chapter 02 essentials final

Slack, Brandon-Jones and Johnston, Essentials of Operations Management, 1st Edition, © Slack, Brandon-Jones and Johnston, 2011

Chapter 2

Operations strategy


Design

Deliver

Direct

Develop

Operations Management

Slack et al’s model of operations management

Operations strategy

Social, environmental and economic performance


In Chapter 3 - Operations strategy– Slack et. al. identify the following key questions…….

What is strategy and operations strategy?What is the difference between a ‘top-down’ and a

‘bottom-up’ view of operations strategy?What is the difference between a ‘market requirements’

and an ‘operations resources’ view of operations

strategy?How can an operations strategy be put together?

Key operations questions


Operations strategy at Flextronics and Ryanair

For each of these companies.......

1. What do they have to be good at to compete in their markets?

2. How do their operations help them to achieve this?


Operations strategic decisions

Industrial parks, withLow cost but close

locationsAnd co-located

suppliers

Market requirements

Low costs

Responsivenes

s

Flexibility

Flextronics

Operations strategy at Flextronics


Operations strategic decisions

Stripped down serviceOne technologyCheap airport

locationsFast turnround

Market requirements

Low prices

Reliability

Basic service

Ryanair

Operations strategy at Ryanair


Setting broad objectives that direct an enterprise towards its overall goal

Planning the path (in general rather than specific terms) that will achieve these goals

Stressing long-term rather than short-term objectives

Dealing with the total picture rather than stressing individual activities

Being detached from, and above, the confusion and distractions of day-to-day activities.

What is strategy?


Strategic decisions are those decisions which: are

widespread in their effect on the organization to which the

strategy refers, define the position of the organization

relative to its environment, and move the organization

closer to its long-term goals.

Strategic decisions


‘Operations’ is not the same as ‘operational’

‘Operations’ are the resources that create products and services.

‘Operational’ is the opposite of strategic, meaning day-to-day and detailed.

So, one can examine both the operational and the strategic aspects of operations.


How is operations strategy different to operations management?

The time scale is longer…

Short-termfor example,

capacity decisions

1-12 months

Dem

and

Long-termfor example,

capacity decisions

1-10 years

Dem

and

Operations management Operations strategy


The level of analysis is higher


Micro -level of the process

Macro -level of the total operation



The level of aggregation is higher


Detailed

For example.....

“Can we give tax services to the small business market in Antwerp?”

Aggregated

For example.....

“What is our overall business advice

capability compared with other capabilities?”



The level of abstraction is higher


Concrete

For example

“How do we improve out purchasing procedures?”

Philosophical

For example

“Should we develop strategic alliances with

suppliers?”



The 4 stage model of operations contribution

Increasing contribution of operations

Incr

easi

ng s

trate

gic

impa

ct

Increasing operations capabilities

Externally supportive

Redefining industry

expectations

STAGE 4Give an Operations Advantage

Driving strategy

After Hayes and Wheelwright

Internally supportive

Clearly the best in the

industry

STAGE 3 Link strategy with operations

Supporting strategy

Externally neutral

As good as competitors

STAGE 2 Adopt best practice

Implementing strategy

Internally neutral

STAGE 1Correct the worst problems

Holding the organisation

back


Top - down Perspective

What the business wants operations to do

Operations resources

Perspective

What operations resources can

doWhat day-to-day

experience suggests operations

should do

Bottom - up Perspective

Market requirement Perspective

What the market position requires operations to do

Operations strategy

The four perspectives on operations strategy


Corporate strategy

Business strategy

Emergent sense of what the strategy should be

Operational experience

Top-down and bottom-up perspectives of strategy

Operations strategy


The strategy hierarchy

Key strategic decisions

Influences on decision making

Business strategy

What is the mission?What are the strategic objectives of the firm?How to compete?

Customer/market dynamicsCompetitor activityCore technology dynamicsFinancial constraints

Corporate strategy

What business to be in?What to acquire?What to divest?How to allocate cash?

Economic environmentSocial environmentPolitical environmentCompany values and ethics

Functional strategy

How to contribute to the strategic objectives?

How to manage the function’s resources?

Skills of function’s staffCurrent technologyRecent performance of the function


Introduction Growth Maturity Decline

Sal

es

volu

me

Volume

Customers

Competitors

Variety of product/ service design

Slow growth in sales

Innovators

Few/none

Customization or frequent design changes

Rapid growth in sales volume

Early adopters

Increasing numbers

Increasingly standardized

Sales slow and level off

Bulk of market

Stable number

Emerging dominant types

Market needs largely met

Laggards

Declining numbers

Possible move to commodity standardization

The effects of the product / service life cycle

Time


Introduction Growth Maturity Decline

Sal

es

volu

me

The effects of the product / service life cycle

Time

Likely order winners

Likely qualifiers

Dominant performance

objectives

Product/ service characteristics

QualityRange

FlexibilityQuality

Availability Quality

Price Range

SpeedDependabilityQuality

Low priceDependable supply

QualityRange

CostDependability

Low price

Dependable supply

Cost


Different competitive factors imply different performance objectives

Competitive factorsIf the customers value these ...

Performance objectivesThen, the operations will need to

excel at these ...Low price Cost

High quality Quality

Fast delivery Speed

Reliable delivery Dependability

Innovative products and services Flexibility (products/services)

Wide range of products and services Flexibility (mix)

The ability to change the timing or quantity of products and

servicesFlexibility (volume and/or delivery)


Order-winning, qualifying and less important competitive factors

Neutral

+ve

-ve

Performance

Competitive benefit

Order-winning factors



Neutral

+ve

-ve

Performance

Competitive benefit

Qualifying factors



Neutral

+ve

-ve

Performance

Competitive benefit

Less important factors


Intended Strategy

Realised Strategy

Deliberative Strategy

Mintzberg’s concept of emergent strategy

Unrealized Strategy

Emergent Strategy


What you HAVE

in terms of operations capabilities

What you NEED

to “compete” in the

market

Operations Resources

Market Requirements

What you WANT

from your operations to

help you “compete”

What you DO

to maintain your

capabilities and satisfy

markets

Strategic Reconciliation


The challenge of operations strategy formulation

An operations strategy should be:

Appropriate...

Comprehensive...

Coherent...

Consistent over time...


An implementation agenda is needed

When to start?

Where to start?

How fast to proceed?

How to co-ordinate the implementation programme?

chapter 02 essentials final

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