4 Operations management and strategy requires analysis at three levels Flow between operationsAnalysis at the level of the supply networkStrategic analysisOperational analysisAnalysis at the level of the operationFlow between processesAnalysis at the level of the processFlow between resources
5 Operations strategy is … ‘… the total pattern of decisions …… that shape the long-term capabilities …… of any type of operation ...… and their contribution to overall strategy…… through the on-going reconciliation of market requirements and operations resources …… so as to achieve a sustainable fit between the two …… whilst managing the risks of misalignment’.
7 How is operations strategy different from operations management? Short-termLong-termTimescalee.g. capacity decisionsDemandDemand1 – 10 years1 – 12 months
8 How is operations strategy different from operations management? MicroMacroLevel of analysisConcerned with the macro operation (level of the firm)
9 How is operations strategy different from operations management? Level of aggregation(Concerned with resources at an aggregated level)DetailedOperations managementAggregatedOperations 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)ConcreteOperations managementPhilosophicalOperations strategy‘How do we improve our purchasing procedures?’‘Should we develop strategic alliances with suppliers?’
11 What is operations strategy about? The sectoral scope of operations strategyProducts or services?Manufacturing or non-manufacturing?For profit or not-for-profit?What is operations strategy about?
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 resourcesTop-downOperations strategy should interpret higher level strategyOperations resourcesOperations strategy should build operations capabilitiesMarket requirementsOperations strategy should satisfy the organisation’s marketsOperations strategy should learn from day-to-day experiencesBottom-up
18 Operations strategy must reflect four perspectives – top-down, bottom-up, market requirements, and operations resourcesCorporate strategyBusiness strategyTop-downCapacityQualitySupply networksSpeedOperations resourcesMarket requirementsProcess technologyDependabilityDevelopment and organisationFlexibilityCostBottom-upEmergent sense of what the strategy should beOperational experience
19 Top-down and bottom-up perspectives of strategy for the Metrology Company Corporate objectives impact on business objectives which, in turn, influence Operations StrategyTop downCorporate strategyBusiness strategyOperations strategyBottom upDay-to-day experience of providing products and services to the market reveals problems and potential solutions which become formalised into Operations StrategyEmergent sense of what the strategy should beOperational experience
20 Top-down and bottom-up perspectives of strategy for the Metrology Company Operations must have fast and flexible technology, supply relationships, process and staffModular strategy provides flexibility and innovation at relatively low costGroup building corporate capability in high technology products and servicesMetrology division competes on ‘fast-to-market’ innovationsExperiment with ‘modular’ design of key products and componentsCustomers confused by continual product innovation and costs are increasingCorporate objectives impact on business objectives which, in turn, influence Operations StrategyBottom upTop downDay-to-day experience of providing products and services to the market reveals problems and potential solutions which become formalised into Operations Strategy
21 Operations strategy reconciles the requirements of the market with the capabilities of operations resourcesStrategic reconciliationOPERATIONS STRATEGYOperations resourcesMarket requirements
27 QualityCompanies (like Bentley or Toyota) have a reputation for qualityProducts 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. DHL and Blue Dart Courier service (Rs. 230/- for delivery within Delhi only) as compared to other courier services.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.
