1. Developing an Operations Strategy:
Deploying Resources, Processes and Operations
Dr Simon Croom.
Smartlink Fellow, University of South Australia

2. Overview
We tend to see strategic success as all about markets, products and services.
We forget that we rely on our processes, as well as those of our suppliers, collaborators and distributors.
Many businesses now recognise that strategic capabilities are determined by HOW they develop, produce and deliver goods and services to their customers.
This session focuses on strategic development
It will provide some basic Principles to help you improve strategic performance

3. What is ‘OPERATIONS’ Strategy?
“The strategic direction and development of the resources and processes which produce and deliver products and services to customers”.
Operations Strategy,
By Nigel Slack & Michael Lewis
Pearson Publishing

4. Principle
The clash between the nature of external markets and the nature of internal resources
Market Requirements are….
Dynamic
Heterogeneous
Ambiguous
Operations Resources are….
Difficult to change
Technically constrained
Complex
BT3

5. The strategic role of operations can be defined by its aspirations (after Hayes and Wheelwright)
Principle
Give an Operations Advantage
Redefine the industry’s expectations
Externally supportive
Link Strategy With Operations
Be clearly the best in the industry
Increasing contribution of operations
Internally supportive
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 Implement
The ability
to support Strategy
The
ability to
Drive strategy

6. Implementing Supporting Driving
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

7. Principle Operations can kick-start two virtuous cycles
Internal
and
External
Understanding of the processes
Strong marketing
Competitiveness
Competencies embedded in the operation
World Class Operations
High margin
Capabilities enhance innovation and improvement
Investment
Developing the resources which let the operation’s performance stay ahead of the competition
Developing customers’ competitors’ and stockholders; perceptions and expectations

8. The operations function can provide a competitive advantage through its performance at the five competitive objectives
Quality
Being RIGHT
Speed
Being FAST
Dependability
Being ON TIME
Competitiveness
Flexibility
Being ABLE TO CHANGE
Cost
Being PRODUCTIVE

9. How is each performance objective being viewed?
The onset of “Total Quality Disillusionment” ISO 9000 sweeps the world (except Japan!)
Quality
Value added methodology increasingly powerful
Major benefit of BPR
Return of the JEDI
Speed
Dependability
Being monitored by customers
Competitiveness
Long term technology flexibility proving difficult to achieve
More closely defined - “rigid flexibility”
Flexibility
Increasing cost pressures
Overcoming the volume and variety effects
New ways of looking at costs
Cost

10. Competitive Objectives are prioritized by CUSTOMERS and COMPETITORS
The first task of an Operations Strategy is to clarify the relative priorities of the competitive objectives
Quality
Speed
Competitive Objectives are prioritized by
CUSTOMERS and COMPETITORS
Dependability
Competitiveness
Flexibility
Cost

11. Operations Policies are shaped by COMPETENCIES and CONSTRAINTS
Operations Strategy Decision Areas Determine Resource Deployment
Resource Deployment
Capacity Structure
Process Technology
Supply Network
Development and Organisation
ISSUES -
VERTICAL INTEGRATION
SUPPLIER DEVELOPMENT
DEVELOPMENT CHAINS
STRATEGIC VALUE FACILITATION
ISSUES -
DEVELOPMENT RATE
AUTOMATION
SIZE
INTEGRATION
IN OR OUT-HOUSE DEVELOPMENT
ISSUES -
ISSUES -
RESPONSIBILITY RELATIONSHIPS
IMPROVEMENT STRATEGIES
PERFORMANCE & CONTROL
CAPACITY
LOCATION
FOCUS & SEGMENTATION
L/T FORECASTS
Operations Policies are shaped by
COMPETENCIES and CONSTRAINTS

12. Operations strategy is defined by the intersections of performance objectives and substrategies
Principle
Resource Deployment
Quality
Speed
Operations Strategy
Competitive Objectives are prioritized by
CUSTOMERS and COMPETITORS
Dependability
Market Competitiveness
Flexibility
Cost
Development and Organization
Capacity Structure
Process Technology
Supply Network
Operations Policies are shaped by
COMPETENCIES and CONSTRAINTS

