1 Operations Strategy

2 Definition of a strategy  Little agreement amongst either practitioners or academics  Misleading to attempt a single definition “Operations strategy is the total pattern of decisions which shape the long term capabilities of any type of operation and their contribution to overall strategy” Slack Operations Strategy, Prentice Hall, 2002 OPERATIONS STRATEGY

3 3 LEVELS OF STRATEGY Corporate Strategy Corporate Head Office Business Level Strategy Company ACompany Β Functional Strategies Marketing Finance R & D Sales HR R & D Production Marketing Sales OPERATIONS STRATEGY

4 EXAMPLE: 3 LEVELS OF STRATEGY Corporate Strategy BAYER S.A. Various OPERATIONS STRATEGY Business Level Strategy PharmaPesticidesChemicalsPlastics Functional Strategies MarketingFinanceR & DSalesHR

5 LevelKey Strategic DecisionsInfluences on decision making Corporate Strategy [3-5 years ahead]  What business to be in (now & in the future)?  What business to acquire or divest?  How to allocate financial resources?  Setting corporate values  How to manage the relationships between businesses?  Environment: Market, political & social  Company ownership: Values, ethics OPERATIONS STRATEGY Levels of strategic decision making

6 OPERATIONS STRATEGY Corporate Strategy Often is not obvious to participants that an organization has a corporate strategy

7 TermDefinitionA personal example MissionOverriding purpose in line with the values or expectations of stakeholders Be healthy and fit Vision or strategic intent Describes aspirations for the future, without specifying the means that will be used to achieve those desired ends of the organization To run the marathon GoalGeneral statement of aim or purpose in line with the mission. Maybe qualitative Lose weight and strengthen muscles ObjectiveQuantification (if possible) or more precise statement of the goal Lose 10 Kg by 1 September and run marathon in 2006 The Terminology of Strategy OPERATIONS STRATEGY

8 TermDefinitionA personal example Core competences Resources, processes or skills which provide “competitive advantage” Proximity to a fitness centre, supportive family and friends and past experience of successful diet StrategiesLong term directionAssociate with a collaborative network (e.g. join running club), exercise regularly, compete in marathons locally, stick to appropriate diet The Terminology of Strategy OPERATIONS STRATEGY

9 TermDefinitionA personal example Strategic architecture Combination of resources, processes and competences to put strategy into effect Specific exercise and diet regime, appropriate training facilities, etc. ControlThe monitoring of action steps to:  Assess effectiveness of strategies and actions  Modify strategies and/or actions as necessary Monitor weight, miles run and measure times:  if satisfactory progress, do nothing;  if not, consider other strategies and actions OPERATIONS STRATEGY

10 List of some Customer Needs necessary to develop business strategy Low Price Ability to satisfy customer’s requirements more cost-effectively than competition Product feature /performance The extend to which a product out-performs the offerings of competition or offers more product features Quality & Reliability The extend to which customers’ expectations are satisfied or exceeded by the product or service, and continue to be satisfied After sales service The effectiveness with which customers queries or complaints are handled Customization The ability of the operations system to tailor its output to meet special customers’ requirements Rapid Innovation The ability of OS to generate and launch new products into market fast Volume Flexibility Ability to cope with abrupt market request Fast & Reliable Delivery Fast & reliable service OPERATIONS STRATEGY

11 QUESTION Match the following order winners with the products or services from the list Products/services a. IKEA b. Rolex c. UPS d. Domino Pizza e. PC’s f. Easy Jet g. Tailor h. Toyota order winners 1. Low Price 2. Product feature /performance 3. Quality & Reliability 4. After sales service 5. Customization 6. Rapid Innovation 7. Volume Flexibility 8. Fast & Reliable Delivery OPERATIONS STRATEGY

12 Considering Customer Needs ANSWER 1. Low Pricef. Easy Jet 2. Product feature /performanceb. Rolex 3. Quality & Reliabilityh. Toyota 4. After sales serviceh. TOYOTA 5. Customizationg. Tailor 6. Rapid Innovatione. PC’s 7. Volume Flexibilitya. IKEA 8. Fast & Reliable Deliveryd. Domino Pizza, c. UPS OPERATIONS STRATEGY

13 Contents of an operations strategy Success factors Super market Fast food Telephone services Petrol stations On-line shopping Financial services Low price Wide variety Quality Delivery Fast response Reliability OPERATIONS STRATEGY

14 Approaches to determining operations strategy Fast food restaurants have a rather sort list on the menu. Could they extend it and still supply all items in as short a delivery period? OPERATIONS STRATEGY

15 Approaches to determining operations strategy Trade – off (see-saw) Examples:  Low Price vs. Available Variety  Delivery time vs. Flexibility  Quality vs. Absolute Cost  Personalized attention vs. Low cost of service  High quality service vs. Staff salaries Performance Objective 2 Performance Objective 1 Performance Objective 1 Performance Objective 2 One aspect of performance can be improved at the expense of others OPERATIONS STRATEGY

16 Can you always compromise? For example in the case of airplanes we can trade off in cruising speed, passenger comfort but not in safety. Approaches to determining operations strategy Trade – off OPERATIONS STRATEGY

17 Can you always compromise? For example in the case of airplanes we can trade off in cruising speed, passenger comfort but not in safety. Performance Objective 2 Performance Objective 1 Performance Objective 2 Performance Objective 1 Move the pivot (=> continuous improvement) Approaches to determining operations strategy Trade – off OPERATIONS STRATEGY

18 Order Qualifiers and Winners  Order qualifiers? They are the basic criteria that permit the firms products to be considered as candidates for purchase by customers.  Order winners? They are the criteria that differentiates the products and services of one firm from another. OPERATIONS STRATEGY

19 Service Breakthroughs  A brand name car can be an “order qualifier”   Repair services can be “order winners” Examples: Warranty, Roadside Assistance, etc. OPERATIONS STRATEGY

20 Order Qualifiers and Order Winners 2-7 EXAMPLES of Order Qualifiers andOrder Qualifiers and Order Winners?Order Winners? A company will enter in its supplier list only these suppliers that are accredited to one of the ISO 9000 quality standards. Order Qualifiers? Order Winners? OPERATIONS STRATEGY

21 Order Qualifiers and Order Winners 2-7 ANSWER OQOW Fast food  Availability  Right type of food  Low cost  Speed of service  Perceived value for money  Cleanliness Easy Jet  Availability  Convenience  speed  Value for money  Dependability  Reliability University  Range of courses  Reputation  Accessibility  Reputation  Accessibility  Cost OPERATIONS STRATEGY

22 Stage Volume slowdecline rapidslow Competitive priority Order winners Product characteristics capability novelty availability quality speed cost dependability cost Competitors: fewincreasingmanydeclining Customers innovatorsearly adoptersbulk of marketlaggards Order qualifiers reputationPrice, rangequality dependability Typical products OPERATIONS STRATEGY

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