Version: 08/05/99 10:07 AM

Session

Date

Module and Description

Required Readings

Cases

1

Sep 28

I. Introduction

Strategic Operational Audit

1. Chapter One of Managing Business Process Flows

1. Swatch

2. Shouldice Hospital Limited

2

Oct 5

II. Competing on Variety

2. Chapter Two of Managing Business

Process Flows

3. American Connector

3

Oct 12

Flexibility and Automation

3. What Really Makes Factories Flexible?

4. Eli Lilly: the Flexible Facility

4

 

Oct 19

 

III. Competing on Time

4. Time: The Next Source of Competitive Advantage

5. Japan’s Dark Side of Time

5. Harley-Davidson Motor Co.

5

Oct 26

Re-engineering

6. Re-engineering Work: Don’t Automate, Obliterate

7. Managing the White Space

6. National Printing Company

6

Nov 2

Team Project Progress Reports

Midterm Exam

    

7

Nov 9

IV. Competing on Quality

8. Why Improving Quality Doesn’t Improve Quality (Or Whatever Happened to Marketing?)

7. Steinway & Sons

8

Nov 16

V. Product & Process Development

9. Is the Make-Buy Decision Process a Core Competency?

10. The Ultimate Core Competency

8. Aquagliss/Ultraglide

9

Nov 23

Operational Hedging and Options

11. How Can Great Firms Fail? Insights from the Hard Disk Drive Industry

12 Make and Buy in Innovation Strategies

9. Seagate Technologies

10. DGPS: Differential Global

Positioning System

10

Nov 30

VI. Competing on Cost/Putting it all Together

Team Project Presentations

Course Review

13. What's Your Strategy for Managing Knowledge?

11. ITT Automotive

11

Dec 7

Hand-in Team Project

    

 

Contact Information

Instructor: Jan A. Van Mieghem Phone: (847) 491-5481, (847) 869-6703

Office: Leverone 565 (MEDS Dept) Fax: (847) 467-1220

Email: vanmieghem@nwu.edu

Office Hours: Monday Afternoon

Instructor: William J. White Phone: (847) 491-3680, (847) 441-5978

Office: Tech D231 Fax: (847) 491-7928

Email: white@iems.nwu.edu

Office Hours: Tuesday and Thursday Morning

1. Course Description and Objectives

This course provides the student with a thorough review and understanding of operations strategy. While the course is titled Manufacturing Strategy, it will cover all segments of operations. The entire process flow from the receipt of an order to delivery will be emphasized. Sometimes manufacturing is thought of as simply producing the product or service. Operations strategy then is choosing one of several ways to focus and align the operating elements of the business to strongly support, and enable the execution of, the overall strategy of the enterprise.

Along with finance and marketing, operations is one of the three primary functions of a firm. At the danger of being simplistic, one may say that marketing induces the demand for products (goods and services), finance provides the capital, and operations produces the product. Even more general, operations spans the entire organization: COOs are in charge of R&D, design/engineering, production operations, marketing, sales, distribution, support and service.

Having said all that, this course will be somewhat like a capstone course. You have now had all the required basic courses in the MMM program. Many of these cases can be approached from the position of the general manager and therefore all the functional issues should be addressed. In addition, the most difficult activities for the general manager generally involve implementation. As a result we will also spend time in class on the general manager’s view and the tasks required implementing the recommended solutions.

This course aims to (1) familiarize you with the problems and issues confronting top level managers, and (2) provide you with language, concepts, insights and tools to deal with these issues in order to gain competitive advantage through operations.

This course should be of particular interest to people aspiring to a career in general management, consulting or as the top functional officer in operations. The course should also be of interest to those who manage interfaces between operations and other business functions such as finance, marketing, accounting and human resources. Finally, a working knowledge of operations, which typically employs the greatest number of employees and requires the largest investment in assets, is indispensable for general managers and entrepreneurs.

You will see how different business strategies require different business processes, and vice versa, how different operational capabilities allow and support different strategies to gain competitive advantage. We will decompose the competitive advantage that is being sought into four dimensions: competing on cost, variety, quality and time.

Finally, we will connect to recent developments such as lean or world-class manufacturing, just-in-time operations, concurrent product development, time-based competition and business re-engineering.

2. Required Texts

Required materials available at the bookstore:

3. Assignments and Grading

Assignments & Grading: The grade you receive for the course is intended to certify your demonstrated proficiency in the course material. Proficiency will be estimated by measuring your performance on:

    1. Individual class contribution 30%

    2. Individual case write-ups (2@10%) 20%

    3. Midterm exam (case study and/or supporting questions) 20%

    4. Group comprehensive project 30%

Why Assignments? The course assignments are designed to engage you in the issues, to teach you ways to think about and analyze strategic issues and to prepare you to be effective managers and decision-makers. The enclosed course outline and detailed schedule provides you, class by class, with a brief description of the class, the readings and questions for discussion.

