pgbm03 mba operation management session 03 operations performance and strategy

Slack, Chambers and Johnston, Operations Management, 6th Edition,© Nigel Slack, Stuart Chambers, and Robert Johnston 20103.1

3.1

PGBM03 Operations Management

Session 03 Operations Performance

and Strategy

Module Leader: Peter Coleman


3.2 Key operations 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?

Key Questions for this Session


3.3

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 strategy at Flextronics and Ryanair


3.4

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


3.5

Operations strategic decisions

• Stripped down service• One technology• Cheap airport

locations• Fast turnaround

Market requirements

• Low prices

• Reliability

• Basic service

Ryanair

Operations strategy at Ryanair


3.6

• 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?


3.7

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


3.8

How is operations strategy different to operations management?

The time scale is longer

Short-termfor example,

capacity decisions

1–12 months

Dem

and

Long-termfor example,

capacity decisions

1–10 years

Dem

and

Operations management Operations strategy


3.9

The level of analysis is higher


Micro-levelof the process

Macro-levelof the total operation

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


3.10

The level of aggregation is higher


Detailed

For example:

‘Can we supply to the small business market in

Antwerp?’

Aggregated

For example:

‘What is our overall service package

capability compared with other capabilities?’



3.11

The level of abstraction is higher


Concrete

For example:

‘How do we improve out purchasing procedures?’

Philosophical

For example:

‘Should we develop strategic alliances with

suppliers?’



3.12 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


3.13 The 4 stage model of operations contribution In

crea

sing

stra

tegi

c im

pact

Increasing operations capabilities

Externally supportive

Redefining industry

expectations

STAGE 4Give an operations advantage

Driving strategy

After Hayes and Wheelwright

Internally supportive

Clearly the best in the

industry

STAGE 3Link strategy with operations

Supporting strategy

Externally neutral

As good as competitors

STAGE 2Adopt best practice

Implementing strategy

Internally neutral

STAGE 1Correct the worst problems

Holding the organization

back


3.14 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 dynamicsCompetitor activityCore technology dynamicsFinancial constraints

Corporate strategy

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

Economic environmentSocial environmentPolitical environmentCompany values and ethics

Functional strategy

How to contribute to the strategic objectives?

How to manage the function’s resources?

Skills of function’s staffCurrent technologyRecent performance of the

function


3.15

Top-down perspective

What the business wants operations to do

Operations resources

perspective

What operations resources can

doWhat day-to-day

experience suggests operations

should do

Bottom-up perspective

Market requirementperspective

What the market position requires operations to do

Operations strategy

The four perspectives on operations strategy


3.16

Corporate strategy

Business strategy

Emergent sense of what the strategy should be

Operational experience

Top-down and bottom-up perspectives of strategy

Operations strategy


3.17

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


3.18 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.


3.19

Different competitive factors imply different performance objectives

Competitive factorsIf the customers value these …

Performance objectivesThen, 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

servicesFlexibility (volume and/or delivery)


3.20

The five competitive objectives

Quality Being RIGHT

Speed Being FAST

Dependability Being ON TIME

Cost Being PRODUCTIVE

Being ABLE TO CHANGEFlexibility


3.21

Minimum cost, maximum value

Minimum price, highest value

Fast throughput

Quick delivery

Reliable operation

Dependable delivery

Error-free processes

Error-free products and services

Ability to change

Frequent new products, maximum choice

The benefits of excelling at the five objectives

Dependability

Cost

Speed

Quality Flexibility

Internal Benefits

External Benefits


3.22 Polar diagrams

Polar diagrams are used to indicate the relative importance of each performance objective to an operation or process.

They can also be used to indicate the difference between different products and services produced by an operation or process. Cost

Quality Flexibility

DependabilitySpeed


3.23 Polar diagrams for a taxi service versus a bus service

Cost

Quality Flexibility

DependabilitySpeed

Taxiservice

Busservice


3.24

Reassurance

Crimereduction

Crimedetection

Working withCriminal justiceagencies

Efficiency

Actualperformance

Required performance

Polar diagrams for a proposed police performance method