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Session 2 : Operations Strategy
Learning Objectives
By the end of this Unit, you should be able to: Understand the concept of business strategy. Explain the strategic planning process and the differences between strategic, tactical and operations planning. Appreciate operations from a systems perspective. Recognize the importance of operations strategy. Describe the key criteria of distinctive competencies. Distinguish between order qualifiers and order winners. Appreciate the concept of the balanced scorecard when formulating strategies.

What is a System? A set of interconnected elements that must function together in unison within a certain environment E al b n lo G atio iz S THIC OIL Price CSR W ar oba m l in g Gl Ta xe s Banks Suppliers Transport Modes Uni o ns Exch ang Rate e s -M ITC LS KYOTO Te c Competi tors Train hn ol o Sh ho arelde rs Your organization Customers ss ine s s Bu ycle C gy ld or e W rad T i ng 3 .

Kyoto Protocol Competing Supply Chains Banks Suppliers Competitors Taxes Inputs Shareholders Transformation Outputs Trade Unions Customers Government Regulations Globalization 4 .

Action Point Using the template below. your organization interacting with its environment: Your Organization from a Systems Perspective Suppliers Inputs Transformation Outputs Customers 5 . illustrate your organization from a systems perspective i.e.

…how an organization plans to accomplish its mission and goals …needed to survive in a changing world …implemented through the process of strategic planning 6 ..Corporate / business strategies are..

Vision/Mission Corporate / Business Strategy Operations Strategy Financial Strategy Marketing Strategy Strategic Planning Tactical Planning Operational Planning Strategic Planning Tactical Planning Operational Planning Strategic Planning Tactical Planning Operational Planning 7 .

8 .term plans by middle management aimed at supporting the strategic plan by achieving functional goals and tactical objectives. Operational planning is the preparation of short-term plans by first-line management aimed at supporting tactical plans and achieving operational goals and objectives.Planning levels: Strategic planning Tactical planning is the preparation of long-term plans by top management aimed at achieving organizational goals and objectives. is the preparation of medium.

monthly) Where do we locate a new factory? Top What new products do we introduce? Manage.How do we increase market share? Should we implement ISO 9001? ment Do we need additional capacity? When? What layout do we need for the new product? When ? What new Senior quality checks are required? or Middle What equipment do we Management replace? Do we need an extra shifts? First Line Management What orders have priority? When can we schedule maintenance? How do we increase productivity? 9 .Types of Planning Strategic Planning: long-range decisions (typically 1 to 5 years) Examples of Decisions Tactical Planning: medium-term decisions (Typically one month and less than 1 year) Operational Planning & Control (OPC): short-term decisions (daily. weekly.

10 . and which result in it being awarded the order. delivery. Order Winners Order Qualifiers: the six competencies needed for a business to be considered as a potential supplier: quality. time.Developing a winning strategy: Order Qualifiers vs. Order Winners: the criteria that differentiate the goods and/or services of one business from those of another. flexibility. cost and service.

how would you develop your package of key competencies/criteria to be distinctive competencies in order to win repeat orders? 11 . Using your organization. it is important for organizations to convert from being order qualifiers to become order winners.Action Point Order Qualifiers and Order Winners To achieve a winning strategy.

customers. 12 . internal processes and learning & growth.What is the Balanced Scorecard ? A holistic strategic planning system that aligns the various business activities of an organization with its overall vision and mission using balanced performance measures in four areas: financial.

these four performance measures could include the following: Financial Perspective Customer Perspective How do we add value for our customers but also reduce our operating and material costs? How do we create value for our customers? How do we change to meet our customers’ present and future demands? What are our training needs? How do we improve our processes to meet the present and future demands of our customers? 13 Learning & Growth Perspective Internal Process Perspective .From an operations management strategic viewpoint.

Strategic Operations Objectives The BIG SIX Key Competencies SERVICE QUALITY FLEXIBILITY DELIVERY TIME COST 14 .

improving quality retains customers 15 .The BIG SIX Key Competencies: 1 QUALITY  High and consistent quality is essential to prosper in a competitive environment  It is the easiest of the key criteria for a customer to judge  Continuously improving quality results in higher productivity and lower costs  High quality attracts customers.

The BIG SIX Key Competencies: 2 DELIVERY  Relates to the delivery of the product or the performance of the service  Sometimes called the “Reliability / Dependability” competency  Late delivery can have serious consequences 16 .

The BIG SIX Key Competencies: 3 COST  Higher productivity leads to lower costs  Lower costs allow a business to offer lower prices  This helps to increase its market share 17 .

competition has changed: from price… …to price & quality …to price & quality & delivery …to price & quality & delivery & TIME  Time (& speed) provide a sustainable competitive advantage  Reducing time serves to gain an advantage 18 .The BIG SIX Key Competencies: 4 TIME 12 9 6 3  In     recent decades.

The BIG SIX Key Competencies: 5 FLEXIBILITY  It means being able to…  …adapt rapidly to changing business conditions  …respond quickly to evolving customer needs  Three types of flexibility:  Volume flexibility – responding to changes in demand  Variety (or mix) flexibility – providing the range of products that customers ask for  Product flexibility – developing new products when needed 19 .

cost. time & flexibility  It also means agility – how quickly a business responds to both market and customer needs  Agility is increasingly important with the growing focus on supply chains 20 . delivery.The BIG SIX Key Competencies: 6 SERVICE  It is the fusion of the other five competencies – a blend of quality.

one key competency may conflict with another An organization may thus take a strategic decision to excel in one or more key competencies at the expense of others 21 .Trade-offs between Key Competencies Often.

Productivity Agility in servicing customers enables organizations along a supply chain to obtain a competitive advantage One way of achieving this is to improve productivity Productivity is probably the performance measure most used in operations management It measures the amount of output (goods and / or services) achieved per unit of input (labour. capital & energy) Productivity = Output Input It measures how efficiently resources have been used 22 . materials.