ATAL BIHARI VAJPAYEE

INDIAN INSTITUTE OF INFORMATION

TECHNOLOGY AND MANAGEMENT

Operations Management
Assignment

Submitted to: Submitted by:

Prof. Gyan Prakash Oshin Malviya
2016IPG-066
1. Burger King
Burger King’s operations management (OM)​ involves strategies to
increase the company’s status toward the top position in the global quick
service restaurant industry. As one of the major players in the industry,
Burger King must address the 10 strategic decision areas of operations
management.
The 10 strategic decisions of operations management (OM) are carefully
included in Burger King’s strategies for high productivity and performance.
These strategies are a result of Burger King’s organizational development
through the years.

Burger King’s Operations Management, 10 Decision

Areas
1.​ ​Design of Goods and Services​. Burger King’s focus in this strategic
decision area of operations management is to differentiate its products
from those of competitors. For example, the company offers flame-grilled
burgers, which are relatively unique in the market. This approach to
operations management supports Burger King’s generic strategy and
intensive growth strategies.

2.​ ​Quality Management​. This strategic decision area involves satisfying

the quality expectations of target customers. To address this concern,
Burger King’s operations management maintains product tests. The
company also collects customer feedback through the My BK Experience
website.

3. Process and Capacity Design​. Burger King’s objective in this strategic

decision area is to implement operations management programs to
maximize capacity utilization and productivity. For example, the company
continuously monitors demand and sales at its restaurants worldwide.
Burger King adjusts its production facilities’ operations accordingly.
4. Location Strategy​. The primary operations management concern
regarding location is to strategically optimize market reach. Burger King’s
strategy to address this decision area involves market penetration, with
focus on town centers and urban centers. Restaurant location is used as a
criterion for evaluating franchise proposals.

5.​ ​Layout Design and Strategy​. Burger King’s operations management

emphasizes efficiency. For example, the company’s kitchen design is as
compact as possible to save space while enabling worker productivity.
Thus, Burger King addresses this strategic decision area through efficient
layouts and workflows.

6.​ ​Job Design and Human Resources​. Sufficient and effective human
resources are the objective in this strategic decision area of operations
management. Burger King satisfies this concern through standardized
training programs. The firm has field teams and Restaurant Support
Centers for this purpose.

7. Supply Chain Managemen​t. Burger King has a global supply chain. In

this strategic decision area, the objective is to ensure adequacy of supply
at all times. Burger King’s operations management strategy involves
consolidating all supply chain activities under Restaurant Services, Inc.
(RSI). Burger King’s materials and ingredients are supplied through RSI.

8.​ ​Inventory Management.​ This strategic decision area highlights the

need for operations management practices that maximize capacity and
satisfaction, and minimize inventory management costs. Burger King
addresses this need through localized inventory practices based on
restaurant performance, as well as global inventory management for
moving products to various restaurant locations.

9.​ ​Scheduling​. Burger King’s approach for this strategic decision area is
based on industry standards. For example, the company’s operations
management uses automated scheduling for human resources. In
addition, manual scheduling is used, especially at individual Burger King
restaurants.

10. Maintenance​. Optimal operating conditions are the main concern in

this strategic decision area of operations management. For this purpose,
Burger King also uses industry standards. The company has dedicated
maintenance teams for corporate operations, and Restaurant Support
Centers for franchisees, as well as third party service providers in various
localities.

Productivity at Burger King

Burger King’s operations management measures productivity from
different angles, such as those of the franchisees, corporate headquarters,
and regional facilities. The goal is to maximize productivity while
minimizing corresponding costs. The following are some notable
productivity criteria at Burger King:

1. Revenues per restaurant (restaurant productivity)

2. Revenues per region (productivity in the regional market)
3. Meals served (general productivity for process evaluation)
4. Documents processed per year (Burger King’s corporate
productivity)

Burger King’s Intensive Strategies (Intensive Growth

Strategies)
Market Penetration​. Burger King’s primary intensive growth strategy is
market penetration. The goal of this intensive strategy is to grow revenues
from existing customers or markets where the firm already has operations.
For example, Burger King implements this intensive growth strategy by
opening new restaurants in its current markets to get a bigger market
share. A strategic objective connected to this intensive growth strategy is
to expand Burger King’s franchise network. In relation, Burger King’s
generic strategy also supports this intensive strategy by highlighting
unique product features to penetrate markets and grow the business.

Market Development​. Market development is Burger King’s secondary

intensive growth strategy. To support business growth, this intensive
strategy involves entering new markets or targeting new market segments.
For example, Burger King implements this intensive growth strategy by
opening new stores in overseas locations where it does not have
operations. However, this strategy is only secondary or minor in Burger
King’s business because the company already has operations in most
markets around the world. A strategic objective for this intensive strategy
is to grow Burger King by attracting new customers in new markets based
on low prices. Thus, this strategic objective emphasizes low prices in
Burger King’s pricing strategy, which is supported through the cost
leadership generic strategy.

Product Development​. Product development is the least significant of

Burger King’s intensive growth strategies. This intensive strategy enables
the company to grow through the introduction of new products. Burger
King only minimally implements this intensive strategy. For example, the
company introduces new products at a slow rate. Most of Burger King’s
products remain on the menu for years. A strategic objective linked to this
intensive strategy is to grow Burger King’s business through product
innovation. This intensive growth strategy supports Burger King’s generic
strategy of broad differentiation by highlighting new products that are
unique compared to those of competing firms.

References
● Burger King Corporation (2015). Burger King Corporate Responsibility.
● Burger King Corporation (2015). My BK Experience.
● Liu, S., & Jiang, M. (2011). Providing Efficient Decision Support for Green Operations
Management: An Integrated Perspective. INTECH.
● Najdawi, M. K., Chung, Q. B., & Salaheldin, S. I. (2008). Expert systems for strategic
planning in operations management: a framework for executive decisions. International Journal
of Management and Decision Making, 9(3), 310-327.
● Restaurant Services, Inc. (2015). About Us.
● Schrunder, C. P., Galletly, J. E., & Bicheno, J. R. (1994). A fuzzy, knowledge-based
decision support tool for production operations management. Expert Systems, 11(1), 3-11.
● Verdaasdonk, P. (1999). Defining an information structure to analyse resource
spending changes of operations management decisions. Production Planning & Control, 10(2),
162-174.

2. ​Intel Corporation
Intel Corporation’s operations management (OM)​ strategy focuses on
supporting product development as the basic factor in the 10 strategic
decision areas. Operations managers deal with these 10 strategic
decisions for the purpose of optimizing organizational processes and
productivity. As a leading semiconductor business, Intel already maintains
optimized operations that suit strategic objectives. The company’s efficient
semiconductor fabrication processes are an indicator of operations
management success.
Operations management needs in its global semiconductor business
pushes Intel to find new ways to optimize efficiency and productivity. As a
technology business, the company takes advantage of its technology savvy
human resources to successfully maintain automation to support
operations managers’ activities. Through these efforts and a constant
monitoring of the global market, Intel remains effective in the 10 strategic
decision areas. Such effectiveness depicts continuous success and
long-term leadership in the industry.

Intel Corporation’s Operations Management, 10 Decision

Areas
1. Design of Goods and Services​. Intel’s mission statement and vision
statement guide operations management decision-making in this strategic
decision area. The company’s objective in this area is to produce profitable
and excellent output that satisfies market demand. For example, Intel’s
corporate vision and mission emphasize leadership in bringing
semiconductor products to every customer around the world. This aim is
achieved through microprocessors and other products designed with
cutting-edge technologies and distributed globally. Intel’s operations
management supports these activities through cost minimization and
resource planning to optimize the impact of product designs on
organizational stability.

2. Quality Management​. The determination and satisfaction of quality

expectations are the objectives in this strategic decision area. Intel’s
operations managers evaluate quality expectations through market
research and feedback from customers, sellers and distributors, among
others. The data is used as basis for implementing adjustments in
operational policies. For example, to address concerns regarding defects,
adjustments are made in Intel’s operations management policy on margins
of error. Such action supports optimal productivity while addressing quality
issues. Operations management effectiveness in this strategic decision
area aligns with Intel’s generic strategy and intensive growth strategies.

3. Process and Capacity Design​. Operations managers’ objective in this

strategic decision area is to maintain processes through standards
compliance and resource adequacy to support productivity goals. In the
case of Intel Corporation, such goals are achieved through process
automation. As part of the company’s operations management, reviews are
regularly conducted on available technologies and related resources to
determine capacity statuses and requirements. For example, operational
capacity levels are evaluated to develop corresponding solutions to
optimize Intel’s operational productivity in its microprocessor fabrication
plants. These operations management efforts ensure high-efficiency
processes and advantageous economies of scale, which are among the
strengths highlighted in the SWOT analysis of Intel Corporation.
4. Location Strategy​. Cost-optimal distances from target markets,
suppliers and resources are the objectives in this strategic decision area of
operations management. Intel’s approach to achieve these objectives
focuses on human resources and logistics. For example, the company
prioritizes access to talent necessary to maintain the competitive
advantage of its semiconductor business. Nonetheless, to complement this
situation, sellers and Intel Store locations are optimized for maximum reach
in target markets. These locations are included in Intel’s marketing mix or
4Ps. The approach ensures the company’s operations management
effectiveness in this strategic decision area.

5. Layout Design and Strategy​. Intel aims to maximize efficiency of the

flow of resources and information to address this strategic decision area.
Through such maximization, the company’s operations management
supports high productivity. Intel fulfills this aim by using office layouts that
facilitate efficient work and creativity. For example, the company’s office
layouts make it easy for employees to meet and share creative ideas for
new product development. Also, many characteristics of layouts, including
processor fabrication plant layouts, are based on Intel’s organizational
structure. Any new product line requires new spaces, layouts, and
corresponding components in the corporate structure. This approach
shows that Intel’s operations management in this strategic decision area is
flexible to accommodate changes linked to business growth and expansion.

6. Job Design and Human Resources​. In this strategic decision area, the
main objective is to maintain adequate human resources to support
operational efficiency and productivity goals. Intel satisfies this objective
through an operations management approach that primarily involves
human resource management. For example, the HR strategy involves job
designs that support Intel’s organizational culture, which emphasizes
discipline, results orientation, and other factors. Also, the company has
productivity enhancement measures, such as leadership development
programs and seminars for better employee output. Thus, Intel’s operations
management addresses the aims in this strategic decision area.

7. Supply Chain Management​. A high-efficiency and adequate supply

chain is the objective in this strategic decision area of operations
management. In Intel’s case, supply chain is automated to maximize
efficiency. For example, the company has computer systems and
databases for monitoring and determining areas that need immediate
adjustment. In addition, Intel’s operations management efforts influence
suppliers through policies that extend to their business activities. For
instance, the company develops and implements policies to improve the
sustainability and environmental impact of the entire supply chain, inclusive
of suppliers and other relevant organizations. These operations
management efforts are part of Intel’s corporate social responsibility
strategy. These efforts are also partly responsible for the company’s high
operational productivity and economies of scale that contribute to Intel’s
competitive advantage in the semiconductor industry.

8. Inventory Managemen​t. Intel’s operations managers are concerned

with inventory holding and ordering to support business productivity goals.
The objective is to ensure that the inventory satisfies capacity requirements
alongside market demand. Intel’s operations management approach for
this strategic decision area involves a serialized inventory and the “first in,
first out” (FIFO) method. For example, the FIFO method addresses issues
with technological obsolescence, especially with regard to intermediate
products in semiconductor fabrication processes. Correspondingly,
serialization allows Intel to track every item in its inventory. The resulting
combination ensures the company’s efficiency and effectiveness in
satisfying changes in market demand. This operations management
approach supports increasing R&D investment, which is a significant
technological external factor (Read: PESTEL/PESTLE Analysis of Intel
Corporation).
9. Scheduling​. In operations management, the objective in this strategic
decision area is to establish short-term and intermediate schedules that
satisfy market demand. An appropriate approach in Intel’s case involves
short-term schedules for immediate concerns and generalized schedules
for regular processes. For example, the company uses short-term
schedules for microprocessor fabrication processes involving batches or
projects. On the other hand, generalized schedules are for regular
processes like equipment maintenance and product development iteration.
This approach ensures that Intel’s operations management and productivity
efforts satisfy dynamic needs and relatively steady needs in the
semiconductor business.

10. Maintenance​. Process stability and reliability are the objectives in this
strategic decision area of operations management. Intel has a
multi-pronged approach to ensure effective solutions for these concerns.
For example, operations managers coordinate with HR management teams
to maintain an adequate workforce. In addition, Intel supports high
operational productivity by maintaining cutting-edge technologies, such as
equipment used to fabricate semiconductor chips. Another operations
management approach involves high R&D investment to maintain
technological competitive advantage, which addresses the external force of
competitive rivalry (Read: Porter’s Five Forces Analysis of Intel
Corporation).
Productivity at Intel
Considering its global business and a growing product mix, Intel
Corporation uses various sets of measures or criteria for evaluating
productivity. Some of these criteria refer directly to individual employee
output, while others measure group or organizational productivity to guide
operations management decision-making. The following are some of the
quantitative productivity criteria applicable at Intel:

1. Batches produced per day (Fabrication productivity)

 2. Problem tickets processed per day (Customer service
productivity)
3. Units delivered per month (Distribution productivity)
4. Units sold per month (Intel Shop productivity)

Intel’s Intensive Strategies (Intensive Growth Strategies)

Product Development (Primary)​. Intel Corporation keeps product
development as its primary intensive growth strategy. Product development
supports business growth through new products that increase revenues.
For example, Intel supports its continued growth and global market
dominance through the introduction of new processors that make previous
processors obsolete. This intensive strategy makes the company’s new
products attractive and profitable, thereby ensuring business growth.
Product development and Intel’s differentiation generic strategy both
support competitive advantage based on product quality and features. A
strategic objective based on product development is to grow the company
through rapid innovation. A related strategic objective based on this
intensive growth strategy is to increase Intel’s R&D investment for new
product development.

Market Penetration (Secondary​). The market penetration intensive

growth strategy involves selling more products to current customers. Intel
implements market penetration as a secondary intensive strategy through
business partnerships and aggressive deals that favor growth and a strong
market presence. For example, the company has special agreements with
laptop manufacturers to use Intel microprocessors in their products. The
differentiation generic strategy pushes the company to develop competitive
advantage based on advanced features and high quality in product
development. Such features and quality support the effective
implementation of the market penetration intensive strategy for Intel’s
growth. A strategic objective based on market penetration is to grow the
company through aggressive marketing strategies.
Market Development (Supporting)​. The market development intensive
growth strategy serves a supporting role in Intel Corporation’s progress. In
implementing this intensive strategy, growth is achieved by entering new
markets or market segments, or by creating new markets for novel
products. In this case, Intel applies market development when it creates
entirely new product lines. For example, the introduction of Pentium mobile
processors in 2011 developed the company’s presence in the mobile
device market. The differentiation generic strategy creates competitive
advantage that increases Intel’s potential success in new markets or
market segments when implementing the market development intensive
growth strategy. A strategic objective based on this intensive strategy is to
grow Intel through novel products to enter new markets, such as the market
for smart home systems.

Diversification (Supporting)​. Intel uses diversification as a supporting

intensive growth strategy. This intensive strategy facilitates the company’s
growth through new business. For example, the 2016 acquisition of the
German company Ascending Technologies, which develops unmanned
aerial vehicles, contributed to the diversification of Intel’s business. The
differentiation generic strategy, when applied within the context of
diversification, ensures the company’s competitive advantage through
products that attract target customers. A strategic objective based on the
diversification intensive strategy is to grow Intel’s business through more
acquisitions in other industries.

References
● Brown, S., Bessant, J. R., & Lamming, R. (2013). Strategic operations
management. Routledge.
● Ceko, E. (2014, May). Relations between Strategic Management, Operations
Management and Environment Protection. In International Conference: Fostering
Sustainable Development through Creation of Knowledge Society (Vol. 17, p.
18).
 ● Gundersen, T. F. (2017). Best Strategic Decisions in Management of Complex
Operations. In International Manufacturing Strategy in a Time of Great Flux (pp.
85-104). Springer International Publishing.
● Intel Corporation – Official Website.
● Intel Corporation Form 10-K.
● Parnell, J. A. (1997). New evidence in the generic strategy and business
performance debate: A research note. British Journal of Management, 8(2),
175-181.
● Spry, A., & Lukas, B. A. (2016). Brand Portfolio Architecture and Firm
Performance: The Moderating Impact of Generic Strategy. In Looking Forward,
Looking Back: Drawing on the Past to Shape the Future of Marketing (pp.
866-867). Springer International Publishing.
● Varadarajan, P., & Dillon, W. R. (1982). Intensive growth strategies: A closer
examination. Journal of Business Research, 10(4), 503-522.

3. ​Nike Inc.
Nike Inc. is a leading global manufacturer and seller of sports shoes,
apparel and equipment. This market position is partly a result of effective
and efficient operations management (OM). To ensure success, Nike’s
managers must continually examine and improve strategies and
approaches used in the 10 strategic decision areas of operations
management. These areas pertain to the main decisions in managing
streamlined operations and productivity that effectively address business
goals and objectives.
The 10 strategic decisions of operations management (OM) at Nike Inc.
cover a wide variety of issues, considering the company’s global market for
sports shoes, apparel and equipment. Nike effectively addresses these
decision areas through standards consistently applied in operations
management throughout the global organization.

Nike’s Operations Management, 10 Decision Areas

1. Design of Goods and Services​. This strategic decision area deals with
the design of Nike’s athletic footwear and other products. The operations
management objective is to ensure that product design aligns with
organizational capabilities and business goals. In this case, Nike Inc.
focuses on designs based on advanced technology and current market
preferences.

2. Quality Management​. Nike emphasizes quality in its processes and

products. The objective in this strategic decision area is to satisfy
consumers’ expectations about product quality. The company’s operations
management addresses this concern through high quality standards and
the application of total quality management (TQM) in the production of
sports shoes, equipment and apparel.

3. Process and Capacity Design​. This strategic decision area requires

that Nike’s operations management must prioritize streamlining and
efficiency of production. The objective is to ensure adequate, effective, and
efficient production. At Nike, operations managers apply continuous
improvement strategies to support the company’s production goals and
needs based on market dynamics.

4. Location Strategy​. Physical location is the typical concern in this

strategic decision area of operations management. The objective is to
optimize costs and efficiency through proximity to employees, suppliers and
the target market. In the case of Nike Inc., the operations managers apply a
corporate strategy that chooses production facility locations based on costs
and nearness to the most significant markets. For example, Nike Inc. has
sports shoe suppliers in Southeast Asia because of the cost advantage
based on cheaper labor in the region.

5. Layout Design and Strategy​. Nike’s operations management deals with

the layout design of its facilities. The objective in this strategic decision
area is to optimize workflow based on human resources, capacity
requirements, technology, and inventory requirements. Nike’s operations
managers apply corporate layout design and strategy to company-owned
facilities only. For example, the firm uses office layouts where employees
can move easily. The factories that produce the athletic shoes, apparel and
equipment are not under Nike’s control in terms of layout design and
strategy.

6. Job Design and Human Resources​. Human resource adequacy and

maintenance are the objective in this strategic decision area of operations
management. Nike Inc. satisfies this concern through internal leadership
development, along with coaching and mentoring. The company also has
regular evaluations of job assignments to ensure person-job fit.

7. Supply Chain Management​. Nike has excellent supply chain

management, which facilitates efficient production to support the global
sports shoes, apparel and equipment business. The objective in this
strategic decision area of operations management is to align the supply
chain with the company’s overall strategic aims. Nike Inc. satisfies this
objective through supply chain automation and optimization of transport
distances among suppliers, production facilities, distributors and retailers.

8. Inventory Management​. The objective in this strategic decision area is

to maintain operations management that minimizes inventory costs while
maximizing its effectiveness and efficiency. Nike’s operations managers
apply the perpetual method of inventory management, which involves
continuous monitoring and movement of inventory from the supply chain to
the distributors and retailers.

9. Scheduling​. Nike’s scheduling approach is primarily concerned with

corporate operations and the coordination of the supply chain with
distribution and retail operations. In this strategic decision area of
operations management, the aim is to maximize resource utilization. Nike
Inc. managers satisfy this aim through automation. Corporate office
schedules are standardized, while supply chain schedules are adjusted
according to the conditions of the market. Nike applies changes to the
supply chain based on market demand for its athletic footwear, equipment
and apparel.

10. Maintenance​. Nike’s maintenance strategy considers adequacy of all

resources. Adequacy of human resources, facilities and capacity is the
objective in this strategic decision area. Nike’s operations management
implements continuous recruitment programs to support HR needs, as well
as reward programs and career development strategies for maximum
retention of employees. For facilities, the company has dedicated teams to
regularly evaluate facility and equipment integrity and requirements. The
companies that manufacture Nike shoes, apparel and equipment are
responsible for their own maintenance.

Productivity at Nike Inc.

Nike Inc. operations management supports maximum productivity of
corporate offices, the supply chain, distribution network, and
company-owned retail facilities. There are a variety of measures applied to
determine actual productivity levels. In this case, Nike uses the following
criteria to measure productivity in some business areas:

1. Revenue per square foot (Productivity of Nike’s retail stores)

2. Pair of shoes per hour (Productivity of Nike suppliers)
3. Items per day (Productivity of inventory personnel)
4. Documents per day (Productivity of Nike’s corporate offices)

Nike’s Intensive Strategies (Intensive Growth Strategies)

Product Development​. Nike’s primary intensive growth strategy is product
development. This intensive strategy involves the introduction of new
products to grow sales revenues. For example, Nike’s mission statement
highlights innovation applied through new designs for shoes and related
products. New technologies enhance the products and set them apart from
the competition. In product development, these products remain attractive
despite changing consumer preferences. Thus, this intensive strategy
supports Nike’s differentiation generic competitive strategy via product
innovation. A suitable strategic financial objective based on this intensive
growth strategy is to increase Nike’s market share through cutting-edge
technologies integrated in the design of sports shoes, apparel and
equipment.

Market Penetration​. Nike’s secondary intensive growth strategy is market

penetration. In this strategy, the company grows by increasing sales
revenues in existing markets. For example, Nike increases its stores and
retailers in the United States to sell more athletic shoes to American
consumers. However, market penetration is just a secondary intensive
growth strategy because the company already has significant presence in
the global market. The cost leadership generic competitive strategy
empowers Nike to penetrate markets based on product affordability. A
strategic objective linked to market penetration is to increase Nike’s market
presence by increasing the number of authorized retailers. In addition, a
financial objective related to this intensive growth strategy is to increase
Nike’s sales revenues through more sales to sports enthusiasts in current
markets.

Market Development​. One of Nike’s supporting intensive growth strategies

is market development. This strategy facilitates the company’s growth by
targeting new markets or market segments. For example, Nike enters new
markets in Africa and the Middle East to increase its shoe sales revenues.
Alongside product development, the company applies the market
development intensive growth strategy by investing in new technologies to
penetrate new market segments, such as segments composed of
bodybuilders. However, the saturation of Nike stores and retailers around
the world means that this intensive strategy has only a supporting role in
the company’s growth. The generic competitive strategy of differentiation
helps the company enter new markets, based on product attractiveness. A
strategic financial objective under this intensive growth strategy is to
increase Nike’s profitability by entering new markets in Africa and the
Middle East.

Diversification​. Diversification is the least significant in Nike’s intensive

strategies for growth. This strategy involves developing new businesses to
achieve growth. Nike implemented this intensive strategy in its early years,
such as when it introduced apparel and sports equipment to its product
mix. Initially, the Nike brand was on athletic shoes only. Diversification can
support Nike’s generic competitive strategy of differentiation through new
businesses that supply materials for product innovation in the athletic
shoes, apparel and equipment business. A strategic financial objective
based on this intensive growth strategy is to improve Nike’s financial risk by
entering other industries.

References
● About Nike – The official corporate website for Nike, Inc. and its affiliate brands.
● Liu, S., & Jiang, M. (2011). Providing Efficient Decision Support for Green Operations
Management: An Integrated Perspective. INTECH.
● Najdawi, M. K., Chung, Q. B., & Salaheldin, S. I. (2008). Expert systems for strategic
planning in operations management: a framework for executive decisions. International
Journal of Management and Decision Making, 9(3), 310-327.
● Nike, Inc. Form 10-K, 2015.
● Schrunder, C. P., Galletly, J. E., & Bicheno, J. R. (1994). A fuzzy, knowledge-based
decision support tool for production operations management. Expert Systems, 11(1),
3-11.
● Verdaasdonk, P. (1999). Defining an information structure to analyse resource spending
changes of operations management decisions. Production Planning & Control, 10(2),
162-174.
● Verdaasdonk, P., & Wouters, M. (2001). A generic accounting model to support
operations management decisions. Production Planning & Control, 12(6), 605-620.

4. ​Toyota Motor Corporation

Toyota Motor Corporation’s operations management (OM)​ covers the
10 decisions for effective and efficient operations. With the global scale of
its automobile business and facilities around the world, Toyota uses a wide
set of strategies for the 10 decisions of operations management, integrating
local and regional automotive market conditions. Toyota is an example of
successful operations management at a global scale. These 10 decisions
indicate the different areas of the business that require strategic
approaches. Toyota also succeeds in emphasizing productivity in all of the
10 decisions of operations management.

Toyota’s Operations Management, 10 Strategic Decision

Areas
1. Design of Goods and Services​. Toyota addresses this strategic
decision area of operations management through technological
advancement and quality. The company uses its R&D investments to
ensure advanced features in its products. Toyota also integrates dealership
personnel needs in designing after sales services.

2. Quality Management​. To maximize quality, the company uses its

Toyota Production System (TPS). Quality is one of the key factors in TPS.
Also, the firm addresses this strategic decision area of operations
management through continuous improvement, which is covered in The
Toyota Way, a set of management principles.

3. Process and Capacity Design​. For this strategic decision area of

operations management, Toyota uses lean manufacturing, which is also
embodied in TPS. The company emphasizes waste minimization to
maximize process efficiency and capacity utilization. Thus, Toyota supports
business efficiency and cost-effectiveness in its process and capacity
design.

4. Location Strategy​. Toyota uses global, regional and local location

strategies. For example, the company has localized manufacturing plants in
the United States, China and Thailand, as well as official dealerships in all
markets except Mongolia and some countries in the Middle East and Africa.
Thus, Toyota addresses this strategic decision area of operations
management through a mixed set of strategies.

5. Layout Design and Strategy​. Layout design in Toyota’s manufacturing

plants highlights the application of lean manufacturing principles. In this
strategic decision area of operations management, the company aims for
maximum efficiency of workflow. On the other hand, Toyota dealership
layout design satisfies the company’s standards but also includes decisions
from the dealers.

6. Job Design and Human Resources​. The company applies The Toyota
Way and TPS for this strategic decision area of operations management.
The firm emphasizes respect for all people in The Toyota Way, and this is
integrated in HR programs and policies. Also, Toyota has training programs
based on TPS to ensure lean manufacturing practice.

7. Supply Chain Management.​ Toyota uses lean manufacturing for supply

chain management. In this strategic decision area of operations
management, the company uses automation systems for real-time
adjustments in supply chain activity. In this way, Toyota minimizes the
bullwhip effect in its supply chain.

8. Inventory Management.​ In addressing this strategic decision area of

operations management, Toyota minimizes inventory levels through
just-in-time inventory management. The aim is to minimize inventory size
and its corresponding cost. This inventory management approach is
covered in the Toyota Production System.

9. Scheduling​. Toyota follows lean manufacturing principles in its

scheduling. The company’s goal for this strategic decision area of
operations management is to minimize operating costs. Cost-minimization
is maintained through HR and resource scheduling that changes according
to market conditions.
10. Maintenance​. For decades, Toyota developed a network of
strategically located facilities to support its global business. The company
also has a global HR network that supports flexibility and business
resilience. Thus, in this strategic decision area of operations management,
Toyota uses its global business reach to ensure optimal and stable
productivity.

Productivity at Toyota
Toyota’s operations management uses productivity measures or criteria
based on the area of business considered. For instance, some of these
productivity measures are as follows:

1. Number of product units per time (manufacturing plant productivity)

2. Revenues per dealership (Toyota dealership productivity)
3. Number of batch cycles per time (supply chain productivity)

Toyota’s Intensive Strategies (Intensive Growth

Strategies)
Market Penetration​. Toyota’s main intensive growth strategy is market
penetration. This intensive strategy supports business growth by reaching
and attracting more customers in the firm’s current markets. To fulfill this
intensive growth strategy, Toyota ensures that it offers products for every
market segment. For example, the company has sedans, trucks, SUVs,
luxury vehicles, and other product lines for every type of customer. This
intensive growth strategy supports the cost leadership component of
Toyota’s generic strategy by enabling the company to maximize sales
volume, which ensures profits despite relatively low selling prices.

Product Development​. Toyota uses product development as its

secondary intensive growth strategy. This intensive strategy supports
Toyota’s growth by attracting customers to new products. The company
uses this intensive growth strategy in the form of rapid innovation. The
company is known for its innovation processes. For example, through the
Toyota Prius, this intensive growth strategy empowers the firm to attract
customers concerned about the environment. This intensive growth
strategy supports Toyota’s broad differentiation generic strategy by using
innovative products that are attractive on the basis of uniqueness or
advanced features.

Market Development​. Toyota already has a global presence. As such,

market development is just a supporting intensive growth strategy for the
business. In this intensive strategy, Toyota grows by entering new markets
or selling to new market segments. However, the company already has
presence in most markets around the world. Also, the firm already sells its
products to every market segment. This intensive growth strategy supports
Toyota’s cost leadership generic strategy by maximizing the company’s
global market presence.

References
● Kachwala, T. T., & Mukherjee, P. N. (2009). Operations management and productivity
techniques. PHI Learning.
● Liu, S., & Jiang, M. (2011). Providing Efficient Decision Support for Green Operations
Management: An Integrated Perspective. INTECH.
● Najdawi, M. K., Chung, Q. B., & Salaheldin, S. I. (2008). Expert systems for strategic
planning in operations management: a framework for executive decisions. International
Journal of Management and Decision Making, 9(3), 310-327.
● Toyota Motor Corporation (2015). Guiding Principles at Toyota.
● Toyota Motor Corporation (2015). Toyota Way 2001.
● Verdaasdonk, P. (1999). Defining an information structure to analyse resource spending
changes of operations management decisions. Production Planning & Control, 10(2),
162-174.
● Verdaasdonk, P., & Wouters, M. (2001). A generic accounting model to support
operations management decisions. Production Planning & Control, 12(6), 605-620​.

5. ​Walmart
Walmart’s operations management covers a variety of approaches
that are focused on managing the supply chain and inventory, as well as
sales performance. The company’s success is partly based on effective
performance in operations management. Specifically, Walmart’s
management covers all of the 10 decision areas of operations
management. These decision areas pertain to the issues and concerns that
managers face on a daily basis.
The 10 decisions of operations management are effectively applied in
Walmart’s business through a combination of approaches that emphasize
supply chain management, inventory management, and sales and
marketing.

Walmart: Operations Management 10 Decision Areas

1. Design of Goods and Services​. This decision area of operations
management involves the strategic characterization of products. In the
case of Walmart, this decision area covers goods and services. As a
retailer, the company offers retail service. However, Walmart also has its
own brands of goods, such as Great Value and Sam’s Choice. The
company’s operations management addresses the design of retail service
by emphasizing the variables of efficiency and cost-effectiveness. Walmart
is known for low costs because of its cost leadership generic strategy. To
fulfill this strategy, the firm focuses on maximum efficiency of its retail
service personnel. To address the design of goods in this decision area of
operations management, Walmart also emphasizes minimal production
costs, especially for the Great Value brand. For example, the firm’s goods
are designed in such a way that they are easy to mass-produce.

2. Quality Management​. This decision area of operations management is

applied at Walmart through three tiers of quality standards. The lower tier
specifies minimum quality expectations of the majority of customers.
Walmart keeps this lower tier for most of its brands, such as Great Value.
The middle tier specifies market average quality for low-cost retailers. This
tier is applied for the performance of Walmart employees, especially sales
personnel. The upper tier specifies quality levels that exceed market
averages. This tier is applied to only a minority of Walmart’s outputs, such
as goods under the Sam’s Choice brand. The firm addresses the decision
area of operations management for quality management through this
three-tier approach that ensures suitable quality in different areas of
Walmart’s organization.

3. Process and Capacity Design.​ Walmart addresses this decision area

of operations management through behavioral analysis, forecasting, and
continuous monitoring. Behavioral analysis of customers and employees,
such as in the stores, serves as basis for Walmart’s process and capacity
design of store processes and capacity, personnel and equipment.
Forecasting is the basis for the firm’s ever-changing capacity design for
human resources. Walmart’s HR process and capacity design evolves as
the business grows. Also, to satisfy concerns in this decision area of
operations management, the company uses continuous monitoring.
Continuous monitoring of store capacities informs Walmart’s corporate
managers to keep or change current designs.

4. Location Strategy​. This decision area of operations management

emphasizes efficiency of movement of materials, human resources and
business information throughout the organization. In this regard, Walmart’s
location strategy includes stores located in or near urban centers. The
company’s aim is to maximize market reach. Materials and goods are
made available to the company’s target consumers through strategic
warehouse locations. To address the business information aspect in this
decision area of operations management, Walmart uses the Internet. The
company has a comprehensive set of online information systems for
real-time reports and monitoring. Thus, Walmart’s main concern in this
decision area is on the location of stores and related facilities.
5. Layout Design and Strategy​. To address this decision area of
operations management, Walmart uses shoppers’ behaviors for the layout
design of its stores. The layout design of individual stores is based on
consumer behavioral analysis and corporate standards. For example,
Walmart’s placement of some goods in certain areas of its stores, such as
near the entrance/exit, is based on this behavioral analysis of shoppers. On
the other hand, the layout design and strategy for the company’s
warehouses are based on the need to rapidly move goods across the
supply chain to the stores. Walmart’s warehouses have adequate space
allocation for the company’s trucks, suppliers’ trucks, and goods. With
efficiency, cost-effectiveness, and cost-minimization, the firm satisfies
needs in this decision area of operations management.

6. Human Resources and Job Design​. Walmart’s human resource

management strategies involve continuous recruitment. The company
suffers from relatively high turnover because of low wages, which relate to
the cost-leadership generic strategy. Nonetheless, continuous recruitment
enables Walmart to address this decision area of operations management.
Also, the firm maintains standardized job processes, especially for
positions in the stores. Walmart’s training programs support the need for
standardization and service quality standards of the business. Thus, the
firm satisfies concerns in this decision area of operations management
even though there are some issues with turnover. (Main article: Walmart:
Human Resource Management)

7. Supply Chain Managemen​t. Walmart’s use of information technology

and bargaining power over suppliers successfully addresses this decision
area of operations management. The company’s supply chain is
comprehensively integrated with advanced information technology. Supply
chain management information systems are directly linked to Walmart’s
ability to minimize costs of operations. These systems enable managers
and vendors to collaborate in deciding when to move certain amounts of
merchandise across the supply chain. Walmart’s operations management
approaches also include wielding the company’s strong bargaining power.
Because it is the largest retailer in the world, Walmart influences suppliers
to cooperate in using these systems.

8. Inventory Management​. In this decision area of operations

management, Walmart’s inventory management involves the
vendor-managed inventory model and just-in-time cross-docking. In the
vendor-managed inventory model, the suppliers access Walmart’s
information systems to decide when to deliver goods based on real-time
data on inventory levels. In this way, the company minimizes stockouts. On
the other hand, in just-in-time cross-docking, Walmart minimizes the size of
its inventory, thereby also supporting the firm’s cost-minimization efforts.
Such approaches help maximize the company’s performance in this
decision area of operations management. (Main article: Walmart: Inventory
Management)

9. Scheduling​. Walmart uses conventional shifts and flexible scheduling.

In this decision area of operations management, the emphasis is on
optimizing internal business process schedules. Through optimized
schedules, the company can expect minimal losses linked to excess
capacity and related issues. At Walmart, scheduling in warehouses is
flexible and based on current trends. For example, based on the company’s
approaches to inventory management and supply chain management,
suppliers readily respond to changes in inventory levels. As a result, most
of Walmart’s warehouse schedules are not fixed. However, the company
generally has fixed conventional shifts for scheduling of store processes
and human resources in sales and marketing. Such fixed scheduling is
needed to optimize human resource expenditure. Still, to fully address this
decision area of operations management, Walmart occasionally changes
store and personnel schedules to address anticipated changes in demand,
such as during Black Friday.
10. Maintenance​. In addressing maintenance needs, managers must
consider maintaining different types of resources. Walmart effectively
addresses this decision area of operations management through training
programs to maintain human resources, dedicated personnel for facility
maintenance, and dedicated personnel for equipment maintenance. The
company’s human resource management provides training programs to
ensure that employees are effective and efficient. Walmart’s dedicated
personnel for facility maintenance keep all the firm’s buildings in shape. In
relation, the dedicated personnel for equipment maintenance fix, repair,
and clean equipment like cash registers, computers, cleaning equipment,
and others. This combination of maintenance approaches contributes to
Walmart’s effectiveness in satisfying concerns in this decision area of
operations management.

Determining Productivity at Walmart

Part of the goals of Walmart’s operations management is to maximize
productivity to support the minimization of costs under the cost leadership
generic strategy. There are various quantitative and qualitative criteria or
measures of productivity that pertain to human resources and related
internal business processes. The most notable of these productivity
measures/criteria at Walmart are:

1. Revenues per sales unit

2. Stockout rate
3. Duration of order filling
The revenues per sales unit refers to the sales revenues per store, average
sales revenues per store, and sales revenues per sales team. Walmart is
interested in maximizing revenues per sales unit. The stockout rate is the
frequency of stockout, which is the condition where inventories for certain
products are already empty or inadequate. Walmart’s objective is to
minimize the stockout rate. The duration of order filling is the amount of
time consumed to fill inventory requests at the stores. Walmart’s objective
is to minimize the duration of order filling. The satisfaction of these
objectives contributes to the company’s performance in operations
management.

Walmart’s Intensive Strategies for Growth (Ansoff Matrix)

Market Penetration (Primary Strategy)​. Walmart’s main intensive growth
strategy is market penetration. In Igor Ansoff’s model, this strategy entails
selling more goods or services to the company’s current markets. Current
markets are those where the business has existing operations. In
implementing this intensive strategy, Walmart Inc. sells more goods and
services to its current consumers by giving discounts and related offers.
For example, as a cost leader, the company offers discounted wholesale
packages of various goods. In addition, Walmart enhances its online
presence to improve customers’ access to the products it sells. This access
improvement contributes to the growth of the company’s sales revenues. A
strategic objective related to this intensive strategy is to increase the
company’s market share, especially in the biggest retail markets, such as
the United States. Walmart applies market penetration by using the selling
point of low prices, which is achieved through the cost leadership generic
strategy.

Market Development​. This intensive strategy is of secondary significance

in supporting Walmart Inc.’s business growth. Market development involves
offering the company’s existing goods and services to new markets. For
example, in using this intensive growth strategy, Walmart opens new stores
in countries where it does not yet have operations. A related strategic
objective is to continue to establish the company’s presence in new
markets. This objective includes online presence for retail transactions. The
cost leadership generic competitive strategy supports the market
development intensive growth strategy through low prices that attract
consumers to Walmart stores in these new markets.
Product Development​. Walmart Inc. uses product development as a
minor intensive strategy for growing the retail business. Based on the
Ansoff Matrix, product development involves developing and offering new
products to the markets where the company currently has operations. In
this case, Walmart has minimal investment in new product development.
The company focuses its investments on sales and marketing, which are at
the core of the retail business. Nonetheless, using this intensive growth
strategy leads to the strategic objective of investing more in research and
development (R&D) to introduce new services or improve Walmart’s
existing products. The cost leadership generic strategy requires that
product development must focus on new products that do not impose costly
processes.

Diversification​. This intensive growth strategy involves providing entirely

new products in new markets, which are usually industries or sectors where
the company does not yet operate. For example, Walmart Inc. entered the
video streaming market in 2010 upon acquiring the content delivery and
media technology company Vudu Inc. A strategic objective in using this
intensive growth strategy is to search for and acquire companies that can
be integrated into Walmart’s existing operations, such as via the company’s
e-commerce website. In following the cost leadership generic competitive
strategy, such acquisitions must involve high efficiency and support
low-cost operations, in line with Walmart Inc.’s operations management
strategy. Despite its use in the business, diversification remains a minor
intensive strategy in growing the company. Walmart Inc. has a low rate of
diversification, as the business focuses on retail operations.

Walmart’s Vendor-Managed Inventory Model

Walmart’s success in managing its inventory is partly due to the effective
implementation of the vendor-managed inventory model. In this model,
suppliers access data from the company’s information systems, such as
data on current inventory levels and the rate at which certain goods are
sold. Suppliers decide when to send additional goods to Walmart, while the
company monitors and controls the actual transit of goods from
warehouses to the stores. This strategy shifts some of the inventory control
activities onto the side of the suppliers.
Walmart’s vendor-managed inventory has the benefit of minimizing delays
in the movement of inventory across the supply chain. This benefit is
achieved because suppliers can directly access current data about the
inventory of their goods at Walmart stores. Another beneficial effect of
using the vendor-managed inventory model is the minimization of costs in
inventory management activity. The company does not need to spend for
extra personnel to manage each supplier’s goods. Instead, this financial
and human resource expense is directly passed on to Walmart’s suppliers.

Types and Roles of Inventory at Walmart Inc.

Walmart uses many types of inventory, each with a corresponding set of
management approaches, strategies, and tactics. Each type fulfills a
certain role in the retail company’s inventory and supply chain. The
following types of inventory are some of the most notable in Walmart’s
practices:

1. Finished Goods Inventory

2. Transit Inventory
3. Buffer Inventory
4. Anticipation Inventory
Finished goods inventory​. The finished goods inventory type is the most
significant in Walmart’s business. Finished goods arrive at the company’s
stores. These goods are stored and the inventory is replenished regularly.
Thus, the role of this type of inventory is to support Walmart store
operations, where the finished goods are moved from the company’s
merchandise distribution centers to be sold to the retail buyers at the
stores.
Transit inventory​. Walmart uses the transit inventory type as the second
most significant in supporting its retail operations. This type of inventory
refers to the goods that are held while in transit. The global extent of
Walmart’s supply chain means that some goods are in transit for days or
weeks. The role of this inventory type is to support the replenishment of the
finished goods inventory in the merchandise distribution centers and
Walmart stores.

Buffer inventory​. Walmart uses the buffer inventory type in its stores by
keeping a small margin of extra goods in order to maintain business
continuity when demand suddenly fluctuates. For this purpose, there will
always be an extra stock of goods at Walmart stores. The role of this type
of inventory is to ensure the adequate capacity of the company to satisfy
sudden increases in demand, considering that current retail market
prediction models may be accurate, but not perfect in modeling such
fluctuations.

Anticipation inventory​. Walmart uses the anticipation inventory type to

ensure optimal capacity to satisfy consumer demand. This type is similar to
the buffer inventory because the company maintains extra stocks of goods
to address an increase in demand. However, the anticipation inventory type
is based on seasonal changes and corresponding empirical data on
seasonal changes in the market. For example, Walmart dramatically
increases its inventory size right before and during Black Friday to satisfy
the massive increase in demand during this special shopping day. The
company also uses anticipation inventory for the Christmas season and
some long holiday weekends. Walmart does not use the anticipation
inventory type during regular shopping days, which are basically the rest of
the year. The role of this inventory type is to enable the company to satisfy
expected seasonal increases in demand.
Just-in-Time Cross-Docking in Walmart’s Inventory
Management
Walmart uses different methods to manage its inventory. Just-in-time
inventory is the application of the just-in-time (JIT) method to inventory
management. This method involves measures and activities for the
operational objective of minimizing storage and related costs. At Walmart,
the just-in-time inventory method is applied in the form of cross-docking. In
cross-docking, suppliers’ trucks and the company’s trucks meet at the
company’s warehouses or merchandise distribution centers. Goods are
transferred from the suppliers’ trucks directly to Walmart’s trucks, which
deliver the goods to the stores.

The main benefit of cross-docking at Walmart’s warehouses is the

minimization of inventory size. Fewer goods are stored at the warehouses.
A smaller inventory is less costly to maintain. Also, cross-docking enables
Walmart to quickly deliver goods to the stores. This condition enables the
firm to rapidly respond to fluctuations in demand and related changes in the
market. Thus, this method of inventory management supports Walmart’s
operational efficiency and business resilience.

Walmart’s Measures of Inventory Performance

Considering the size of its business and the variety of products it offers,
Walmart uses numerous variables as measures of inventory performance.
The following measures are some of the most significant:

1. Inventory turnover
2. Stock-out rate
3. Inventory size
Inventory turnover is the rate at which Walmart’s inventory is sold out and
replenished. It is a measure of the cost of keeping each item in stock. A
higher inventory turnover rate is less costly and more desirable for the
company. The stock-out rate is the frequency at which Walmart’s inventory
becomes inadequate in satisfying demand. A lower stock-out rate is
desirable. In addition, the company uses inventory size as a gauge of cost.
As noted, the corporation spends less for a smaller inventory. These
measures reflect the cost minimization objectives linked to Walmart’s cost
leadership generic competitive strategy, which requires low costs to
maintain attractive low selling prices.

Managing Inventory across Walmart’s Supply Chain

ABC Analysis​. The Category A items in Walmart’s inventory include the
finished goods sold at its stores and operations equipment, such as
information systems for supply chain management and inventory
management. Items in this category are regularly monitored and recorded.
The Category B items in Walmart’s inventory are the other supplies or
materials used for operations, such as maintenance equipment and office
furniture. These items are moderately monitored and have moderate
recording accuracy. Category C involves the least monitored and recorded
inventory items, such as janitorial supplies and office supplies like paper.
This category has the least impact on the company’s daily retail operations.

Inventory Information Systems​. Walmart is known for its advanced

information systems specifically designed to support international retail
operations, including e-commerce operations. These information systems
cover every area of the business. In inventory management, Walmart uses
a system that allows suppliers to access data on the inventory levels of
their products. This system supports the company’s vendor-managed
inventory model, which helps minimize operating costs and enables the
business to offer low selling prices.

Bullwhip Effect in Walmart’s Supply Chain​. The bullwhip effect is the

propagation of error in the form of inadequacy or excesses in the supply
chain. A small error in one part of Walmart’s supply chain could lead to
bigger errors and higher costs across the supply chain. The company
minimizes the bullwhip effect in its supply chain through the
vendor-managed inventory model. Vendor-managed inventory allows
suppliers to directly access Walmart’s inventory data. In this way, the
company’s personnel have minimal contribution to possible errors in
managing the movement of goods from the suppliers to the company’s
stores.

Financial Impact of Walmart’s Inventory Management

Walmart’s vendor-managed inventory model minimizes the cost of
managing inventory because some of the cost is transferred to the
suppliers. The combination of the finished goods inventory, transit
inventory, buffer inventory, and anticipation inventory supports the
company’s cost leadership generic strategy through cost minimization.
Walmart’s cross-docking as a form of the just-in-time inventory method also
helps reduce inventory costs by minimizing inventory size. This combined
approach supports the company’s profitability and financial soundness.

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