STRATEGIC DEVELOPMENT IN HOSPITALITY

CHAPTER 1 INTRODUCTION TO STRATEGIC

OPERATIONS MANAGEMENT

LESSON 1: INTRODUCTION OF STRATEGIC OPERATIONS

MANAGEMENT

Although most people are not always aware of it operations are around in various
forms. Operations occur when people are taking their meals in a restaurant; when they
have a” service experience’’ as patients in a hospital, when they attend in educational
institutions like schools and universities and when they see products being assembled.
Operations are not only about production line and high-value manufacturing.
Operations take place in almost all kinds of situations. Operations management is
significantly important to any organization.

THE FIELD OF STRATEGIC OPERATIONS MANAGEMENT

Operations managers have responsibilities that extend beyond management of assets,
costs and human resources in the transformation process. In the contemporary
business environment, operations must be managed in a manner that will allow the
firm to participate against extensive and growing competition from around the world.
This way managing operations takes on completely diverse requirements to how it was
carried out in the past. In short, operations management becomes strategic operations
management.

Strategically, operations management entails the long-term planning and structuring

of work. In reality, the task of operations strategy is to plan the operating system,
which is the combined configuration of resources and processes, such that its resultant
competencies are made parallel with the organization's desired competitive position
Simply, operations strategy centers on how to best enable and put into practice the
organization's strategy. The so-called "best" for profit organizations, can be measured
as maximize the net present value of profits. On the other hand, for not-for-profits, it
could denote minimizing cost subject to strategically specified constraints on quality,
time, flexibility, and other financial metrics. Organizations that take the design of their
operations sincerely and better equal supply with demand will get a significant
competitive advantage greater than their adversaries.
Operations and operations management are of strategic importance to an organization.
This is because all modern day organizations have to stand out in mass customization,
lean production, agile manufacturing and customer-center prerequisite among others.
Organizations success on these targets depends on the ability of the organization to
actually do these things and such capabilities exist within operations.
The competence to penetrate and contend equally in new and existing markets is
extremely reliant on operations capabilities, Although, other areas are also vitally
important like marketing, finance and other major functions. However, it is true that
operations management is about uniting these other areas and functions into a central
core of capabilities for the organization in both manufacturing and service settings. All
capabilities depend, to a very large extent, on managing operations in a strategic
manner. Forming an operations strategy that links into, and forms part of, the overall
business strategy can also be a vital factor in uniting the organization.

Reference:

Prof. Angelita Ong Camilar-Serrano, DBA, 2016, Strategic Operations Management by

UNLIMITED BOOKS LIBRARY SERVICES & PUBLISHING INC. pg. 1-2

Congratulations you just finished lesson 1

LESSON 2: OPERATIONS AS SERVICES

Many companies have effectively transformed their manufacturing, research and

development, and other business functions by improving their performance while
reducing cost However, fewer organizations have optimized their service operations,
even though they can have a big effect on customer acquisition and retention. When
service levels and costs are well balanced and optimized, they can convey a sizeable
and sustainable competitive advantage that competitors will uncover to be tough to
compete.
By their nature, service operations are a lot labor intensive and difficult to manage.
Repetition and consistency, usual features of excellence in service operations, can
work not in favor of an organization that is trying to achieve step change
improvements in processes and behaviors. Moreover, executives across many
industries are finding it ever more challenging to maintain service costs in check while
maintaining service levels. Latest technological advances like self- service kiosks
normally in airports, banks, and hotels have helped improve overall productivity, but
technology is only one part of the solution.

Designing a tailored set of service models based on customer segments is a

requirement for granting the preferred services with no overspending. Whether the
business is a retailer trying to optimize sales floor coverage, a hospital seeking to
improve care delivery through better allocating nurses and beds a hotel working to
speed up check-in times or a manufacturer delivering technical support in global
markets, the leaders of the organization must carefully and holistically manage the
factors that affect service delivery and costs.

Principal Drivers of Service Quality and Cost

Service operations leaders must be in a position to spot and capture opportunities for
progress. There are several factors that determine quality and cost in service which
are:

• Product and Process Design

The basis for high-quality, cost-effective service operations is established far upstream
of the point of service delivery during product design or, in the case of services
companies, process design. Design affects quality and total service costs in significant
means. In particular, it can diminish service costs early in product life cycles by
reducing defects. It can reduce total service costs by lessening the time it takes for a
product to shift from infancy to a stable mature stage.

Streamlining product architectures and configurations, for instance, can have a

beneficial effect on service. One computer equipment company saved on repair, order
processing, and technical support costs merely by installing its largest hard drive in
every unit sold.
Analyzing quality at the product level can also aid determine problems that can lead to
higher service costs? Through detection of notable differences in mean time between
failures (how often a product breaks) and mean time to repair how long it takes to fix
it) between products developed internally and those developed by a third party,
another computer manufacturer was able to take steps to close the gap by improving
design and technician training for the inferior products.

Embedding remote diagnosis and repair capabilities in products and processes can
simultaneously reduce service costs (right part, right place) and enhance customer
satisfaction and loyalty
• Service-level Labor Requirements

Typically, labor is the largest cost in service operations and a key driver of customer
satisfaction. Matching service requirements to customer needs, desires, and
expectations is job number one. Some customers may want a lot of hand holding
whereas others may be content with self-service options, for example, bank ATMs,
grocery self-checkouts, and automated tech support online or via phone. Matching
customer expectations with the service delivery method increases revenue and
simultaneously lowers the cost-to-serve.

