Operations Strategy is
the decisions which shape the long-term
capabilities of the companys operations and their contribution to overall strategy through
the on-going reconciliation of market
requirements and operations resources
The 4 Perspectives On Operations Strategy
Top - down Perspective What the business wants operations to do
Operations resources Perspective What operations resources can do
Market Reqd Perspective What the market position requires operations to do
Operations strategy
What day-to-day experience suggests operations should do Bottom - up Perspective
Corporate strategy
Business strategy
Top-Down and Bottom-Up Perspectives of Strategy
Operations strategy
Emergent sense of what the strategy should be
Operational experience
Mintzbergs Concept of Emergent Strategy
Intended Strategy Deliberative Strategy Realised Strategy
Un-realized Strategy
Emergent Strategy
Operations Can Kick-Start 2 Virtuous Cycles
Internal Understanding of the processes and
External
Competitiveness
Strong marketing
Competencies embedded in the operation
World Class Operations
High margin
Investment
Capabilities enhance innovation and improvement
Developing the resources which let the operations performance stay ahead of the competition
Developing customers, competitors and stockholders perceptions and expectations
5 Steps for Strategy Formulation
1. Defining a primary task
What is the firm in the business of doing? What does the firm do better than anyone else? What qualifies an item to be considered for purchase? What wins the order? How will the firm compete?
2. Assessing core competencies 3. Determining order winners and order qualifiers
4. Positioning the firm
5. Deploying the strategy
Market Req & Operations Resources Perspectives of Operations Strategy
Strategic Reconciliation
Operations Resources OPERATIONS STRATEGY Market Requirements
Operations strategy reconciles the requirements of the market with the capabilities of operations resources
Tangible and Intangible Resources
Customer Needs Operations Strategy Decision Areas
Operations Capabilities
Performance Objectives
Market Positioning
Operations Processes Understanding resources and processes Strategic decisions Required performance
Competitors Actions
Understanding markets
Operations strategy is the strategic reconciliation of market requirements with operations resources
Operations Resources
Market Requirements
What you HAVE
in terms of operations capabilities
What you DO
to maintain your capabilities and satisfy markets
What you WANT
from your operations to help you compete
What you NEED
to compete in the market
Strategic Reconciliation
Strategic Decisions in Operations
Products
Services Processes and Technology
Capacity
Human Resources
Quality
Facilities
Sourcing
Operating Systems
Products & Services
Maketoorder Maketostock
Made to customer specifications after order received
Made in anticipation of demand
Assemble to-order
Add options according to customer specification
Processes & Technology
Project Continuous Mass Batch
How much?
Excess Demand
Capacity Changes
Capacity
Facilities Workers
Best Size
Facilities
Large or Small Focus Location
3 4
5
Global
People Systems
Skill level required
Supervision methods
Freedom
Policies
Individual or Teamwork
Mgt. Levels Training
Profit sharing
Quality
Target level
QA Systems
Measurement
Empowerment
Awareness
Evaluation of Efforts Customer Perception
Training
Supplier
1 2 3 4 5 Vertical integration Supplier selection Supplier relationship Supplier quality Supplier coorperation
Operating System
Execute strategy daily
IT Support
Alignment of inventory levels and schedule
Effective planning and control systems
The Nature and Content of Operations Strategy
The content of operations strategy The process of operations strategy
A statement of the principles and policies which guide the operations activities
The way in which the guiding principles and policies are developed
Prioritized performance objectives for each product/service group
Strategies for each decision area
Design
Planning and control
Improvement
Different competitive factors imply different Performance Objectives
Competitive factors If the customers value these ...
Low price High quality Fast delivery Reliable delivery
Innovative products and services
Performance objectives Then, the operations will need to excel at these ...
Cost Quality Speed Dependability Flexibility (products/services) Flexibility (mix) Flexibility (volume and/or delivery)
Wide range of products and services
The ability to change the timing or quantity of products and services
Relative Importance of Performance Objectives
The influence of the organizations customers The influence of the organizations competitors The relative importance of each performance objective to the operation
The stage of the organizations products and services in its life cycle.
Performance Objectives (Operational Priorities)
Cost Other product specific criteria Quality
Delivery Flexibility
Concept
Speed of Prod Dev Delivery Speed
Coping with Changes in Demand
Delivery Reliability
Competing On Cost
Eliminate All Waste Invest in Latest Tech Streamline Operations
Training and Development
Competing On Quality
Please
The
Customer
Understand customer attitudes toward and expectations of quality
Competing on Flexibility
Modify existing products quickly Produce wide variety of products Introduce new products
Respond to customer needs
Competing on Speed
Rapid Prod Dev
Fast moves
Fast adaptations Tight linkages
Strategy Process
Environmental Analysis Company Mission Business Strategy Functional Area Strategies Marketing Decisions Operations Decisions Fin./Acct. Decisions SWOT Analysis
Mission
Organizations purpose for being
Provides boundaries & focus Answers How can we satisfy peoples needs? Expressed in mission statement
Factors Affecting Mission
Philosophy Environment Values
Profitability
Mission
Growth Public Image
Benefit To Society
Action plan to achieve mission
What Is Strategy?
Shows how mission will be achieved
B
C
Company has a business strategy
D
Functional areas have strategies
SWOT Analysis To Strategy Formulation
Strength
Weaknesses
Threats
Opportunities
Operations Decision Areas
Cost
Location
Supply Chain
Product Design
Layout
Inventory
Process Design
HRM
Scheduling
Functional Strategy
To Recap: Strategies are put together.
Identify how the operation could do these things better Identify what the operation needs to do better how well the operation performs versus its competitors
what is wanted in the marketplace
Analyze
Evaluate
Compare
Identify
The Challenge of Operations Strategy Formulation
Strategy
Appropriate Comprehensive
Coherent
Consistent
An Implementation Agenda Should Answer:
When Where How Long Who
When to start?
Where to start?
How fast to proceed?
How to coordinate the implement ation program?
Implementation Steps
Key Tasks
If done well, help provide competitive advantage. Reflect unique internal strengths. Distinctive competencies
Create Org Staff Org
Project team
Assign task responsibilities & deadlines
Balanced Scorecard
Balanced scorecard measuring more than financial performance finances customers processes learning and growing Key performance indicators a set of measures that help managers evaluate performance in critical areas
Balanced Scorecard
Finance How should we look to our shareholders? Customer How should we look to our customers? Processes At which business processes must we excel? Learning and Growing How will we sustain our ability to change and improve?
Company Issues & Product Life Cycle Product Life Cycle
Introduction
Issues
Focus on getting product out the door with consistent quality. R&D & engineering are critical Focus on price, quality, delivery. Marketing is critical: differentiate product from competitors Focus on costs & new products. Maintain image, price, & quality Cost control critical
Growth
Maturity
Decline
Operations Issues & Product Life Cycle Product Life Cycle
Introduction
Issues
Product design & development critical; many process changes. High production costs.
Growth
Forecasting critical. Improve product; increase capacity & distribution.
Standardize product. Long production runs
Maturity
Decline
Reduce product line, lower costs
How Do The Industry Winners Do It?
They have the basics down pat They believe quality drives profit They know their customers Focused moments of truth operations They have whatever it takes attitude
How Do The Industry Winners Do It?
Service inside well as outside Management support Care about employees Skillful recovery from blunder
Continuous improvement
