A Comparison of the Operations Strategy of Manufacturing and Service Firms
This paper is about the operations strategy of two types of firms, the manufacturing and the service firms. For the manufacturing type, the writer has chosen Toyota and Dell Inc. While for the service type, Disney World and McDonald’s are the firms chosen by the reader. The discussion is on the individual operations strategy for the said firms. They are presented by type, first is the manufacturing, followed by the companies under the service type. A brief introduction about operations strategy is also included to establish the topic to the reader.
Operations Strategy
An operations strategy must be devised after the development of the business strategy. This is done to provide a plan for the design and management of the operations function, in ways that support the business strategy. The operations strategy is the one that associates the business strategy to the operations function. The focus lies on the operation’s particular capabilities that give a competitive edge to the company. These capabilities are referred to as competitive priorities. By means of excelling in any one of the said capabilities, there exists the possibility for the company to become the frontrunner in its specific market.
Competitive Priorities
In order to understand the competitive situation in the company’s market, it is important for operations manager to work closely with the marketing. It should be done to be able to determine which among the different set of competitive priorities are important. The four broad categories of competitive priorities are cost, quality, time, and flexibility.
All of the said priorities are important but as more resources are dedicated to a specific priority, fewer resources are left for the others. That is why the operations function, must put greater emphasis on the priorities that directly support the business. This is called the need to trade-off. Even though the primary focus of the company lies only to some priorities, it is still relevant for them to at least achieve a basic level for each priority.
For that reason, it is important to distinguish which among the said priorities are order winners and the order qualifiers. The latter refer to priorities that are required to qualify as a competitor in a particular marketplace. On the other hand, the former are those priorities that aid a company in winning orders in the marketplace. However, to be able to compete successfully, a company needs to change its order winners to differentiate themselves from their competitors. This is also done in cases when companies try to imitate the order winner of a successful company, knowing that they will also gain the same success they achieved.
Operations Strategy of Manufacturing Firms: Toyota and Dell Inc.
Toyota
Toyota’s operations strategy focuses on maximum reliability, easy maintenance of its cars in each class, production systems that includes product design, processes, and supply chain management focused on their goal.
European automakers need to be more prepared as Toyota releases its handful of hot models. While the powerhouse of Japan figures how to build cars which attracts the Europeans, it was also bearing down on costs to yield its needed efficiency to prevail in one of the world’s lowest-margin auto markets. The management of Toyota is asking its engineers to propose a design, which is innovative and cost saving in nature at the same time, for the facility of the Valenciennes. And the result is the compact, star-shaped factory, which is a first for Toyota. The production area has a limited space for the storage of other parts and components. The two and a half hours’ worth of inventory on hand is lower compared to other Toyota factories in the world.
Fewer man-hours, less inventory, this is how Toyota is. They consistently have the highest quality cars with the fewest defects compared to its competitors in the manufacturing (auto) industry. Their well-known “Toyota Production System” (TPS) or “Lean Production” seems to be their secret weapon in improving the speed of their business processes, quality of their product and service, as well as the reduction of costs.
The TPS developed as a new paradigm of manufacturing excellence, which transforms businesses across different industries. The company also encourages employee involvement in all levels. In addition, they also discover the difference between the traditional process improvement and Toyota’s Lean improvement.
In order for the said system to work at your advantage, there is also the need for you to follow the so-called “14 Toyota Way Principles”. This operating philosophy serves as a guide for its management. First principle is to base your management decisions on a long-term philosophy, even at the expense of your short-term financial goals. Second, you must create a continuous flow of processes to bring out any possible problems. Third, to be able to avoid overproduction problems, you must use the pull systems. Fourth, level outing of workload is also important. As they say, work like a tortoise, not like the hare. Fifth is to build a stopping culture to fix problems as soon as possible. It also enables to get quality right the first time. Standardizing of tasks is also important as it serves as the foundation for continuous improvement. To avoid missing any possible hidden problems, the use of visual control can be a great help. You must also make sure that all the technologies you are using are reliable and thoroughly tested to be able to serve your people and the processes of your business. This is to avoid wasting of time, resources, and effort used in an ineffective technology. Next, leaders should serve as the role model of all. He himself should understand the work thoroughly and live its philosophy to be able to teach it to others and make them follow his ways. In turn, the leader can now develop exceptional people and teams in accordance to your company’s philosophy. Respect is another important thing among you and your extended network of partners and suppliers. This can be done by challenging and helping them improve their ways and doings. For you to be able to understand a given situation, you yourself must go and see it. As they say, you will only believe and understand if you yourself have seen and experience the situation. The process of decision-making should also be done slowly to avoid making hasty decisions, which are risky most of the time. It should come from a consensus, with consideration to all available options. While on the other hand, its implementation should be done quickly. Lastly, through relentless reflection and continuous improvement, your company should become a learning organization for all people involved in your company.