Service operations leaders study usage patterns and consider them in light of
corporate targets, like market share and revenue goals, to guarantee the proper
service coverage. One company with a huge and active mail room embarked on such
an investigation and discovered that misalignments in its service coverage resulted in
preventable idle time at some times of the day and backlogs at other times Through
realigning coverage with demand, the company had proficient process incoming
demand within the agreed-upon service level. It was able to shrink labor costs by
lessening coverage during slow periods also. This alteration enabled the company to
enhance overall productivity, and better customer satisfaction resulting in increased
revenues.
 Service Network Structure

Eventually, as business and economic growth rates differ, mergers and acquisitions
take place, and companies modify their product mix and market focus, service costs
can get out of whack. Management layers become unnecessary processes become less
standardized, work loads not anymore align with staffing levels, and unneeded facility
expenses are incurred. At times it is essential to recognize how a service delivery
network is structured. To illustrate, one service outsourcer was keeping two isolated
organizations to offer hardware installation and repair in similar geographic areas. This
model had permitted speedy response in the past but as the volume of service
requests lessened, partly due to design and quality improvements, it made more logic
to combine the two organizations.
The efficiency of service operations also is apt to differ very much among geographic
locations. By means of putting in place the appropriate tracking and reporting
processes, companies can even out variances and improve overall service performance.
Then again, companies can use shared services models to notably trim down overhead
costs.

Outsourcing will frequently generate short-term cost savings, but if it pessimistically

affects customer satisfaction and the company's competitive position outsourcing can
be counterproductive in the long term. The correct combination of sourcing, balances
low costs and service quality in a manner that enhances a company's competitive
advantage.

 Service Process Management

Service processes are seldom fixed. They vary in answer the needs of the business and
its customers. This being the situation, they call for constant monitoring and adjusting
to maintain costs in check and make certain their continuing effectiveness. Continuous
improvement is a broadly establish idea, but in many companies, the culture does not
simply support it. In addition, service processes require gatekeepers who have
decision rights for process changes and are responsible for their performance.

Meanwhile, companies can observe to discover any process steps that can be standard
across customers and geographies, Process standardization, possibly automation can
lessen labor

requirements and boost customer satisfaction. To illustrate, one hospital reduced the
wait time for fresh admissions from four and a half hours to one and a half hours by
standardizing the admissions approval process.

 Workforce Management

The productivity of employees in a chief concern in all service operations. In order to

optimize employee productivity decision makers have to find compute the total labor
hours they require in each location, either in a bottom-up manner or top-down manner.
Bottom-up manner means identifying labor drivers and creating a model for
determining task times and frequencies While top-down manner is based on
comparison of operational performance to labor hours Either method works, except
that the bottom-up approach presents an added benefit in that permits labor hours to
be further adjusted as input drivers change easily. In one case, one company created
a detailed model based on unique store demand patterns, to estimate the necessary
staffing essential to manage its truck tire service centers, producing a 12% savings in
labor costs.

Once labor hours per location are known, management can reflect on how the hours
should be allocated between full-time and part-time employees. Management also can
determine how these employees should be scheduled to meet customer demand and
fulfill operational activities. To illustrate, when one hotel studied its check-in process, it
was revealed that many guests were experiencing check-in waits of more than 20
minutes. A large number of guests waited so long that they said they did not plan any
more to stay at the hotel again. Yet with the adding of just five part-time employees
only during peak periods, a tiny additional spending in the hotel budget more than
90% of guests could be checked in with less than a 15-minute wait.

• Measurement and Compensation

Regrettably, not many service operations and companies have sophisticated

performance measurement and compensation structures. The majority fall into one of
these three groups:

1. those that follow metrics in a steady way at all levels, but have not make
parallel their compensation systems to the metrics

2. those that follow metrics, although make use of not consistent definitions
across levels and

3. those that do not follow metrics at all

The end result of imaginary, improper, or incoherent measurements are missed

improvement opportunities, the incapability to comprehend whether process changes
are effective, and unproductive decision making.

Meanwhile, most service organizations, particularly in the retail sector, are drowning in
data and gathering more every day, however and still eager to insights. In order to rise
above this problem, companies must recognize the data that is really applicable to the
performance of their service operations and make certain that it is correctly collected
and utilized. It is vital to gather

nonfinancial data, like customer profitability and customer satisfaction, in addition to

key financial and operational indicators.
After this step the service company should also compensation and reward systems
with desired employee behaviors. With clearly identifying compensation and rewards
and communicating the metrics that determine them service operations can inspire
employee motivation and offer the transparency that people want to modify their
behaviors.
In addition, service operation managers ought to work with Human Resource (HR) to
take a more upbeat role in instituting and supervising compensation and reward
systems. They must know that tenured workforces come at a higher co that frequently
cannot be warranted in terms of performance: the absence of salary caps and
compensation bands can generate extensive variations in cost between similarly skilled
employees; and market-based salary reference points are a lot overstated and
therefore provide as a poor guide to compensation. In order to deal with the problems
that result from unproven assumptions companies can take action with varying levels
of aggressiveness to lessen labor costs Levels of reduction will be based on internal
and external factors that consist of individual performance salary benchmarks, the
financial condition and goals of the company, and labor supply conditions.

 Service strategy approach

Service strategy success always boils down to execution. In service operations

leaders should approach the quality and cost challenge. They ought to give particular
attention to the first two drivers product and process design and service-level labor
requirements Too frequently, these drivers are ignored for the reason that they must
be activated in the design stage of products and processes, a stage in which service
managers customarily have not partook. The remaining four drivers which are service
network structure, service process management, workforce management, and
measurement and compensation are the levers that service leaders can pull to get
better the quality and cost of existing operations, Knowledgeable service leaders are
aware of the interrelated character of these four drivers and use them in an integrated
and holistic way.

High quality, cost-effective service is indispensable to corporate success, except it is

particularly challenging to realize. Defining unique customer segments and models to
gainfully serve them necessitates regular study Service workforces are likely to be big
and have high turnover rates and so they are hard to mobilize Service processes are
difficult and regularly reliant on the dependable execution of many detailed steps And
immense, dramatic solutions to too much cost are uncommon. Nevertheless,
companies that obtain a measured and complete technique to delivering service can
develop their bottom line and achieve a hard to-match competitive advantage in the
marketplace.

