1. Operation Management Strategy
Chapter 3
Slack et al

2. What is strategy? Strategic decisions – means 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
Move the organization closer to its long-term goals.

3. ‘Operations’ is not the same as ‘operational’
‘Operations’ are the resources that create products and services
‘Operational’ is the opposite of strategic, meaning day-to-day and detailed
So, one can examine both the operational and the strategic aspects of operations

4. The strategy hierarchy
Key strategic decisions
Influences on decision making
Corporate strategy
What business to be in?
What to acquire?
What to divest?
How to allocate cash?
Economic environment
Social environment
Political environment
Company values and ethics
Business strategy
What is the mission?
What are the strategic
objectives of the firm?
How to compete?
Customer/market dynamics
Competitor activity
Core technology dynamics
Financial constraints
Functional strategy
How to contribute to the
strategic objectives?
How to manage the
function’s resources?
Skills of function’s staff
Current technology
Recent performance of the
function

6. Operations strategy is …
‘… Operations strategy is the total pattern of decisions and actions which set the role, objectives and activities of the operation so that they contribute to and support the organisation’s business strategy …’

7. Purposes of Operations Strategy
To contribute directly to the strategic objectives of the next level up in the hierarchy;
To help other parts of the business make their own contribution to strategy

8. Operations strategy is different from operations management
Example: capacity decisions
Operations management
Operations strategy
Short-term
capacity decisions
1–12 months
Demand
Long-term
capacity decisions
1–-10 years
Demand
Time scale

9. Operations strategy is different from operations management
Level of analysis
Micro
level of the process
Macro
level of the total operation

10. Operations strategy is different from operations management
Level of aggregation
Detailed
For example
“Can we give tax services to the small business market in Antwerp?”
Aggregated
For example
“What is our overall business advice capability compared with other capabilities?”

11. Operations strategy is different from operations management
Level of abstraction
Concrete
For example
“How do we improve our purchasing procedures?”
Philosophical
For example
“Should we develop strategic alliances with suppliers?”

12. The four perspectives on operations strategy
Top-down perspective
What the business wants operations to do
Operations resources perspective
What operations resources can do
Market requirement perspective
What the market position requires operations to do
Operations strategy
What day-to-day experience suggests operations should do
Bottom-up perspective 1

13. Top-down and bottom-up perspectives of strategy
Corporate strategy
Business strategy
Operations strategy
Emergent sense of what the strategy should be
Operational experience

14. Operations Strategy Decisions Capabilities
Resources
Tangible
Equipment
Staff
Intangible
Reputation
Relationships
(internal and external)
Experience
Operations Strategy Decisions
Capabilities
Application of leading- edge lighting and sound technology
Articulation of client requirements
Location
Virtual reality technology
Supplier development
Equipment tracking system
Organizational structure
Staff meetings
Processes
Integration of equipment supply and client requirements
Design process
Supplier liaison process
The operations resource perspective analysis of the lighting company

15. The market perspective on operations strategy
Customer Needs
Market Positioning
Performance Objectives
Competitors’ Actions
Required performance
Understanding markets
The market perspective on operations strategy

16. Strategic reconciliation
Market requirements and operations resources perspectives of operations strategy
Strategic reconciliation
OPERATIONS STRATEGY
Operations resources
Market requirements
Operations strategy reconciles the requirements of the market with the capabilities of operations resources

17. What you HAVE What you DO What you WANT What you NEED
Operations resources
Market requirements
Strategic reconciliation
What you HAVE
in terms of operations capabilities
What you DO
to maintain your capabilities and satisfy markets
What you WANT
from your operations to help you ‘compete’
What you NEED
to ‘compete’ in the market

18. Operations strategy is the strategic reconciliation of market requirements with operations resources
Understanding Resources and Processes
Market Requirements
Understanding Markets
Market Positioning
Market Segmentation
Competitor Activity
Operations Processes
Operations Resources
Operations Competences
Strategic Decisions
Operations Strategy Decisions
Required Performance
Performance Objectives
Quality
Speed
Dependability
Flexibility
Cost
Capacity
Supply networks
Process technology
Development and organization

19. The Content of Operations Strategy

20. Relative Importance of each performance objective
The Influence of the organisation’s customers
The influence of the organisation’s competitors
The stage of organisation’s products and services in their life cycle

21. Customer influence on performance objectives

22. Performance objectives
Different competitive factors imply different performance objectives
Competitive factors
If the customers value these ...
Performance objectives
Then, 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 and services)
Wide range of products and services
Flexibility (mix)
Ability to change the timing or quantity of products and services
Flexibility (volume and/or delivery) 3

23. Order Winning and Qualifying Objectives

24. Order-winning, qualifying and less important competitive factors
Order-winning factors
Competitive benefit
+ve
Neutral
–ve
Performance

25. Show a steady and significant increase in their contribution to competitiveness as the operation gets better at providing them

26. Order-winning, qualifying and less important competitive factors
Qualifying factors
Competitive benefit
+ve
Neutral
–ve
Qualifying level
Performance

27. Only start to make a contribution to competitiveness when the operation manages to raise its performance to a qualifying level.

