ORDER-

WINNERS
AND
QUALIFIERS

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CHARACTERISTICS OF TODAY’S MARKETS:
DIFFERENCE AND SPEED OF CHANGE

• Past markets were characterized by similarity and

stability.
• Current markets are characterized by difference and
rapid change.
• Market characteristics of today place a greater need on
understanding than in the past.

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UNDERSTANDING
ORDER WINNER
AND QUALIFIERS
 Order-winners and qualifiers can evolve over time,
just as competencies can be gained and lost.

Japanese automaker initially competed on price but to

ensure certain levels of quality before the U.S consumer
would consider their product.

Over time, the consumer was willing to pay higher price

(within reason) for the assurance of a superior-quality
Japanese car. Price became a qualifier, but quality won
the orders.

Today, high quality, as a standard of the automotive

industry, has become an order qualifier, and innovative
design or superior gas mileage wins the orders.

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TRADE-OFFS

• The involvement of time and money to change, develop or

improve elements of the delivery system or infrastructure
within operations always involves choices.
• With choices there are trade offs.
• Compromise is a must in making choices
• Companies makes choices at several levels

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LEVEL 1: WHICH
BUSINESS UNIT?
• Where companies of a size
that making splitting the whole
into two (at least), or more,
business units – the company
need to make choice where to
allocate the resources
• The decisions are regarding
about future sales and profit
growth.

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 LEVEL 2: WHICH MARKET?
• As businesses are typically in two or more markets,
prioritizing the investments made by functions such as
operations needs to reflect the corporate importance of
the market choices involved.

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LEVEL 3: WHICH
ORDER-WINNER
AND QUALIFIER?
• The competitive drivers in
markets typically differ.
• This level need to make set
of choices concerns which
order-winner(s)/qualifier(s)
in the chosen market(s) is
the priority in terms of
where investments will be
made.
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LEVEL 4: WHICH FUNCTION?

• To improve the company’s ability to better provide a chosen

order-winner and qualifier- the next choice is how to achieve
this most effectively.
• The first step is to determine how this will be provided in terms
of the two or more functions that often can contribute to
improving support for a competitive driver in a company’s
market(s).
• E.g Price and delivery speed

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Price
• Price as order-winner, the
strategic task of relevant
functions is to reduce cost in
product specification or in
operation processes.
• The trade-offs decision at this
level is when choosing which
function can best support this
strategy.
• For example
• The design function
• The operation function
• The engineering function

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• Design function –change or simplify current design in
order to
• Saved material cost, reduce materials, substitute materials. But
must meet product specification
• Reduce the labour cost by reducing number of parts

• Operations function – to improve the existing process

• Reduce waste
• Reduce processing steps
• Increase process speed

• Engineering function – could invest in modifying, or

retrofitting the existing process in order to
• Increase throughput speed
• Reduce the number of people to run the process
• Reduce the level of rejects or process waste
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Delivery speed
• If the delivery speed an
order-winner, so what is the
strategic task?
• So what is the trade-offs
decision concern with
functions?
• Operation?
• Design?

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LEVEL 5: WHICH INVESTMENT?

• The evaluation of alternative investments has to take into

account not only the trade-offs inherent in the investment
itself but also a comparison between this investments and
alternatives

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ORDER-WINNERS AND
QUALIFIERS: BASIC
CHARACTERISTICS
• General statements about market embody imprecise
meaning
• Order-winners and qualifiers are market specific
• When developing order-winner and qualifiers,
companies must distinguish the level of importance for
individual criteria for each market. Allocate point 1-
100 to order winners, and denoted Q for qualifiers
and QQ for order-losing sensitive qualifiers
• Order-winners and qualifiers and their relative
weightings will change over time.

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• Differences typically exist between the criteria and their weightings
necessary to retain existing market share, those necessary to increase
market share and those to gain new customers.
• The criteria that relate to winning orders for a primary suppliers will
differ from those for secondary or other supplier categories.
• Not all order winners and qualifiers relate to operations. However,
over time, operations-related criteria will often come to the fore

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ORDER-WINNER AND
QUALIFIERS: SPECIFIC
DIMENSIONS
 Operations-related and operation-specific
criteria
 Price
 Delivery reliability or on-time delivery
 Delivery speed
 A market-driving option
 Quality conformance
 Demand increases
 Product range

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Operation related but not operation-specific criteria
 Design
 Lead times
 Distribution

Non operations related criteria

 Design leadership
 Being an existing supplier
 Marketing and sales
 Brand name
 Technical liaison and support
 After-sales support 16
OPERATIONS-RELATED
AND OPERATION-
SPECIFIC CRITERIA

Price

 In many markets, and particularly in the growth,

maturity and saturation phases of product life cycle,
price is an important order-winner.