Reference:

Prof. Angelita Ong Camilar-Serrano, DBA, 2016, Strategic Operations Management by

UNLIMITED BOOKS LIBRARY SERVICES & PUBLISHING INC. pg. 3-6
 Congratulations you just finished lesson 2

LESSON 3: HISTORICAL DEVELOPMENT OF

OPERATIONS MANAGEMENT

Operations in some forms have been around as long as human endeavor itself but, in
manufacturing at least, it has changed dramatically over time. There are three major
phases in the development of operations management namely craft manufacturing,
mass production and the modem period.

Craft Manufacturing Phase

The first major phase is craft manufacturing and service shop delivery. Craft
manufacturing describes the process by which skilled craftspeople produce goods in
low volume with a high degree of variety, to meet the requirements of their individual
customers. Over the centuries, skills have been transmitted from masters to
apprentices and journeymen, and controlled by guilds Craftspeople usually worked at
home or in small workshops. Such a system worked well for small-scale local
production, with low levels of competition. Some industries, such as furniture
manufacture and clock-making still include a significant proportion of craft working

Some craft manufacturing still remains today. Craft manufacturing is still present in
markets where exotic products and services are being sold due to their distinctive
features or high level of desirability In house building, furniture making and dock and
watch making, the process of craft manufacturing is still done by skilled workers with
single or few items of output at a time. The processes and techniques used in craft
manufacturing is highly inefficient, yet the exceptional quality the products commands
a premium price.

In services the craft era still continued. The adoption to new technologies and new
systems is the main reason for the slow pace of change in service. Only services that
need little skill at the operating level (like fast moving consumer goods) or processing
huge amounts of information (like financial services are notably different now from
what they have been like several decades ago. Despite new technologies many
services like hotels, schools, hospitals, hair salons, vehicle repairs and transportation
have changed due to their core nature.
Mass Production Phase

In numerous industries, craft manufacturing began to be substituted by mass

production in the 19th century. Mass production engages producing goods in high
volume with low variety. This is the opposite of craft manufacturing. Customers are
anticipated to buy what is supplied, rather than goods made to their own specifications.
Producers are determined on keeping costs, and thus prices, down by minimizing the
variety of both components and products and setting up

large production runs. They developed aggressive advertising and engaged sales
forces to market their products.
An important innovation in operations that made mass production possible was the
system of standardized and interchangeable parts. Instead of being duce for a specific
machine or piece of equipment, parts were prepared to a standard design that could
be employed in different models. This really reduced the amount of work necessary in
cutting filing and fitting individual parts, and destined that people or companies could
specialize in particular parts of the production process.

A second innovation was the development by Frederick Taylor (1911) of the system of
scientific management. This system wanted to revamp jobs using similar principles to
those used in designing machines. Taylor argued that the role of management was to
analyze jobs in order to find the "one best way of performing any task or sequence of
tasks, rather than allowing workers to determine how perform their jobs. By breaking
down activities into tasks that were sequential logical and easy to understand, each
worker would have narrowly defined and repetitious tasks to perform at high speed
and therefore with low costs.

A third innovation was the development of the moving assembly line by Henry Ford
Instead of workers bringing all the parts and tools to a fixed location where one car
was put together at a time, the assembly line brought the cars to the workers Ford
thus extended the ideas of scientific management, with the assembly line controlling
the pace of production. This completed the development of a system through which
large volumes of standardized products could be assembled by unskilled workers at
constantly decreasing costs. This is the apogee of mass production

The Modern Phase

Mass production worked well as long as high volumes of mass-produced goods could
be produced and sold in predictable and slowly changing markets However, during the
1970s, markets became highly fragmented; product life cycles reduced dramatically
and consumers had far greater choice than ever before.
An unforeseen challenge to Western manufacturers emerged from Japan. New
Japanese production techniques, such as total quality management (TQM), just-in-
time (IT) and employee involvement were emulated elsewhere in the developed world,
with mixed results More recently, the mass production paradigm has been replaced,
but there is as yet no single approach to managing operations that has become
similarly dominant.
The different approaches for managing operations that are currently popular include:

1. Flexible specialization in which firms (especially small firms) focus on separate

parts of the value-adding process and collaborate within networks to produce
whole products Such an approach requires highly developed networks,
effective processes for collaboration and the development of long term
relationships between firms.

2. Lean production which developed from the highly successful Toyota Production
System. It focuses on the elimination of all forms of waste from a production
system. A focus on driving inventory levels down also exposes inefficiencies
reduces costs and cuts lead times

3. Man’s customization seeks to combine high volume, as in mass production

with adapting products to meet the requirements of individual customers Mass
customization is becoming increasingly feasible with the advent of new
technology and automated processes.

4. Agile manufacturing emphasizes the need for an organization to be able to

switch frequently from one market-driven objective to another. Again, agile
manufacturing has only become feasible on a large scale with the advent of
enabling technology In various ways, these approaches all seek to combine the
high volume and low cost associated with mass production with the product
customization, high levels of innovation and high levels of quality associated
with craft production.

Reference:

Prof. Angelita Ong Camilar-Serrano, DBA, 2016, Strategic Operations Management by

UNLIMITED BOOKS LIBRARY SERVICES & PUBLISHING INC. pg. 6-9

Congratulations you just finished lesson 3

LESSON 4: CURRENT ISSUES IN OPERATIONS
MANAGEMENT

Despite all the tools and systems at their disposal, operations managers face extensive
challenges when it comes to managing an organization's resources. The global
marketplace is characterized by its large size and dynamic makeup. The operations
manager must grab this truth to maintain optimal process performance in a shifting
global landscape. Successful operations managers stay of these trends and implement
proactive systems to take advantage of them. Globalization, technology advancements,
and redefined marketplace priorities are among the many challenges at hand today.

