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

Processes & Technology

CapacityCapacity Changes

How much? Excess

Demand

Facilities

Workers

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

Rapid Rapid Prod DevProd Dev

Fast moves

Fast adaptations

Tight linkages

Competing on Speed

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?

SWOT Analysis To Strategy Formulation

Threats

Weaknesses

Strength

Opportunities

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

How Do The Industry Winners Do It?

Service inside well as outside

Management support

Care about employees

Skillful recovery from blunder

Continuous improvement