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Lecture 2 MBF2213 | Operations Management

Prepared by Dr Khairul Anuar

L2: Operations Strategy

Design

Planning and control

Operation’s performance

Operations strategy

Improvement

Operations management

Operations strategy

Slack et al.’s model of operations management

Key operations questions

Identify the following key questions:

• What is strategy and what is operations strategy?

• What is the difference between a ‘top-down’ and a

‘bottom-up’ view of operations strategy?

• What is the difference between a ‘market

requirements’ and an ‘operations resources’ view

of operations strategy?

• How can an operations strategy be put together?

Operations strategy at Flextronics and Ryanair

For each of these companies: • What do they have to be good at to compete in their

markets? • How do their operations help them to achieve this?

Operations strategic decisions

• Industrial parks, with

– low cost but close locations – and co-located

suppliers

Market requirements

• Low costs

• Responsiveness

• Flexibility

Flextronics

Operations strategy at Flextronics

Operations strategic decisions

• Stripped down service

• One technology • Cheap airport locations • Fast turnround

Market requirements

• Low prices

• Reliability

• Basic service

Operations strategy at Ryanair

• Setting broad objectives that direct an enterprise towards its overall goal.

• Planning the path (in general rather than specific terms) that will achieve these goals.

• Stressing long-term rather than short-term objectives.

• Dealing with the total picture rather than stressing individual activities.

• Being detached from, and above, the confusion and distractions of day-to-day activities.

What is strategy?

Strategic decisions are those decisions which:

• are widespread in their effect on the organization to

which the strategy refers,

• define the position of the organization relative to its

environment and

• move the organization closer to its long-term goals.

Strategic decisions

‘Operations’ is not the same as ‘operational’

‘Operations’ are the resources that create products and services.

‘Operational’ is the opposite of strategic, meaning day-to-day and detailed.

So, one can examine both the operational and the strategic aspects of operations.

How is operations strategy different to operations management?

The time scale is longer

Short-term for example,

capacity decisions

1–12 months

Dem

and

Long-term for example, capacity

decisions

1–10 years

Dem

and

Operations management Operations strategy

The level of analysis is higher

Operations management Operations strategy

Micro-level of the process

Macro-level of the total operation

How is operations strategy different to operations management? (Continued)

The level of aggregation is higher

Operations management Operations strategy

Detailed

For example:

‘Can we give tax services to the small business market in

Antwerp?’

Aggregated

For example:

‘What is our overall business advice capability

compared with other capabilities?’

How is operations strategy different to operations management? (Continued)

The level of abstraction is higher

Operations management Operations strategy

Concrete

For example:

‘How do we improve out purchasing procedures?’

Philosophical

For example:

‘Should we develop strategic alliances with

suppliers?’

How is operations strategy different to operations management? (Continued)

What is the role of the operations function?

Operations as implementer of

strategy

Operations implements strategy

Operations drives strategy

Operations as driver of strategy

Operations supports strategy

Operations as supporter of

strategy

The 3 key attributes

of operations strategy Operations contribution

Implementing be Dependable

Operationalize strategy

explain Practicalities

Supporting be Appropriate

Understand strategy

Contribute to decisions

Driving be Innovative

provide Foundation of strategy

Develop long-term Capabilities

The strategic role of the operations function

The 4 stage model of operations contribution In

crea

sin

g st

rate

gic

imp

act

Increasing operations capabilities

Externally supportive

Redefining industry

expectations

STAGE 4 Give an operations advantage

Driving strategy

After Hayes and Wheelwright

Internally supportive

Clearly the best in the

industry

STAGE 3 Link strategy with operations

Supporting strategy

Externally neutral

As good as competitors

STAGE 2 Adopt best practice

Implementing strategy

Internally neutral

STAGE 1 Correct the worst problems

Holding the organization

back

Top-down perspective

What the business

wants operations to do

Operations resources

perspective

What operations resources can do

What day-to-day experience suggests operations should do

Bottom-up perspective

Market requirement perspective

What the market position requires operations to do

Operations strategy

The four perspectives on operations strategy

Corporate strategy

Business strategy

Emergent sense of what the strategy should be

Operational experience

Top-down and bottom-up perspectives of strategy

Operations strategy

The strategy hierarchy

Key strategic decisions

Influences on decision-making

Business strategy

What is the mission?

What are the strategic objectives of the firm?

How to compete?

Customer/market dynamics

Competitor activity

Core technology dynamics

Financial constraints

Corporate strategy

What business to be in? What to acquire? What to divest? How to allocate cash?

Economic environment Social environment Political environment Company values and ethics

Functional strategy

How to contribute to the

strategic objectives?

How to manage the

function’s resources?

Skills of function’s staff

Current technology

Recent performance of the

function

Introduction Growth Maturity Decline

Sale

s vo

lum

e

Volume

Customers

Competitors

Variety of product/

service design

Slow growth in sales

Innovators

Few/none

Customization or frequent design changes

Rapid growth in sales volume

Early adopters

Increasing numbers

Increasingly standardized

Sales slow and level off

Bulk of market

Stable number

Emerging dominant types

Market needs largely met

Laggards

Declining numbers

Possible move to commodity standardization

The effects of the product / service life cycle

Time

Introduction Growth Maturity Decline

Sale

s vo

lum

e

The effects of the product / service life cycle (Continued)

Time

Likely order winners

Likely qualifiers

Dominant performance

objectives

Product/ service characteristics

Quality range

Flexibility quality

Availability quality

Price range

Speed dependability quality

Low price dependable supply

Quality range

Cost dependability

Low price

Dependable supply

Cost

Different competitive factors imply different performance objectives

Competitive factors If the customers value these …

Performance objectives Then, the operations will need to

excel at these …

Low price Cost

High quality Quality

Fast delivery Speed

Reliable delivery Dependability

Innovative products and services Flexibility (products/services)

Wide range of products and services Flexibility (mix)

The ability to change the timing or quantity of products and services Flexibility (volume and/or delivery)

Intended strategy Realized strategy Deliberative strategy

Mintzberg’s concept of emergent strategy

Unrealized strategy Emergent strategy

What you HAVE

in terms of operations capabilities

What you NEED

to ‘compete’ in the market

Operations resources

Market requirements

What you WANT

from your operations to

help you ‘compete’

What you DO

to maintain your

capabilities and satisfy

markets

Strategic reconciliation

Reconciling market requirements and operations resources

The challenge of operations strategy formulation

An operations strategy should be:

Appropriate…

Comprehensive…

Coherent…

Consistent over time…

An implementation agenda is needed

When to start?

Where to start?

How fast to proceed?

How to co-ordinate the implementation programme?

The five P’s of operations strategy implementation

• Purpose — a shared understanding of the motivation, boundaries and context for developing the operations strategy.

• Point of Entry — the point in the organization where the process of implementation starts.

• Process — How the operations strategy formulation process is made explicit.

• Project Management — The management of the implementation.

• Participation — Who is involved in the implementation.