Globalization has radically altered the way operations managers carry out their
day-to-day activities. Landforms, distances, and time zones no longer disconnect
people from information. Because of this, modern corporations can and, in some
competitive instances, ought to base their operations in any number of countries to
minimize costs and maximize performance efficiency.

The instantaneous availability of information is directly attributable to modem

technological advancements. Technologies such as global positioning systems (GPS)
and radio-frequency identification (RFID) have revolutionized inventory management
Corporations can now account for inventory in real time, no matter how detached it is
What's more, these technological advancements have made planning systems more
accurate, thus lessening operations managers' margins for error. Technology is
moving at quick speed. Keeping up can be rewarding, but failing to do so can be
disastrous.

The global marketplace has been, and is continuing to be redefined by new priorities.
With a rising population depending on a preset amount of resources companies are
being obligated to make sustainability a main concem Customer priorities are changing
too, especially when it comes to health. Changes such as these are impacting the ways
businesses must perform operations management and will continue to generate
operational challenges. The companies with the most knowledgeable operations
managers will be able to embrace the adversity challenges present and alter the
marketplace in the process.

Reference:

Prof. Angelita Ong Camilar-Serrano, DBA, 2016, Strategic Operations Management by

UNLIMITED BOOKS LIBRARY SERVICES & PUBLISHING INC.pg. 9-10

Congratulations you just finished lesson 4

 CHAPTER 2 OPERATIONS STRATEGY AND
COMPETITIVENESS

LESSON 5: OPERATIONS STRATEGY AND

COMPETITIVENESS

Operations management can make or break any business. The operations function is
large and for most businesses and represents the bulk of the assets and the majority
of the people. It also makes the business competitive by providing the ability to
respond to customers and by developing the capabilities that will keep it ahead of its
competitors in the future.

OPERATIONS STRATEGY

Operation strategy involves decisions that related to the specifications and design of
the product or service, design of a production process and the infrastructure needed to
support the process, the role of inventory in the process, and locating the process
Operations strategy decision is part of corporate planning process that coordinates the
goals of operations with those of marketing and that of larger organization Specifically,
an operations strategy must include at least the following:

1. Amounts of capacity required by the organization to achieve its aims;

2. the range and locations of facilities;
3. technology investment to support process and product developments;
4. formation of strategic buyer-supplier relationships as part of the
organization's extended enterprise;
5. the rate of new product or service introduction;
6. organizational structure to reflect what the firm "does best, often tailing
outsourcing of other activities.

Steven C. Wheelwright and Robert H. Hayes described four generic roles that
manufacturing can play within a company, from a strategic perspective. While they
specifically discuss the manufacturing function, the term operations can be substituted
with no loss in relevance. These generic roles are labeled stages 1 to 4 as explained.

The Four-stage Model of the Strategic Role of Operations

Table 1 Internally Neutral Operations maintain a reactive

mode. Seeks only to minimize any
 negative impact that operations
may have on the firm. The
operations function is regarded as
being incapable of influencing
competitive success.

Table 2 Externally Neutral Operations seek parity with

competitors (neutrality) by
following standard industry
practices. They are likely to copy
the prevailing best practices of its
industry but never develop the
same level of proficiency in their like
the industry leaders.

Table 3 Internally Supportive Operations contribution to the firm

is dictated by the overall business
strategy. However, operations have
no input into the overall strategy.
Firms formulate and pursue a
formal operations strategy.

Table 4 Externally Supportive They use their operation excellence

as the basis for business strategy,
hence called operations based
strategy. The operations of these
firms are the head of developments
in best practice. They set the
industry standards in manners of
customer satisfaction, thus enabling
to gain customer loyalty and attract
new ones.

Stage 1

Firms are said to be internally neutral meaning that the operations function is regarded
as being incapable of influencing competitive success. Management thereby, seeks
only to minimize any negative impact that operations may have on the firm. Their
operations performance objectives are continually changing between low cost,
increased flexibility and improved quality. One might say that operations maintain a
reactive mode. When strategic involving operations arise the firm usually calls in
outside experts.
Stage 2
Firms are said to be externally neutral, meaning they seek parity with competitors
(neutrality) by following standard industry practices. They are likely to copy the
prevailing best practices of its industry like Just in Time (ITI, Total Quality
Management TOM) and Business Process Outsourcing (BPO) among others. They
always adopt these techniques in the wake of industry leaders but by no means
expected to have the same level of proficiency in their use. The combination of
operations practices adopted may be considered an operation strategy due to its
consistency.

However, they cannot be still be overtly linked to business strategy due to

inappropriateness. Capital investments in new equipment and facilities are seen as the
most effective means of gaining competitive advantage.
Stage 3

A firms are labeled internally supportive, that is, operations contribution to the firm is
dictated by the overall business strategy. These firms do formulate and pursue a
formal operations strategy. This means that its operations performance objectives are
aligned with supportive of, its business objectives. This alignment and support
provides that operations could offer the ways of achieving a competitive advantage.
Adopting best practices in its operation, an organization could increase the chances of
attaining competitive advantage.

Stage 4

Firms are at the most progressive stage of operations development. It is completely

different among any of the other stages. These firms are said to be externally
supportive. They use their operation excellence as the basis for business strategy,
hence called operations based strategy. These firms expect operations to muke an
important contribution to the competitive success of the organization. The operations
of of these firms are the head of developments in best practice. They set the industry
standards in manners of customer satisfaction, thus enabling to gain customer loyalty
and attract new ones. Firms under this stage should continually develop its operations
because competitors will most likely imitate their operations-based competitiveness.
They have to make the most of their existing resources and must learn to develop new
capabilities to remain in this stage.

