2. Operations Strategy. Operations managers must address every activity they are engaged with on the value added chain: producing to target, to cost quality.

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Presentation transcript:

2. Operations Strategy

Operations managers must address every activity they are engaged with on the value added chain: producing to target, to cost quality - doing things right - error free processes speed or time compression - customer responsiveness, lead times and elimination of delays, bottlenecks and inventory predictability - to control events, actions and relationships in orderly measured ways but with an eye on flexibility (new products, product /service range, volume and delivery). control over costs (staff, facilities/technology, materials)

Value-added stages include: needs identification and design of products/services/processes securing supplies and other inputs manufacturing components from raw materials assembling components into finished goods/services distributing finished product to wholesalers, retailers, or end users providing maintenance and after-care.

PLC – Development/Growth PLC – Development/Growth Operations flexibility is at a premium. The product may be made in low volumes. Its design features are still being fined tuned and there are still market uncertainties. Cash flow is negative. Launch demands marketing and promotional expenditure. This continues until the product is established. Sales revenues must catch up. This is the classical break-even point concern.

PLC - Maturity & Decline The product and market are stable. The aim is market share and cash generation with operations achieving consistent, high quality, low cost output. Predictability is a premium more than flexibility. Investment in operational improvements aims to lower costs. Product moving into decline may attract design changes which will require operations to implement. Improvement is the constant call as the firm strives to keep its existing products from entering terminal decline.

Innovator or Imitator? Imitator: Wait until a product market is known, growing and maturing and they can copy (legitimately or illegitimately) the design. Wait until a product market is known, growing and maturing and they can copy (legitimately or illegitimately) the design. If an original developer-innovator wants to move on - they may seek to re-coup part of their original investment by licensing older products and selling the designs and tools they do no longer need. If an original developer-innovator wants to move on - they may seek to re-coup part of their original investment by licensing older products and selling the designs and tools they do no longer need.

Innovator or Imitator? Innovator: Introduce early product up-dates and invest in market research/product design and grab market leadership. Rising star products offer premium prices and high market share. Introduce early product up-dates and invest in market research/product design and grab market leadership. Rising star products offer premium prices and high market share. The innovator researches and develops rising star products with unique selling points. The innovator researches and develops rising star products with unique selling points. Innovation often comes from quick exploitation of new technology, brand promotion and defence of patents. Innovation often comes from quick exploitation of new technology, brand promotion and defence of patents.

Self-sufficiency or Outsourcing? Vertical integration - ownership and having all functions in-house with overall control and economies of scale. But centralised, integrated systems can become bureaucratic and this may affect service and quality. But centralised, integrated systems can become bureaucratic and this may affect service and quality. The early 1990's - slim the organisation down to core functions by out-sourcing peripheral activities. Management can then concentrate energy on core essentials. Needs balance

Automation Automation speeds up operations, make them more reliable and reduces unit costs Decisions, however, affect staff: jobs, overtime, terms and conditions of employment, and full-time/part-time staffing mix etc. Technology may require fewer but more skilled staff. The organisation may become dependent on a small cohort of specialists. Automation has implications of changes in specialisation and relationships between people. The skill mix of jobs change.

Process-Service Mix Operations are a blend of: S - supply M - manufacture S - service T - transport S - supply M - manufacture S - service T - transport Operations must correctly balance SMST and monitor their interaction and performance.

Others Delivering on Price: Need to reduce operational costs Delivering on quality: premium quality, responsiveness & variety Availability: readily available or made-to- order?