OPERATIONS

MANAGEMENT
FOR COMPETITVE A
DVANTAGE
ดร. ชัยรัช หิรัญยะวะสิต
Chairat Hiranyavasit, Ph.D., CPIM (APICS)
คณะบริหารธุรกิจ
สถาบันบัณฑิตพัฒนบริหารศาสตร์ (NIDA)

Telephone: 08-1614-6910
chairatdr@yahoo.com

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 1

 Instructor’s Background
• Education Degrees:
– B.Sc. in Chemical Engineering, Chulalongkorn University
– M.S. in Production and Inventory Management, Georgia State
University
– Ph.D. in Operations Management, Georgia State University
– Certified Production and Inventory Management (CPIM) by
American Production and Inventory Control Society (APICS)

• Areas of Specialization:
– Strategy Formulation and Deployment
– Operations Management

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 2

 Instructor’s Background
• Past Work Experiences:
– Bangkok Motor Equipment Co., Ltd., Thailand / Project Manager
– Siam Technology, Co., Ltd. / Engineering Consultant
– IBM-GSU Project, Atlanta, Georgia, USA / Research Team Leader
– Georgia State University, Atlanta, Georgia, USA / Instructor
– Auburn University, Auburn, Alabama, USA / Assistant Professor

• Current Works:
– National Institute of Development Administration (NIDA)
• Full-time Faculty in Operations Management, School of Business
Administration
– Consultant

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 3

ระบบการปฏิบต
ั ิการ (Operations System)

Environment
Social Political Economy Legal Technology
Suppliers Competitors Customers

Outcome
Transformation
SUPLLIERS Inputs Process Outputs CUSTOMERS

Actions Data Data Actions Data Data

Monitoring & Control

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 4

 CUSTOMER VALUE CHAIN
FRAMEWORK
Cu stomer Valu e
Eff ectiv eness
Effic iency
Develop Market
Analyze Analyze and design Develop Produce Deliver
and sell Collect
market and industry and Formulate products/ and design products/ products/ payment
products/
customers competitors strategies services processes services services
services

PRIMARY ACT IVIT IES

Accounting
Human
Information Technology and Performance
resource
management management financial measurement
management
management

SUPP ORTING ACT IVIT IES

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 5

 CUSTOMER VALUE
Customer Value
• สร้างคุณค่าต่อลูกค้า
• ความสามารถในสนองตอบความต้องการของลูกค้า
• สามารถแก้ไขปัญหาให้ลูกค้าได้
• สร้างประโยชน์แก่ลูกค้า

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 6

 CUSTOMER VALUE

Perceived
quality

Speed & Convenience

Reliability

Customer
value

Customer
Dependability treatment

Monetary
price

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 7

 EFFECTIVENESS
Ef fectiveness
• doing the righ t thing s to cr eate
the most value s for cu stom er and co m
pany.
...การผลิตและส่งมอบสินค้า/บริการตรงกับความต้องการของลูกค้า
...สร้างความพึงพอใจแก่ลูกค้าได้
…ไม่ทำาลายสิง่ แวดล้อม และวัฒนธรรมที่ดีงาม

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 8

 EFFICIENCY
Ef fici ency

• doing som et hing t he right wa y

at t he l owest po ssi ble cost .
...การออกแบบ การผลิต การส่งมอบ
สินค้า/บริการที่มีคุณภาพตามมาตรฐานที่กำาหนดไว้
มีต้นทุนและค่าใช้จา่ ยในการดำาเนินงานตำ่า

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 9

 ความท้าทาย (Challenges)
ของผู้ผลิต

การแข่งขันทวีความรุนแรงขึน ้ มาก
• คูแ
่ ข่งขันมากขึน
้ เก่งขึน
้
• มีสินค้าในตลาดให้ลูกค้าได้เลือกซ้ือมากขึน ้
• ลูกค้าต้องการสินค้าคุณภาพสูงขึน ้
ในราคาถูกลง
• ผู้ผลิตต้องต่อสู้กบ
ั ต้นทุนการผลิตและค่าใช้จ่า
ยในการดำาเนินกิจการท่ส ี ูงขึน
้ อย่างต่อเน่ ือง