 Thus the task of operation is to reduce cost to create

the level of profit margin necessary

 In most companies in developed countries – direct

labour is only small part of total cost

 Materials and overhead usually cost about 80-90%

of total cost

 Where margin is high, price is not an order winner

but a qualifier

 Where price in an order winner, margins will be low

– thus cost reduction is priority

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• There are difference between being price competitive (a
qualifier) and competing on price (an order-winner).
• Where price is qualifier, a company cannot simply charge
whatever it wishes. Must price the product according to market.
• Or else Q become QQ
• Where price is an order winner, low margins give operations
the clear task of reducing cost

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GENERALIZED PRODUCT LIFE CYCLE
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WHAT TO DO IF PRICE IS ORDER WINNER?QUALIFIER

Cost reduction
• Need to concentrate their efforts in those areas where costs
are greater
• Look at materials and overheads
• Overheads – rent, gas, electricity, wages

Lean operations
• The aim is to seek out and eliminate waste in all its forms
including the elimination of non-value added activities and
inventory reduction.
• Homework – read about lean productions (e.g source of 20
wastes, LP elements)
Continuous improvement
• Known as Kaizen
• Is the ongoing drive to seek improvements (no matter what
their size) in all aspects of a business and for this to be set
within the domain of the staff undertaking the work
involved.
• Improvement becomes an integral part of a person’s job
and is ongoing in nature.
• While typically the changes that result are small leading
to incremental improvement, but the wealth of ideas leads
to sizeable results overall with immediate and identifiable
benefits. 21
Experiences curves

• There is an evidences shows that as experiences

accumulates, performance improves.
• The basic phenomenon of the experience curves is that the
cost of manufacturing a given item falls in a regular and
predictable way as the total quantity produced increases.

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Delivery reliability or on-time delivery
• OTD means supplying the products ordered in full and on
the agreed due-date.
• Major task of operation
• It is a qualifier for many operations
• Many time it become order losing sensitive. So if company
miss due date, the customer will quickly respond
• The need to identify different OTD expectations is a
critical step here as with order-winners and qualifiers.
• Operation tasks – consideration on capacity, scheduling
and inventory, WIP and finished goods 23
Delivery speed
• A company may win-orders through its ability to deliver
more quickly than competitors or to meet delivery date
required when none of the competitors can do so.
• Product like this need an operation process that can
respond to this requirements.
• Key measurement here is to compare a customer’s lead
time with operation lead time (OLT)
• OLT = material lead time (MLT) or numbers of orders
already accepted and waiting to be made (OBL) which is
greater + process lead time (PLT)
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THE COMPONENTS OF OPERATIONS LEAD TIME
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SITUATION 1
Options (for infrequent and short-term responses)
• Increasing short-term capacity by overtime working
• Change customer priorities in the existing order backlog
queue or jobs going through the operations process

The first will increase cost and the second increase pressure
on scheduling

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Options (for long term)
Increase capacity either on permanent or semi permanent.
Permanent – an additional shift or purchase new equipments.
Semi –permanent- increase daily working hours
Hold selected materials in stock and hence reduce the MLT
element of the OLT.
Move from MTO to ATO or MTS in order to reduce PLT
Contract with suppliers to guarantee providing a given
number of orders at all times and with the ability to choose
how to use the associated capacity allocation, thus reducing
OBL elements of a suppliers own OLT
Arrange for a supplier to hold selected material inventory
hence reducing MLT element of the company’s own OLT 27
CUSTOMER LEAD TIME AND OPERATIONS LEAD TIME
COMPARISONS – 2 SITUATION
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THE ELEMENTS MAKING UP A SUPPLIER’S OPERATIONS LEAD TIME THAT
CONSTITUTE THE COMPANY’S OWN MATERIAL LEAD TIME
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A-market Driving Option
• Reducing OLT by a range of alternatives where it is
considered that customers would value shorter lead times,
or to change the accepted current market norms on
supplier’s lead times to disadvantage competitors and it
that way increase market share.
• Response to reducing lead times needs to be corporate
wide
• From the moment an order reaches the factory, all
elements of lead time need to be reviewed, with the aim
of reducing each component involved in the total process.
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• Companies can offer short lead times by e.g holding
excess capacity, maintaining zero or low order backlogs,
holding inventory at any or all stages in the process.
• These decisions would fall within the domain of the
business strategy making group, with operations’ role to
implement and maintain the chosen alternatives.
• Possible scenarios company can select to reduce lead time

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 Initial positions Length of lead
times
1 Design to order – new product response where companies design and Long
manufacture a product to meet the specific needs of a customer.

