Operations Strategy_chap -1 Introduction.pdf

Operation strategy presentation

1. An Introduction to Operations
Strategy

2. The basic strategy model

4. Operations management and strategy
requires analysis at three levels
Flow between operations
Analysis at the level
of the supply
network
Analysis at the
level of the
operation
Flow between processes
Analysis at the level of the process
Flow between resources
Strategic analysis
Operational analysis

5. Operations strategy is …
‘… the total patternof decisions …
… whilst managing the risksof misalignment’.
… through the on-going reconciliation of market
requirementsand operations resources …
… and their contribution to overall strategy…
… of any typeof operation ...
… that shape the long -term capabilities …
… so as to achieve a sustainable fit between the two …

6. The Goods –Services Continuum

7. How is operations strategy different
from operations management?
Timescale
e.g. capacity
decisions
Short-term
Operations management
Long-term
Operations strategy

8. How is operations strategy different
from operations management?
Level of analysis
Concerned with the
macro operation
(level of the firm) Micro
Operations management
Macro
Operations strategy

9. How is operations strategy different
from operations management?
Level of aggregation
(Concerned with
resources at an
aggregated level)
Detailed
Operations management
Aggregated
Operations strategy
‘Can we give tax services to the small business
market in Antwerp?’
‘What is overall business
advice capability
compared with other
capabilities?’

10. How is operations strategy different
from operations management?
Level of abstraction
(Concerned with
the conceptual)
Concrete
Operations management
Philosophical
Operations strategy
‘How do we improve
our purchasing
procedures?’
‘Should we develop
strategic alliances with
suppliers?’

11. Products or services?
Manufacturing or non- manufacturing?
What is operations strategy about?
For profit or not- for-profit?
The sectoral scope of operations
strategy

12. The role of operations strategy

14. Hayes and Wheelwright’s Four
Stages of Strategy

16. The importance of operations to
business and market needs

17. The four perspectives on operations strategy –top-
down, bottom-up, market requirements and operations
resources
Top-down
Operations
strategy should
interpret higher
level strategy
Operations
resources
Operations strategy should
build operations capabilities
Operations strategy should learn from
day-to-day
experiences
Bottom-up
Market requirements
Operations strategy
should satisfy the
organisation’s markets

18. Operations strategy must reflect four perspectives –top-
down, bottom-up, market requirements, and operations
resources
Top-down
Bottom-up
Corporate strategy
Business strategy
Emergent sense of
what the strategy
should be
Operational
experience
Operations
resources
Capacity
Supply networks
Process technology
Development and
organisation
Market
requirements
Quality
Speed
Dependability
Flexibility
Cost

19. Top-down and bottom-up perspectives
of strategy for the Metrology
Company
Corporate objectives impact on
business objectives which, in turn,
influence Operations Strategy
Top down
Corporate strategy
Business strategy
Bottom up
Day-to-day experience of providing
products and services to the market
reveals problems and potential
solutions which become formalised
into Operations Strategy
Emergent sense of what the
strategy should be
Operational experience
Operations
strategy

20. Operations must have fast and flexible
technology, supply relationships, process
and staff
Modular strategy provides flexibility
and innovation at relatively low
cost
Group building corporate capability in
high technology products and
services
Metrology division competes on ‘fast- to-
market’ innovations
Experiment with ‘modular’ design of
key products and components
Customers confused by continual product
innovation and costs are increasing
Corporate objectives impact on
business objectives which, in turn,
influence Operations
Strategy
Bottom up
Top down
Day-to-day experience of providing
products and services to the market
reveals problems and potential solutions
which become formalised into Operations
Strategy
Top-down and bottom-up perspectives
of strategy for the Metrology
Company

21. Operations strategy reconciles the requirements of
the market with the capabilities of operations
resources
Operations
resources
Market requirements
Strategic reconciliation
OPERATIONS STRATEGY

23. The critical link between marketing
and operations

24. Operations strategy is the strategic
reconciliation of market requirements with
operations resources
Tangible and
intangible
resources
Operations capabilities
Operations
processes
Operations strategy
decision areas
Customer
needs
Market
positioning
Competitors’
actions
Performance objectives
Understanding
resources
and processes
Strategic decisions
Capacity
Supply networks
Process technology
Development and
organisation
Required performance
Quality
Speed
Dependability
Flexibility
Cost
Understanding
markets

25. British Sugar Hierarchy of Strategies

26. The performance measures

27. Quality
Companies (like Bentley or Toyota) have a
reputation for quality
Products or services. High-quality hotels
and restaurants, also luxury services such
as high price hairdressers, etc.
High conformance is necessary for safety
reasons such as in hospital blood testing.

28. Speed
Any accident, emergency or rescue service.
Transportation examples where different speeds are
reflected in the cost of the service., e.g., Amazon
delivery cost variation.
Likewise, the fast check- in service offered to business
class passengers at airports.
And the exceptionally fast service of Concord which
used to offer a fast service at a very high price (an
example that no longer exists).