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 10

ความท้าทาย (Challenges) ของผู้ผลิต
จะอยู่รอดและประสบความสำาเร็จได้ต้องสามารถผ
ลิตสินค้า
• BETTER: คุณภาพสูงขึน้ (Better quality)
• FASTER: ส่งมอบได้เร็วขึน
้ (Faster delivery)
• CHEAPER: ต้นทุนถูกลง (Lower costs)

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 11

มีเหตุการณ์เหล่านีเ้กิดขึน
้ ในสถานท่ีทำางานของ
ท่านบ้างหรือไม่

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 12

 MARKET AND CUSTOMER
ANALYSIS
EF FEC TIVEN ESS
EF FICIENC Y
CUS TOMER VAL UE
Develop Market
Analyze Analyze and design Develop Produce Deliver
and sell Collect
market and industry and Formulate products/ and design products/ products/ payment
products/
customers competitors strategies services processes services services
services

PRIMARY ACT IVIT IES

Accounting
Human
Information Technology and Performance
resource
management management financial measurement
management
management

SUPP ORTING ACT IVIT IES

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 13

 MAREKET AND CUSTOMER
ANALYSIS
• Scan the macro-environment
• Divide a big market into market segments.
• Select market segment (specific customer group) to target
• Assess the customer needs

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 14

 S-P-E-L-T Aanalysis

Economic

Political Legal

Social Technological

Organization’s
Opportunities and
Threats
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 15
 Major Segmentation
Variables for Consumer Ma
rkets
• Geographic: Country, Region, City
• Demographic: Age, Family Size, Family Life Cycle,
Gender, Income, Occupation, Education, Religion, Race, Na
tionality, Social Class
• Psychographic: Lifestyle, Personality
• Behavioral: User status, Usage rate, Loyalty status,
Buyer-readiness stage, Attitude toward product

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 16

 Segmentation of the
Toothpaste Market
Segments Demographics Behavioristics Psychographics Favored Brands

Economy Low income Heavy users High autonomy, value oriented Any brands
family on sales
Medicinal Health conscious Heavy users Hypochonodriac, conservative Fluocarin
family
Cosmetic Teens, Smokers High sociability, active Zact
young adults Coffee/Tea drinkers
Taste Children in Spearmint/fruit lovers High self-involvement, hedonistic Kodomo
family

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 17

Select the Market Segment to
Focus
• Must look at two factors:
– Overall attractiveness of the segment:
• Size
• Growth
• Profitability
• Scale economy
• Risk
– Company’s objectives and resources:
• In-line with the company’s long term objectives
• Required technology, skills, and resources

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 18

 Assess the Customer Needs
• Product/service needs: quality, degree of customization
desired, price
• Delivery needs: speed of delivery, delivery dependability,
safety, courtesy, convenience
• Volume needs: high or low volume, degree of variability in
volume, degree of predictability on volume
• Other needs: reputation, number of years in business,
technical after-sale support, billing system, product/service d
esign capability

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 19

Order Qualifiers and Winners
• An ORDER QUALIFIER is a screening criterion that permits
a firm’s products/services to even be considered as possible
candidates for purchase. (ตัวแปรที่ลูกค้าใช้ในการ Screen
หาตัวเลือกสินค้า)
• An ORDER WINNER is a criterion that customers use to
make the final decision to buy products. The Order Winner
is the key attribute that a firm should differentiate its’ produc
ts/services from other firms.
(ตัวแปรที่ลูกค้าใช้ในการติดสินใจซื้อขั้นสุดท้าย)

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 20

 Example…Food Company

Market Segment I: General Household Market Segment II: Restaurant chain

Consumers
Products: ไก่หมักซ๊อส
Products: Ready to eat foods
Order Winners: Taste
Order Winners: Taste Delivery dependability
Brand reputation Price
Packaging
Order Qualifiers: Brand reputation
Order Qualifiers: Quality conformance Packaging
Convenience to buy Quality conformance
Price Delivery speed

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 21

The Unexploited Opportunities

Unarticulated Unexploited Unexploited

Opportunities Opportunities
Customer Needs
Unexploited
Articulated Opportunities

Served Unserved
Customer Types
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 22
 INDUSTRY AND COMPETITOR
ANALYSIS
EF FEC TIVEN ESS
EF FICIENC Y
CUS TOMER VAL UE
Develop Market
Analyze Analyze and design Develop Produce Deliver
and sell Collect
market and industry and Formulate products/ and design products/ products/ payment
products/
customers competitors strategies services processes services services
services