2 Engineer to order – changes to standard products offered to customers

and only made to order. Such changes would be substantial in nature
and customer specific. Lead times include the relevant elements of
design, engineering and all operations.

3 Make to order – concerns manufacturing a standard product (any

customization is nominal and does not increase total lead times) only
on receipt of a customer order or against agreed schedules or call-
offs
4 Assemble to order – components and subassemblies have been made
to stock on receipt of an order (or against an agreed schedule or call-
off) the required parts are drawn from work-in-progress/component
inventory and assembled to order.

5 Make to stock – finished goods are made ahead of demand in line 32

with sales forecasts. Customers’ orders are met from inventory. Short
Quality conformance

• Quality conformance- making products to specification

• Many companies were slow to respond to the new quality
conformance levels provided by competitors.
• Lack of clarity on the meaning of quality – broad definitions
encompassed many dimensions.

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 Dimensions of quality Function (s) with
prime responsibility
for provision

Performance A product’s primary operating characteristics

Features Secondary characteristics, the ‘bells’ and ‘whistles’

Reliability The probability of a product malfunctioning within a Design

given period.
Aesthetics How the final products looks
Durability A measure of a product’s life in terms of both its
technical and economic dimensions

Conformance The degree to which a product is manufactured to Operations

the agreed specification
Serviceability The ease of servicing (planned or breakdown) to Design and after-sales
include the speed and provision of after-sales
services.
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Perceived quality How a customer views the products Marketing and design
Demand increases
in some market, a company’s ability to respond to increase in
demand is an important factor in winning orders.
For high seasonality products, spasmodic or one-off nature
Need to identify through predicting the sales – level of
predictability surrounding demand itself, a product’s shelf life
and the frequency of product modifications in line with market
requirements
All these affect operations’ response
Knowing the pattern of seasonal demand makes it possible to
reach agreement between supplier, manufacturer, distributor
and customer about inventory holdings throughout, process
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capacity and planned increases in labour.
• For one-off or spot business (e.g H1N1 epidemic) –
response can be by holding materials or forms of
capacity, arranging short-term increases in labour
capacity, re-arranging priorities or some combination of
these.
• We called this ‘flexibility’
• How to respond to demand increases is an important
strategic decision.
• To allow each function to respond according to its own
interpretation invariably reduces the benefits of
corporate cooperation on the one hand and leads to
mismatches on the other. 36
Product range
• Markets are increasingly characterized by difference not
similarity (anymore)
• Have to have balance between levels of customization
and the volume base for repetitive operations and have
to addressed by business as a whole
• Operations needs to develop processes that can cope
with product range differences and provide low costs.
• Product range differences – need to be recognized
during process investments
• Low costs- e.g reduce set up times, assembly types 37
OPERATIONS-RELATED
BUT NOT-OPERATIONS
SPECIFIC CRITERIA
Design

 The links between design, operations and market are the very
essence of a business.

 Both design and operations’ aim is to provide products

according to their technical and business specification.

Low cost

 Products have to be designed both with process characteristics

and cost reduction in mind.

 Design not only concerns functionality but has a critical impact

on product costs and with direct materials.

 Opportunities to reduce cost at source are substantial

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 Product range
• Increasing level of product diversification.
• The pressure on design will vary from market to market
and the interpretation and execution of these
requirements are important for companies to stay
competitive
• Companies must be able to keep pace with growth of
diversity
• Demand for styling and product features must be
reconciled with other pressures e.g green products

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Lead times
Speed to market with new product design and
developments has become significant.
Companies receive a number of distinct advantages from
reducing product design and development lead times
(NPD lead times)

Benefits
1) Benefits of double gain – advantages of higher
volumes and higher margins
 Product life cycle are extended
 Increased market share
 Higher profits margins – higher level of pricing freedom 40
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2. Technology, consumer preference and corporate image –
reductions in product development lead times also providing
opportunities for companies to sustain technology leadership
and corporate image.
• Exploiting technology opportunities
 Where companies develop products quickly, they are able to
synchronies product developments with the latest technologies and
thus exploit these opportunities fully
• Matching customer change
 Short product development lead times help a business to match
market changes
• Corporate image
 Developing products more quickly will help a firm to maintain its
corporate image of being progressive frontrunner in developments
and technology excellence. 42
3. Reduction in design cost – reduce NPD will reduced
design cost. This can be achieved by increasing level of
cooperation, communication with will reduces
misunderstanding. E.g concurrent engineering
philosophy.