How To do Assignments? Your study groups will be divided into two sections. On the weeks where two cases are assigned each section will be assigned a primary case. The study groups in the assigned section will be expected to focus on the indicated case and in addition be familiar with the second case.

It’s recommended you prepare both with your study group because it enriches the learning experience.

Some cases have quantitative questions and issues. These require both qualitative and quantitative analysis. You should be prepared to discuss your quantitative valuation model in detail.

4. Class Contribution & Midterm

Class Contribution: Your comments and contributions to each class’ discussion are valuable to your classmates. Although activity is important, the quality and impact of your comments are much more significant. The evaluation of your class participation will be based on the substance and insight of your comments.

Voluntary: In-class participation will consist mainly of voluntary contributions, although students will be called on, usually to answer opening questions. If you feel uncomfortable with being called on in class please let it be known in advance..

Electronic Participation: E-mail and the FirstClass software should be used to add ideas and observations after class. We will use the web to post electronic handouts, if applicable.

Midterm Exam: The midterm exam will consist of three parts. First will be a case similar to those covered in class. The case will be available a week or so before the exam for you to read and analyze. The questions to be answered regarding the case will be handed out the day of the exam.

The other two parts of the exam will cover the concepts we have covered and discussions we have had in class.

5. Individual Papers

Individual Paper: You will be required to submit two write-ups of a case analysis. One must be submitted no later than class six (November 2nd). All cases must be submitted before the case discussion.

Case Selection: The following cases are not eligible for write-ups: Swatch, Shouldice, National Printing and you can do only one of Seagate and DGPS.

Content: Completely answer the questions in bold type for the cases you select. Assume you are writing to the CEO who knows the facts, keep it succinct because CEO’s don’t read long reports.

Format: Four pages plus exhibits. Done in Word with 12pt. font using line spacing of exactly 20pts. with 1 inch margins. Guidelines:

    1. Page 1: executive summary + recommendation

    2. Pages 2- 4: analysis (3 pages max)

    3. Exhibits to support your analysis can be added (not page limit constrained)

  1. Team Project: A Strategic Operational Audit

Team Project: Identify an organization (one familiar to your group would work well) where you can perform a strategic operational audit, utilizing some of the concepts studied in class.

Determine how the organization’s operational strategy fits the business strategy.

As a result of your analysis make recommendations as to how modifications could be made to the operations to better support the company strategy.

Your recommendations should include how the new ideas will be implemented. Consider such things as:

The organization should be of a modest size and relatively well defined in terms of location and size. For example, a single plant or service facility, an MIS department, a single store, a logistics operation, a ski resort, a taxi company, etc.

Team: The group should consist of 4-6 members. Your team can be different from your study group.

Format: Your report should be in the form of a mini case. The maximum length is nine pages (excluding exhibits). The report is due on Tuesday December 7, 1999. Some guidelines:

  1. Provide a short description of your unit and it’s competitive identity and larger environment.

  2. Describe the organization’s current business strategy.

  3. Describe the strategic issues and challenges.

  4. Describe the operating strategy, capabilities and processes.

  5. Identify any nonalignment issues or capability gaps.(results of the audit)

  6. Recommend a modified strategy that addresses those issues and challenges.

  7. Discuss implementation steps.

  8. Identify a follow-up or tracking systems.

7. Detailed Course Schedule

See next page.

–––––––––––––––––––Part 1 The Role of Operations Strategy–––––––––––––––

Class 1: Introduction to Operations Strategy Tuesday September 28

Objective: Highlight the importance of Operations Strategy. How the four dimensions of competitive space and the alignment of the business functions are important in gaining and sustaining competitive advantage.

Read: · Chapter One: Managing Business Process Flows

Be prepared to discuss Shouldice Hospital in class focusing on the following questions:

  1. Model Shouldice Hospital as a processing operation with products, attributes and resources.

  2. What are Shouldice’s competitive priorities? What kind of market have they chosen to focus on? How does their operations strategy support their business strategy?

  3. How defensible is Shouldice’s competitive advantage?

  4. Should Shouldice grow? If so, how?

Be prepared to discuss Swatch in class with an emphasis on the following:

  1. What information would you need and how would you obtain it before designing a strategy for the Swiss’ watch industry?

 

––––––––––––––––––Part 2 Competing on Variety––––––––––––––––

Class 2: Competing on Variety Tuesday October 5

Objective: Study how corporations can structure their operations to provide variety. Introduce the concept of "focus" and the link between processes and strategy.