PRIMARY ACT IVIT IES

Accounting
Human
Information Technology and Performance
resource
management management financial measurement
management
management

SUPP ORTING ACT IVIT IES

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 23

 The Diamond of National
Advantage
Firm strategy,
Structure
And rivalry

Factor (input) Demand

Conditions Conditions

Related and
Supporting
industries

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 24

 The Diamond of National
Advantage
Firm strategy,
Structure
And rivalry

Factor (input) Demand

Conditions Conditions

Related and
Supporting Government
industries Policy and
Regulation

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 25

 Selected Regional Clusters of
Competitive U.S. Industries
Detroit Auto equipment and parts
New York City Financial service, Advertising, Publishing, Multimedia
Pennsylvania/New Jersey Pharmaceuticals
Dalton, Georgia Carpet
South Florida Health technology, Computer
South Texas/Louisiana Chemicals
Silicon Valley Microelectronics, Biotechnology, Venture capital
Seattle Aircraft equipment and design, Boat and ship building,
Metal fabrication
Loa Angeles Area Defense/aerospace, Entertainment
Las Vegas Amusement, Casinos, Small airlines

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 26

 COMPETITIVE FORCES THAT
SHAPE STRATEGY
กำาแพงกีดกัน่ Potential
การเข้ามาของ
คู่แข่งรายใหม่ New
Entrants

อำานาจการต่อ Rivalry อำานาจการต่อรอง

รองของผู้ขาย ของผูซ
้ ้ ือ
among
Suppliers Competing Buyers
Sellers
สภาวะการแข่งขัน
ระหว่างผู้ผลิต
ภัยคุกคามจาก
สินค้าทดแทน
Substitute
Products
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 27
 Benchmarking
• “Know your enemy and know yourself; in a hundred battles
you will never be in peril.”
• Benchmarking is a continuous systematic process for
evaluating the products, services, and work processes of org
anizations that are recognized as representing best practices
for the purpose of organizational improvement.
• Benchmarking is an effective tool for:
– Establishing that there is a need for change
– Identifying what should be changed
– Creating a picture of how the organization should look after the
change.
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 28
 Types of Benchmarking
• TWO types of benchmarking
– Internal Benchmarking
• compares business practices internally.
• identifies the best internal practices.
– Competitive Benchmarking
• focuses on the products, services, and work processes of
your direct and/or indirect competitors.
• identifies your organization’s strengths and weaknesses.
• uncovers the best practices of an organization that is
recognized as the leader in a specific area.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 29

 The Xerox Ten-Step
Benchmarking Process Model
1. Identify benchmarking subjects.
Planning 2. Identify benchmarking partners.
3. Determine collection method and collect data.
4. Determine current competitive gap.
Analysis
5. Project future performance.
6. Communicate findings and gain acceptance.
Integration
7. Establish functional goals.
8. Develop action plans.
Action 9. Implement plans and monitor progress.
10. Recalibrate the benchmark.
Source: Xerox Corporation.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 30

 Competitive Benchmarking
and Gap Analysis
COMPETITOR
IMPORTANCE ASSESSMENT
CUSTOMER REQUIREMENTS TO CUSTOMERS WORST BEST
Product Performance/ Features 30%
Product Reliability 20%
Price 20%
Brand Reputation 10%
Conformance to Specification 10%
Fast and on-time delivery 5%
Quick repair services 5%
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 31
The Importance-Performance
Matrix
Order Urgent action
winning zone
Performance
Features
Price Product Reliability

e
zon
Importance to

Brand

ia te
Order
Customers

Reputation

r op r
qualifying

Ap p
Past, On-Time
Delivery Excess zone
Less Quick Repair
important
Worst Better
than than
competitors Relative competitors
Performance
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 32
 STRATEGY FORMULATION
EF FEC TIVEN ESS
EF FICIENC Y
CUS TOMER VAL UE
Develop Market
Analyze Analyze and design Develop Produce Deliver
and sell Collect
market and industry and Formulate products/ and design products/ products/ payment
products/
customers competitors strategies services processes services services
services

PRIMAR Y ACT IVIT IES

Accounting
Human
Information Technology and Performance
resource
management management financial measurement
management
management

