Category Archives: Operations Strategy

Service

Service

With product life cycles becoming shorter and shorter the actual products themselves tend to quickly resemble those of other companies  As a consequence these products are often viewed as commodities in which price is the primary determinant in deciding which one to buy A good example of this is the personal computer (PC) industry Today the differences in the products offered among the different PC manufacturers are relatively insignificant so price is the prime selection criterion  To obtain an advantage in such a competitive environment  firms are now providing’ “value-added” service  This is true for firms that provide goods and services  The reason simple As Sandra Vanderbilt puts it The market power is in the service  because the value is in the results Specific examples of how manufacturers are using en ices as a competitive advantage are presented later in this chapter  Within the service sector  Putnam Investments in Boston offers a wide range of mutual funds through independent brokers To obtain a competitive advantage over other mutual fund companies Putnam now provides brochures and prospectuses of their mutual fund to brokers within 24 hours of request.

Flexibility

Flexibility

From a strategic perspective in terms of how a company competes flexibility consists of two dimensions both of which relate directly to how the firm’s processes are designed  One element of flexibility is the firm’s ability to offer its customers a wide variety of products  The greatest flexibility along this dimension is achieved when every product is customized to meet the specific requirements of each individual customer This is often referred to as mass customization Examples of firms that have achieved this level of flexibility include Dell Computers and the National Bicycle Industrial Company in Japan See
OM in Practice box The other dimension of flexibility is how fast a company can change over its production facilities to produce a new line of products This dimension is  growing in importance as product life cycles become shorter and shorter Sony provides a good example here with its ability to quickly produce new models of its Walkman Because it has this high degree of changeover flexibility Sony is able to easily substitute new Walkman models for those models that do not sell well

operations Management in Practice

operations Management in Practice

ZARA EXCELS ON PRICE,SPEED, AND FLEXIBILTY

zara a retail chain of high-fashion boutique clothing stores has grown rapidly since Mancini Ortega opened his first store in Spain in 1975 Headquartered in northern Spain zara with more than 400 retail stores in 25 countries, now generates sales of more than U3$2 billion annually primarily in Europe but is now beginning to penetrate the US market The reasons for its success are attributed to-several factors including low prices speed of delivery and flexibility Merchandise is delivered to each zara retail location twice a week Merchandise is air freighted to its stores in the United States  This fast and almost contumelious replenishment concept reduces the need for significant in-store inventories and the possibility- of clothes going out of fashion A major factor in area’s ability to react quickly to changes in the customer buying behavior is its use of information and technology Salespeople in each retail location use handheld computers to record buyer preferences and trends  This information along with actual sales data are transmitted daily through the Internet to zara’s headquarters in Spain  In addition, unlike its major competitors, which outsource manufacturing zara produces most of its merchandise in its state-of-the-art factory in Spain Products are designed, produced and delivered to Its stores in as little as two weeks after they have appeared for the first time in a fashion show On contrast, competitors like the GAP and H&M require between live weeks and five months lead time to’ fill orders from its retail operands.)

Delivery

Delivery

Another market niche considers speed of delivery to be an important determinant in its purchasing decision. Here. the ability of a firm to provide consistent delivery allows it to charge a premium price for its products George Stalk Jr  of the Boston Consulting Group has demonstrated that bath profits and market share are directly Ink  to the with which a company can deliver It products relative to It cornerstone In addition to fa t delivery the reliability of the delivery  i also important In other words products should be delivered to customers with minimum variance in delivery time.

Quality

Quality

Quality can be divided into two categories product quality and process quality. The level of quality in a product’s design will vary as to the particular market that it is aimed to serve. Obviously a child’s first two-wheel bicycle is of significantly different quality than the bicycle of a world-class cyclist. The use of thicker sheet metal and the application of extra
coats of paint are some of the product quality characteristics that differentiate a Mercedes- Benz from a Hyundai. One advantage of offering higher-quality products is that they command higher prices in the marketplace. The goal in establishing the proper level of product quality is to focus on the requirements of the customer. Over designed products with too much quality will be viewed as being prohibitively expensive. Under designed products. on the other hand. will lose customers to products that cost a little more but are perceived by the customers as offering much greater benefits.
Process quality is critical in every market segment. Regardless of whether the product is a child’s first two-wheeler or a bicycle for an international cyclist or whether it is a Mercedes-Benz or a Hyundai customers want products without defects. Thus. the goal of process quality is to produce error-free products.