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The three levels of operations strategy process
Increasing complexity Level 1 - Fit Align resources with requirements Level 2 - Sustainability Develop sustainable competitive advantage Level 3 - Risk Include impact of uncertainty
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Operations Strategy Formulation
Putting an operations strategy together presents some particular difficulties: Senior operations managers are often geographically dispersed The operation still needs running Predominance of line management Complexity of operations resources Inertia of operations resources
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Operations Strategy Formulation
There are many formulation process stage models. They often include: Links between competitive strategy objectives and operations objectives (strategic fit) The use of ‘competitive objectives’ as the translation device between strategic and operations objectives Judging the importance of competitive objectives against customer/market requirements Current performance judged against competitor performance An iterative process The concept of an ‘ideal’ of ‘greenfield’ operation against which to compare current operations. A gap-based analysis
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Level of market requirements
In operations strategy ‘fit’ is the alignment between market and operations capability Level of market requirements Line of fit Alignment between market and operations capability Y X Level of operations resource capability
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Operations resource capability
‘Fit’ means that the operations resources and processes are aligned with the requirements of its markets. ‘Fit’ can also mean that market requirements are moved to exploit operations resource capabilities Line of fit Market requirements Operations resource capability
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‘Fit’ operations resources to market requirements ‘fit’
Market Segmentation Operations Strategy Decision Areas Market Positioning Operations Performance Objectives Operations Capabilities Competitor Activity State market requirements in terms of operations performance objectives Make strategic operations decisions … to enhance core capabilities Define competitive position Understand markets ‘Fit’ operations resources to market requirements ‘fit’
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‘Fit’ market positioning to operations resources capabilities
Tangible and Intangible Resources Potential Market Positioning Operations Strategy Decision Areas Operations Performance Operations Capabilities Operations Processes Define market potential of operations performance Make appropriate strategic operations decisions Determine competitive position Identify core capabilities Understand resources and processes ‘Fit’ market positioning to operations resources capabilities
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IBM operations strategy matrix (1970-1985)
Resource Usage Critical Critical Critical Quality Speed Market Competitiveness Performance objectives Dependability Flexibility Critical Critical Critical Critical Cost Development and Organization Supply Network Process Technology Capacity Decision areas IBM operations strategy matrix ( )
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The level of ‘fit’ may not always be ‘tight’
Minimum resource capability Ideal resource capability Line of fit B y2 ‘Ideal’ market requirements Y Level of market requirements Tight fit Minimum market requirements y1 A x1 X x2 Level of operations resource capability The level of ‘fit’ may not always be ‘tight’
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‘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 Process Technology Development and Organization Supply Network Capacity Decision areas
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Resource Usage Provide resources to support quality Use quality as performance criteria Continuous quality emphasis with suppliers Purchase using quality criteria Work on functional barriers Built-in quality in processes Statistical process control Enhance quality capability Quality as a performance criteria Long-term plans Quality culture Continuous improvement Quality performance measurement and control Operational supervision is important Communication Appropriate org. structure Quality Market Competitiveness Performance objectives Speed Dependability Flexibility Cost Development and Organization Supply Network Process Technology Capacity Decision areas To be strategic, quality initiatives need to comprehensively cover all decision areas
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The Hill framework of operations strategy formulation
Step 1 Step 2 Step 3 Step 4 Step 5 Corporate objectives Marketing strategy How do products or services win orders? Operations strategy Process choice Infrastructure Growth Profit ROI Other ‘financial’ measures Product/service markets and segments Range Mix Volumes Standardisation or customisation Innovation Leader or follower Price Quality Delivery speed Delivery dependability Product/service range Product/service design Brand image Technical service Process technology Trade-offs embodied in process Role of inventory Capacity, size, timing, location Functional support Operations planning and control systems Work structuring Payment systems Organisational structure The Hill framework of operations strategy formulation
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The Platts-Gregory procedure
OPPORTUNITIES AND THREATS? THE EXISTING OPERATION Facilities Capacity Span of process Processes Human resources Quality Control policies Suppliers New Products WHAT THE MARKET WANTS? Features Quality Delivery Flexibility Price WHAT DO WE NEED TO DO TO IMPROVE THE REVISED OPERATIONS STRATEGY? HOW THE OPERATION PERFORMS Features Quality Delivery Flexibility Price The Platts-Gregory procedure
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Uses of profiling in the Platts-Gregory procedure
Product family Market requirements Achieved performance Delivery lead-time Ex-stock Short Not significant Long Reliability Into stock point Variable Critical: Project delay Good Features Fit for purpose Few features Many features/ High absolute level Quality Acceptable at price Acceptable Total reliability essential High Flexibility design All designs customer specified All products customised Standard range only Standard only Volume Stable market Little variation required Volume variations low Highly cyclic variable market Volume variations high Price cost Price competition dominant Low Non-price competition dominant High Uses of profiling in the Platts-Gregory procedure
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