This is the very core reason why Toyota, despite the competitors’ effort of imitation, continues to gain market share and huge profits, continues on building new plants, retains a harmonious relation with its supplier and enthusiastic workforce, with its labor costs retained at a lower amount compared to others. They are also described as “the fastest runner in the race” in auto industry. Production efficiency helps them reach that point. Their record (most productive) of 27.9 hours per-vehicle time surpasses the record of their competitors like Ford and Chrysler. The tools of the TPS seem to work smoothly for them. These tools are lean, agile, TQM, TPM, re-engineering, just in time, cellular/continuous workflow, etc. TPS should not only be a cost-based strategy, it should also be a value-based one. The full potential of the TPS is as an operational solution ready to remake entire organizations – both at the process and management levels.
Dell Inc.
Dell Inc. is a premier provider of products and services required, for the building of information-technology and Internet infrastructures of customers worldwide. Its operations strategy focuses on mass customization marketing strategy, build-to-order production system, as well as on its production and supply chain designed for its agile and fast turnarounds.
Operating a plant owned by the company itself is one of the global manufacturing strategies of the Dell Inc. This is to bring their online operation in time, in achieving its goal of meeting the ever-growing customer needs. It also provides good proximity to an available workforce and supports the objectives of its logistics.
In locating its possible plants, it places preference over strategic locations suitable to advanced manufacturing and distribution companies serving the East Coast markets. Like Dell’s Winston-Salem plant who will produce their PowerEdge servers, PowerVault and the Dell/EMC products, and OptiPlex and Dimension desktop computers primarily for the US market. The said distribution’s advantages made it to be the company’s site choice. This is its easy access to almost all of the major East Coast markets, within a one-day truck haul.
Dell Inc. also operates one of the highest-volume internet commerce sites in the world. According to a study done by Mainstay Partners, the returns of the company will come through cost avoidance in four principal ways. They are by the breakage of the buying cycle and maintenance of expensive proprietary hardware systems; by substantial reduction on administrative and database management costs; by a boost on system capacity while scaling as the business requires; and by raising its availability, thus, the potential for revenue-draining downtime is greatly reduced.
The company uses a sales strategy that was a model of the lean efficiency. It involves direct customer sales, without the use of retailers or intermediaries. Through this high-efficiency business model, the company is able to keep low costs in bringing new technology to its market, faster than any companies, using indirect distribution channels. Dell’s marketplace advantage is brought up by its innovation together with its one-to-one direct customer communication. Another innovation is their web presence through the Dell.com, a massive channel for sale.
In addition, the new system of Dell running Oracle 10g grid on Linux is another success on the company’s part, as it does more work, more quickly compared to their previous one. Among its gains includes doubled session capacity characterized by stronger, more sustainable system performance; higher daily order volume, due to its improved performance and availability for users through the elimination of constraints and slowness; automatic distribution and balancing of the increased workload in case of node/s’ failure; and the elimination of system outrages, that cause gaps in line manufacturing and raises the chances of staff sent home.
The new system delivers seven times the performance for only one-tenth the cost. Besides, due to its improved performance and reliability, the company will be able to save around $4.6 million for over five years time, as projected by a study. Other area of potential value brought by the grid system is the automated storage management in Dell’s back office operations.
Moreover, Dell has become a poster child for outsourcing, using its emerging trend of near shoring. “Near shoring” refers to the companies’ practice of going offshore (but in countries with closer proximity to its home bases) in outsourcing its operations. Its success lies on its developed innovative supply chain together with its just-in-time operation. The latter combined more responsibility pushed onto suppliers with the outsourcing of non-essential functions.
