1. An Introduction to Operations Strategy

2. The basic strategy model

4. Operations management and strategy requires analysis at three levels
Flow between operations
Analysis at the level of the supply network
Strategic analysis
Operational analysis
Analysis at the level of the operation
Flow between processes
Analysis at the level of the process
Flow between resources

5. Operations strategy is …
‘… the total pattern of decisions …
… that shape the long-term capabilities …
… of any type of operation ...
… and their contribution to overall strategy…
… through the on-going reconciliation of market requirements and operations resources …
… so as to achieve a sustainable fit between the two …
… whilst managing the risks of misalignment’.

6. The Goods – Services Continuum

7. How is operations strategy different from operations management?
Short-term
Long-term
Timescale
e.g. capacity decisions
Demand
Demand
1 – 10 years
1 – 12 months

8. How is operations strategy different from operations management?
Micro
Macro
Level of analysis
Concerned with the macro operation (level of the firm)

9. How is operations strategy different from operations management?
Level of aggregation
(Concerned with resources at an aggregated level)
Detailed
Operations management
Aggregated
Operations strategy
‘Can we give tax services to the small business market in Antwerp?’
‘What is overall business advice capability compared with other capabilities?’

10. How is operations strategy different from operations management?
Level of abstraction
(Concerned with the conceptual)
Concrete
Operations management
Philosophical
Operations strategy
‘How do we improve our purchasing procedures?’
‘Should we develop strategic alliances with suppliers?’

11. What is operations strategy about?
The sectoral scope of operations strategy
Products or services?
Manufacturing or non-manufacturing?
For profit or not-for-profit?
What is operations strategy about?

12. The role of operations strategy

14. Hayes and Wheelwright’s Four Stages of Strategy

16. The importance of operations to business and market needs

17. The four perspectives on operations strategy – top-down, bottom-up, market requirements and operations resources
Top-down
Operations strategy should interpret higher level strategy
Operations resources
Operations strategy should build operations capabilities
Market requirements
Operations strategy should satisfy the organisation’s markets
Operations strategy should learn from day-to-day experiences
Bottom-up

18. Operations strategy must reflect four perspectives – top-down, bottom-up, market requirements, and operations resources
Corporate strategy
Business strategy
Top-down
Capacity
Quality
Supply networks
Speed
Operations resources
Market requirements
Process technology
Dependability
Development and organisation
Flexibility
Cost
Bottom-up
Emergent sense of what the strategy should be
Operational experience

19. Top-down and bottom-up perspectives of strategy for the Metrology Company
Corporate objectives impact on business objectives which, in turn, influence Operations Strategy
Top down
Corporate strategy
Business strategy
Operations strategy
Bottom up
Day-to-day experience of providing products and services to the market reveals problems and potential solutions which become formalised into Operations Strategy
Emergent sense of what the strategy should be
Operational experience

20. Top-down and bottom-up perspectives of strategy for the Metrology Company
Operations must have fast and flexible technology, supply relationships, process and staff
Modular strategy provides flexibility and innovation at relatively low cost
Group building corporate capability in high technology products and services
Metrology division competes on ‘fast-to-market’ innovations
Experiment with ‘modular’ design of key products and components
Customers confused by continual product innovation and costs are increasing
Corporate objectives impact on business objectives which, in turn, influence Operations Strategy
Bottom up
Top down
Day-to-day experience of providing products and services to the market reveals problems and potential solutions which become formalised into Operations Strategy

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

23. The critical link between marketing and operations

24. Operations strategy is the strategic reconciliation of market requirements with operations resources
Tangible and intangible resources
Operations capabilities
Operations processes
Operations strategy decision areas
Customer needs
Market positioning
Competitors’ actions
Performance objectives
Understanding resources and processes
Strategic decisions
Capacity
Supply networks
Process technology
Development and organisation
Required performance Quality
Speed
Dependability
Flexibility
Cost
Understanding markets

25. British Sugar Hierarchy of Strategies

26. The performance measures

27. Quality
Companies (like Bentley or Toyota) have a reputation for quality
Products or services. High-quality hotels and restaurants, also luxury services such as high price hairdressers, etc.
High conformance is necessary for safety reasons such as in hospital blood testing.

28. Speed Any accident, emergency or rescue service.
Transportation examples where different speeds are reflected in the cost of the service. DHL and Blue Dart Courier service (Rs. 230/- for delivery within Delhi only) as compared to other courier services.
Likewise, the fast check-in service offered to business class passengers at airports.
And the exceptionally fast service of Concord which used to offer a fast service at a very high price.

