O PERATIONS STRATEGY 4 th course

Human resources Supply chain Mngm

W HAT IS IT ABOUT ? Choosing a different set of activities to deliver a unique mix of value Strategic positioning Operations management Operations effectiveness Customer management Product innovation

K EY QUESTIONS : What role should the operations function play in achieving strategic success? What are the performance objectives of operations What are the internal and external benefits which derive from excelling in each of them?

R OLE OF O PERATIONS : Implementing strategy: Ex: insurance company moving to an online service Supporting business strategy: developing those capabilities which allow the organization to improve and refine its strategic goals Ex: mobile phone manufacturer aiming at constant product innovation Driving business strategy: Unique operations capabilities: customer relationships, supplier relationship, new product development

T HE FOUR STAGE MODEL OF OPERATIONS CONTRIBUTION :

1. internal neutrality: operations are not the source of competitive drive avoiding to make market mistakes 2. external neutrality: the operations function starts comparing itself to other companies similar functions trying to implement “best practice” 3. internally supportive: gaining a clear view of the company’s competitive or strategic goals and supporting it by developing appropriate operations resources companies that are among the bets in the market credible operations strategy 4. externally supportive: the operations function is providing the foundation for competitive success operations are innovative, creative, proactive

O PERATIONS P ERFORMANCE OBJECTIVES : Basic task – satisfying customer requirements Quality advantage: consistent conformance to customers’ expectations Externally - important aspect of customer satisfaction Internally - quality operations both reduce costs and increase dependability Speed advantage: elapsed time between customers requesting products and their receiving them Externally - an important aspect of customer service Internally - both reduces inventories by decreasing internal throughput time and reduces risks by delaying the commitment of resources. Dependability advantage: delivering products when they were promised to the customer Externally - an important aspect of customer service Internally - increases operational reliability, thus saving the time and money Flexibility advantage: the degree to which an operation’s process can change what it does, how it is doing it, or when it is doing it Externally : produce new products and services (product/service flexibility); produce a wide range or mix of products and services (mix flexibility); produce different quantities or volumes of products and services (volume flexibility); produce products and services at different times (delivery flexibility). Internally - help speed up response times, save time wasted in changeovers and maintain dependability. Cost advantage: priced appropriately for the market while still allowing for a return to the organization Externally - low costs allow organizations to reduce their price in order to gain higher volumes or, alternatively, increase their profitability on existing volume levels Internally – cost performance is helped by good performance in the other performance objectives.

QUALITY

S PEED :

DEPENDABILITY

FLEXIBILITY

COST

EXTERNAL AND INTERNAL EFFECTS / BENEFITS OF PERFORMANCE OBJECTIVES Corporate agility

K EY QUESTIONS : What is the difference between a ‘market requirements’ and an ‘operations resource’ view of operations strategy? What is the difference between a ‘top-down’ and a ‘bottom-up’ view of operations strategy? How can an operations strategy be put together?

O PERATIONS STRATEGY Operations strategy concerns the pattern of strategic decisions and actions which set the role, objectives and activities of the operation operation strategy is a top-down reflection of what the whole group or business wants to do operations strategy is a bottom-up activity where operations improvements cumulatively build strategy operations strategy involves translating market requirements into operations decisions operations strategy involves exploiting the capabilities of operations resources in chosen markets.

T OP - DOWN APPROACH

B OTTOM - UP APPROACH

M ARKET - REQUIREMENTS PERSPECTIVE Operations seek to satisfy customers through developing their five performance objectives. Factors which define customers’ requirements - competitive factors: Order-winning factors directly and significantly contribute to winning business. They are regarded by customers as key reasons for purchasing the product or service – contribute to business growth Qualifying factors those aspects of competitiveness where the operation’s performance has to be above a particular level just to be considered by the customer. performance below this ‘qualifying’ level of performance will possibly disqualify the company any further improvement above the qualifying level is unlikely to gain the company much competitive benefit.

M ARKET - REQUIREMENTS PERSPECTIVE

T HE PRODUCT LIFE - CYCLE INFLUENCES ON PERFORMANCE OBJECTIVES

T HE RESOURCE - BASED PERSPECTIVE The perspective on strategy that stresses the importance of capabilities (sometimes known as core competences) in influencing operations strategy and determining sustainable competitive advantage. Intangible resources: relationship with suppliers reputation knowledge of process technologies the way staff can work together in new product and service development Operations capabilities are developed partly through the strategic decisions taken by the operation. Strategic decision areas: structural - those which define an operation’s shape and form. infrastructural - those which influence the systems and procedures that determine how the operation will work in practice.

S TRATEGIC DECISION AREAS 1.Goods and service design 2.Quality 3.Process and capacity design 4.Location selection 5.Layout design 6.Human resources and job design 7.Supply chain management 8.Inventory 9.Scheduling 10.Maintenance

O PERATIONS CONTRIBUTION TO STRATEGY Product Quality Process Location Layout Human resource Supply chain Inventory Scheduling Maintenance FLEXIBILITY: Sony’s constant innovation of new products………………………………....Design HP’s ability to lead the printer market………………………………Volume Southwest Airlines No-frills service……..…..COST Pizza Hut’s 5-minute guarantee at lunchtime…………………..…..………………….SPEED Federal Express’s “absolutely, positively on time”……………………..DEPENDABILITY QUALITY: Motorola’s HDTV converters….…… Conformance Motorola’s pagers………………………..….Performance OperationsSpecificCompetitive DecisionsExamplesperformance objectiveAdvantage Response (Faster) Cost leadership (Cheaper) Differentiation (Better)