The three levels of operations strategy process

Increasing
complexity

Align resources with

Level 1 - Fit
requirements

Develop sustainable
Level 2 - Sustainability
competitive advantage

Include impact of
Level 3 - Risk uncertainty

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

Level of market
requirements

Alignment
between market
and operations
Y capability

X Level of operations
resource capability

© Nigel Slack and Michael Lewis 2003

 ‘Fit’ means that the operations resources and processes are
aligned with the requirements of its markets.
‘Fit’ can also mean that market requirements are moved to
exploit operations resource capabilities
Market requirements

Operations resource capability

© Nigel Slack and Michael Lewis 2003

 Market
Segmentation

Operations Operations
Market Operations
Performance Strategy
Positioning Capabilities
Objectives Decision
Areas

Competitor
Activity

State market
requirements Make … to
Define
Understand in terms of strategic enhance
competitive
markets operations operations core
position
performance decisions capabilities
objectives

‘Fit’ operations resources to market requirements ‘fit’

© Nigel Slack and Michael Lewis 2003

 Tangible and
Intangible
Resources

Potential Operations
Operations Strategy Operations
Market
Performance Decision Capabilities
Positioning
Areas

Operations
Processes
Define Make
Determine market appropriate Identify Understand
competitive potential of strategic core resources and
position operations operations capabilities processes
performance decisions

‘Fit’ market positioning to operations

resources capabilities

© Nigel Slack and Michael Lewis 2003

 Resource Usage
Performance objectives

Quality Critical Critical Critical

Competitiveness
Speed

Market
Dependability

Flexibility

Cost Critical Critical Critical Critical

Supply Process Development

Capacity Technology and
Network
Organization
Decision areas

IBM operations strategy matrix

(1970-1985)
© Nigel Slack and Michael Lewis 2003
 Minimum Ideal
resource resource
capability capability

B
y2
Level of market
requirements

‘Ideal’ market
Y requirements
Tight
fit
Minimum
y1 market
A requirements

x1 X x2
Level of operations resource capability

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

© Nigel Slack and Michael Lewis 2003

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

Resource Usage
Performance objectives

Quality Coherence Critical

Correspondence

Competitiveness
Speed

Market
Dependability Critical

Flexibility Critical

Cost Critical Critical

Supply Process Development

Capacity Technology and
Network
Organization
Decision areas
Comprehensive?

© Nigel Slack and Michael Lewis 2003

 Resource Usage

• Provide • Continuous • Built-in quality • Long-term

resources to quality in processes plans
support emphasis with •Statistical •Quality culture
quality suppliers process •Continuous
•Use quality as •Purchase
Performance objectives

Competitiveness
control improvement
Quality performance using quality •Enhance •Quality
criteria criteria quality performance

Market
•Work on capability measurement
functional •Quality as a and control
barriers performance •Operational
criteria supervision is
important
•Communication
•Appropriate
org. structure
Speed
Dependability
Flexibility
Cost
Supply Process Development
Capacity Technology and
Network
Organization
Decision areas

To be strategic, quality initiatives need to comprehensively cover all

decision areas
© Nigel Slack and Michael Lewis 2003
 Step 1 Step 2 Step 3 Step 4 Step 5

Corporate Marketing How do products Operations strategy

objectives strategy or services win
orders? Process choice Infrastructure

• Growth • Product/service • Price • Process • Functional

markets and technology support
• Profit • Quality
segments
• Operations
• ROI • Delivery speed
• Range • Trade-offs planning and
• Other ‘financial’ • Delivery embodied in control systems
• Mix
measures dependability process
• Work structuring
• Volumes
• Product/service • Role of
• Payment
• Standardisation range inventory
systems
or
• Product/service • Capacity, size,
customisation • Organisational
design timing, location
structure
• Innovation
• Brand image
• Leader or
• Technical
follower
service

The Hill framework of operations strategy

formulation

© Nigel Slack and Michael Lewis 2003

 OPPORTUNITIES
AND THREATS?

THE EXISTING OPERATION

• Facilities
WHAT THE
MARKET WANTS? • Capacity
• Features • Span of process WHAT DO WE NEED
TO DO TO IMPROVE
• Quality • Processes
THE REVISED
• Delivery • Human resources OPERATIONS
• Flexibility • Quality STRATEGY?

• Price • Control policies

• Suppliers
HOW THE • New Products
OPERATION
PERFORMS
• Features
• Quality
• Delivery
• Flexibility
• Price
The Platts-Gregory procedure

© Nigel Slack and Michael Lewis 2003

 Product Market requirements
family Achieved performance

Delivery
lead-time Ex-stock Not significant
Short Long

Reliability
Into stock point Critical: Project delay
Variable Good

Features
Fit for purpose Many features/
Few features High absolute level

Quality
Acceptable at price Total reliability essential
Acceptable High
Flexibility
design All designs customer specified
Standard range only All products customised
Standard only

Volume
Stable market Highly cyclic variable market
Little variation required Volume variations high
Volume variations low
Price cost
Price competition Non-price competition
dominant dominant
Low High

Uses of profiling in the Platts-Gregory procedure

© Nigel Slack and Michael Lewis 2003