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The strategic role of Operations and
Operations Strategy
By: Munyao MulwaDept of Management Science
DOM 511 : Operations Management Practice
Concerned with meeting existing market needs as well as exploiting opportunities for potential market segments
Making the best use of resources & leveraging these resources either alone or with partners
Devising and implementing processes that will enable the enterprise to compete & ideally create competitive advantage
Concerned with developing capabilities within the firm’s operations that are superior to other competitors and that other competitors either cannot copy or will find it extremely difficult to copy
While a vision unifies an Organization, a mission states what the firm is about and strategy is says how the organization will achieve the mission
Provides Consistency in Decisions
Keeps an Organization moving in the right Direction
Example ( Kai-Z household Pride Ltd)
The mission (the ‘what’ element) : ‘to crush, squash and slaughter selling of household utensils and appliances in supermarkets’
(The ‘How element ‘, ->> by locating low cost, variety led utensils & appliances outlets in all major cities & towns in Kenya within 18 months Consider Operations Capabilities Consider capabilities outside the firm
An Operations Strategy must include at least the following; amounts of capacity required by the organization to achieve
its aims; the range and locations of facilities; technology investment to support process and product
developments; formation of strategic buyer–supplier relationships as part
of the organization’s ‘extended enterprise’; the rate of new product or service introduction; organizational structure – to reflect what the firm ‘does
best’, often entailing outsourcing of other activities.
3
Customer Needs Corporate Strategy
Operations Strategy
Alignment
CoreCompetencies
Decisions
Processes, Infrastructure, and Capabilities
What is the role of the operations function?
Operations as effector
Operations as follower
Operations as leader
Ops
Strategy
Operationsimplements strategy
Operationssupports strategy
Operationsdrives strategy
Strategy Ops
Strategy
Ops
The 3 key attributes of operations Operations Contribution
Implementing
Supporting
Driving
Be Dependable
Operationalise strategy
Explain Practicalities
Be Appropriate
Understand strategy
Contribute to decisions
Be Innovative
Provide Foundation of strategy
Develop long-term Capabilities
The Strategic Role of the Operations Functions
4
Cost Quality Delivery Flexibility Delivery Speed Delivery Reliability Coping with Changes in Demand Flexibility and New Product Introduction
Speed Other Product-Specific Criteria
Eliminate all wasteEliminate all waste Invest inInvest in
Updated facilities & equipmentUpdated facilities & equipment Streamlining operationsStreamlining operations Training & developmentTraining & development
Please the customerPlease the customer Understand customer Understand customer
attitudes toward and attitudes toward and expectations of expectations of quality quality
Produce wide variety Produce wide variety of productsof products
Introduce new Introduce new productsproducts
Modify existing Modify existing products quicklyproducts quickly
Respond to customer Respond to customer needsneeds
Fast movesFast moves Fast adaptationsFast adaptations Tight linkagesTight linkages
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Cost
Quality
DeliveryFlexibility
FOCUS FOCUS
FOCUSFOCUS
Plant within a Plant (PWP)
TraditionalApproach
Advanced Approaches
World Class Manufacturing
Trade-offs
6
World-class manufacturers no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs. They are order qualifiers & order winners.
Order qualifiers - a screening criterion that permits a firm’s products to be considered as possible candidates of purchase e.g on time delivery
Order winners – A criterion that differentiates the products or services of one firm from another e.g price, quality & reliability
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Service can be an “order winner”
Warranty
RoadsideAssistance
LoanVehicles
Leases
8
Customer Needs
New and CurrentProducts
Performance Prioritiesand Requirements
Quality, Dependability,Speed, Flexibility, and Price
Operations & Supplier Capabilities
Technology PeopleSystems R&D CIM JIT TQM Distribution
Support Platforms
Financial Management Human Resource Management Information Management
Enterprise Capabilities
Strategic Vision
9
Consider the case of a personal computer manufacturer.
1. How would we segment the market according to product group?
2. How would we identify product requirements, demand patterns, and profit margins for each group?
3. How do we identify order winner and order qualifiers for each group?
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4. How do we convert order winners into specific performance requirements?