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Distribution
• Distribution plays important roles in delivery. Need to
consider storage, warehouse administration and
movement.

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NON-OPERATIONS-RELATED CRITERIA

Design leadership
• Design function’s principal roles concerns the development of
products in terms of features, aesthetics, perceived levels of
design specification and reliability while in service.
• Frequent design introductions offer a competitive edge, this
requirement will be at the forefront of the function’s strategic
priorities.

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Being an existing supplier
Where a company is an existing supplier, it may continue to
win orders in part or solely because of this factor.
Relevant to both low-volume and spares market.
Operations needs to continue to support the relevant order-
winners and qualifiers.

Marketing and sales

Marketing and sales functions’ principal orientation is towards
the marketplace.
Its important links to customer and its insights into the
characteristics of relevant market segments – pricing,
competitive threats', growth/decline of markets and
identification of new opportunities 46
Brand name
• Companies needs to establish brand names for their products
through various activities such as design advertising

Technical liaison and support

• In certain market, customer will seek technical liaison from
suppliers during pre-contract phase and technical support
thereafter

After-sales support
• Companies may look for ways of differentiating their total
product by offering, for instance a high level of customer
support. 47
 BENCHMARKING
• Companies must
Continue to update the level and dimensions of competition within
its market
Seeking proactively to improve its own business performance by
learning from other companies about what can be done and how
to do things better

• Benchmarking is a process in which one company studies

the processes of another company (or industry) to identify
best practices.

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Benefits of benchmarking

It describes that ‘what’ rather than the ‘how’, presenting companies with
targets and not solutions. This increases the ownership aspect and
reinforces the inappropriateness of solution-oriented approaches.
Having targets helps to create a uniform response from all parts of a
business- when goals are common, improvement becomes a shared task.
It reinforces the executive role, rather than that of support staff, as the
key element to bring about sustained performance improvements.
External and particularly ex-sector, comparisons are often perceived as
being more objectively derived and therefore more readily accepted.
It opens up new improvement horizons that frequently represent a
stepped change in performance. In so doing, it gives the opportunity to
leapfrog competitors in selected and relevant dimensions of
performance.

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KEY ELEMENTS MUST BE IN PLACE TO
IMPLEMENT BENCHMARKING
• Rigour
• Companies need to ensure that the targets to be achieved are
set high enough, with targets derived from knowledge, not
institution.

• Overcoming disbelief
• Companies need to convince themselves that not only they can
do it better but they can meet the daunting tasks that
benchmarking reviews typically identify.

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• Accountability
• Benchmarking represents an ongoing procedure for measuring
performance and ensuring improvements
• Prerequisite to instill in everyone the responsibility and authority
for identifying, checking and implementing the changes
necessary to achieve the target.

• Culture change
• Managers typically spend most of their time on internal issues.
Reorienting companies to be external rather than internally
focused is essential to the successful introduction and ongoing
development of benchmarking

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BEST TO TAKE NOTE THAT COMPETITORS ARE
MOVING TARGETS

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BEST-IN CLASS EXEMPLARS

• Other parts of the same companies (internal

benchmarking)
• Direct competitors
• Companies in the same industrial sectors but not a direct
competitors
• Latent competitors
• Companies outside the industry
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WAYS TO CLOSE THE GAP THEN
SURPASS EXEMPLARS
• Try harder
• A classic approach that, if adopted, implies a failure to recognise the principles
underpinning benchmarking

• Emulate
• Involves setting achievement targets on a par with competitors and/best-in class exemplars
• Leapfrog
• Setting targets higher than existing exemplar norms
• Change the rules of the game
• Entails setting the pace in driving the order-winners and qualifiers in relevant markets

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STEPS IN BENCHMARKING

1. Select the process to benchmark

2. Indentify an organisation that is best in class in
performing the process you want to study
3. Study the benchmark organisation
4. Analyse the data

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TUTORIAL

• What is the result when an operations strategy

development process is not in place?
• Select two operations-related and operations-specific
criteria and explain using illustrations, some of the issues
involved.

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THE END

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