Operations Strategy is

“… the decisions which shape the long-term

capabilities of the company’s operations and

their contribution to overall strategy through

the on-going reconciliation of market

requirements and operations resources …”

Operations strategy

Top - down Perspective

What the

business wants operations to

do Market 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

Emergent 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

5 Steps for Strategy Formulation

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

Operations

Resources Market

Requirements

Strategic

Reconciliation

Operations strategy reconciles the

requirements of the market with the

capabilities of operations resources

OPERATIONS

STRATEGY

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

Capabilities

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 & Services

Make-

to-

order

Make-

to-

stock

Assemble

to-order

Made to customer specifications

after order received

Made in anticipation of demand

Add options according to customer

specification

Processes & Technology

Project

Continuous Batch

Mass

Capacity Capacity Changes

How much? Excess

Demand

Facilities

Workers

Fa

cil

itie

s

Best Size

2 Large or Small

3 Focus

4 Location

5 Global

People Systems

Individual or Teamwork

Mgt. Levels

Training

Skill level required

Freedom

Policies

Profit sharing

Supervision methods

Quality

QA Systems

Awareness

Evaluation of Efforts

Customer Perception

Target level

Measurement

Empowerment

Training

Supplier

1

2

3

4

5

Vertical integration

Supplier selection

Supplier relationship

Supplier quality

Supplier coorperation

Operating 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

Improvement Planning and

control Design

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

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)

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.

Relative Importance of Performance Objectives

Performance Objectives (Operational Priorities)

Cost Quality

Delivery

Flexibility

Delivery Speed

Delivery

Reliability

Coping

with

Changes

in Demand

Concept Speed

of Prod

Dev

Other

product

specific

criteria

Competing On Cost

Training and Development

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 Prod Dev

Fast moves

Fast adaptations

Tight linkages

Competing on Speed

Strategy Process

Company

Mission

Business

Strategy

Functional Area

Strategies

Marketing

Decisions

Operations

Decisions

SWOT

Analysis

Environmental

Analysis

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 Society

Action plan to achieve mission

Shows how mission will be achieved

Company has a business strategy

Functional 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 Strategy Formulation

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

Tasks

Create

Org Project team

Staff

Org

If done well, help provide competitive

advantage. Reflect unique internal

strengths. Distinctive competencies

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?

Product

Life Cycle Issues

Introduction

Focus on „getting product out the door‟ with

consistent quality. R&D & engineering are

critical

Growth Focus on price, quality, delivery. Marketing is

critical: differentiate product from competitors

Maturity Focus on costs & new products. Maintain

image, price, & quality

Decline Cost control critical

Company Issues & Product Life Cycle

Product

Life Cycle Issues

Introduction Product design & development critical; many

process changes. High production costs.

Growth Forecasting 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