Operations Strategy

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
Operations
resources
Perspective
What
operations
resources can
do
What the
business wants
operations to
do
Operations
strategy
What day-to-day
experience
suggests
operations should
do
Bottom - up
Perspective
Market Reqd
Perspective
What the
market
position
requires
operations to
do
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
Un-realized
Strategy
Deliberative
Strategy
Realised
Strategy
Emergent
Strategy
Operations Can Kick-Start 2 Virtuous

Cycles
Internal
and
Understanding
of the
processes
Competencies
embedded in
the operation
External
Competitiveness
Strong
marketing
World Class
Operations
Capabilities enhance
innovation and
improvement
Developing the resources

which let the operations
performance stay ahead of
the competition
High
margin
Investment
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?
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
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
Operations
Capabilities
Customer
Needs
Operations
Strategy
Decision
Areas
Performance
Objectives
Operations
Processes
Understanding
resources and
processes
Market
Positioning
Competitors
Actions
Strategic
decisions
Required
performance
Understanding
markets
Operations strategy is the strategic reconciliation of

market requirements with operations resources
Market
Requirements
Operations
Resources
What you
HAVE
What you
DO
in terms of
operations
capabilities
to maintain
your
capabilities
and satisfy
markets
What you
WANT
from your
operations to
help you
compete
Strategic
Reconciliation
What you
NEED
to compete
in the market
Strategic Decisions in Operations

Products
Capacity
Facilities
Services
Human
Resources
Sourcing
Processes
and
Technology
Quality
Operating
Systems
Products & Services

Maketoorder
Made to customer specifications

after order received
Maketostock
Made in anticipation of demand
Assemble
to-order
Add options according to customer

specification
Processes & Technology
Project
Continuous
Batch
Mass
How
much?
Capacity
Changes
Excess
Demand
Capacity
Facilities
Workers
Facilities
Best Size
2
3
4
5
Large or Small
Focus
Location
Global
People Systems
Skill level required
Supervision methods
Freedom
Individual or Teamwork
Policies
Mgt. Levels
Profit sharing
Training
Quality
Target level
QA Systems
Measurement
Awareness
Empowerment
Evaluation of Efforts
Training
Customer Perception
Supplier
1
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
A statement of the
principles and policies
which guide the operations
activities
Prioritized performance
objectives for each
product/service group
The process of
operations strategy
The way in which the

guiding principles and
policies are developed
Strategies for each

decision area
Design
Planning and
control
Improvement
Different competitive factors imply

different Performance Objectives
Competitive factors
Performance objectives
If the customers value these

...
Then, 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 services
Flexibility (volume and/or

delivery)
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
Quality
Other
product
specific
criteria
Delivery
Flexibility
Concept
Speed
of Prod
Dev
Coping
with
Changes
in Demand
Delivery Speed
Delivery
Reliability
Competing On Cost
Eliminate
All Waste
Training and
Development
Invest in
Latest
Tech
Streamline
Operations
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
SWOT
Analysis
Functional Area
Strategies
Marketing
Decisions
Operations
Decisions
Fin./Acct.
Decisions
Mission
Organizations purpose for
being
Provides boundaries & focus
Answers How can we satisfy
peoples needs?
Expressed in mission statement
Factors Affecting Mission
Philosophy
Environment
Profitability
Mission
Values
Growth
Public Image
Benefit To Society
What Is
Strategy?
Action plan to achieve mission
Shows how mission will be achieved
Company has a business strategy
Functional areas have strategies
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
When to
start?
Where
Where to
start?
How Long
How fast
to
proceed?
Who
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
Project team
Staff
Org
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
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
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.
Maturity
Standardize product. Long production runs
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

Operations Strategy

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Operations Strategy is

the decisions which shape the long-term

the on-going reconciliation of market

The 4 Perspectives On Operations Strategy

Emergent sense of what

Operations Can Kick-Start 2 Virtuous

Developing the resources

5 Steps for Strategy Formulation

Market Req & Operations Resources

Operations strategy reconciles the

Operations strategy is the strategic reconciliation of

Strategic Decisions in Operations

Products & Services

Made to customer specifications

Made in anticipation of demand

Add options according to customer

Processes & Technology

Skill level required

Effective planning and

The Nature and Content of

The way in which the

Strategies for each

Different competitive factors imply

If the customers value these

Then, the operations will

Innovative products and services

Wide range of products and

The ability to change the timing or

Flexibility (volume and/or

Relative Importance of Performance

The stage of the organizations

Modify existing products quickly

Produce wide variety of products

Respond to customer needs

Rapid Prod Dev

Factors Affecting Mission

Action plan to achieve mission

Shows how mission will be achieved

Company has a business strategy

Functional areas have strategies

Operations Decision Areas

To Recap: Strategies are put

The Challenge of Operations

An Implementation Agenda Should

If done well, help provide competitive

Assign task responsibilities & deadlines

Key performance indicators

Company Issues & Product Life Cycle

Focus on price, quality, delivery. Marketing is

Focus on costs & new products. Maintain

Cost control critical

Operations Issues & Product Life Cycle

Forecasting critical. Improve product; increase

Standardize product. Long production runs

Reduce product line, lower costs

How Do The Industry Winners Do It?

They believe quality drives profit

They have whatever it takes attitude

How Do The Industry Winners Do It?