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Operations Strategy is
“… “… the decisions which shape the long-term the decisions which shape the long-term
capabilities ofcapabilities of the company’s the company’s operation operationss and and
their contribution to overall strategy through their contribution to overall strategy through
the on-going reconciliation of market the on-going reconciliation of market
requirements and operations resources requirements and operations resources ……””
Operations strategy
Top - down Perspective
What the business wants operations to
doMarket Req’d Perspective
What the market
position requires
operations to do
Operations resources
Perspective
What operations
resources can do
What day-to-day experience suggests
operations should do
Bottom - up Perspective
The 4 Perspectives On Operations Strategy
Top-Down and Bottom-Up Perspectives of Strategy
Emergent sense of what the strategy should be
Operational experience
Corporate strategy
Business strategy
Operations strategy
Intended Strategy
Realised Strategy
Deliberative Strategy
Mintzberg’s Concept of Mintzberg’s Concept of Emergent StrategyEmergent Strategy
Un-realized Strategy
Emergent Strategy
Operations Can Kick-Start 2 Virtuous Cycles
World Class Operations
and
Understanding of the
processes
Competencies embedded in the operation
Capabilities enhance innovation and improvement
Developing the resources which let the operation’s
performance stay ahead of the competition
Internal
Competitiveness Strong marketing
High margin
Investment
Developing customers’, competitors’ and
stockholders’ perceptions and expectations
External
1. Defining a primary task• What is the firm in the business of doing?
2. Assessing core competencies• What does the firm do better than anyone else?
3. Determining order winners and order qualifiers• What qualifies an item to be considered for
purchase?• What wins the order?
4. Positioning the firm• How will the firm compete?
5. Deploying the strategy
5 Steps for Strategy Formulation
Strategic Reconciliation
Operations strategy reconciles the requirements of the market with the capabilities of operations resources
OPERATIONS OPERATIONS STRATEGYSTRATEGY
Market Req & Operations Resources Perspectives of Operations Strategy
Operations strategy is the strategic reconciliation of market requirements with operations resources
Performance Objectives
Market Positioning
Customer Needs
Competitors’ Actions
Required performance
Understanding markets
Operations Strategy Decision
Areas
Tangible and Intangible Resources
Operations Processes
Understanding resources and
processes
Strategic decisions
What you HAVE
in terms of operations capabilities
What you NEED
to “compete”in the market
Market Requirements
Operations Resources
What you WANT
from your operations to
help you “compete”
What you DO
to maintain your
capabilities and satisfy
markets
Strategic
Reconciliation
Strategic Decisions in Operations
Products
Processes and
Technology
Capacity
Human Resources Quality
Facilities Sourcing
Services
Operating Systems
Products & ServicesProducts & Services
Make-to-
order
Make-to-
stock
Assemble to-order
Made in anticipation of demand
Add options according to customer specification
Fac
iliti
esF
acili
ties
Best SizeBest Size
2 Large or SmallLarge or Small
3 FocusFocus
4 LocationLocation
5 GlobalGlobal
People SystemsPeople Systems
Individual or Teamwork
Mgt. Levels
Training
Skill level required
Freedom
Policies
Profit sharing
Supervision methods
QualityQuality
QA Systems
Awareness
Evaluation of Efforts
Customer Perception
Target level
Measurement
Empowerment
Training
SupplierSupplier
11
22
33
44
55
Vertical integration
Supplier selection
Supplier relationship
Supplier quality
Supplier coorperation
Operating SystemOperating System
Alignment of inventory levels and schedule
IT Support
Execute strategy daily
Effective planning and control systems
The Nature and Content of Operations Strategy
The content of operations strategy
Prioritized performance objectives for each product/service group
A statement of the principles and policies which guide the operation’s activities
The process of operations strategy
The way in which the guiding principles and policies are developed
Strategies for each decision area
ImprovementPlanning and
controlDesign
Different competitive factors imply different Performance ObjectivesPerformance Objectives
Competitive factors
If the customers value these ...
Low price
High quality
Fast delivery
Reliable delivery
Innovative products and services
Wide range of products and services
The ability to change the timing or quantity of 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)
RRelative Importance of Performance elative Importance of Performance ObjectivesObjectives
The influence of the organization’s customers
The influence of the organization’s competitors
The relative importance of each
performance objective to the operation
The stage of the organization’s products and services in its life
cycle.
Performance ObjectivesPerformance Objectives(Operational Priorities)
Cost Quality
Delivery Flexibility
Delivery Speed
Delivery Reliability
Coping with
Changes in Demand
ConceptConceptSpeed of Prod
Dev
Other product specific criteria
Competing On CostCompeting On Cost
Training and Training and DevelopmentDevelopment
Eliminate All Waste
Invest in Latest Tech
Streamline Operations
Competing On Quality
Please
The
Customer
Understand customer
attitudes toward and expectations
of quality
Competing on Flexibility
Produce wide variety of products
Introduce new products
Modify existing products quickly
Respond to customer needs
Strategy ProcessStrategy ProcessStrategy ProcessStrategy Process
CompanyMission
BusinessStrategy
Functional AreaStrategies
MarketingDecisions
OperationsDecisions
SWOTAnalysis
EnvironmentalAnalysis
Fin./Acct.Decisions
Mission
Expressed in mission statement
Answers ‘How can we satisfy people’s needs?’
Provides boundaries & focus
Organization’s purpose for being
Factors Affecting Mission
Mission
Philosophy
Environment
Values
Profitability
Growth
Public Image
Benefit To SocietyBenefit To Society
Action plan to achieve mission
Shows how mission will be achieved
Company has a business strategy
DDFunctional areas have strategies
What Is Strategy?
Operations Decision Areas
• Functional Strategy
Cost
Product Design
Process Design
Supply Chain
Inventory
Scheduling
Location
Layout
HRM
To Recap: Strategies are put together….
Analyze
Evaluate
Compare
Identify
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
The Challenge of Operations The Challenge of Operations Strategy Strategy FormulationFormulation
Strategy
Appropriate Comprehensive Coherent Consistent
An Implementation Agenda Should Answer:
Where to start?
When to start?
When Where How Long Who
How to co-ordinate
the implement
ation program?
How fast to
proceed?
Implementation Steps
Key Key TasksTasks
Create Create OrgOrg
Project team
Staff Staff OrgOrg
If done well, help provide competitive advantage. Reflect unique internal strengths. Distinctive competencies
Assign task responsibilities & deadlines
• 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?
Balanced Scorecard
Product Life Cycle
Issues
IntroductionFocus on ‘getting product out the door’ with consistent quality. R&D & engineering are critical
GrowthFocus on price, quality, delivery. Marketing is critical: differentiate product from competitors
MaturityFocus on costs & new products. Maintain image, price, & quality
Decline Cost control critical
Company Issues & Product Life Cycle
Product Life Cycle
Issues
IntroductionProduct design & development critical; many process changes. High production costs.
GrowthForecasting critical. Improve product; increase capacity & distribution.
Maturity Standardize product. Long production runs
Decline Reduce product line, lower costs
Operations Issues & Product Life Cycle
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