SU PPO RT ING ACT IVIT IES

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 33

Operations Strategy Process

Market and Competitive

Customer Study Benchmarking

Corporate/Business Strategy

Operations Strategy

Decisions on Processes
and Infrastructure

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 34

 Patterns of Target Market
Selection
Single-segment Selective
concentration specialization
M1 M2 M3 M1 M2 M3

P1 P1 P = Product
M = Market
P2 P2

P3 P3

Market Product Full market

specialization specialization coverage
M1 M2 M3 M1 M2 M3 M1 M2 M3

P1 P1 P1

P2 P2 P2

P3 P3 P3

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 35

 Competitive Strategy

Competitive Advantage
Cost Other Uniqueness

Broad Target
COST LEADERSHIP DIFFERENTIATION
Competitive Scope
DIFERENTIATION
Narrow Target COST FOCUS
FOCUS

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 36

 Competitive Strategy
• Competitive Strategic Choices:
– Cost Leadership Strategy
– Differentiation Strategy:
• Superior quality
• Superior service
• Fast delivery
• High delivery reliability
• New product introduction speed
• Flexible to volume change
• Flexible to customize the products to each individual
customer
– Focus Strategy: Cost Focus and Differentiation Focus

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 37

 What is
Strategy?
By Michael E. Porter
• The myriad activities
(HBR, 1996) that go into creating,
producing, selling, and delivering a product or
service are the basic units of competitive
advantage.
• Operational effectiveness means performing these
activities better – that is, faster, or with fewer inputs
and defects – than rivals.
• Companies can reap enormous advantages from
operational effectiveness.
 What is
Strategy?
By Michael E. Porter
(HBR, 1996)

• But from a competitive standpoint, the problem with

operational effectiveness is that best practices
are easily emulated.
• Strategic positioning attempts to achieves
sustainable competitive advantage by preserving
what is distinctive about a company.
 What is
Strategy?
By Michael E. Porter
(HBR, 1996)
• Strategy is the creation of unique and valuable
position, involving a different set of activities.
Serving few needs of many customers
(Jeffy Lub provides only auto lubricants)
Serving broad need of few customers
(Bessemer Trust targets only very high-wealth clients)
Serving broad needs of many customers in a
narrow markets (Carmike Cinemas operates only in
cities with a population under 200,000)
 What is
Strategy?
By Michael E. Porter
(HBR, 1996)
• Strategy requires you to make trade-offs in
competing – to choose what not to do.
Neutrogena soap is positioned more as a medicinal
product than a cleansing agent. The company says
“no” to sales based on deodorizing, gives up large
volume, and sacrifices manufacturing efficiencies.
By contrast, Maytag’s decision to extend its product line
and acquire other brands represented a failure to make
difficult trade-offs: boost in revenues came at the
expense of return on sales.
 What is
Strategy?
By Michael E. Porter
(HBR, 1996)

• Strategy involves creating “fit” among a company’s

activities.
Fit has to do with the ways a company’s activities
interact and reinforce one another.
Fit drives both competitive advantage and sustainability:
when activities mutually reinforce each other, competitors
can’t easily imitate them.
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 43
 What is
Strategy?
By Michael E. Porter
(HBR, 1996)
More than 35 years ago, Rollin King and Herb Kelleher
got together and decided to start a different kind of airline.
They began with one simple notion: If you get your
passengers to their destinations when they want to get
there, on time, at the lowest possible fares, and make
sure they have a good time doing it, people will fly your
airline.
What began as a small Texas airline has gone to become
one of the largest airlines in America. Today Southwest
Airline flies more than 80 million passengers a year to 62
great city across America.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 45

 What is
Strategy?
By Michael E. Porter
(HBR, 1996)
 Ten Driving Forces of Changes
for the Future

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 47

 Driving Force 1:
REAL-TIME REPONSIVENESS
• “Speed is life.”
• Speed in responding to changing needs of customers
• Speed in responding to new demand
• Speed of manufacturing and delivery lead time
• Speed of transaction
• Speed of approval
• Speed of repair

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 48

 Driving Force 1:
REAL-TIME REPONSIVENESS
Examples:
• Get your hamburger in 60 seconds
• Pizza delivered to your door in 30 minutes
• Personal loan approval in 3 minutes
• Mortgage loan approval in 3 days
• Quick-lub service in 30 minutes
• Overnight parcel delivery

