts, Mar%ets and #ompetitive +riorities 0. stablishment of +olicy $uidelines and #onstraints Mission ( "hy are we in the businessM +ision 2 "hat do we want our organization to loo% li%e ; years from nowM Strategic Goa#s2 4pecific intended targets that indicate how the organization will achieve its mission and vision Operations Strategy Once the organization has a clear picture of where it is heading the operations strategy can be addressed.

+rofessionals site

+urpose 2 To support the organization strategy. Operations can be used as a #ompetitive "eapon

( by e-celling in one or two %ey areas of operations a company may gain an edge over its competition. The relationship between Operations and #orporate 4trategy Product Strategy, 1efinition N combination of physical, service and other characteristics to meet customer needs +roduct 1ifferentiation

O O

design a product to meet customers needs to create a competitive advantage

Mar-et Strategy $rouping of customers based on important difference in their needs, preferences and:or ability to buy options,

mass differentiation niche2focus

Co petitive Pre ise <ow do we intend to compete in the mar%et placeM "hat will we offer our customers that is .. C. H. 0. important to them different from our competitors conomically feasible difficult to match : imitate

Co petitive Priorities #ompetitive priorities9 the elements in which operations must e-cel in order to support corporate strategy. ! company cannot e-cel on all dimensions and must select the ones most important to its operations and organizational strategy. 1, Cost and.or price

the production and distribution of a product or service with a minimum of e-penses or wasted resources low cost production and distribution low price product or service

!, /ua#ity and dependa%i#ity

producing a product which meets &or e-ceeds' customer e-pectations for quality providing consistent quality &AdependabilityA'

0, Per"or ance

product features high2performance design allows product to do things that other products cannot

1, 'e#ivery

the ability to meet requested and promised delivery schedules short lead time or fast delivery &AspeedA' on2time delivery &AreliabilityA' speed in developing and introducing new products or services

2, )#e&i%i#ity The ability to respond to rapid changes in customer demand and requirements for e-isting

products or services product fle-ibility 2 quic%ly introduce new products or ability to ma%e rapid design changes to e-isting products

process fle-ibility &Avolume fle-ibilityA'

3, Innovativeness: !bility to introduce and incorporate new ideas into products and processes. Top Ran-ed Co petitive Priorities 1445 Co petitive Priorities #onformance quality On2time delivery +roduct reliability +erformance quality 5ow +rice 1443 Co petitive Priorities #onformance quality +roduct reliability On2time delivery 5ow price ,ast delivery +erformance quality 4peedy new product introduction

Mar%et 6ualifying:Order "inning +riorities Mar%et qualifying 2 characteristics a product must have to be in the mar%et 2 "hich is mar%et qualifying for a lu-ury carM Order winning 2 characteristics ma%e a product different and cause customers to buy 2 "hich is mar%et winning for a +orsche /..M "ocus

6usiness syste

"hat are the %ey value adding activities "hich activities will be done.

O O O

"ithin the organization &internal'M *y others &e-ternal'M 3ointlyM

*usiness system 2 the combination of all activities &physical vs. service) primary vs. support) internal, (oint, e-ternal' that must be performed to product and mar%et a product

'eve#oping an Operations Strategy .. C. group H. group 0. #onvert these attributes into specific performance characteristics 2 most focus 1etermine mar%et qualifying and order winning attributes for each product 4egment the mar%ets by product groups Identify product requirements, demand patterns and profit margins for each

will be on order winning