Read: · American Connector Company (A), Case (No. 9-963-035)

Be prepared to discuss American Connector. Consider:

  1. How serious is the threat of DJC to American Connector Company?

  2. How big are the cost differences between DJC’s plant and ACC’s Sunnyvale plant? Consider both DJC’s performance in Kawasaki and its potential in the United States.

  3. What accounts for these differences? How much of the difference is inherent in the way each of the two companies competes? How much is due strictly to the differences in the efficiency of the operations?

  4. Focus on the "fixed factory overhead" line item: determine how much of the difference between ACC and DJC is a function of strategic decisions and how much is related to operating effectiveness. Provide a quantitative assessment.

 

Class 3: Competing on Variety Tuesday October 12

Objective: We will discuss how investments in advanced technology affect a company’s competitive advantage. At the same time we will explore the idea of maintaining flexibility to respond to changes in demand.

Read: · What Really Makes Factories Flexible?

Be prepared to discuss Eli Lilly. Consider:

  1. How has the competitive environment in pharmaceuticals been changing in the late 1980’s and early 1990’s? What are the implications for the role of manufacturing within Eli Lilly?

  2. What type of flexibility does the "flexible facility" provide? What is the value of this flexibility to Lilly? How much is Lilly paying for the flexibility?

  3. How does each facilities option affect Lilly’s cost structure and capacity management rules? How does each affect their product development capabilities?

  4. Make a qualitative cost-benefit analysis of the facility options.

  5. What facility policy do you recommend for Eli Lilly? Back up financial evaluation. (Assume a weighted average cost of capital of 8% and an average inflation rate of 4% for both construction and operating costs. Also, you may adopt the additional assumptions stated on the two page Kellogg addendum to the case.)

  6. Describe other options that Lilly should be contemplating.

 

––––––––––––––––––––––Part 3 Competing on Time––––––––––––––––––––––––

Class 4: Competing on Time Tuesday October 19

Objective: Discuss the processes used by organizations to respond to demand through the use of time in the delivery cycle. This can be done both offensively and defensively. We explicitly investigate the use of capacity to affect responsiveness and entry by new competitors.

Read: · Time: The Next Source of Competitive Advantage

Be prepared to discuss Harley-Davidson. Consider:

  1. What is Harley-Davidson’s (HD) corporate strategy? That is, on what basis do they strive to deliver superior corporate performance?

  2. Demand uncertainty is a major factor in strategic capacity decisions. How does Harley-Davidson take uncertainty into account in their planning processes? How does HD’s history affect its decision making process, if at all?

  3. What are the factors that HD should consider when analyzing the alternatives?

  4. What is your recommendation to Harley-Davidson? Assess fit with HD’s strategy and assess financial attractiveness of your plan: develop pro-forma income statement and NPV analysis. (FYI: HD’s weighted average cost of capital WACC is 12% and its marginal tax rate is 37%.)

  5. Why are new competitors (Polaris, Excelsior-Henderson, etc.) entering the heavyweight cruiser market? Should this impact Harley-Davidson’s strategy, that is, how much of a threat do these new entrants pose to HD? (You may do some web and literature research.)

 

Class 5: Reengineering Tuesday October 26

Objective: Apply the concepts of business process reengineering through role playing in a simulation of a real business situation. This simulation covers the work done by a business team in attempting to satisfy a customer’s delivery request. From this we will formulate a framework for analysis and improvement.

Read: · Re-Engineering Work: Don’t Automate, Obliterate

National Printing Company: (First half of the class)

The class will break up into teams (decided in the previous class) and each team will meet in its assigned room. It is crucial that all students make it a point to attend this class. Every student will have a tailored assignment. The objective of the team is to:

    1. Understand the current business process.

    2. Figure out what went wrong.

    3. And reengineer the process to prevent those problems in the future.

National Printing: (Second half of the class)

Prepare a short presentation (one per group) on the "as is" and the reengineered process flow at National Printing Company. Hand in: Two process flow charts; one for the current process and one for the re-engineered process.

 

Class 6: Team Progress Reports and Midterm Exam Tuesday November 2

Objective: Share with the other groups how you are progressing, your tentative conclusions and potential barriers to completion.

Each team will have ten minutes to present. Following the break the mid term will be held.

 

–––––––––––––––––––––––Part 4 Competing on Quality–––––––––––––––––––––

Class 7: Competing on Quality Tuesday November 9

Objective: Understand what really defines quality and how it can be used strategically.

Read: · Why Improving Quality Doesn’t Improve Quality (Or Whatever Happened to Marketing?)

Be prepared to discuss Steinway & Sons. Consider:

  1. What accounts for Steinway’s reputation as a manufacturer of high quality pianos?

  2. How does Steinway’s strategy compare with that of its major competitors? How does Steinway’s quality differ from Yamaha’s?

  3. Should Steinway introduce the Model K vertical piano? Why or why not? What implications does this decision have for the current manufacturing strategy?

