Examples of How to Successfully Create and Execute Operations Strategy to Support Your Business Strategy
Companies benefit from operations science primarily by mastering knowledge and control of their operations. With this renewed knowledge and control, companies craft and execute powerful operation strategies to achieve overall business strategy.
Results include hundreds of millions of dollars of savings across a wide variety of industries, improved customer service, reduced confusion and chaos, and stronger competitive advantage.
The results are widely documented in literature and on the worldwide web. Following are a couple examples, others are available on our Blog or on the Articles page.
Medical Devices: Delivering Customer Satisfaction
Arc Precision’s mission is to provide medical device and instrument companies with best in class engineering, supply chain, and operations capabilities that deliver quality precision machined components on-time to customer request.
With a CAGR of revenue of 16% from 2018 thru 2022, Arc built its business using operations science to drive operations strategy and execution. Extensive description is provided in Chapter 7 of Factory Physics for Managers. In particular, operations science-based capacity planning and management enables Arc to deliver consistently on-time and meet its service commitments. Just as importantly, Arc avoids infeasible delivery promises. Arc’s customers know they can count on its delivery commitments and have shown their appreciation by awarding Arc as an outstanding supplier.
Arc also uses its command of operations science to provide strategic incentives for its customers. This has resulted in reduced inventory and cost for both Arc and its customers. By commanding the tradeoff advantages of its buffering options, Arc can offer a menu of cost, lead time, and inventory configurations to best suit its customers’ businesses. See the table below. This benefits both the customer and Arc.
|
OPTION
|
ORDER QUANTITY
|
ORDER FREQUENCY
|
LEAD TIME
|
COST REDUCTION
|
CUSTOMER INVENTORY REDUCTION
|
ARC BUILD AHEAD
|
|---|---|---|---|---|---|---|
|
Initial Terms
|
45
|
Per P.O.
|
Quoted
|
NA
|
NA
|
NA
|
|
JIT
|
1
|
As needed
|
Same day
|
7%
|
100%
|
12
|
|
Periodic
|
15
|
Once per month
|
4 weeks
|
15%
|
63%
|
15
|
|
JIT, extra build ahead
|
1
|
As needed
|
Same day
|
26%
|
100%
|
39
|
Configure to Order Project Management: Reducing Lead Time and Cost
A configure to order company producing electro-mechnical devices requires extensive design input for configuration of the final product before release to production. Each order is essentially a design project. The challenge was that the design project management process was taking too long even after the company added capacity which was hard-to-get and expensive engineering talent.
The solution? Train the entire project management team in the concepts of operations science. Map the process and build a simple capacity model as a baseline for clearly “seeing” the process. Once the group had their minds around the operations science and could see their design process in terms of its throughput, cycle time, work in process, and variability, they were off to the races with their own approach to addressing their challenges.
Within a few months they were able to free up 20% of engineering capacity requirements with process changes; this was a large cost savings as the company faced increasing demand.
At the same time, they reduced order cycle time (from order receipt to production) and process variability (escapes). Order cycle time was reduced by 32%. An “escape” is any task in a design project that gets past a step in the process with incomplete information. This causes rework and destroys productivity. Escapes were reduced by 71%.
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