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 49

 Driving Force 2:
NO-HASSLE CONVENIENCE
• “If you don’t make shopping easy for me, I’m not going to
waste my time.”
• Even though I could go right around the corner to buy
business supplies, it’s easier to call and place an order.
They bring it right to the door.”
• Look for possibilities to provide no-hassle convenience: time
frame, ease of doing business, ease of buying and return,
ease of payment method, after-sale service.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 50

 Driving Force 2:
NO-HASSLE CONVENIENCE
Examples:
• Seven-Eleven convenience store
• Home-delivered pizza
• 7-24 on-line service

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 51

 Driving Force 3:
AGING BOOMERS/RISING XERS
• The aging baby boom
• The rising generation X
• Boomers and Xers have different preferences on how they
spend their money.

Examples:
• Aging boomers => health care, travel, etc.
• Rising Xers => entertainment, sport, beauty, fashion,
computers, mobile phone, games, etc.
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 52
 Driving Force 4:
MASS CUSTOMIZED CHOICE
• “Have it their way…the customer way.”

Examples:
• 40+ channels cable TV
• MK Suki restaurant
• Salad bar
• Assemble to customer order at Dell

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 53

 Driving Force 5:
LIFESTYLE
• Look for possibilities to benefit from change in the way we live.
• New lifestyles: J-kid, HIP, YUPPY, health conscious, etc.

Examples:
• e-Girl by KBANK
• MP3
• Mobile phone
• Weight control nutrition
• No salt-low carb-low fat foods

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 54

 Driving Force 6:
DISCOUNTING
• Position your business in a era of price competition.
• More and more customer become cost conscious.

Examples:
• Discount superstore: Lotus, Big C, Makro
• บ้านเอื้ออาทร

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 55

 Driving Force 7:
VALUE DIFFERENTIATION
• Create alternatives to price competition
• Look for possibilities to add value to your products/services and
profit from it.

Examples:
• In-stores classes or seminars for customers
• Warehouse service – ships customer orders as needed
• Overdraft protection
• Computerized kitchen and remodeling planning
• Extended warrantee
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 56
 Driving Force 8:
ULTRA SERVICE
• “These people demand service…if they don’t get it from your
company, they’ll get it from your competitor.”
• Ultra service can…
– overcome a competitor’s price advantage.
– let a small company take on a big one-and win.
– build customer loyalty that lasts for years.
Examples:
• Nordstrom Department Store
• Oriental Hotel
• Singapore Airline

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 57

 Driving Force 9:
TECHNO-EDGE
• Using technology to lead the field.

Examples:
• Computer network to link supplies, manufacturers,
distribution centers, and retailers
• e-Business
• e-ticket for airline
• PDA Phone for salespeople

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 58

 Driving Force 10:
World Class Quality
• Use quality as a strategic weapon

Examples:
• Toyota – reliable car
• Ferrari – high speed sport car
• Mercedes Benz – luxury car
• Toyota – Just-in-Time and lean systems

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 59

 DRI VIN G
GR OWTH
TH ROUGH
INN OVATIO
N By Dr. Chairat Hiranyavasit
School of Business Administration
National Institute of Development Administration

TEL: 08-1614-6910 FAX: 02-728-0258

E-Mail:chairatdr@yahoo.com

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage

60
What Strategies do Most of the Companies
Adopt in Order to Close the gap?

• Increase marketing and sales efforts

• Launch traditional new product/services
• Cost-cutting, efficiency-enhancing initiatives
• Acquisition and mergers
• …
• …

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 61

 “Invention” versus
“Innovation”

• Invention = Coming up with new ideas

• Innovation = Bringing new ideas to life

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 62

 Happy Accident
• Nutrasweet, a $2 billion a year product for G.D. Searle
Company, was discovered by a researcher attempting to
find a drug to treat ulcers.
• Viagra, a latest blockbuster drug for Pfizer, was
accidentally discovered by scientists attempting to stimulate
receptors in the hearths of people with angina.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 63

 Three Types of Innovation

1. Product Innovation

3. Process Innovation

5. Strategy Innovation

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 64

 The Innovation Opportunity
Grid

Product Process Strategy

Breakthrough

Substantial

Incremental

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 65

 McDonald Corporation’s
Innovation Opportunity Grid

Product Process Strategy

Franchisee
Big Regulations Global
Breakthrough Mag Of Quality Expansion
Consistency