29. Dependability
Some of the best examples are those where
there is a fixed ‘delivery’ time for the product
or service.
Theatrical performances, magic shows are an
obvious examples.
Or the preparation and delivery of lectures in
a classroom.
Other examples include space exploration
projects which rely on launch dates during a
narrow astronomical ‘window’.

30. Flexibility
Example would be a tailor who has to be sufficiently
flexible to cope with different shapes and sizes of
customers and also (just as importantly) different
aesthetic tastes and temperaments.
Another example would be the oil exploration
engineers who need to be prepared to cope with
whatever geological and environmental conditions
they find drilling for oil in the most inhospitable parts
of the world.
Accident and emergency departments in hospitals.
Unless they have a broad range of knowledge which
allows them to be flexible, they cannot cope with the
broad range of conditions presented by their
patients.

31. Cost
Examples of low-cost airlines in the
world.
Apex fare and other schemes of some
airlines, no toffees on flights, no free
liquor in international flights run by
American Airlines or Continental Airlines.

32. The ‘market requirements’ and
‘operations resource’ analysis of the
lighting company
Resources
Equipment
Staff
Reputation
Relationships (internal
and external)
Experience
Capabilities
Application of leading
edge lighting and sound
technology
Articulation of client
requirements
Processes
Integration of equipment
supply and client
requirements
Design process
Supplier liaison process
Operations strategy
decisions
Location
Virtual reality technology
Supplier development
Equipment racking system
Organisational structure
Staff meetings
Customers Professional theatres
(static, low margins)
Exhibitions (slow growth,
low margins)
Conferences etc. (fast
growth, higher margins
Market position
Traditionally differentiated
on high service level in
theatre and exhibition
markets, innovation and
service in conference
market
Competitors
Big groups dominating
professional theatres
In-house operations
growing in exhibitions
market
Conference market still
fragmented
Performance objectives
Aesthetically innovative designs
Presentation advice
High customisation of
lighting solutions
Fast and dependable supply

33. Market-Operations Link: McDonald’s
From managing a single part of the organisation
(such as, a single McDonald’s store) to managing the
operations for the whole of the organisation (for
example, what are the key operations strategy
decisions for McDonald’s in the whole of Europe?).
There is a difference between the two levels of
analysis. Especially how the operational day-to-day
issues (such as, the way staff are scheduled to work
at different times in McDonald’s stores) can affect
the more strategic issues for the organisation as a
whole (such as, what level of service and costs are
McDonald’s franchise holders expected to work to?).

34. The market perspective analysis of a
garment company
PERFORMANCE OBJECTIVES MARKET POSITION
Differentiation on:
CUSTOMERS
Segmentation on:
Age – youth
Purpose – general
COMPETITORS
Traditionally weak in:
Innovative products
Time to market
Product range
Coordinated launches
promotion
design innovation
Dependability
Speed of delivery
Product mix flexibility
Speed to market

35. Operations strategy decision areas are partly
structural and partly infrastructural
Capacity
Development and organisation
Supply network
Process technology
Structural issues
Infrastructural issues

36. Operations strategy
Performance objectives
Quality
Speed
Dependability
Flexibility
Cost
Development
and
organisation
Capacity
Supply
network
Process
technology
Decision areas
Market competitiveness
The operations strategy matrix
Resource usage

37. 7-Eleven Japan
Sells 15.X as much per store as nearest rival
History of cautious expansion and technical and service innovation
‘Field Counsellors’ spread operations knowledge (also distance training)
Expansion by territory to reduce distribution costs
Early use of TIS (Total Information System)
TIS controls stock replenishment by twice a day delivery (sales analysed twice a
day)
New systems Internet- based
New service includes:
Bank terminals
Downloading games
Internet ordering and collection
Largest retailer in Japan

38. COSTin terms of
minimising…
•operating cost
•capital cost
•working capital
QUALITYof products
and services
Speed and
dependability combined
to indicate AVAILABILITY
FLEXIBILITYof
response to sales and
customer trends
Area dominance
reduces distribution
and advertising costs

•Location of stores
•Size of stores
Distribution centre
grouping by
temperature

Distribution centres and inventory management systems
give fast stock
replenishment


TIS allows trends to be forecast and supply adjustments
made

Common distribution
centers give small
frequent deliveries
from fewer sources

•Number and type of
distribution centres
•Order and stock
replenishment
TIS gives comprehensive and
sophisticated analysis of
sales &supply patterns
daily


•The Total
Information System
(TIS)
Information sharing and parenting system spreads service
ideas


Field counsellors with
sales data help
stores to minimise
waste and increase
sales


•Franchisee
relationships
•New
product/service
development
•Approach to
operations
improvement
DEVELOPMENT
AND
ORGANISATION
PROCESS
TECHNOLOGY
SUPPLY
NETWORKSCAPACITY
RESOURCE DEPLOYMENT
Market Competitiveness
 Pivotal
 Critical
 Secondary
7-11 JAPAN

39. Specifics of operations strategy

41. The Hill Framework