1. Strategic Reconciliation
Operations Resources
Market Requirements
OPERATIONS STRATEGY
Strategic Reconciliation
Operations strategy content
Operations strategy process
Resource Usage
Level 1 - Fit
Level 3 - Risk
Align resources with requirements
Include impact of uncertainty
Level 2 - Sustainability
Develop sustainable competitive advantage
Market competitiveness
Performance objectives
Decision areas
Topics in operations strategy treated in this chapter

2. Hospital Milestone Software producer
Presentation of symptoms
Awareness of need
Customer decides new software is needed
Enquiry decision time
Visit to doctor for advice and tests
Request for information
Asks for specification and estimates
Enquiry time
Receipt of information
Test information confirms diagnosis
Receives proposal
Customer decision time
Request for product/service
Decide on surgery
Places order
Waiting time
Start of core processing
Start of design and coding
Enter hospital for surgery
Core processing time
End of core processing
Procedure successfully completed
Software ‘completed’
Installation time
‘Installed’ product/service fully operational
Patient fully recovered
Software fully debugged and working
Significant ‘milestone’ times for the delivery of two products/services

3. Different product groups require different performance objectives
First/Business class
Economy class
Services
First/Business-class cabin, airport lounges, pick-up service
Economy cabin
Customers
Wealthy people, business people, VIPs
Travellers (friends and family), vacation takers, cost-sensitive business travel
Service range
Wide range, may need to be customised
Standardized cabin
Rate of service innovation
Relatively high
Relatively low
Volume of activity
Relatively low volume
Relatively high volume
Profit margins
Medium to high
Low to medium
Main competitive factors
Customization, extra service, comfort features, convenience
Price, acceptable service
Performance objectives
Quality (specification and conformance), Flexibility, Speed
Cost, Quality (conformance)
Different product groups require different performance objectives

4. Market Competitiveness
Quality
Being RIGHT
Speed
Being FAST
Dependability
Being ON TIME
Market Competitiveness
Flexibility
Being ABLE TO CHANGE
Cost
Being PRODUCTIVE
The operations function can provide a competitive advantage through its performance at the five competitive objectives

5. Order-winners and qualifiers
Positive
Order-winners
Less important
Competitive benefit
Neutral
Qualifiers
Negative
Low
High
Achieved performance
Order-winners and qualifiers

6. Customer Needs
Importance to customers
Priority of performance objectives
Performance against competitors
Competitors’ Actions
The priority of performance objectives is influenced by what is regarded as important by customers and how the operation performs against competitors

7. Decomposing the ratio profit/total assets
Output
Total assets
Profit
Output = x
Profit
Output
Revenue
Output
Cost
Output = x
Average revenue
Average cost
Output
Total assets
Output
Capacity
Fixed assets
Total assets
Capacity
Fixed assets = x x
Productivity of fixed assets
Utilization
Working capital
Operations strategy decision areas
Capacity
Supply network
Process technology
Development and organization
Decomposing the ratio profit/total assets

8. The Elements of an International Operations Strategy
Resource Deployment
Capacity Structure
ISSUES -
Capacity
Location
Focus & segmentation
L/T forecasts
Do it yourself or buy-in?
Customer and supplier relationships
Supply chain dynamics and integration
Supply Network
ISSUES -
Process Technology
ISSUES -
Development rate
Automation
Size
Integration
In our out-house development
Development and Organization
New product/service development
Organization structure
Performance measurement
Improvement strategy
ISSUES -
Operations Decisions are shaped by
COMPETENCIES and CONSTRAINTS

9. The four categories of operations strategy decision areas
Resource Usage
Issues include:
Total capacity
Number, size of sites
Allocation of tasks to sites
Location
Issues include:
Vertical integration
Network behaviour
Supplier relationships
Supplier development
Issues include:
Rate of development
Automation
Integration
Implementation
Subcontracted development
Issues include:
Responsibility relationships
Performance and control
Process development
Product and service development
Process Technology
Development and Organization
Capacity
Supply Network
The four categories of operations strategy decision areas

10. Development and Organization Infrastructural issues
Process Technology
Development and Organization
Capacity
Supply Network
Structural issues
Infrastructural issues
Operations strategy decision areas are partly structural and partly infrastructural

11. Operations strategy is defined by the intersections of performance objectives and Operations decisions
Capacity
Supply Network
Process Technology
Development and Organization
Resource Usage
Operations Decisions shape
COMPETENCIES and CONSTRAINTS
Quality
Market Competitiveness
Speed
Dependability
Flexibility
Cost
Competitive Objectives are prioritized by
CUSTOMERS and COMPETITORS