Us(Core competencies)
Competition(Them) Differentiation
Strategy Begins with Priorities
1. Internally Neutral2. Externally Neutral3. Internally Supportive4. Externally Supportive
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Stage 1--Internally Neutral Minimize manufacturing’s negative
potential Management control systems
Stage II--Externally Neutral Achieve parity with competitors Follow industry practice
Stage III--Internally Supportive Support the business strategy
Stage IV-- Externally Supportive Manufacturing-based competitive
advantage
Link Strategy With
Operations
Give an Operations Advantage
Externally supportive
Adopt best Practice
Correct the Worst
Problems
Increasing contri
bution of o
peratio
ns
Internally supportive
Externally neutral
Internally neutral
The strategic role of operations can be defined by its aspirations (Hayes and Wheelwright)
STAGE 1 STAGE 2 STAGE 3 STAGE 4
The ability
to Implement
The ability
to Drive strategy
Stop holding the
organisation back
Be as good as
competitors
Be clearly the best in
the industry
Redefine the industry’s
expectations
The abilityto
support Strategy
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Stage I. Available for Service Reactive, non-performance-based
survival
Stage II. Journeyman
Firm neither sought nor avoided
Reliable but uninspired operation
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Stage III. Distinctive Competence Achieved
Reputation for meeting customers’ expectations
Customer-focused operations--management support
Stage IV. World Class Service Delivery
Firm name synonymous with service excellence--focus on delighting rather than satisfying customers
Continuous learning and improvement of operations
Products Processes and
Technology
Capacity
Human Resources Quality
Facilities Sourcing
Services
Operating Systems
Make-to-orderMake-to-order Made to customer specifications Made to customer specifications
after order receivedafter order received Make-to-stockMake-to-stock
Made in anticipation of demandMade in anticipation of demand Assemble-to-orderAssemble-to-order
Add options according to Add options according to customer specificationcustomer specification
Job shopJob shop Production of product to customer orderProduction of product to customer order
Batch productionBatch production Process many jobs at same time in batchProcess many jobs at same time in batch
Mass productionMass production Produce large volumes of standard product Produce large volumes of standard product
for mass marketfor mass market Mass customizationMass customization
Very high volume unique productsVery high volume unique products Continuous ProductionContinuous Production High volume commodity productsHigh volume commodity products
How much capacity to provideHow much capacity to provide Size of capacity changesSize of capacity changes Handling excess demandHandling excess demand Hiring/firing Hiring/firing
workersworkers Need for new Need for new
facilitiesfacilities
Best size for facility?Best size for facility? Large or small facilitiesLarge or small facilities Facility focusFacility focus Facility locationFacility location Global facilityGlobal facility
Skill levels requiredSkill levels required Degree of autonomyDegree of autonomy PoliciesPolicies Profit sharingProfit sharing Individual or team Individual or team
workwork Supervision methodsSupervision methods Levels of Levels of
managementmanagement TrainingTraining
Target levelTarget level MeasurementMeasurement Employee involvementEmployee involvement TrainingTraining Systems needed to ensure Systems needed to ensure
qualityquality Maintaining quality awarenessMaintaining quality awareness Evaluating quality effortsEvaluating quality efforts Determining customer Determining customer
perceptionsperceptions
Degree of vertical Degree of vertical integrationintegration
Supplier selectionSupplier selection Supplier Supplier
relationshiprelationship Supplier qualitySupplier quality Supplier Supplier
cooperationcooperation
Execute strategy dailyExecute strategy daily Information technology Information technology
supportsupport Effective planning & control Effective planning & control
systemssystems Alignment of inventory Alignment of inventory
levels, scheduling priorities, levels, scheduling priorities, & reward systems& reward systems
CorporateStrategy
MissionVision
MarketingStrategy
FinancialStrategy
OperationsStrategy
BusinessEnvironment
Voice of the Customer
From Formulating => Making it happen A need for breakdown/ translation at
department level A need to go from (long term) Strategic
Goals to daily Tactics & Actions A Strategic Planning Hierarchy is
required
Download two articles from the e-learning portal & read them; Too busy to develop an operations
strategy Operations strategy: genealogy,
classification and anatomy