Operations Strategy

Arriving at the Competitive Priorities

Corporate Strategy
environmental scanning core competencies core processes global strategies

Market analysis
segmentation needs analysis

Competitive priorities
Cost dependability quality time flexibility

Corporate Strategy and Key Operations Management Decisions

Corporate strategy Market analysis Competitive priorities New Service/ Product Development
Yes

No Performance Gap?

Operations strategy
Decisions Managing Processes Managing Value Chains

Capabilities

Operations Strategy
 Operations strategy is the means by which operations implements the firms corporate strategy and helps to build a customer-driven firm.
It links long-term and short-term operations decisions to corporate strategy. It is the core of managing processes and value chains.

The operations function can provide a competitive advantage through its performance at the five competitive objectives

Quality

Being RIGHT

Speed

Being FAST

Dependability

Being ON TIME

Flexibility

Being ABLE TO CHANGE Being PRODUCTIVE

Cost

The benefits of excelling

Minimum price, highest value

Cost Quick delivery Speed Minimum cost, maximum value Fast throughput Error-free processes Quality Error-free products and services Reliable operation Ability to change Flexibility Frequent new products, maximum choice Dependability Dependable delivery

Quality means different things in different operations

Hospital
Patients receive the most appropriate treatment Treatment is carried out in the correct manner Patients are consulted and kept informed Staff are courteous, friendly and helpful

Automobile plant
All assembly is to specification The product is reliable All parts are made to specification The product is attractive and blemish-free

Bus company
The buses are clean and tidy The buses are quiet and fume-free The timetable is accurate and user-friendly Staff are courteous, friendly and helpful

Supermarket
The store is clean and tidy Dcor is appropriate and attractive Goods are in good condition Staff are courteous, friendly and helpful

Quality
Quality has several meanings, the two most common are Quality as the specification of a product or service
Eg. Lower Hurst Farm produces organic meat raised exclusively on its own farm

Quality as the conformance with which the product or service is produced

Eg. Quick service restaurants like McDonalds buy less expensive meat

Quality
Irrespective of a product or services specification quality, producing it so it conforms to its specification consistently brings benefits to any operation Externally -- it enhances the product or service in the market, or at least avoids customer complaints Internally -- it brings other benefits to the operation It prevents errors slowing down throughput speed It prevents errors causing internal unreliability and low dependability It prevents errors causing wasted time and effort, therefore saving cost

Quality
External and internal benefits
Cost Speed Dependability

Quality On-specification products and services

Flexibility

Speed means different things in different operations

Hospital
The time between requiring treatment and receiving treatment kept to a minimum The time for test results, X-rays, etc. to be returned kept to a minimum

Automobile plant
Minimizing the time between dealers requesting a vehicle of a particular specification and receiving it Minimizing the time to deliver spares to service centres

Bus company
The time between customer setting out on the journey and reaching his or her destination kept to a minimum

Supermarket
Minimizing the time for the total transaction of going to the supermarket, making the purchases and returning The immediate availability of goods

Speed again has different interpretations externally and internally

Externally it means the elapsed time between a customer asking for a product or service and getting it (in a satisfactory condition) It often enhances the value of the product or service to customers

Internally -- it brings other benefits to the operation It helps to overcome internal problems by maintaining dependability It reduces the need to manage transformed resources as they pass through the operation, therefore saving cost

Speed
External and internal benefits
Cost Speed Dependability

Short delivery lead-time

Quality On-specification products and services

Flexibility

Dependability means different things in different operations

Hospital
Proportion of appointments which are cancelled kept to a minimum Keeping appointment times Test results, X-rays, etc. returned as promised

Automobile plant
On-time delivery of vehicles to dealers On-time delivery of spares to service centres

Bus company
Keeping to the published timetable at all points on the route Constant availability of seats for passengers

Supermarket
Predictability of opening hours Proportion of goods out of stock kept to a minimum Keeping to reasonable queuing times Constant availability of parking

Dependability

Externally -- it enhances the product or service in the market, or at least avoids customer complaints

Internally -- it brings other benefits to the operation It prevents late delivery slowing down throughput speed It prevents lateness causing disruption and wasted time and effort, therefore saving cost

Dependability
External and internal benefits
Cost Speed Dependability

Short delivery lead-time

Reliable delivery

Quality On-specification products and services

Flexibility

Flexibility has several distinct meanings but is always associated with an operations ability to change Change what ? The products and services it brings to the market Product/service flexibility The mix of products and services it produces at any one time Mix flexibility The volume of products and services it produces Volume flexibility The delivery time of its products and services Delivery flexibility

Flexibility means different things in different operations

Hospital
Introducing new treatments A wide range of treatments The ability to adjust the number of patients treated The ability to reschedule appointments

Automobile plant
The introduction of new models A wide range of options The ability to adjust the number of vehicles manufactured The ability to reschedule manufacturing priorities

Bus company Supermarket

The introduction of new routes and excursions A large number of locations served The ability to adjust the frequency of services The ability to reschedule trips The introduction of new goods A wide range of goods stocked The ability to adjust the number of customers served The ability to get out-of-stock items

Flexibility
External and internal benefits
Short delivery lead-time Speed Cost Dependability Reliable delivery

Quality On-specification products and services

Flexibility Frequent new products/services Wide range Volume and delivery changes

Cost means different things in different operations

Hospital
Bought-in materials and services Technology and facilities costs

Automobile plant
Bought-in materials and services Technology and facilities costs Staff costs

Staff costs

Bus company
Bought-in materials and services Staff costs Technology and facilities costs

Supermarket
Bought-in materials and services Technology and facilities costs Staff costs

Cost
External and internal benefits
Short delivery lead-time Speed Cost Dependability Reliable delivery

Quality On-specification products and services

Flexibility Frequent new products/services Wide range Volume and delivery changes

Cost
External and internal benefits
Low price, high margin, or both Cost Speed Dependability Reliable delivery

Short delivery lead-time

Quality On-specification products and services

Flexibility Frequent new products/services Wide range Volume and delivery changes

What is the role of the operations function?

Operations as implementer
Strategy

Operations as supporter
Strategy

Operations as driver

Ops

Ops Ops Strategy

Operations implements strategy

Operations supports strategy

Operations drives strategy

The strategic role of operations can be defined by its aspirations (Hayes and Wheelwright)
Give an Operations Advantage Link Strategy With Operations
Be as good as competitors Stop holding the organization back Be clearly the best in the industry Redefine the industrys expectations

Externally supportive

Internally supportive

Adopt best Practice Correct the Worst Problems

Externally neutral Internally neutral

STAGE 1

STAGE 2

STAGE 3

STAGE 4

The ability to Implement

The ability to support Strategy

The ability to Drive strategy