Opening
Value Hamburger
Substantial Meals University
For
Breakfast

Green
New French Boston
Milkshakes
Incremental for St. Pat’s
Fry Markets
Cooker Acquisition
Day

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 66

 Innovation Opportunity Grid
Cosmetics Company

Product Process Strategy

Franchisee
Beauty Nutrition International
Breakthrough And Fashion
Quality Assurance
Expansion
System

Skin-cared
Store Expansion
Products and Supply Chain
Substantial Make-up Management System
throughout
Thailand
Cosmetics

Bar Codes, POS,

Body-cared and
and Customer Membership
Incremental Hair-cared
Relationship Program
Products
Management System

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 67

 Degrees of Innovation

Breakthrough
Magnitude of Change

Substantial

Incremental

Revenue and Profit Growth

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 68
 WORKSHOP
What do these products have in common?
• 3M’s Post-it Notes
• Gillette’s Sensor Razor
• FedEx’s Overnight Letter
• Callaway’s Big Bertha
• Miller Lite
• Sun Microsystems’ Unix Server
• Sony’s Walkman / Sony’s Playstation
• Merrill Lynch’s cash Management Account
Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 69
Generating Growth Strategies

1. Look for opportunities in market positioning.

2. Look for opportunities in customer outsourcing.
3. Look for opportunities in understanding customer needs.
4. Look for opportunities in reinventing your business model.
5. Look for opportunities in redefine value-added.
6. Rethinking how your product or service gets to the hands of
customers.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 70

 Leading Innovation
1. Design and implement an innovation strategy
2. Spread responsibility for making innovation happen
3. Allocate resources and decide on levels of risk
4. Establish innovation matrices
5. Reward innovation

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 71

 Idea Management Models
• Open Door Model
• Suggestion System Model
• Continuous Improvement Model
• New Venture Team Model
• The Incubator Lab Model
• The Innovation Team Model
• The Innovation Catalyst Model

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 72

WORKSHOP: Design the Innovation Opportunity
Grid for Your Company

Product Process Strategy

Breakthrough

Substantial

Incremental

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 73

 CUSTOMER VALUE CHAIN
CUS TOM ER VAL UE
EF FEC TIVEN ESS
EF FICIENC Y
Develop Market
Analyze Analyze and design Develop Produce Deliver
and sell Collect
market and industry and Formulate products/ and design products/ products/ payment
products/
customers competitors strategies services processes services services
services

PRIMARY ACT IVIT IES

Accounting
Human
Information Technology and Performance
resource
management management financial measurement
management
management

SUPP ORTING ACT IVIT IES

All Rights Reserved by Chairat Supply Chain Management 74

Product Development Stages

All Rights Reserved by Chairat Supply Chain Management 75

 Design Team Approach

All Rights Reserved by Chairat Supply Chain Management 76

Design for Customer: Fitness
for Use
• Performance
• Features
• Reliability
• Durability
• Maintainability
• Aesthetics

All Rights Reserved by Chairat Supply Chain Management 77

Design for Manufacturability
(DFM)

• Design a product so that it can be made easy, fast, cheap,

and no defect.
– Reducing the number of separate parts
• Use as much as possible the standard and common Parts
• Use modular design
– Simplify operations
• Avoid using fasteners

All Rights Reserved by Chairat Supply Chain Management 78

Design for Environment (DFE)

All Rights Reserved by Chairat Supply Chain Management 79

Computer-Aided Design (CAD)

All Rights Reserved by Chairat Supply Chain Management 80

 CUSTOMER VALUE CHAIN
CUS TOM ER VAL UE
EF FEC TIVEN ESS
EF FICIENC Y
Develop Market
Analyze Analyze and design Develop Produce Deliver
and sell Collect
market and industry and Formulate products/ and design products/ products/ payment
products/
customers competitors strategies services processes services services
services

PRIMARY ACT IVIT IES

Accounting
Human
Information Technology and Performance
resource
management management financial measurement
management
management

