2 Slack et al.’s model of operations management Operation’s performanceOperations strategyOperations strategyDesignImprovementOperations managementPlanning and control
3 Key operations questions In Chapter 3 – Operations strategy – Slack et al. identify the following key questions:What is strategy and what is operations strategy?What is the difference between a ‘top-down’ and a ‘bottom-up’ view of operations strategy?What is the difference between a ‘market requirements’ and an ‘operations resources’ view of operations strategy?How can an operations strategy be put together?
4 Operations strategy at Flextronics and Ryanair For each of these companies:What do they have to be good at to compete in their markets?How do their operations help them to achieve this?
5 Operations strategy at Flextronics Operations strategic decisionsIndustrial parks, withlow cost but close locationsand co-located suppliersFlextronicsMarket requirementsLow costsResponsivenessFlexibility
6 Operations strategy at Ryanair Operations strategic decisionsStripped down serviceOne technologyCheap airport locationsFast turnroundRyanairMarket requirementsLow pricesReliabilityBasic service
7 What is strategy?Setting broad objectives that direct an enterprise towards its overall goal.Planning the path (in general rather than specific terms) that will achieve these goals.Stressing long-term rather than short-term objectives.Dealing with the total picture rather than stressing individual activities.Being detached from, and above, the confusion and distractions of day-to-day activities.
8 Strategic decisionsStrategic decisions are those decisions which: are widespread in their effect on the organization to which the strategy refers, define the position of the organization relative to its environment and move the organization closer to its long-term goals.
9 ‘Operations’ is not the same as ‘operational’ ‘Operations’ are the resources that create products and services.‘Operational’ is the opposite of strategic, meaning day-to-day and detailed.So, one can examine both the operational and the strategic aspects of operations.
10 How is operations strategy different to operations management? Short-termfor example, capacity decisions1–12 monthsDemandLong-termfor example, capacity decisions1–10 yearsDemandThe time scale is longer
11 Operations management How is operations strategy different to operations management? (Continued)Operations managementOperations strategyMicro-levelof the processMacro-levelof the total operationThe level of analysis is higher
12 How is operations strategy different to operations management How is operations strategy different to operations management? (Continued)Operations managementOperations strategyDetailedFor example:‘Can we give tax services to the small business market in Antwerp?’AggregatedFor example:‘What is our overall business advice capability compared with other capabilities?’The level of aggregation is higher
13 How is operations strategy different to operations management How is operations strategy different to operations management? (Continued)Operations managementOperations strategyConcreteFor example:‘How do we improve out purchasing procedures?’PhilosophicalFor example:‘Should we develop strategic alliances with suppliers?’The level of abstraction is higher
14 What is the role of the operations function? Operations as implementer of strategyOperations implements strategyStrategyOperationsOperations supports strategyOperations as supporter of strategyStrategyOperationsOperations drives strategyOperations as driver of strategyStrategyOperations
15 The strategic role of the operations function The 3 key attributesof operations strategyOperations contributionImplementingbe DependableOperationalize strategyexplain PracticalitiesSupportingbe AppropriateUnderstand strategyContribute to decisionsDrivingbe Innovativeprovide Foundation of strategyDevelop long-term Capabilities
16 The 4 stage model of operations contribution Externally supportiveRedefining industry expectationsSTAGE 4Give an operations advantageDriving strategyIncreasing contribution of operationsInternally supportiveClearly the best in the industrySTAGE 3Link strategy with operationsSupporting strategyExternally neutralAs good as competitorsSTAGE 2Adopt best practiceImplementing strategyIncreasing strategic impactInternally neutralSTAGE 1Correct the worst problemsHolding the organization backAfter Hayes and WheelwrightIncreasing operations capabilities
17 The four perspectives on operations strategy Top-down perspectiveWhat the business wants operations to doOperations resources perspectiveWhat operations resources can doMarket requirement perspectiveWhat the market position requires operations to doOperations strategyWhat day-to-day experience suggests operations should doBottom-up perspective1
18 Top-down and bottom-up perspectives of strategy Corporate strategyBusiness strategyOperations strategyEmergent sense of what the strategy should beOperational experience
19 The strategy hierarchy Key strategic decisionsInfluences on decision-makingCorporate strategyWhat business to be in?What to acquire?What to divest?How to allocate cash?Economic environmentSocial environmentPolitical environmentCompany values and ethicsBusiness strategyWhat is the mission?What are the strategicobjectives of the firm?How to compete?Customer/market dynamicsCompetitor activityCore technology dynamicsFinancial constraintsFunctional strategyHow to contribute to thestrategic objectives?How to manage thefunction’s resources?Skills of function’s staffCurrent technologyRecent performance of thefunction
20 The effects of the product / service life cycle IntroductionGrowthMaturityDeclineSales volumeTimeVolumeCustomersCompetitorsVariety of product/ service designSlow growth in salesInnovatorsFew/noneCustomization or frequent design changesRapid growth in sales volumeEarly adoptersIncreasing numbersIncreasingly standardizedSales slow and level offBulk of marketStable numberEmerging dominant typesMarket needs largely metLaggardsDeclining numbersPossible move to commodity standardization6
21 The effects of the product / service life cycle (Continued) IntroductionGrowthMaturityDeclineSales volumeTimeLikely order winnersLikely qualifiersDominant performance objectivesProduct/ service characteristicsQualityrangeFlexibilityqualityAvailability qualityPrice rangeSpeeddependabilityqualityLow pricedependable supplyQualityrangeCostdependabilityLow priceDependable supplyCost6
22 Different competitive factors imply different performance objectives If the customers value these …Performance objectivesThen, the operations will need to excel at these …Low priceCostHigh qualityQualityFast deliverySpeedReliable deliveryDependabilityInnovative products and servicesFlexibility (products/services)Wide range of products and servicesFlexibility (mix)The ability to change the timing or quantity of products and servicesFlexibility (volume and/or delivery)3
23 Order-winning, qualifying and less important competitive factors Order-winning factors+veCompetitive benefitNeutral–vePerformance
24 Order-winning, qualifying and less important competitive factors (Continued) Qualifying factors+veCompetitive benefitNeutral–vePerformance
25 Order-winning, qualifying and less important competitive factors (Continued) Less important factors+veCompetitive benefitNeutral–vePerformance
27 What you HAVE What you DO What you WANT What you NEED Reconciling market requirements and operations resourcesOperations resourcesMarket requirementsStrategic reconciliationWhat you HAVEin terms of operations capabilitiesWhat you DOto maintain your capabilities and satisfy marketsWhat you WANTfrom your operations to help you ‘compete’What you NEEDto ‘compete’ in the market
28 The challenge of operations strategy formulation An operations strategy should be:Appropriate…Comprehensive…Coherent…Consistent over time…
29 An implementation agenda is needed When to start?Where to start?How fast to proceed?How to co-ordinate the implementation programme?
30 The five P’s of operations strategy implementation Purpose — a shared understanding of the motivation, boundaries and context for developing the operations strategy.Point of Entry — the point in the organization where the process of implementation starts.Process — How the operations strategy formulation process is made explicit.Project Management — The management of the implementation.Participation — Who is involved in the implementation.