13. Operations strategy is defined by the intersections of performance objectives and substrategies
Resource Deployment
Quality
key
Speed
key
Competitive Objectives are prioritized by
CUSTOMERS and COMPETITORS
Dependability
key
Market Competitiveness
Flexibility
key
Cost
key
key
Development and Organization
Capacity Structure
Process Technology
Supply Network
Operations Policies are shaped by
COMPETENCIES and CONSTRAINTS

14. How to ensure a strategic Fit

15. Prioritizing Objectives
Priorities should be determined by
Your
PERFORMANCE
in each of the
competitive
objectives
The
IMPORTANCE
of each
competitive
objective
IMPROVEMENT PRIORITIES

16. Principle ORDER-WINNING OBJECTIVES QUALIFYING OBJECTIVES
Competitive
Benefit
Achieved performance
ORDER-WINNING
OBJECTIVES
+ve
neutral
-ve
Low
High
qualifying
level
QUALIFYING
OBJECTIVES
Competitive
Benefit
Achieved performance
+ve
neutral
-ve
Low
High
LESS IMPORTANT
OBJECTIVES
Competitive
Benefit
Achieved performance
+ve
neutral
-ve
Low
High

17. Principle Competitive Benefit Achieved Performance
Qualifiers
Qualifiers are the “givens” of doing business
Order Winners
Order Winners gain more business the better you are
Delights
Adding Delights
Time
Delights become Order winners and Order winners become Qualifiers
Positive
Competitive Benefit
Neutral
Negative
Low
High
Achieved Performance

18. A method for identifying our ‘strategic’ operations priorities
Identify what is important to customers
Assess how well we perform
Relate our performance to customer’s or market requirements

19. 9 Point Importance Scale
For this product group does this performance objective
1 - Provide a crucial advantage with customers
2 - Provide an important advantage with most customers
3 - Provide a useful advantage with most customers
ORDER
WINNING
OBJECTIVES
4 - Need to be up to good industry standard
5 - Need to be around median industry standard
6 - Need to be within close range of the rest of the industry
QUALIFYING
OBJECTIVES
7 - Not usually important but could become more so in future
8 - Very rarely rate as being important
9 - Never come into consideration
LESS
IMPORTANT
OBJECTIVES

20. Temperature controlled - Overnight service
Example
IMPORTANCE to Customers
PRICE X
SERVQUAL (DISN.) X
SERVQUAL (ORDER TAKE) X
ENQUIRY LEAD-TIME X
DROP QUOTE X
WINDOW QUOTE X
DELIVERY PERFORMANCE X
DELIVERY FLEXIBILITY X
VOLUME FLEXIBILITY X
DOC. SERVICE X

21. 9 Point Performance Scale
For this product group is achieved performance
1 - Consistently considerably better than our nearest
competitor
2 - Consistently clearly better than our nearest competitor
3 - Consistently marginally better than our nearest competitor
BETTER
THAN
COMPETITORS
4 - Often marginally better than most competitors
5 - About the same as most competitors
6 - Often close to main competitors
SAME AS
COMPETITORS
7 - Usually marginally worse than main competitors
8 - Usually worse than most competitors
9 - Consistently worse than most competitors
WORSE
THAN
COMPETITORS

22. Temperature controlled - Overnight service
Example
Temperature controlled - Overnight service
PERFORMANCE against Competitors *
COST X
SERVQUAL (DISN.) X
SERVQUAL (ORDER TAKE) X
ENQUIRY LEAD-TIME X
DROP QUOTE X
WINDOW QUOTE X
DELIVERY PERFORMANCE X
DELIVERY FLEXIBILITY X
VOLUME FLEXIBILITY X
DOC. SERVICE X
Estimated *

23. Example X X X X X X X X X X PERFORMANCE COMPETITORS IMPORTANCE
AGAINST
COMPETITORS
GOOD
BAD
Example 1
Delivery X
better 2
Volume Flex
than X
Window Quote
Drop Quote 3 X X 4 X
Servqual (DISN)
same 5 X as
Doc Service 6 X
Price/Cost X
Delivery Flex 7 X
Servqual (Order Take) 8
worse X
Enquiry Lead-Time
than 9 9 8 7 6 5 4 3 2 1
less
order
qualifying
important
winning
IMPORTANCE
FOR
CUSTOMERS
LOW
HIGH