Reference:

Prof. Angelita Ong Camilar-Serrano, DBA, 2016, Strategic Operations Management by

UNLIMITED BOOKS LIBRARY SERVICES & PUBLISHING INC.pg. 23-25

Congratulations you just finished lesson 5

LESSON 6: STRATEGIC OPERATIONS DIMENSION

Since most firms have the bulk of their labor force and assets tied to the operations
function it makes sense for most firms to strive for a position in Stage 3 or Stage 4
Firms can, certainly, progress from one stage to the next with few, if any, hopping a
stage In reality, the majority of exceptional firms are in Stage 3 since Stage is very
hard to attain.

Firms that fall short of fully taking advantage of the strategic power of operations will
be hindered in their competitive abilities and vulnerable to attack from those
competitors who do exploit their operations strategy. In order to do this effectively,
operations must be involved throughout the whole of the business strategy. Corporate
executives are inclined to presume that strategy has only to do with marketing
initiatives. They inaccurately create the assumption that operation's role is strictly to
act in response to marketing changes rather than make inputs into them. In addition,
corporate executives assume that operations have the flexibility to react positively to
changing demands

STRATEGIC OPERATION DIMENSIONS

Operations management focus must increasingly be toward strategy, Operations

strategies must complement with the fundamental organizational strategies via the
following ways:

1. Improved responsiveness in terms of:

a. Minimizing time to respond
b. Timely respond
c. Accessibility through better locations, better geographical proximity, Improved
logistics and better systems of communication
d. Wider product/service choice through flexible operation manufacturing system,
reduced throughput times, reduced cycle times reduced set-up times flexible
manpower, better trained manpower flexible machines and improved product
designs and processing capabilities.
e. Increased proactivity

2. Reduced prices through:

a. Overall improvements in the production-delivery

b. Better designs of products/services
3. Improved quality through:

a. Better skills, better knowledge and better attitudinal orientation of all production
and service providers
b. Improved technology
c. Reduced complexity and confusion
d. Reduced problem generators

Competitive Dimensions

Competitiveness is necessary for companies to sell their goods and services in the
marketplace. It is an important factor in determining the success or failure of an
organization. Business firms often compete with its rivals in a number of ways.

There are five generic performance competitive dimensions that are particularly
relevant to operations and supply chain activities. They must be possessed by firms as
operating advantages in order to outperform their competitors:

1. Quality is defined as the characteristics of a product or service that bear on its ability
to satisfy stated or implied needs. An alternative definition is features and freedom
from defects.
a. Performance quality addresses the basic operating product or service.
b. Conformance quality addresses whether the product was made or the service
performed to specifications.
c. Reliability quality addresses whether a product will without failing or requiring
maintenance.

2. Time refers to a number of different aspects of an organization's operations.

a. Delivery spend refers to how quickly the operations or supply chain function
can fulfill a need once it has been identified
b. Delivery reliability refers to the ability to deliver products or services when
promised.
c. Delivery window is the acceptable time range in which deliveries can be made

3. Flexibility considers how quickly operations and supply chains can respond to the
unique needs of customers.
a. Mix flexibility is the ability to produce a wide range of products or services
b. Changeover flexibility is the ability to provide a new product with minimal
delay.
c. Volume flexibility is the ability to produce whatever needs.
4. Cost refers to the ability to manufacture a product to a required cost. Typical cost
management categories are material, engineering and quality related costs Further,
cost could also be failure costs, appraisal costs and prevention costs.

5. Product differentiation means any special features like design, cost, quality, ease of
use, convenient location or warranty among others that causes a product or service to
be perceived by the buyer as more suitable than the competitor's product or service.

The Notion of Trade-Offs

A sustainable strategic position needs trade-offs. A trade-off is the decision by a firm to

accentuate one performance dimension over another, based on the recognition that
superiority on some dimensions that may conflict with superiority on others. Firms
must make trade-offs or decisions to highlight some dimensions at the expense of
others. For instance, in making decision concerning the amount of inventory to stock,
operations manager must take into consideration the trade-off between the increased
level of customer service that the additional inventory yield and the increased costs
required to stock that inventory. Likewise, in choosing a piece of equipment a manager
for operations must assess the qualities of extra features compared to the cost of
those extra features. The employment of overtime to enhance output is another
example. Here the operations manager must evaluate the value of increased output
versus the increased costs of overtime such as lower productivity, higher costs of labor,
lower quality and increased risks of accidents.

A strategic position is not sustainable unless there are trade-offs with other positions.
Trade-offs happens when activities are incompatible. Simply put, a trade-off means
that more of one thing necessitates less of another. An airline can choose to serve
meals adding cost and slowing turnaround time at the gate or I can choose not to, but
it cannot do both without bearing major inefficiencies.

Trade-offs takes place for three reasons. The first is i or reputation. A company famous
for delivering one kind of may have credibility and confuse customers or even damage
its reputation, if it delivers another kind of value or attempts to deliver two not
consistent things at the same time. For example, Ivory soap, with its position as a
basic, reasonably priced everyday soap would have a tough time reshaping its image
to match Neutrogena's finest medical reputation. Efforts to produce a new image
typically cost tens or even hundreds of millions of money in a major industry, a
dominant obstacle to imitation.

Second, and more vital trade-offs arise from activities themselves. Different positions
(with their tailored activities) entail different product configurations, different
equipment, different employee behavior, different skills, and different management
systems. Many trade-offs reflect inflexibilities in machinery, people, or systems. The
more Ikea has configured its activities to lesser costs by having its customers do their
own assembly and delivery, the less able it is to satisfy customers who need higher
levels of service.