Operations Strategy of Service Firms: Disney World and McDonald’s
Disney World
The operations strategy of Disney World centers on the total amusement experience marketing strategy; an organizational management system based on the keen attention to details and comprehensive system of supply chain management, scheduling, product and process design, and maintenance; structured leadership and organization to preserve and enhance creativity, culture, and best practices; and the establishment of continued leadership in maintaining its momentum and further development of its talents.
The company has been able to grow over a longer time period, dominating the family entertainment market. Through its past experiences, it is able to successfully meet the specific needs and wants of its target customers. Disney has focused on market diversification for years, covering a wide variety of products and services. It also practices economies of scale in its production. In addition, most of the company’s product mix focuses on the intangible returns on the buyer’s money.
Large volumes of unique products are also purchased by the company from its unique suppliers. This is to ensure quality service delivered to its customers, while maintaining a strong supplier- relationship. Moreover, due to its highly differentiated products, switching costs is important as expensive advertising campaigns are done in order to obtain market share. The company has also effectively diversified its operations and products, both in the local and global level. The company has also been able to retain its innovative employees, control its costs while producing quality goods and services, and minimized its financial risks.
To avoid being runned out of fresh new ideas, employee participation is highly encouraged, especially the most creative and talented ones. There is the so-called “Gong Shows” where the participants share their own set of unique ideas. Effective distribution channels and marketing are also used to meet the growing demands of its customers. Despite the increasing costs of production due to recent trends, the company has able to survive. Efficiency, through the enforcement of tighter budgets and higher expected returns, made it possible for the company to produce cheaper but high quality movies compared to its competitors. In its rapid expansion and diversification of its products and services, risks are minimized by covering-up the losses of one product line by another product line.
On the other hand, a risky but cutting-edge technology strategy is designed to aid in restoring the luster of Disney’s aging brand, increase its efficiency and boost attendance. Among them is the Pal Mickey. This is an experiment in bridging the gap between the static data about a customer and its dynamic behavioral preferences, which depends on its physical location and movements at any given time. It is considered as a new evolution of CRM. Another one is the Destination Disney, a new customer experience strategy. In here, the company intends to leverage technology, with hopes of personalizing a person’s parking experiences. Under the said strategy connects another initiative called the Magical Gatherings. This is a website with the specific intentions of boosting new revenues and group business bookings, through the encouragement of far-flung family members in collaborating online, for planning their next reunion or group event in the Disney World. There are still many other strategies at hand waiting for its final utilization. Together, all of the said strategies will aid Disney in maintaining its competitive edge in the entertainment industry.
McDonald’s
McDonald’s has developed three strategies for its future scenarios. These are customer convenience, customer value, and optimal operations. Together with the digital strategies, it will help create new and bold ideas for the company. The stores are characterized by the operations team as miniature manufacturing facilities. With its goal in improving the suite of its manufacturing systems (inventory control, production planning, financial control, and point-of-sale order entry) that supports the store, the team has developed ways of improving its overall operations.
Aside from offering hamburgers and french fries, the current trend in McDonald’s extends in serving as a family retreat, and as a community center for senior citizens. The means for the former one are its extensive indoor playgrounds and promotional toys, while the invitational plays of bingo are for the latter one. As this trend continues, an extension of more service-oriented technologies is needed. They can conduct studies and surveys to better know which among the different alternatives serves the company’s objectives the best. These might include robots taking orders instead of humans, automated processes of food production, and the like.
To achieve customer convenience, one of their key initiatives is on the improvement in the speed of new stores’ opening. To answer this, the “day in the life” scenario was developed for site developers that described the optimal toolset and the collaborative environment they would have with them as they scouted for locations. Rather than choosing individual tools, they should think about the tools on the horizon-geographical information systems, global positioning satellites, new media such as teleconferencing, and the expanding flow of information through public networks like the Internet.
For the achievement of customer value, focus should remain on real-time information flow that allows instant corrections of the menu and prices in response to customers’ preferences, competitive environment, and even the ingredients’ global commodities market.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment