Operations Strategy Decisions

Henry C. Co Technology and Operations Management, California Polytechnic and State University

Hayes, et al, Table 2-1, p. 41

11 Categories of Operations Strategy Decisions

I.

II.

Structural Decisions the organizations brick and mortal attributes (requires substantial capital investment; difficult to alter or reverse) Infrastructural Policies and Systems systems, policies and practices that determine how organizations structural aspects are to be managed.

I. Structural Decisions
1. 2.

3.

4.

Capacity amount, type, timing Sourcing and vertical integration direction, extent, balance Facilities size, location, specialization Information and process technology degree of automation, interconnectedness, lead versus follow.

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II. Infrastructural Policies and System

5.

6.

7.

Resource allocation and capital budgeting systems Human resource systems selection, skills, compensation, employment security Work planning and control systems purchasing, aggregate planning, scheduling, control of inventory and/or waiting time backlog

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8.

9.

10.

11.

Quality systems - defect prevention, monitoring, intervention, and elimination Measurement and reward systems measures, bonuses, promotion policies Product and process development systems leader or follower, project team organization Organization centralized versus decentralized, which decisions to delegate, role of staff groups

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Structural Decisions
Capacity Sourcing and vertical integration Facilities Information and process technology

Hayes, et al, Section 2.3.4

1. Capacity

HOW much long range capacity will be needed? WHEN will the additional capacity be required?

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Factors affecting actual capacity

1.

2.
3.

4.

Process technology affects the efficiency with which various resources are consumed. Capacity fluctuates as one bottleneck is supplanted by another. Capacity is mix dependent. Capacity cushion (maintaining excess equipment or labor as safety capacity) adds to the maximum capacity but may not be sustainable over a longer period of time.
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Hayes, et al, Section 3.2

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5.

6.

7.

8.

Management policies affect capacity - hours worked per week on an operation, inventory of final or intermediate products, capacity cushion. Learning curve affects capacity (efficiency improves over time; successive bottlenecks discovered and removed) Capacity is location specific excess labor, materials, machinery and space in the wrong location are not usable capacity. Capacity depends on variability of arrival rates of work (see Figure 3-1, p.81)
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2. Sourcing and Vertical integration

Span of process make versus buy Outsourcing strategies

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3. Facilities

WHERE should the facility be located? - near markets or near sources of inputs? WHAT should the layout and characteristics of the facility be? HOW focused (product vs. process focused)? One large vs. many small plants? Choice of equipment general purpose or special purpose? Tooling temporary, minimum tooling or production tooling?

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4. Information/Process Technology

Degree of automation Interconnectedness Lead versus follow

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Infrastructural Policies and Systems

5. Resource Allocation andCapital Budgeting

Investment in buildings, equipment, inventory and research Financial analysis (week 10)

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6. Human Resource Systems

Selection, skills, compensation, employment security Job specialization highly specialized or not highly specialized? Supervision technically trained first-line supervisors or non-technically trained supervisors? Close supervision or loose supervision? Wage system many job grades or few job grades; incentive wages or hourly wages? Industrial engineers many or few of such people?
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7. Work Planning and Control Systems

Purchasing, aggregate planning, scheduling, control of inventories and/or waiting time backlog Frequency of inventory taking Inventory size high or low? Degree of inventory control control in great detail or in lesser detail? What to control controls designed to reduce machine downtime or labor cost or time to process, or to maximize output or material usage?
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8. Quality Systems

Defect prevention, monitoring, intervention, and elimination High reliability and quality or low costs?

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9. Measurement and Reward Systems

Measures, bonuses, promotion policies Use of standards formal or informal or none at all?

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10.Product and Process Development Systems

Leader or follower, project team organization Size of product line many customer specials or few specials or none at all? Design stability frozen design or many engineering change orders? Technological risk use of new processes unproved by competitors or follow-theleader policy? Engineering complete packaged design or design-as-you-go approach? Use of manufacturing engineers few or many manufacturing engineers?

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11.Organization

Centralized versus decentralized, which decisions to delegate, role of staff groups Kind of organization functional or product focus or geographical? Executive use of time highly involvement in investment or production planning or cost control or quality control or other activities Degree of risk assumed decisions based on much or little information? Use of staff large or small staff group? Executive style much or little involvement in detail; authoritarian or nondirective style; much or little contact with organization?
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