However, trade-offs can be even more fundamental. In general, value is destroyed if

an activity is over designed or under designed for its use. For example, even if a given
salesperson were competent of providing a high level of assistance to one customer
and none to another, the

salesperson's talent and (and some of his cost) would be wasted on the second
customer. Furthermore, productivity can get better when variation of an activity is
restricted. Through providing a high level of assistance all the time, the salesperson
and the whole sales activity can frequently attain efficiencies of learning and scale.

Lastly, trade-offs arise from limits on internal coordination and control. By means of
obviously preferring to compete in one way and not another, senior management
makes organizational priorities clear. Companies that try to be all things to all
customers, in contrast, risk confusion in the trenches as employees attempt to make
day-to-day operating decisions with no a clear framework.

Plant-within-a-Plant (PWP) Defined

The underlying logic was that a factory could not excel simultaneously on all four
competitive priorities. Consequently, management had to decide which priorities were
critical to the firm's success, and then concentrate or focus the resources of the firm on
those particular characteristics. For firms that have numerous product lines or business
units, they can employ a plant-within-a plant (PWP) concept where different locations
within the facility are allocated to different product lines, each with their own
operations strategy.

Each PWP has its own facilities in which it can focus on its particular manufacturing
task using its own work force management approaches production control,
organization structure and so forth. Quality and volume levels are not combined,
worker training and incentives have an apparent focus; and engineering of process,
equipment and materials handling are specialized as required.

Each PWP gains experience readily by focusing and concentrating every of s work on
those reotriched essential objectives which comprise its ring task Since a
manufacturing task is a brood of a corporate strategy marketing program, a is
susceptible to either gradual or sweeping change he PNP approach makes it easier to
perform realignment of essential operations and system elements over time as the
task changes.
Straddling Defined

Straddling in an extort by one manufacturer to copy the activities or the features of

another organization or its products Straddling may entail the addition of new features,
technologies or services to the business own existing activities Often straddling takes
place in a haphazard manner and is considered to be something of a hasty reaction to
a competitor's introduction of a product or a process which is deemed by the use
organization to be capable of giving the competitor and For the most part, straddling
may well cause many problems than it solves as new process which had not been
developed within the organization are spend into the operations This, in tum may
cause other conflicts which are not wanted and had not been anticipated.

Order Qualifiers and Winners

Order qualifiers and order winners were terms coined by Terry Hill. Order qualifiers are
criteria that situate a company's products in consideration for purchase. Simply, these
are factors that the firm needs to be able to attain in order to compete at all in the
marketplace in the absence of these capabilities the firm will lose orders In fact, order
qualifiers may tum into order losers for the firm Order-qualifying criteria must not
therefore be sighted as less essential than order winning criteria because failure to
achieve these will be the reason for the firm to decline. Of Order qualifiers are not
present in a company's product they do not enter the purchase evaluation process of
significant number of customers. Order are those factors that win orders in the
marketplace over other competitors. Order winners are given as basis for purchase by
the buyers from among the choices considered for purchase Order winners are the
features which results in getting orders.

An order qualifier must take in up-to-date technology because without this the firm
cannot hope to compete and will decline Low cost is an obvious one, but delivery
requirements are important too. In addition, the ability to configure to customer
requirements due to mass customization) is also important.

Order winners and qualifiers are both market specific and time specific. They work in
different combinations in different ways on different markets and with different
customers. While, some general trends exist across markets, these may not be stable
over time. For example, in the late 1990s delivery speed and product customization
were common order winners, while product quality and which previously were
frequent order winners, tend to be order qualifiers. Hence, firms need to develop
different strategies to maintain different marketing needs and these strategies will
change over time. Also, since customers stated needs do not always reveal their
buying habits, Hill recommends that firms study how customers behave, not what they
say.
When a firm's perception of order winners and qualifiers match the customer's
perception of the same there exists between the two perspectives. When a it exists
one would expect a positive sales performance.

Reference:

Prof. Angelita Ong Camilar-Serrano, DBA, 2016, Strategic Operations Management by

UNLIMITED BOOKS LIBRARY SERVICES & PUBLISHING INC.pg. 26-31

Congratulations you just finished lesson 6

LESSON 7: THE CORPORATE OF STRATEGY DESIGN

The strategic perspective that Kaplan and Norton have developed is very valuable.
Before Kaplan and Norton, most academic strategy courses were dominated by the
thinking of Michael Porter, who began by highlighting the Five Forces Model" that
recommended what external, environmental factors would alter an organization's
competitive situation, and then focused on improving the value chain.

By comparison, Kaplan and Norton have put a lot more emphasis on measures and
alignment, which has certainly led to a more comprehensive approach to strategy.
During the Nineties the prime concern was with horizontal alignment. Companies tried
to eradicate operational and managerial problems that arose from silo thinking and see
how a value chain linked all activities, from the supplier to the customer. Today, most
companies seem to have moved on to vertical alignment, seeking to organize the way
strategies align with measures and how processes align to the resources that
implement them. In the shift it was believed that something very valuable from the
horizontal perspective has been lost.

The focus now is on alignment without simultaneously maintaining the Kaplan and
Norton claim that this generic map reflects a generalization of their work with a large
number of companies for whom they have developed specific Strategy Maps Notice
that the four sets of Balanced Scorecard measures are now arranged in a hierarchical
fashion, with Financial Measures at the top, driven by Customer Measures, which are,
in turn, the result of Internal (Process) Measures, and are supported, by Innovation
and Learning Measures.

Financial Perspective
Building a strategy map typically starts with a financial strategy for increasing
shareholder value Nonprofit and government units often place their customers or
constituents not the financial are the top of their strategy maps. Companies have two
basic levers for their financial strategy: revenue growth and productivity.

