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