28. Order-winning, qualifying and less important competitive factors
Less important factors
Competitive benefit
+ve
Neutral
–ve
Performance

29. Little important impact on the customers no matter how well the operation performs them

30. Different customer needs imply different objectives

32. Stages of PLC

33. The effects of the product/service life cycle on the organization
Sales volume
Introduction
Growth
Maturity
Decline
Volume
Slow growth in sales
Rapid growth in sales volume
Sales slow down and level off
Market needs largely met
Customers
Innovators
Early adopters
Bulk of market
Laggards
Competitors
Few or none
Increasing numbers
Stable number
Declining numbers
Variety of product / service design
Possible high customization or frequent design changes
Increasingly standardized
Emerging dominant types
Possible move to commodity standardization 6

34. The effects of the product/service life cycle on the organization
Sales volume
Introduction
Growth
Maturity
Decline
Likely order winners
Product/service characteristics, performance or novelty
Availability of quality products/services
Low price
Dependable supply
Likely qualifiers
Quality
Range
Price Range
Dependable supply
Dominant operations performance objectives
Flexibility
Quality
Speed
Dependability
Cost

36. Methods to Develop Operations Strategy

37. The Hill Methodology
Based on the top driven and market driven perspectives
Steps
Step 1 – understanding the long-term corporate objectives
Step 2 – how the marketing strategy has developed to achieve the corporate objectives
Step 3 – translates marketing strategy into ‘competitive factors’ – order winning and qualifying

38. Step 4 – Process choice – define a set of structural characteristics of the operation which are consistent with each other and appropriate for the way the company wishes to compete
Step 5 – Infrastructural features of the operation

40. The Platts Gregory procedure
3 stages. 1) market position, 2) operations capabilities, 3) reviewing operations strategies, after doing 1) and 2)

43. The challenge of operations strategy formulation
An operations strategy should be:
Appropriate ...
Comprehensive ...
Coherent ...
Consistent over time ...

44. An implementation agenda is needed
When to start?
Where to start?
How fast to proceed?
How to coordinate the implementation programme?

45. 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

46. Trade-offs “Do you want it good, or do you want it Tuesday?”
“No such thing as a free lunch.”
“You can’t have an aircraft which flies at the speed of sound, carries 400 passengers and lands on an aircraft carrier. Operations are just the same.” (Skinner)
“Trade-offs in operations are the way we are willing to sacrifice one performance objective to achieve excellence in another.”

47. Key Terms Test Strategic decisions
Decisions that are widespread in their effect, define the position of the organization relative to its environment, and move the organization closer to its long-term goals.
Top-down
The influence of the corporate or business strategy on operations decisions.
Bottom-up
The influence of operational experience on operations decisions.

48. Key Terms Test Market requirements
The performance objectives that reflect the market position of an operation’s products or services; also a perspective on operations strategy.
Operations resource capabilities
The inherent ability of operations processes and resources; also a perspective on operations strategy.
Business strategy
The strategic positioning of a business in relation to its customers, markets and competitors; a subset of corporate strategy.

49. Key Terms Test Functional strategy
The overall direction and role of a function within the business; a subset of business strategy.
Emergent strategy
A strategy that is gradually shaped over time and based on experience rather than theoretical positioning.
Competitive factors
The factors such as delivery time, product or service specification, price, etc. that define customers’ requirements.

50. Key Terms Test Order-winning factors
The arrangement of resources that are devoted to the production and delivery of products and services.
Qualifying factors
Aspects of competitiveness where the operation’s performance has to be above a particular level to be considered by the customer.
Less important factors
Competitive factors that are neither order-winning nor qualifying; performance in them does not significantly affect the competitive position of an operation.

51. Key Terms Test Product/service life cycle
A generalized model of the behaviour of both customers and competitors during the life of a product or service; generally held to have four stages: introduction, growth, maturity and decline.
Resource-based view (RBV)
The perspective on strategy that stresses the importance of capabilities (sometimes known as core competences) in determining sustainable competitive advantage.
Intangible resources
The resources within an operation that are not immediately evident or tangible, such as relationships with suppliers and customers, process knowledge, new product and service development.