SUPP ORTING ACT IVIT IES

All Rights Reserved by Chairat Supply Chain Management 81

Make-to-Order versus Make-
to-Stock
Make-to-Order
• Only activated in response to
an actual customer order.
• Both work-in-process (WIP)
and finished goods inventory
kept to a minimum.
All Rights Reserved by Chairat
Make-to-Stock
• Process activated to meet
expected or forecast demand.
• Customer orders are served from
target stocking level.
Supply Chain Management 82
 Make-to-Order

Customer
places order

Raw
material Cook Assemble Deliver

All Rights Reserved by Chairat Supply Chain Management 83

 Make-to-Stock

Customer
places order

Raw Finished
material Cook Assemble goods Deliver

All Rights Reserved by Chairat Supply Chain Management 84

Make-to-Stock (for parts) and
Assemble-to-Order

Customer
places order

Raw
material Cook WIP Assemble Deliver

All Rights Reserved by Chairat Supply Chain Management 85

 Product Structure
Product Life Cycle Stage
I II III IV
Low volume Multiple products Few major High volume
Process Structure products High Standardization
Low standardization Low volume
Process Life Cycle Stage Often one of a kind Higher volume Commodity products Effectiveness Measures:

Flexibility (high)
I Not feasible
Customized Unit cost (high)
Job Shop products

II
Paint
Batch

III Automobile
Assembly Line assembly

IV Oil
Continuous Flow Not feasible refinery Flexibility (low)
Unit cost (low)

All Rights Reserved by Chairat Supply Chain Management 86

Flexible Manufacturing System
Computer
control
Tools room

Conveyor

Machine Machine

Pallet

Machine Machine

Machine Machine

Load
Unload Finished
Parts Terminal goods

All Rights Reserved by Chairat Supply Chain Management 87

All Rights Reserved by Chairat Supply Chain Management 88
 Supply chain is a part of a
customer value chain.
EF FEC TIVEN ESS
EF FICIENC Y
CUS TOMER VAL UE
Develop Market
Analyze Analyze and design Develop Produce Deliver
and sell Collect
market and industry and Formulate products/ and design products/ products/ payment
products/
customers competitors strategies services processes services services
services

PRIMARY ACT IVIT IES

Accounting
Human
Information Technology and Performance
resource
management management financial measurement
management
management

SUPP ORTING ACT IVIT IES

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 89

 What is Supply-Chain?

• Supply-chain is a term that describes how organizations

(suppliers, manufacturers, distributors, and customers) are
linked together.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 90

Common Problems in Supply-
Chain
• High inventories
• Poor conformance quality, high defect rate
• Poor product design quality, low product performance and less
features
• Operations inefficiency
• Slow delivery, take too long time to delivery
• Unreliable delivery, cannot delivery when promise
• Long lead time for new technology development and introduction,
always behind competitors to launch new products
• Limited flexibility, not able to cope with the changes in market place.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 91

 Results

• High costs
• Poor quality
• Poor customer services
• Lower sales
• Lower profit / Higher loss.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 92

 Common Causes of the
Problems
• Lack of data
• Poor data accuracy
• Poor planning
• Poor decision making
• Poor cooperation inside and outside the firm
• Lack of discipline
• Fear of change

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 93

 What is Supply-Chain
Management?
• Supply-Chain Management is a total system approach to
managing the entire flow of information, materials, products,
services, and cash from suppliers through manufacturers,
distributors, and retailers to the end customers.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 94

 Objectives of Supply-Chain
Management
• Maximize customer values:
– by designing and producing high, consistent product / service quality
that meet the customers’ requirements.
– by delivering products / services fast and always on-time.
• Minimize costs
– by reducing and eliminating any things which are more than absolutely
required to create values to the customers.

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 95

 Supply-Chain Management
Framework

M D
S A C
I
Information Flow
U N T R U
P U R E S
P F CollaborativeI Planning Flow T T
A A
L C B O
I T U I M
E
Material,
U Product,
T and Service Flow
L E
R O E
R R R R
E
S S S
R CashS Flow
S

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 96

 Information Flow

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 97

 Collaborative Planning
Activities

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 98

Enterprise Resource Planning
(ERP) System

PLANNING

SUPPLIERS BUY MAKE SELL CUSTOMERS

AP COSTING AR

FA GL PR

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 99

 Just in Time Inventory
Replenishment System

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 100
 การแสดงตัวอย่างการทำางานของ
Toyota Production
System