The former generally has two components: build the franchise with revenue from new
markets new products and new customers and increase value to existing customers by
depending relationships with them through expanded sales like a cross-selling
products or offering bundled products instead of single products. The productivity
strategy also usually has two parts improve the company’s cost structure by reducing
direct and indirect expenses, and use assets more efficiently by reducing the working
and fixed capital needed to support a given level of business.

In most cases, the productivity strategy yields results sooner than the growth strategy
But one of the principal contributions of a strategy map is to emphasize the
opportunities for enhancing financial performance through revenue growth not just by
cost reduction and improved asset utilization. Also, balancing the two strategies helps
to guarantee that cost and asset reductions do not compromise a company's growth
opportunities with customers

Customer Perspective

The center of any business strategy is the customer value proposition, which illustrates
the unique mix of product and service attributes, customer relations and corporate
image that a company offers. It defines how the organization will differentiate itself
from competitors to attract, retain, and deepen relationships with targeted customers.
The value proposition is critical because it helps an organization connect its internal
processes to improved outcomes with its customers.

Usually, the value proposition is chosen from among three differentiators: operational
excellence (for example, McDonald's and Dell Computer), customer intimacy (for
example, Home Depot and IBM in the 1960s and 1970), and product leadership (for
example, Intel and Sony). Companies struggle to excel in one of the three areas
example. While maintaining threshold standards in the other two. Through identifying
its customer value proposition, a company will then recognize which classes and types
of customers to target. In research, it was found that although a comprehensible
definition of the value proposition is the single most important step in developing a
strategy, approximately three-quarters of executive teams do not have consensus
about this fundamental information.
Specifically, companies that pursue a strategy of operational excellence need to excel
at competitive pricing product quality and selection speedy order fulfillment, and
on-time delivery. For customer intimacy, an organization must stress the quality of its
relationships with customers consisting of exceptional service and the completeness of
the solutions it offers. And companies that pursue a product leadership strategy must
concentrate on the functionality, features, and overall performance of its products or
services.

Internal Process Perspective

Once of an organization has understandable picture of its customer and financial
perspectives, it can then establish the means by which it will realize the differentiated
value proposition for customers and the productivity improvements to get to its
financial objectives The internal process perspective captured these vital
organizational activities, which fall into four high-level process build the franchise by
innovating with new products and services and by penetrating e markets and customer
segments: increase customer value by depending relationships with existing
customers; achieve operational excellence by improving supply chain management,
the cost, quality, and cycle time of internal processes et utilization, and capacity
management, and become a good corporate action by establishing effective
relationships with external stakeholders.

An important caution to remember here is that while many companies espouse

strategy that calls for innovation or for developing value adding customer relationships,
they mistakenly choose to measure only the cost and quality of their operations and
not their innovations or their customer management process. These companies have a
absolute disconnect between their strategy and how they determine it. Not to my
surprise, these organizations normally have great difficulty implementing their growth
strategies.

The financial benefits from improved business processes typically disco themselves in
stages Cost savings from increased operational efficiencies and process improvements
create short-term benefits. Revenue growth from enhanced customer relationships
accrues in the intermediate term. And increased innovation can produce long-term
revenue and margin improvements. Thus, a complete strategy, should involve
generating returns from all three of these internal processes.

Learning and Growth Perspective

The foundation of any strategy map is the learning and growth perspective which
defines the core competencies and skills, the technologies and the corporate culture
needed to support an organization's strategy. These objectives enable a company to
align its human resources and information technology with its strategy. Specifically,
the organization must decide how it will satisfy the requirements from vital internal
processes, the differentiated value proposition and customer relationships. Although
executive teams readily acknowledge the importance of the learning and growth
perspective, they generally have trouble defining the corresponding objectives.

Reference:

Prof. Angelita Ong Camilar-Serrano, DBA, 2016, Strategic Operations Management by

UNLIMITED BOOKS LIBRARY SERVICES & PUBLISHING INC.pg. 26-33

Congratulations you just finished lesson 7

LESSON 8: STRATEGIC FIT-FITTING OPERATIONS TO

STRATEGY
The extent to which the activities of a single organization or of organizations working
in partnership complement each other in such a way as to contribute to competitive
advantage. The benefit of good strategic to include cost reduction, due to economies
of scale, and the transfer of knowledge and skills.

Strategic fit exists when value chain of different business are related. When these
different value chains allow transferring skills and expertise from one business to other,
and their combined performances work to reduce cost. Operational fit arises when
different businesses work along in order to explore opportunities for cost sharing or
skill transfer. This fit includes the following:

1. Procurement of purchased input

2. R&D/technology

3. Manufacture & assembly

4. Administrative support functions

5. Marketing & distribution

Types of Strategic Fit

There are three types of fit although they are not mutually exclusive. First- order fit is
simple consistency between each activity (function) and the overall strategy. Vanguard,
for example, aligns all activities with its low-cost strategy. It minimizes portfolio
turnover and does not need highly compensated money managers. The company
distributes its funds directly, avoiding commissions to brokers. It also limits advertising
relying instead on public relations and word of mouth recommendations. Vanguard ties
its employees' bonuses to cost savings.

Consistency ensures that the competitive advantages of activities cumulate and do not
erode or cancel themselves out. It makes the strategy easier to communicate to
customers, employees and shareholders, and improves implementation through
single-mindedness in the corporation.

Second-order fit occurs when activities are reinforcing. Neutrogena, for example,
markets to upscale hotels eager to offer their guests a soap recommended by
dermatologists. Hotels grant Neutrogena the privilege of using its customary
packaging while requiring other soap to feature the hotel's name. Once guests have
tried Neutrogena in a luxury hotel, they are more likely to purchase it at the drugstore
or ask their doctor about it. Thus Neutrogena's medical and hotel marketing activities
reinforce one another, lowering total marketing costs.

