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The strategic role of Operations and Operations Strategy

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Title: The strategic role of Operations and Operations Strategy


1
DOM 511 Operations Management Practice
  • The strategic role of Operations and Operations
    Strategy
  • By Munyao Mulwa
  • Dept of Management Science

2
What is Strategy?
  • 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 firms operations that are superior to other
    competitors and that other competitors either
    cannot copy or will find it extremely difficult
    to copy

3
What is Strategy?
  • 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

4
What is Strategy?
  • 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 , -gtgt 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

5
What is Strategy?
  • 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 buyersupplier
    relationships as part of the organizations
    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.

6
Steps in Strategy Formulation
  1. Define a Primary Task what is the firm in the
    business of doing. Defines the competitive arena
  2. Define a Vision describes what the organization
    sees itself becoming
  3. Assessing Core Competency what the firm does
    better than anyone else (quality, speed, possible
    choice, lower cost, faster innovation). Must
    remain sustainable
  4. Determine
  5. Order Qualifiers characteristics that make a
    product /service to be considered for purchase
  6. Order Winners what wins the order on the
    marketplace (quality, price, availability)
  7. Positioning how will the firm compete? Focus on
    one important thing (for the client) on which to
    concentrate do extremely well

7
Operations Strategy
Customer Needs
Corporate Strategy
Operations Strategy
Processes, Infrastructure, and Capabilities
3
8
What is the role of the operations function?
Operations
Operations
Operations
as effector
as follower
as leader
Strategy

Ops

Strategy

Ops

Ops

Strategy

Operations
Operations
Operations
implements strategy
supports strategy
drives strategy
9
The Strategic Role of the Operations Functions
The 3 key attributes of operations
Operations Contribution
Implementing
Be Dependable Operationalise strategy Explain
Practicalities
Supporting
Be Appropriate Understand strategy Contribute to
decisions
Driving
Be Innovative Provide Foundation of
strategy Develop long-term Capabilities
10
Operations Priorities
  • Cost
  • Quality
  • Delivery Flexibility
  • Delivery Speed
  • Delivery Reliability
  • Coping with Changes in Demand
  • Flexibility and New Product Introduction Speed
  • Other Product-Specific Criteria

4
11
Competing on Cost
  • Eliminate all waste
  • Invest in
  • Updated facilities equipment
  • Streamlining operations
  • Training development

12
Competing on Quality
  • Please the customer
  • Understand customer attitudes toward and
    expectations of quality

13
Competing on Flexibility
  • Produce wide variety of products
  • Introduce new products
  • Modify existing products quickly
  • Respond to customer needs

14
Competing on Speed
  • Fast moves
  • Fast adaptations
  • Tight linkages

15
Dealing with Trade-offs
Traditional Approach
Plant within a Plant (PWP)
5
16
World-Class Manufacturing
  • 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 firms 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

6
17
Service Breakthroughs
  • Service can be an order winner

Warranty
Leases
Roadside Assistance
Loan Vehicles
7
18
A Framework for Manufacturing Strategy
8
19
Strategy Begins with Priorities
  • 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?

9
20
Strategy Begins with Priorities
  • 4. How do we convert order winners into specific
    performance requirements?

Us (Core competencies)
Competition (Them)
10
21
Hayes and Wheelwrights Four Stage model
  1. Internally Neutral
  2. Externally Neutral
  3. Internally Supportive
  4. Externally Supportive

22
Manufacturings Role in Corporate Strategy
  • Stage 1--Internally Neutral
  • Minimize manufacturings 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

11
23
The strategic role of operations can be defined
by its aspirations (Hayes and Wheelwright)
Redefine the industrys expectations
Give an Operations Advantage
Externally supportive
Be clearly the best in the industry
Link Strategy With Operations
Internally supportive
Increasing contribution of operations
Be as good as competitors
Adopt best Practice
Externally neutral
Stop holding the organisation back
Correct the Worst Problems
Internally neutral
STAGE 1
STAGE 2
STAGE 3
STAGE 4
The ability to Drive strategy
The ability to Implement
The ability to support Strategy
24
Four Stages of Service Firm Competitiveness
  • Stage I. Available for Service
  • Reactive, non-performance-based survival
  • Stage II. Journeyman
  • Firm neither sought nor avoided
  • Reliable but uninspired operation

12
25
Four Stages of Service Firm Competitiveness
(continued)
  • 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