12. The operations strategy matrix
Resource Usage
Quality
Speed
Operations strategy
Market Competitiveness
Performance objectives
Dependability
Flexibility
Cost
Development and Organization
Supply Network
Process Technology
Capacity
Decision areas
The operations strategy matrix

13. 7-Eleven Japan Largest retailer in Japan
Sells 1.5X as much per store as nearest rival
History of cautious expansion and technical and service innovation
“Field Counsellors” spread operations knowledge (also do distance training)
Expansion by territory to reduce disn costs
Early use of TIS (total information system)
TIS controls stock replenishment twice a day delivery (sales analysed twice a day)
New system not internet-based
New services include,
Banking terminals
Downloading games
Downloading music to MD
Internet ordering and collection

14. Market Competitiveness
Resource Deployment
QUALITY of products and services
Distribution center grouping by temperature 
Distribution centers 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 centers
Order and stock replenishment
Information sharing and parenting system spreads service ideas 
Field counselors with sales data help stores to minimize waste and increase sales 
Franchisee relationships
New product/service development
Approach to operations improvement
Speed and dependability combined to indicate AVAILABILITY
FLEXIBILITY of response to sales and customer trends
TIS gives comprehensive and sophisticated analysis of sales & supply patterns daily

The Total Information System (TIS)
Market Competitiveness
COST in terms of minimizing…
operating cost
capital cost
working capital
Area dominance reduces distribution and advertising costs 
Location of stores
Size of stores
7-11 JAPAN
 pivotal
 critical
 secondary
DEVELOPMENT AND ORGANIZATION
PROCESS TECHNOLOGY
SUPPLY NETWORKS
CAPACITY

15. Align resources with requirements Level 1 - Fit
Develop sustainable competitive advantage
Increasing complexity
Level 2 - Sustainability
Include impact of uncertainty
Level 3 - Risk
The practice of operations strategy involves considering fit, sustainability and risk

16. Market requirements
Line of fit
Alignment between market and operations capability X Y
Level of operations resource capability
In operations strategy ‘fit’ is the alignment between market and operations capability

17. Extension of market requirements Sustainable improvement
Improvements in operations capabilities
Level of operations resource capability
Sustainable improvement implies simultaneous extension/improvement of market requirements and operations capabilities

18. Virgin Trains
Market requirements
Line of fit
Nissan
Level of operations resource capability
Virgin Trains and Nissan positioned in relation to market requirements and operations capabilities

19. Quality (specification) Quality (conformance)
Cost X X X
Delivery flexibility X X
Speed X X X
Volume flexibility
Dependability
Customization
Current products
New products
Dresding Medical - Polar diagram illustrating the relative importance of the performance objectives for the current and new products

20. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Resource Usage * * *
Quality (spec) * * * * * * * *
Quality (conform) * * * *
Speed * *
Dependability * * *
Performance objectives
Market Competitiveness *
Delivery flex * *
Volume flex * * *
Customization * * * * * * *
Cost * *
Capacity
Supply Network
Process Technology
Development and Organization * * *
very important
Lab style manufacture easy to change capacity incrementally
50% of activities in-house
Low process technology (but high product technology)
R&D, Mfg. and Sales all share common knowledge base. Incremental new product development * *
medium importance *
some importance
Decision areas
Dresding Medical - Current product range
Slide 2.17

21. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Resource Usage * *
Quality (spec) * * * * * * *
Quality (conform) * * * * * * * *
Speed * * *
Dependability * * * *
Performance objectives
Market Competitiveness *
Delivery flex * * *
Volume flex * * * *
Customization * * * * *
Cost * * * *
Capacity
Supply Network
Process Technology
Development and Organization * * *
very important
May need to adjust quickly depending on demand
New supplies will be needed / developed
Needs investment in volume processes
R&D, Mfg. and Sales less interdependent. Faster time-to-market needed * *
medium importance *
some importance
Decision areas
Dresding Medical - New product range
Slide 2.18

22. ‘Fit’ is concerned with ensuring comprehensiveness, correspondence, coherence and criticality
Resource Usage
Correspondence
Comprehensive?
Critical
Quality
Coherence
Speed
Market Competitiveness
Performance objectives
Dependability
Flexibility
Cost
Development and Organization
Supply Network
Process Technology
Capacity
Decision areas