24. URGENT ACTION IMPROVE APPROPRIATE EXCESS ?
better
than
same as
worse
less
important
qualifying
order
winning 1 2 3 4 5 6 7 8 9
IMPORTANCE
FOR
CUSTOMERS
LOW
HIGH
PERFORMANCE
AGAINST
COMPETITORS
GOOD
BAD
URGENT
ACTION
IMPROVE
APPROPRIATE
EXCESS ?
CUSTOMERS

25. Budget Hotel Chain Example Today Tomorrow Delights Central reservation
Order Winners
Central reservation
Location (autoroutes)
Location (autoroutes)
Location (restaurants)
Price
Loyalty cards
Qualifiers
Location (restaurants)
Price
Loyalty cards
Cleanliness
Cleanliness
Decor
Decor
Service ?

26. Budget Hotel Chain Example Today Tomorrow Price Location (restaurants)
Delights
Central reservation
Price
Order Winners
Central reservation
Location (autoroutes)
Location (autoroutes)
Location (restaurants)
Location (restaurants)
Price
Loyalty cards
Qualifiers
Location (restaurants)
Price
Loyalty cards
Cleanliness
Cleanliness
Decor
Decor
Service ?

27. Budget Hotel Chain Example Delights Order Winners Qualifiers
What aspects of service will form tomorrows delights, order winners and qualifiers?
What new capabilities will operations need to develop to deliver these?
Delights
Price
Cheap land costs
Build at low cost
Operate at low cost
Search processes
Flexible design
Low fixed costs
Standardisation
Low overheads
Low labour costs
New technology
Order Winners
Central reservation)
More, smaller sites
Location (autoroutes)
Partnership deals with restaurants
Location (restaurants)
Qualifiers
Location (restaurants)
Price
Loyalty cards
Cleanliness
Decor
TTT 16

28. What performance objectives are Qualifiers, Order Winners and Delights ?
… and in the future ?
???
What is the operation doing today to develop the capabilities which will provide the “Delights” of the future ?
Today
Tomorrow
Delights
Order Winners
Qualifiers

29. Where will you be in the Future?
Delights
Order Winners
Qualifiers
Today
Tomorrow

30. 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.”

31. Driving Learning & Improvement whilst avoiding Strategic Vulnerability
Be Clear about your current performance in terms of:
Process Capability
Alignment of resources to customers & markets
Responsiveness of your resources to external variations
Performance measurement and objectives
Service level agreements, specifications and targets
Consistency of purpose
Appropriate relationships across your supply chain and operations network

32. How can we carry out such a ‘Health Check’?
Benchmarking against others
Validation against best practice
Evaluation of Strategic Criteria
Audit of the pressures and stresses faced by your organisation

33. What is Stress Point Analysis?
A research tool developed to accommodate the individual context and conditions facing an organisation
A methodology for highlighting key areas of strategic weakness
A comparative analysis – benchmarking against others and against best practice
A customised methodology for an individual audit

34. Strategic Performance - Responsiveness of Your Operation
Response curve
Stress Point
Performance
Failure Point
KEY To ZONES
Desired Capability
‘Force’
Operating Capability
STRESS

35. The Causes of Supply Chain and Operations Stress
Congruence
Alignment to customer needs, potential degradation of delights
Mismatched relationships with customers and suppliers
Confusion over needs
Capabilities
Processes are not able to meet the performance targets
Service levels are inappropriate
Capability Not Measured
No laid down process maps or procedures
Capacity
Poor utilisation, slow response to demand, too many set ups, high or increasing variety
Low Value Adding content
Low T/E (throughput efficiency)
Control
High Forecasting Errors
‘Bullwhip’ across the chain (Forrester Effect)
Resource Scheduling and Inventory inaccuracies

36. To AUDIT your Business Logon to http://www.supply-chain.org.uk
Click on the SPA Methodology link
Login to the ht2 site using:
Username SPA**
Password SPA** (Same as your username)
I will allocate your number
Complete the survey
Your results will be ed to you in early April as a benchmark report