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 101
 การแสดงตัวอย่างการทำางานของ
Toyota Production
System

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 102
 การแสดงตัวอย่างการทำางานของ
Toyota Production
System

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 103
 การแสดงตัวอย่างการทำางานของ
Toyota Production
System

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 104
 Kanban System

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 105
 WAL-MART

All Rights Reserved by Chairat Supply Chain Management 106

All Rights Reserved by Chairat Supply Chain Management 107
 Corporate
Profile

All Rights Reserved by Chairat Supply Chain Management 108

 Supply Chain
Management

All Rights Reserved by Chairat Supply Chain Management 109

 Volkswagen in Brazil

All Rights Reserved by Chairat Supply Chain Management 110

 DELL

• DELL uses low cost - rapid response strategy

• DELL takes customer orders via Internet, telephone, and fax.
• DELL sends customer orders to the distributor nearest to the customer.
• The distributor assembles PCs according to customer orders, then tests
and delivers them to the customers.
• Suppliers that make component parts for DELL link their computers with
DELL’s so they can check DELL’s inventories on-line. The suppliers
restock the warehouse and manage their own inventories.
• DELL keeps the part costs and inventories low (13 days versus 25 for
Compag) and sell at prices 10 to 15% below those of competitors.
All Rights Reserved by Chairat Supply Chain Management 111
 Supply Chain Network – Cement Thai Home Mart

Customers
Suppliers

DC Rangsit
Customers
HUB
(Lampang,
Nonesomboon, Customers
Thungsong)

All Rights Reserved by Chairat Supply Chain Management 112

 Hub & Spoke

Lampang

Nonesomboon

DC.Rangsit
Regional Hubs
Distribute Goods
to Customers by
Window Delivery.

Thung Song

All Rights Reserved by Chairat Supply Chain Management 113

 Order Processing

Salesma ORDERS
n

SAP

SAP

• E-Ordering
• Call Center
CTL Carrier Dealer

All Rights Reserved by Chairat Supply Chain Management 114

 E-Ordering System

All Rights Reserved by Chairat Supply Chain Management 115

 E-Payment

All Rights Reserved by Chairat Supply Chain Management 116

 ด้านบริหารการจัดส่ง
TRANSPORTATION
MANAGEMENT
SYSTEM Logistics Planning

Transportation Order
Processing

Shipping Transportation Sales &

Marketing
Management

Accounting
Warehousing Order Tracking

✦ จัดการกับคำาสั่งซื้อของลูกค้า ✦ การทำาบัญชีค่าขนส่ง
✦ การวางแผนเส้นทางการขนส่ง ✦ ติดตามสถานะของคำาสัง่ ซือ้ ของลูกค้า

All Rights Reserved by Chairat Supply Chain Management 117

 การติดตามสถานะจัดส่ง
✦ สามารถทราบตำาแหน่งของรถขนส่งเป็น latitude,longitude
✦ ทราบความเร็วของรถ ( Real Time )
✦ ทำาให้ระบบการจัดส่งเป็นไปอย่างถูกต้องและมีประสิทธิภาพ
มากขึน้
Satellite

Logistics
Online Planning
Center

Transportation
Communication Dealer
Network
End users

All Rights Reserved by Chairat Supply Chain Management 118

 CUSTOMER VALUE CHAIN
FRAMEWORK
Cu stomer Valu e
Eff ectiv eness
Effic iency
Develop Market
Analyze Analyze and design Develop Produce Deliver
and sell Collect
market and industry and Formulate products/ and design products/ products/ payment
products/
customers competitors strategies services processes services services
services

PRIMARY ACT IVIT IES

Accounting
Human
Information Technology and Performance
resource
management management financial measurement
management
management

SUPP ORTING ACT IVIT IES

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 119
 CO NTI NUOUS QU ALI TY IMPRO VEMEN T

LEVEL 4: Quality as Strategic Weapon –

L U V ED
VA R O
E Strategic Quality Management
IMP

LEVEL 3: Eliminate Defects – Zero Defect System

STS
CO

LEVEL 2: Reduce Defects – Quality Control System

CED
U
RED

LEVEL 1: Detect defects – Inspection System

LEVEL 0: No Formal Quality System

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 120
 THE END
Thank You

Chairat Hiranyavasit, Ph.D., CPIM Operations Management for Competitive Advantage 121