Operation management is the systematic design, direction & control of the

process that transform inputs into services.

 Plants – Factory & location where all activities take place.

 People – Direct & Indirect workforce.
 Parts – The components, sub assemblies, or even products.
Processes – Methodologies, technology, tooling & fixtures for establishing
maintaining, and improving productivity.
Planning & control – MIS which initiates, direct, monitors &
collect feedback.

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 OPERATION MANAGEMENT AND STRATEGY
Operation function should be guided by strategies which are consistent with the
organisation strategies

Corporate Strategy
• Environment Scanning Market Analysis
• Core Competencies. • Market Segmentation
• Core Process • Needs Assessment
• Global Strategies Competitiv
e
Competitive Priorities Capabilities
• Cost
• Quality • Current
Functional Strategy • Time • Needed
• Finance • Flexibility • Planned
• Marketing
• Operations
New Service/ Product Design
• Design
• Analysis
• Development
• Full launch 2
 OPERATION STRATEGY
The set of decision that are warranted in the operational processes to support
the competitive of the business. To develop organizational strategies at three
level of operation:
• Corporate Level
• Business Level
• Functional Level

CORPORATE STRATEGY

GLOBAL BUSINESS STRATEGY COMPETENCIES

BUSINESS
ENVIROMEN
T PRODUCT OR SERVICES

COMPETITIVE PRIORITIES
( COST, TIME QUALITY, FLEXIBILITY)

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 LINKAGE BETWEEN CORPORATE, BUSINESS &
OPERATION STRATEGY

OPERATION STRATEGY

 Production Systems ( Make to stock/ Order, Assemble to

order)
 Product Plans
 Outsourcing
 Process Decisions
 Quality Decisions
 Capacity Decisions ( Facility planning, location, layout)
 Operating Decisions.
 Technology Decisions.
 Resource Planning.

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 ELEMENTS OR COMPONENTS OF OPERATION
STRATEGY
The six elements of operation strategy are:

1) Designing of the production system – The product design has two

varieties -
 Customised product design – The design is customised when the volume is
low
and special features are inbuilt. Eg: Turbines, boiler, air compressors etc.
 Standard product design – The designer adopt a universal design so that
the product will have wide acceptance across the customer. Eg: Air
conditioners, TV.

There are two types of production systems:

 Product focussed – system is adopted where mass production is using a group
of machines. Eg: Automobiles, computer.
 Process focussed – system is based on a single task like painting, packing, heat.

2) Facilities for the production and services – Production allows the firm to
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provide the customer with products of low cost, faster delivery, on-time
 ELEMENTS OR COMPONENTS OF OPERATION
STRATEGY
3) Product & service design and development –

 Generating the idea.

 Creating the feasibility reports.
 Designing the prototype
 Preparing a production model.
 Evaluating the economies of scale for production.
 Testing the product in the market.
 Obtaining feedback.
 Creating the final design and starting the production.

Product life cycle introduced in the market has its own life
cycle.
1) Introduction stage.
2) Growth stage.
3) Maturity stage.
4) Decline stage. 6
 OPERATION MANAGEMENT AND STRATEGY
 Phases of Operations Strategy

Factor To Be Reduced During Operation

Quality is the driving factor for
any organisation. Quality Planning
includes Just-In-Time, Lean
Manufacturing, Total Quality
Management, Total Productive Design Time
Maintenance.
QUALITY

Processing Time
Flexibility enables a firm to OPERATION
meet the changing demands STRATEGY
of the customers to develop Changeover Time
new processes and materials
and to make the organisation
more agile in its
manufacturing FLEXIBILITY TIME Delivery Time

Response Time 7
 OPERATION MANAGEMENT AND STRATEGY
Strategic Decision Making- is most crucial management function.
Decisions commit the organisation and its members to activities which have
financial repercussions and effect the functioning of others departments or
division. Strategic Decision making consist of :-

• Data Gathering
• Analysis
• Predicting outcomes
• Environmental Scanning
• Core competencies

Environmental Scanning
• Competitors may be gaining an edge by diversification, making forays into
firm niche market by making new and better products.
• Suppliers could be forming cartels and preparing to drive hard bargains.
•Government could be passing laws and issuing order which could affect the
supply of materials. Now it is used to be SWOT analysis and PESTLE
analysis.
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 OPERATION MANAGEMENT AND STRATEGY
 Strategic Decision Making
• Core competencies – The objective to use unique strengths to create and develop
an organisation. Core processes of an organisation are determined by the core
competencies. Four main core processes are mentioned:

New Product
Customer
Services
Relationship
Development

Supplier Order
Relationship Fulfillm ents .

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 OPERATION MANAGEMENT AND STRATEGY
Differentiation Strategic – is referred to the long term priorities or goal achieve.
“Companies have different potential in terms of maneuverability along with target market
place (channels), promotion and price. These are affected by the company’s position in the
market, and the industry structure”. The BCG growth-share matrix displays the various
business units on a graph of the market growth rate vs. market share relative to competitors:

A business unit that A business unit that has a

has a large market small market share in a high
share in a growth market. These
fast growingindustry business units require
resources to grow market
Stars may .
share, but whether they will
cash, but because
generate
the succeed and become stars is
market is growing unknown.
rapidly they require
investment to
maintain their lead.
If successful, a star
will become a cash
cow when its
industry matures

A business unit that has a small market share in a

a business unit that has a large market
share in a mature, slow growing industry.
Cash cows require little investment and
generate cash that can be used to invest in
other business units
mature industry. A dog may not require
substantial cash, but it ties up capital that could
better be deployed elsewhere. Unless a dog has
some other strategic purpose, it should be
liquidated if there is little prospect for it to gain
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market share.
 INDUSTRY BEST PRACTICES
Pragmatic Benchmarking – is a method of measuring a company’s processes,
methods and procedures in a way that all functions in great details.
Benchmarking - A process of comparison with a superior performer anywhere in
the world to improve quality . The following are types of benchmarking:-

 Process benchmarking – Business process.

 Financial benchmarking.
Performance benchmarking.
 Product benchmarking.
 Strategic benchmarking.
 Functional benchmarking.

Benchmarking is classified into two groups :

Internal Benchmarking – refers to comparison within the organisation or
industry.
 External Benchmarking – refers to comparison with outsiders.

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 INDUSTRY BEST PRACTICES
Steps in Benchmarking –
Planning, analysis, integration, and action are the four steps recognized in the
process of benchmarking. Targets are set and activities are conducted to reach
them.

 Planning – determines the process, service, or the product to be benchmarked

on which metrics are assigned for collection of data.
Analysis – Analysed data gives inputs for comparison with the target company’s
performance on the parameter benchmark on which data was collected.
Integration – Resources are required across all functions to achieve the target
needs. Integration involves putting together resources like people, equipments and
communication, so that progress is unhindered.
Action – When changes are needed, actions have to be planned according to the
steps earlier stated. The teams are provided with necessary leadership, authority
and supporting facilities to enable them to complete all activities within the time
frame set for the purpose.

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 MANUFACTURING STRATEGIES
There are many types of competitive priorities for process used in the
manufacturing of products. The production systems are:
 Batch production.
 Mass production.
 Customised production.
 Assemble products.

The following are three dominant strategies:

Make to stock – Manufacturing firms adopt this strategy to ensure immediate
delivery of the products, minimizing delivery times. Eg: chemical, soft drink.
 Assemble to order – This strategy serves as a competitive priority of
customization and ensures fast delivery. Eg: Paints to colors, furniture.
Make to order – The firms set of processes that suits the manufacture based on
the customer requirements. This strategy gives a higher degree of customization,
one of the major competitive priority.

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