© Nigel Slack and Michael Lewis 2003

The three levels of operations strategy process

Level 1 - FitAlign resources with requirements

Level 2 - Sustainability Develop sustainable competitive advantage

Level 3 - RiskInclude impact of uncertainty

Increasing complexity

© Nigel Slack and Michael Lewis 2003

Operations Strategy Formulation

Putting an operations strategy together presents some particular difficulties:

Senior operations managers are often geographically dispersed

The operation still needs running

Predominance of line management

Complexity of operations resources

Inertia of operations resources

© Nigel Slack and Michael Lewis 2003

Operations Strategy Formulation

There are many formulation process stage models.

They often include:

Links between competitive strategy objectives and operations objectives (strategic fit)

The use of ‘competitive objectives’ as the translation device between strategic and operations objectives

Judging the importance of competitive objectives against customer/market requirements

Current performance judged against competitor performance

An iterative process

The concept of an ‘ideal’ of ‘greenfield’ operation against which to compare current operations.

A gap-based analysis

© Nigel Slack and Michael Lewis 2003

Lev

el o

f m

arke

t re

qu

irem

ents

Level of operations resource capability

In operations strategy ‘fit’ is the alignment between market and operations capability

Line

of fit

Alignment between market and operations capabilityY

X

© Nigel Slack and Michael Lewis 2003

‘Fit’ means that the operations resources and processes are aligned with the requirements of its markets.

Line of f

it

Mar

ket

req

uir

emen

ts

Operations resource capability

‘Fit’ can also mean that market requirements are moved to exploit operations resource capabilities

© Nigel Slack and Michael Lewis 2003

Operations Capabilities

Operations Strategy Decision

Areas

Operations Performance Objectives

Market Positioning

Market Segmentation

Competitor Activity

Understand markets

Define competitive

position

State market requirements

in terms of operations

performance objectives

Make strategic

operations decisions

… to enhance

core capabilities

‘Fit’ operations resources to market requirements ‘fit’

© Nigel Slack and Michael Lewis 2003

Operations Capabilities

Operations Strategy Decision

Areas

Operations Performance

Potential Market

Positioning

Tangible and Intangible Resources

Operations Processes

Determine competitive

position

Define market

potential of operations

performance

Make appropriate

strategic operations decisions

Identify core

capabilities

Understand resources and

processes

‘Fit’ market positioning to operations resources capabilities

© Nigel Slack and Michael Lewis 2003

Quality

Per

form

ance

ob

ject

ives

Capacity Supply Network

Process Technology

Development and

Organization

Resource Usage

Mar

ket

Co

mp

etit

iven

ess

Decision areas

IBM operations strategy matrix (1970-1985)

Speed

Dependability

Flexibility

Cost

CriticalCritical

Critical CriticalCritical

Critical

Critical

© Nigel Slack and Michael Lewis 2003

Lev

el o

f m

arke

t re

qu

irem

ents

Level of operations resource capability

y1

x1

The level of ‘fit’ may not always be ‘tight’

Line

of fit

‘Ideal’ market requirements

Ideal resource capability

Tight fit

A

Y

y2

X x2

B

Minimum resource capability

Minimum market

requirements

© Nigel Slack and Michael Lewis 2003

Quality

Per

form

ance

ob

ject

ives

Capacity Supply Network

Process Technology

Development and

Organization

Resource Usage

Mar

ket

Co

mp

etit

iven

ess

Decision areas

‘Fit’ is concerned with ensuring comprehensiveness, correspondence, coherence and criticality

Speed

Dependability

Flexibility

Cost

Critical

Critical

Critical

CriticalCritical

Coherence

Co

rres

po

nd

ence

Comprehensive?

© Nigel Slack and Michael Lewis 2003

Quality

Per

form

ance

ob

ject

ives

Capacity Supply Network

Process Technology

Development and

Organization

Resource Usage

Mar

ket

Co

mp

etit

iven

ess

Decision areas

To be strategic, quality initiatives need to comprehensively cover all decision areas

SpeedDependability

FlexibilityCost

• Long-term plans•Quality culture•Continuous

improvement•Quality performance

measurement and control

•Operational supervision is important

•Communication•Appropriate

org. structure

• Built-in quality in processes

•Statistical process control•Enhance quality capability •Quality as a

performance criteria

• Continuous quality

emphasis with suppliers

•Purchase using quality

criteria•Work on functional barriers

• Provide resources to

support quality•Use quality as

performance criteria

© Nigel Slack and Michael Lewis 2003

Process choice

Operations strategy Corporate objectives

Marketing strategy

How do products or services win

orders?

Step 1 Step 2 Step 3 Step 4 Step 5

The Hill framework of operations strategy formulation

• Price

• Quality

• Delivery speed

• Delivery dependability

• Product/service range

• Product/service design

• Brand image

• Technical service

• Product/service markets and segments

• Range

• Mix

• Volumes

• Standardisation or

customisation

• Innovation

• Leader or follower

• Growth

• Profit

• ROI

• Other ‘financial’ measures

• Process technology

• Trade-offs embodied in process

• Role of inventory

• Capacity, size, timing, location

• Functional support

• Operations planning and control systems

• Work structuring

• Payment systems

• Organisational structure

Infrastructure

© Nigel Slack and Michael Lewis 2003

• Facilities

• Capacity

• Span of process

• Processes

• Human resources

• Quality

• Control policies

• Suppliers

• New Products

THE EXISTING OPERATION

WHAT DO WE NEED TO DO TO IMPROVE

THE REVISED OPERATIONS STRATEGY?

WHAT THE MARKET WANTS?

• Features

• Quality

• Delivery

• Flexibility

• Price

OPPORTUNITIES AND THREATS?

HOW THE OPERATION PERFORMS

• Features

• Quality

• Delivery

• Flexibility

• Price

The Platts-Gregory procedure

© Nigel Slack and Michael Lewis 2003

Product family

ReliabilityInto stock point Variable

Critical: Project delay Good

FeaturesFit for purpose Few features

Many features/ High absolute level

Total reliability essential High

Flexibility design Standard range only

Standard only

QualityAcceptable at price Acceptable

All designs customer specified All products customised

Stable marketLittle variation required Volume variations low

Highly cyclic variable marketVolume variations high

Delivery lead-time Ex-stock

ShortNot significant Long

Volume

Price costPrice competition dominantLow

Non-price competition dominantHigh

Achieved performance

Uses of profiling in the Platts-Gregory procedure

Market requirements