TU-C2020 OPERATIONS MANAGEMENT (5 cr)

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1 TU-C2020 OPERATIONS MANAGEMENT (5 cr) Operations Strategy Timo Seppälä

2 Peter Drucker pointed out the essence "What the customer buys and considers value is never a product and/or service. It is always utility - that is, what a product and/or service does for him."

3 Operations management and Smart Products and Services Porter, M & Heppelmann, J. (2014), How Smart, Connected Products Are Transforming Competition Porter, M & Heppelmann, J. (2015), How Smart, Connected Products Are Transforming Companies

4 Operations management Operations management is an activity of managing the different types of resources (tangible and intangible) which create and deliver value added for different products and services Slack et al., 2012 Inputs Transformation Outputs

19.9.2012 Kalm, M. & Seppälä, T. (2012).

5 Kalm, M. & Seppälä, T. (2012). Will production relocate from Asia to Finland? Case Bicycle, ETLA Discussion Papers No Kuva: Helkama

6 TU-C2020 OPERATIONS MANAGEMENT (5 cr) Operations Management and Strategy

7 How does your Operations Strategy fit with the Corporate Strategy, Business Strategy (Customers), and to Execution Strategy of other Functional Units?

8 Peter Drucker pointed out the essence "What the customer buys and considers value is never a product and/or service. It is always utility - that is, what a product and/or service does for him."

9 Alternatives for Product and Operations Strategies The 3 Basic Competive Games Exploration game Early market Product leadership strategy Agility game Tornado, early main street Customer intimacy strategy Commodity game Late main street, total assimilation Operational efficiency strategy Source: Hayes & Wheelwright

10 New Markets and Business Opportunity Management

11 New Markets and Business Opportunity Management CDMA Opportunity GSM Opportunity Electronics Modules Describe customer s main challenges Lack of Qualcomm Technology platform QC Patent Lisence will expire own platform is getting old Lack of Linux Operating System Platform Lack of Hand Writing Regognition products Lack of resources Functional Parts like BB, RF, AP and Complementary units are too big in size Need for lower cost minityrized modules Formulate Your Key / Unique Value Proposition (Core promise) 215MUSD savings In 3 year period of time 90 MUSD tied up Capital savings Early access to new technologies and operators 2 years shorter time to market / Linux 15 MUSD savings R&D Access to the Technology that customer does not have Technology advantage through Industrializing IMB technology Implementing the IMB technology to ODM products Describe Your Competitive Advantage Revenue potential for You Qualcomm technology Partner Global Manufacturing Footprint Lower Total Cost of Ownership 400 MUSD / MUSD / 2008 Hardware and Software for Linux Product exists Noone else has the Competeting solution Lower Total Cost of Ownership 100 MUSD / MUSD / 2008 We are the early bird in IMB technology Niche Technology will bring us a position in vertical integration 43 MEUR / MEUR / ,5% PAFI 6,5% PAFI Target 10% PAFI

12 New Markets and Business Opportunity Management EMS Opportunity Automotive After Market Services Describe customer s main challenges Lack of cost competetive location in Europe and Americas High total cost ownership In supply chain and logistics Lack of competetive product solutions Lack of innovative ODM partner The total cost of Ownership is very high Number suppliers is too many Formulate your Key / Unique Value Proposition (Core promise) Secureing the low cost Fast access to resources and competencies Proven track record in EMS: approx. 200M Engines; 1000M SA s Track record in our EDC and Pecs Plant to support Automotive Business We have a proven track record in design: 810, 610, 616 Track record in our Monterrey Plant Millions of phones repaired by our plants Describe your Competitive Advantage Engines are done today globally at Plants Quality of the work done and products produced Yield record of 99% for Penny engine Track record offering innovative concepts and Products (Roosa) We are the only EMS partner Right locations (St P.) to Support customer Distribution Networks Revenue potential for You 500 MUSD / MUSD / MUSD / MUSD / EUR / MEur / 2007

13 Growing and Strengtening your Market Position

Operations Management and Strategy Business Case Preparation Building a new Operational Unit Make or Buy? If Make than What is the General Schedule of the Project? What is the Process Concept?

14 Operations Management and Strategy Business Case Preparation Building a new Operational Unit Make or Buy? If Make than What is the General Schedule of the Project? What is the Process Concept? What is the Geographical location? How does your company secure resources? Competitiveness Analysis from selected geographical location to different markets Funding of the project Own capital financing vs. dept financing Risk Analysis

15 Alternatives for Operations Strategy EXTERNALLY SUPPORTIVE Pursue a manufacturing based competitive advantage Anticipate the potential of new manufacturing practices Manufacturing involved in major marketing and and engineering decisions Long range program to acquire capabilities in advance of needs INTERNALLY SUPPORTIVE Provide credible support to business strategy Investments for consistency with the business strategy Manufacturing strategy is formulated and pursued Long term trends and development addressed systematically Source: Hayes & Wheelwright

16 Alternatives for Operations Strategy EXTERNALLY NEUTRAL Achieve parity with competitors Industry practice followed Investment horizon covers one business cycle Capital investment primary means to catch competition INTERNALLY NEUTRAL Minimise manufacturing s negative potential Role of outside resources dominant Internal, detailed management control systems for monitoring Reactive mode Source: Hayes & Wheelwright

17 Alternatives for Operations and Supply Chain Management Structures Source: Gereffi, G., Humphrey, J. & Sturgeon, T. (2005). The Governance of global value chains. Review of International Political Economy. Vol. 12, Issue 1, p

18 Operations (and Demand/Supply Chain) Management 18

19 Case Elcoteq (R.I.P)

20 Case Elcoteq Operations Structure Mexico USA Sweden Germany France Finland New plant New in Russia, plant in Russia Russia autumn autumn Estonia Hungary China India Korea Japan Elcoteq Partners Emerging markets Brazil Q4/2004

21 Case Elcoteq Operations Structure Design NPI Operations AMS Customer Pre-Design Support in Europe, Americas Customer Design Support Centers in APAC, Europe, Americas Customer NPI Support Centers in APAC, Europe, Americas Global + Consistent Plant Network Customer Industrial Repair Logistics Support in APAC, Europe, Americas

TU-C2020 Operations Management. Timo Seppälä

TU-C2020 Operations Management Timo Seppälä Operations management Operations management is an activity of managing the resources which create and deliver services and products Slack et al., 2012 Inputs