Third-order fit goes beyond activity reinforcement is called optimization of effort. The
Gap, a retailer of casual clothes, considers product availability in its stores a critical
element of its strategy, The Gap could keep products either by holding store inventory
or by restocking from warehouses. The Gap has optimized its effort across these
activities by restocking its selection of basic clothing almost daily out of three
warehouses, thereby minimizing the need to carry large in-store inventories The
emphasis is on restocking because the Gap's merchandising strategy sticks to basic
items in relatively few colors. While comparable retailers achieve turns of three to four
times per year, the Gap tums its inventory seven and a half times per year. Rapid
restocking, moreover, reduces the cost of implementing the Gap's short model cycle,
which is six to eight weeks long.

Is all three types of fit the whole matters mate than any individual part Competitive
advantage grows out of the entire system of activities? The fit among activities
substantially reduces cost or increases differentiation. Beyond that the competitive
value of individual activities or the associated skills, competencies, or resources cannot
be decoupled from the system or the strategy. Thus in competitive companies it can be
misleading to explain success by specifying individual strengths, core competencies,
for critical resources. The list of strengths cuts across many functions and one strength
blends into others. It is more useful to think in terms of themes that pervade many
activities, such as low cost a particular notion of customer service, or a particular
conception of the value delivered. These themes are embodied in nests of tightly
linked activities.

Activity-System Maps Defined

Activity system maps such as this one for Ikea, show how a company's strategic
position is contained in a set of tailored activities designed to deliver it In companies
with clear strategic position a number of higher-order strategic themes in black can be
identified and implemented through clusters of tightly linked activities (in gray).

Focusing on Core Capabilities

In order to successfully put into practice operation strategy, be it within a

manufacturing firm or within a service certain core capabilities must be recognized.
These core capabilities let the firm to set up its competitive priorities in the
marketplace. Core capabilities can thus be described as that skill or set of skills that the
operations management function has developed that permits the firm to differentiate
itself from its competitors. Similar core capabilities need to be identified in the other
functional areas too, and each of these functional capabilities should be aligned to
meet the overall goals of the organization.

In order to focus on these core capabilities firms, both in manufacturing and services,
have begun to dissociate themselves themselves from those activities that are not
considered being vital to their success. In manufacturing, more and more components
and subassemblies that were formerly built in-house are now being subcontracted or
outsourced to suppliers. As a consequence the material cost in most manufacturing
companies, as a percentage of total manufacturing costs

has significantly increased in recent years On the other hand, the labor cost, as a
percentage has been significantly reduced, often to less than 5 percent of total costs.

This focus on core capabilities also has impacted services. More and more service
operations are now subcontracting out supplementary support services that were
formerly provided in-house Once more, this strategy has allowed these services to
focus on improving their core capabilities. For instance, some universities subcontract
bookstore operations to retailers in many instances, the companies that have
subcontracted support services have revealed that the subcontractors can execute
them better and at a lower cost than when they were done within. This focus on core
capabilities further supports the concept of a value chain. Here each company focuses
on its core capabilities, thereby permitting it to exploit its value contribution to the end
product that is provided to the customer.
Integration of Manufacturing and Services
Many firms are currently looking to incorporated and user-friendly service as a means
of obtaining a competitive advantage in the marketplace. In so doing they are
recognizing the need to align and integrate the products that are being offered. This is
true for both manufacturing and service operations.

These services can range from activities in the pre-purchase to purchase and
post-purchase phases and even activities downstream from production as distribution.
Hendrix Voeders, traditionally a teed supplier to pig larceny in Holland, now provides a
wide range of services including consulting on p breeding, nutritional management,
and logistics Coca Cola has taken over w of the bottling and distribution of Coke
product downstream activities that we previously done by independent bottlers.

Some manufacturers offer extensive customer training to accompany the purchase of

products Customers become familiar with the products and learn to use them optimally.
In addition this Foxboro Company uses training to distance itself from the competition.
before its process control products are delivered, customers are invited to Foxboro’s
manufacturing facility, where their equipment is set up and they learn how to use it
under the guidance of Foxboro instructors. This is one of the reasons Faster
experiences a very high percentage of repeat business from existing customers.

By integrating goods and services into a total package, or a "bundle of benefits

companies are better able to address the overall needs of their customers.

Reference:

Prof. Angelita Ong Camilar-Serrano, DBA, 2016, Strategic Operations Management by

UNLIMITED BOOKS LIBRARY SERVICES & PUBLISHING INC.pg. 34-38

Congratulations you just finished lesson 8

LESSON 9: ATTACKING THROUGH OPERATIONS

All these successful attacks were based primarily on the kind of operation advantages.
Indeed, that operations advantage was the key to the sustainability of the attacker's
success. None were built around a new product or service, a unique technology, or a
marketing or financial advantage. Nor did the attacker do anything that could not have
been copied by any of their competitors, had they reacted in time. But, over time, the
attackers became so effective at implementing their strategies, and extending them
into new areas that the approaches they employed were no longer easily replicable.

There are two ways in which these successful attackers created and exploited their
operating advantage. First, they adopted an operations strategy that gave them a
competitive advantage along dimensions or in locations that, although valued by
certain subsets of their customers, were not being emphasized by competitors. This is
what is sometimes referred to as a differentiating competitor position. Often, the
operating capabilities they developed were cultivated in other countries or different
industries. Second, they reinforced this alternative way of appealing to customers with
the development of a tightly integrated system of supporting values, skills,
technologies, supplier/customer relationship, human resources, and approaches to
motivation that were neither easily copied nor transferable to other organizations.

The key to the successful counterattacks was that the incumbents either persuaded
customers that their own competitive advantage was more desirable than the
attacker's; they exploited the inherent weaknesses in the attacker's specialized
operating systems, and/or they emulated its strategy so quickly that the attacker never
had enough time to develop a superior operating effectiveness.