  4. What other advice would you give Peter Perez as a newer strategic business unit (SBU) manager concerning:

 

––––––––––––––––––Part 5 Product and Process Development––––––––––––––

Class 8: Product Development Strategies Tuesday November 16

Objective: Understand how organizations use their total process skills in bringing products to market strategically.

Read: · Make and Buy in Innovation Strategies, research paper 1998 (read sections I and II, which summarize current theory on innovation and make vs. buy, pp.1-10)

Be prepared to discuss Aquagliss/Ultraglide. Consider:

  1. How successful is the Aquagliss/Ultraglide product?

  2. How well did marketing and the other functions (research, engineering, manufacturing and design) work together during the product development process prior to 1972? What are the pros and cons of the way this process was managed?

  3. What do you think of the way the interface was managed between 1972 and 1977? Between 1977 and 1980?

  4. What do you think of the "Innovation Charter" developed in 1983/84? What if any, are the implications to their manufacturing strategy?

  5. What do you think of the role marketing played in the FVD project? Why did the project get stuck?

  6. What are the similarities/differences of Paul Rivier’s approach to new product development compared to the previous approach? How effective is it? What would you change?

  7. How would you go about institutionalizing the new approach to new product development at Calor?

  8. How would you diffuse best new product development practices throughout the SEB group?

 

Class 9: Hedging and Options Tuesday November 23

Objective: Learn how organizations can manage the effects of uncertainty with a high tech product mix. Introduction to operational hedging and application of option valuation to operations strategy.

Read: · "The Innovator’s Dilemma", Chapter One: How Can Great Firms Fail? Insights from the Hard Disk Drive Industry.

Be prepared to discuss Seagate Technologies. Consider:

  1. What is Seagate’s corporate strategy and how does its manufacturing strategy and processes support it?

  2. What are Seagate’s major risks? How does it manage those risks?

  3. Critically evaluate Seagate’s product and process development strategy, which calls for development in its respective product/process center in the U.S. and then exporting the developed process to a site in the Far East for high-volume production.

  4. Draw a process flow diagram of the two-product final assembly and test manufacturing process. Superimpose on the diagram in Exhibit 4 a region showing the combinations of Cheetah and Barracuda production quantities that would be feasible if the current CAR capacity proposal were implemented. What is the expected profit and ROI under this investment? (Given the short product life, assume the firm is making its decisions for a single time period of length one year, at the end of which manufacturing capacity will have zero salvage value.)

  5. Given the uncertainty in the demand forecast (in the form of the three points), would you adjust the capacity plan to provide an optimal hedge against uncertainty? That is, is there a better capacity plan that maximizes expected profit? Draw the new feasibility set on your diagram. What is the expected profit and ROI now? Are both financial measures in agreement as to the recommended course of action? If not, what do you recommend?

  6. In broad conceptual terms, what do you think of "coordinated capacity planning"? That is, of Seagate’s practice of coordinating capacity decisions through the use of a single, deterministic production plan that marketing, manufacturing and financial managers have approved?

Be prepared to discuss DGPS. Consider:

  1. What does Crossair’s "decision tree" look like? That is, try to determine the sequence of investment decisions that need to be made, when they are made and what information Crossair will likely have when they are made.

  2. What do you think of Waser’s analysis in Exhibit 6? Does it appropriately evaluate the project’s attractiveness? If not, what specific characteristics of the project does it ignore?

  3. Why would Crossair apply a discount rate of 15% to projects such as this? What does this discount rate reflect?

  4. How would the value of the project be affected if the competitive damage may be anywhere between 2.5 and 10 M SFr? How would the value be affected if there were a possibility of quality problems with the SNS system, causing additional maintenance costs after installation?

 

––––––––––––––Part 6 Competing on Cost/Putting It All Together ––––––––

 

Class 10: Competing on Cost/Putting It All Together Tuesday November 30

Objective: Understand the tradeoffs with automation and standardization. Also look at a general case to apply the concepts covered.

Read: · What’s Your Strategy for Managing Knowledge? by Morten T. Hansen, Nitin Nohria, and Thomas Tierney (HBR, Mar-Apr 1999)

Be prepared to discuss ITT Automotive. Consider:

  1. Is this new process working? What evidence do you have?

  2. What are your recommendations regarding the issue of standardizing process technology across all plants? Are there motives behind this proposal other than those stated in the case?

  3. As Jergen Geissenger, how would you go about implementing your recommendations? How would you overcome resistance from the plants? As Steve Dickerson, the plant manager of Asheville, North Carolina, what line of reasoning would you use to convince senior managers that full automation is the less desirable alternative?

  4. As Klaus Lederer, what option would you like to see pursued? How do various options fit into the broader corporate strategy of ITT Automotive?