13
26
Strategic Decisions in Operations
27
Products Services
  • Make-to-order
  • Made to customer specifications after order
    received
  • Make-to-stock
  • Made in anticipation of demand
  • Assemble-to-order
  • Add options according to customer specification

28
Strategic Decisions in Operations (Products
Services)
  • Make to Order
  • Designed, produced delivered to customer
    specifications, after an order has been received
    (custom tailored clothes, charter flights etc)
  • Critical Success Factors
  • meeting individual requirements
  • time to delivery
  • Make to Stock
  • Produced according to Standard specifications in
    expectation of orders to come in (books, TV,
    airline flights)
  • Critical Success Factors
  • forecasting future demand
  • manage properly stock levels
  • Assemble to Order
  • Options available according to client
    requirements (computers, executive training,
    industrial equipment)
  • Critical Success Factors
  • Minimizing inventory level
  • Delivering on time

29
Processes Technology
  • Job shop
  • Production of product to customer order
  • Batch production
  • Process many jobs at same time in batch
  • Mass production
  • Produce large volumes of standard product for
    mass market
  • Mass customization
  • Very high volume unique products
  • Continuous Production
  • High volume commodity products

30
Strategic Decisions in Operations Process
Technology
  • Batch production the system processes different
    jobs at the same time in groups ( batches)
    (printers, bakeries, education, furniture making)
  • Mass production produces large volumes of a
    standard product for mass market (automobiles,
    computers, household goods)
  • Continuous production used for very high volumes
    commodity products refined oil, water, chemicals,
    paper, foodstuff)
  • Project one at a time production of a product to
    customer order (a ship, a building, a plant)

31
Capacity Facilities
  • How much capacity to provide
  • Size of capacity changes
  • Handling excess demand
  • Hiring/firing workers
  • Need for new facilities

32
Facilities
  • Best size for facility?
  • Large or small facilities
  • Facility focus
  • Facility location
  • Global facility

33
Strategic Decisions in Operations Capacity
Facilities
  • Affects ability to compete by determining
  • Lead times
  • Customer responsiveness
  • Operating costs
  • Ability to grow
  • Global capacity to be spread into individual
    capacities of sub-processes
  • One large or several small plants?
  • Preferred geographic regions, customers, products
    to serve.
  • Make, buy sell in foreign countries associated
    contracts commercial agreements

34
Human Resources
  • Skill levels required
  • Degree of autonomy
  • Policies
  • Profit sharing
  • Individual or team work
  • Supervision methods
  • Levels of management
  • Training

35
Quality
  • Target level
  • Measurement
  • Employee involvement
  • Training
  • Systems needed to ensure quality
  • Maintaining quality awareness
  • Evaluating quality efforts
  • Determining customer perceptions

36
Sourcing
  • Degree of vertical integration
  • Supplier selection
  • Supplier relationship
  • Supplier quality
  • Supplier cooperation

37
Strategic Decisions in Operations Sourcing
  • Vertical Integration along the value chain
  • Selling, assembling, producing, extracting raw
    material by one company not always possible
    neither whished
  • focus on core business
  • Positioning
  • costs
  • Make or buy components (outsourcing)?
  • Bargaining power of suppliers clients (Porter)
  • Level of independence
  • Protection of intellectual rights
  • Competency building
  • Outsourcing
  • selection of partner criteria, number, location,
    profile
  • Incentives protection from competitors?
  • Contracts cost, duration, specifications
    quality control liabilities

38
Operating Systems
  • Execute strategy daily
  • Information technology support
  • Effective planning control systems
  • Alignment of inventory levels, scheduling
    priorities, reward systems

39
Strategic Decisions in Operations Operating
System
  • Day to day management of the production lines
  • To be designed to support competitiveness of the
    firm on the market place
  • Must support client workers demand for
  • Easy fast access to information storage
    retrieval
  • Planning Control Systems feedback
  • Inventory levels
  • Scheduling priorities
  • Reward systems in line with strategic goals

40
Strategy Deployment
Mission Vision
Business Environment
Voice of the Customer
Corporate Strategy
Marketing Strategy
Financial Strategy
Operations Strategy
41
Strategy Deployment
  • From Formulating gt 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

42
Reading Assignment
  • Download two articles from the e-learning portal
    read them
  • Too busy to develop an operations strategy
  • Operations strategy genealogy, classification
    and anatomy
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