The operations function is fashionable! The consultancy services market % of world revenues of 40 largest firms Financial 6 Marketing/sales 2 Organizational design 11 Operations and process management 31 Benefits/Actuarial 16 IT strategy 17 Corporate strategy 17 © Nigel Slack and Michael Lewis 2003

Strategic Reconciliation Operations Resources OPERATIONS STRATEGY Market Requirements Operations strategy reconciles the requirements of the market with the capabilities of operations resources © Nigel Slack and Michael Lewis 2003

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 …” © Nigel Slack and Michael Lewis 2003

Operations strategy is different to operations management Short-term Long-term for example, capacity decisions for example, capacity decisions Time scale Demand Demand 1-12 months 1-10 years Micro level of the process Macro level of the total operation Level of analysis Detailed Aggregated Level of aggregation For example For example “Can we give tax services to the small business market in Antwerp?” “What is our overall business advice capability compared with other capabilities?” Concrete Philosophical Level of abstraction For example For example “How do we improve our purchasing procedures?” “Should we develop strategic alliances with suppliers?” Operations strategy is different to operations management © Nigel Slack and Michael Lewis 2003

Top-down and bottom-up perspectives of strategy Corporate strategy Business strategy Operations strategy Emergent sense of what the strategy should be Operational experience Top-down and bottom-up perspectives of strategy © Nigel Slack and Michael Lewis 2003

The market perspective analysis of the garment company CUSTOMERS Segmentation on: Age - youth Purpose - general PERFORMANCE OBJECTIVES MARKET POSITION Dependability Speed of delivery Product mix flexibility Speed to market Differentiation on: Innovative products Time to market Product range Coordinated launches COMPETITORS Traditionally weak in: promotion design innovation The market perspective analysis of the garment company © Nigel Slack and Michael Lewis 2003

The market perspective on operations strategy Customer Needs Market Positioning Performance Objectives Competitors’ Actions Required performance Understanding markets The market perspective on operations strategy © Nigel Slack and Michael Lewis 2003

Operations Strategy Decisions Capabilities Resources Tangible Equipment Staff Intangible Reputation Relationships (internal and external) Experience Operations Strategy Decisions Capabilities Application of leading- edge lighting and sound technology Articulation of client requirements Location Virtual reality technology Supplier development Equipment tracking system Organizational structure Staff meetings Processes Integration of equipment supply and client requirements Design process Supplier liaison process The operations resource perspective analysis of the lighting company © Nigel Slack and Michael Lewis 2003

Tangible and Intangible Resources Operations Capabilities Operations Strategy Decision Areas Operations Processes Understanding resources and processes Strategic decisions The operations resource perspective on operations strategy © Nigel Slack and Michael Lewis 2003

Tangible and Intangible Resources Customer Needs Operations Capabilities Operations Strategy Decision Areas Market Positioning Performance Objectives Operations Processes Competitors’ Actions Understanding resources and processes Strategic decisions Required performance Understanding markets Operations strategy is the strategic reconciliation of market requirements with operations resources © Nigel Slack and Michael Lewis 2003

Operations has to cope with the clash between the nature of external markets and the nature of internal resources Operations Resources are…. Market Requirements are…. Difficult to change Dynamic Technically constrained Heterogeneous Ambiguous Complex © Nigel Slack and Michael Lewis 2003

Operations strategy is the strategic reconciliation of market requirements with operations resources Understanding Resources and Processes Market Requirements Understanding Markets Market Positioning Market Segmentation Competitor Activity Operations Processes Operations Resources Operations Competences Strategic Decisions Operations Strategy Decisions Required Performance Performance Objectives Quality Speed Dependability Flexibility Cost Capacity Supply networks Process technology Development and organization © Nigel Slack and Michael Lewis 2003

What you HAVE What you DO What you WANT What you NEED Operations Resources Market Requirements Strategic Reconciliation What you HAVE in terms of operations capabilities What you DO to maintain your capabilities and satisfy markets What you WANT from your operations to help you “compete” What you NEED to “compete” In the market © Nigel Slack and Michael Lewis 2003

Operations can kick-start two virtuous cycles Understanding of the processes Competencies embedded in the operation Capabilities enhance innovation and improvement Developing the resources which let the operation’s performance stay ahead of the competition Internal and Competitiveness Strong marketing High margin Investment Developing customers’ competitors’ and stockholders; perceptions and expectations External World Class Operations © Nigel Slack and Michael Lewis 2003

Existing ‘effective’ capability Lafage Cosmetics’ requirements wide Existing ‘effective’ capability Variety of items per order Store delivery Catalogue customers narrow small large Number of items per order Hagen Style – Comparison of new demands placed on the order fulfilment processes by potential new business opportunities © Nigel Slack and Michael Lewis 2003

Hagen Style – Operations resources and market requirements Cost efficiency Fast delivery Traditional ‘representative’ sales channels declining in popularity 2 x distribution centers State-of-art packing and information technology Processes ‘fine tuned’ to traditional ‘representative’ sales channels Good at what it does cost efficient fast throughput As above plus wider range of requirements more demand fluctuations? New channels catalogue Internet discount stores Hagen Style – Operations resources and market requirements © Nigel Slack and Michael Lewis 2003