29 DependabilitySome of the best examples are those where there is a fixed ‘delivery’ time for the product or service.Theatrical performances, magic shows (P.C. Sircar Sr. and Jr.) 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 FlexibilityExample 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 CostExamples of low-cost airliners in India, but only some of them survive.21-day apex fare and other schemes of other airlines, kingfisher reducing the pouch size (or altogether no pouch at all), 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 ResourcesEquipmentStaffReputationRelationships (internal and external)ExperienceCapabilitiesApplication of leading edge lighting and sound technologyArticulation of client requirementsProcessesIntegration of equipment supply and client requirementsDesign processSupplier liaison processCustomersProfessional theatres (static, low margins)Exhibitions (slow growth, low margins)Conferences etc. (fast growth, higher marginsMarket positionTraditionally differentiated on high service level in theatre and exhibition markets, innovation and service in conference marketCompetitorsBig groups dominating professional theatresIn-house operations growing in exhibitions marketConference market still fragmentedPerformance objectivesAesthetically innovative designsPresentation adviceHigh customisation of lighting solutionsFast and dependable supplyOperations strategy decisionsLocationVirtual reality technologySupplier developmentEquipment racking systemOrganisational structureStaff meetings
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 the garment company PERFORMANCE OBJECTIVESMARKET POSITIONDifferentiation on:CUSTOMERSSegmentation on:Age – youthPurpose – generalCOMPETITORSTraditionally weak in:Innovative productsTime to marketProduct rangeCoordinated launchespromotiondesign innovationDependabilitySpeed of deliveryProduct mix flexibilitySpeed to market
35 The operations resource perspective analysis of the lighting company ResourcesTangible:EquipmentStaffIntangible:ReputationRelationships (internal and external)ExperienceOperations strategy decisionsCapabilitiesLocationApplication of leading-edge lighting and sound technologyVirtual reality technologySupplier developmentEquipment tracking systemsArticulation of client requirementsOrganisational structureStaff meetingsProcessesIntegration of equipment supply and client requirementsDesign processSupplier liaison process
36 What you HAVE What you NEED What you WANT What you DO in terms of operations capabilitiesWhat you NEEDto ‘compete’ in the marketOperations resourcesMarket requirementsWhat you WANTfrom your operations to help you ‘compete’What you DOto maintain your capabilities and satisfy marketsStrategic reconciliation
37 Operations strategy is ….. ‘… the decisions which shape the long-term capabilities of the company’s operations and their contribution to overall strategy through the on-going reconciliation of market requirements and operations resources …’
38 Decomposing the ratio profit/total assets to derive the four strategic decision areas of operations strategyProfitTotal assetsOutput=×OutputTotal assetsCapacityFixed assetsUtilisationWorking capitalProductivity of fixed assets=×ProfitOutputRevenueCostAverage revenueAverage cost=Operations strategy decision areasCapacitySupply networkProcess technologyDevelopment and organisation
39 Operations strategy decision areas are partly structural and partly infrastructural CapacityDevelopment and organisationSupply networkProcess technologyStructural issuesInfrastructural issues
40 The operations strategy matrix Resource usageOperations strategyPerformance objectivesQualitySpeedDependabilityFlexibilityCostDevelopment and organisationCapacitySupply networkProcess technologyDecision areasMarket competitiveness
41 7-Eleven Japan Largest retailer in Japan Sells 15.X as much per store as nearest rivalHistory of cautious expansion and technical and service innovation‘Field Counsellors’ spread operations knowledge (also distance training)Expansion by territory to reduce distribution costsEarly use of TIS (Total Information System)TIS controls stock replenishment by twice a day delivery (sales analysed twice a day)New systems not Internet-basedNew service includes:Bank terminalsDownloading gamesDownloading music to MDInternet ordering and collection
42 7-11 JAPAN RESOURCE DEPLOYMENT Market Competitiveness Pivotal Distribution centre grouping by temperatureDistribution centres and inventory management systems give fast stock replenishment TIS allows trends to be forecast and supply adjustments madeCommon distribution centers give small frequent deliveries from fewer sourcesNumber and type of distribution centresOrder and stock replenishmentInformation sharing and parenting system spreads service ideas Field counsellors with sales data help stores to minimise waste and increase salesFranchisee relationshipsNew product/service developmentApproach to operations improvementQUALITY of products and servicesSpeed and dependability combined to indicate AVAILABILITYTIS gives comprehensive and sophisticated analysis of sales & supply patterns dailyThe Total Information System (TIS)Market CompetitivenessFLEXIBILITY of response to sales and customer trendsCOST in terms of minimising…operating costcapital costworking capitalArea dominance reduces distribution and advertising costsLocation of storesSize of stores7-11 JAPAN Pivotal Critical SecondaryDEVELOPMENT AND ORGANISATIONPROCESS TECHNOLOGYSUPPLY NETWORKSCAPACITY