OPERATIONS STRATEGIES FOR COMPARATIVE ADVANTAGE

Strategic planning is the broad overall planning that precedes the more detailed operational planning. Executives who head the production and operations function are actively involved in strategic planning, developing plans that are consistent with both the firms overall strategies and such other functions as marketing, finance accounting, and engineering. Once developed, production and operations strategic plans are the basis for (1) operational planning of facilities and (2) operational planning for the use of these facilities. STRATEGIC PLANNING APPROACHES FOR PRODUCTION/OPERATIONS 1. Entrepreneurial mode one strong, bold leader takes planning action in behalf of the production/ operations function. 2. Adaptive mode a managers plan is formulated in a series of small, disjointed steps in reaction to a disjointed environment. 3. Planning model uses planning essentials combined with the logical analysis of management science. A STRATEGIC PLANNING OPERATIONS MODEL Professor Chris A. Voss developed a concept where manufacturing strategy tries to link the policy decisions associated with operations to the marketplace, the environment, and the companys overall goals. The key to efficiency is to be a low-cost producer in your market. Minimum use of scarce resources labor, management, materials, equipments/facilities, and energy - while sustaining high outputs is the key to productivity. The following areas must be considered in making the operations strategy: - facilities - aggregate capacity - choice of process - vertical integration - operations integration - operations interface with other functions PRODUCTIVITY AND QUALITY Productivity can be expressed on a total factor basis or on partial factor basis. Total factor productivity is the ratio of outputs over all inputs: Productivity = Outputs / (Labor + Capital + Materials + Energy) Outputs relative to one, two, or three of inputs are partial measures of productivity. There is a clear relationship between quality and productivity. Generally, when quality increases, so will productivity because of the elimination of waste. The amount of resource inputs required to produce good outputs is reduced. Productivity increases. There are also other views of quality-productivity relationship. One such view is that quality and productivity move in opposite directions.

These two contrasting positions may be resolved with the concept of capability. As long as there is unused capability in the individual or the productive system, increases in speed (and productivity) can be achieved without declines in quality. Or, alternatively, quality can be improved without changing speed. If one focuses on quality while holding speed constant, quality should increase, waste should be eliminated, and productivity should increase. TECHNOLOGY AND MECHANIZATION Organizations today face decisions regarding which variations in technology to employ and what degree of mechanization is best. Many challenges on productivity and quality are answered by managers and owners as they adopt more sophisticated technologies and increased mechanizations. However, the costs associated with an inappropriate strategy for technology and mechanization can be great. On the other hand, competitors who effectively substitute capital and equipment for labor in order to gain lower production and operating costs may increase market share very quickly. It is a matter of judgment what level of technological and mechanization policy must a company take to survive.