29. Dependability
Some of the best examples are those where there is a fixed ‘delivery’ time for the product or service.
Theatrical performances, magic shows (P.C. Sircar Sr. and Jr.) are an obvious examples.
Or the preparation and delivery of lectures in a classroom.
Other examples include space exploration projects which rely on launch dates during a narrow astronomical ‘window’.

30. Flexibility
Example would be a tailor who has to be sufficiently flexible to cope with different shapes and sizes of customers and also (just as importantly) different aesthetic tastes and temperaments.
Another example would be the oil exploration engineers who need to be prepared to cope with whatever geological and environmental conditions they find drilling for oil in the most inhospitable parts of the world.
Accident and emergency departments in hospitals. Unless they have a broad range of knowledge which allows them to be flexible, they cannot cope with the broad range of conditions presented by their patients.

31. Cost
Examples of low-cost airliners in India, but only some of them survive.
21-day apex fare and other schemes of other airlines, kingfisher reducing the pouch size (or altogether no pouch at all), no toffees on flights, no free liquor in international flights run by American Airlines or Continental Airlines.

32. The ‘market requirements’ and ‘operations resource’ analysis of the lighting company
Resources
Equipment
Staff
Reputation
Relationships (internal and external)
Experience
Capabilities
Application of leading edge lighting and sound technology
Articulation of client requirements
Processes
Integration of equipment supply and client requirements
Design process
Supplier liaison process
Customers
Professional theatres (static, low margins)
Exhibitions (slow growth, low margins)
Conferences etc. (fast growth, higher margins
Market position
Traditionally differentiated on high service level in theatre and exhibition markets, innovation and service in conference market
Competitors
Big groups dominating professional theatres
In-house operations growing in exhibitions market
Conference market still fragmented
Performance objectives
Aesthetically innovative designs
Presentation advice
High customisation of lighting solutions
Fast and dependable supply
Operations strategy decisions
Location
Virtual reality technology
Supplier development
Equipment racking system
Organisational structure
Staff meetings

33. Market-Operations Link: McDonald’s
From managing a single part of the organisation (such as, a single McDonald’s store) to managing the operations for the whole of the organisation (for example, what are the key operations strategy decisions for McDonald’s in the whole of Europe?).
There is a difference between the two levels of analysis. Especially how the operational day-to-day issues (such as, the way staff are scheduled to work at different times in McDonald’s stores) can affect the more strategic issues for the organisation as a whole (such as, what level of service and costs are McDonald’s franchise holders expected to work to?).

34. The market perspective analysis of the garment company
PERFORMANCE OBJECTIVES
MARKET POSITION
Differentiation on:
CUSTOMERS
Segmentation on:
Age – youth
Purpose – general
COMPETITORS
Traditionally weak in:
Innovative products
Time to market
Product range
Coordinated launches
promotion
design innovation
Dependability
Speed of delivery
Product mix flexibility
Speed to market

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

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

37. Operations strategy is …..
‘… the decisions which shape the long-term capabilities of the company’s operations and their contribution to overall strategy through the on-going reconciliation of market requirements and operations resources …’

38. Decomposing the ratio profit/total assets to derive the four strategic decision areas of operations strategy
Profit
Total assets
Output = ×
Output
Total assets
Capacity
Fixed assets
Utilisation
Working capital
Productivity of fixed assets = ×
Profit
Output
Revenue
Cost
Average revenue
Average cost =
Operations strategy decision areas
Capacity
Supply network
Process technology
Development and organisation

39. Operations strategy decision areas are partly structural and partly infrastructural
Capacity
Development and organisation
Supply network
Process technology
Structural issues
Infrastructural issues

40. The operations strategy matrix
Resource usage
Operations strategy
Performance objectives
Quality
Speed
Dependability
Flexibility
Cost
Development and organisation
Capacity
Supply network
Process technology
Decision areas
Market competitiveness

41. 7-Eleven Japan Largest retailer in Japan
Sells 15.X as much per store as nearest rival
History of cautious expansion and technical and service innovation
‘Field Counsellors’ spread operations knowledge (also distance training)
Expansion by territory to reduce distribution costs
Early use of TIS (Total Information System)
TIS controls stock replenishment by twice a day delivery (sales analysed twice a day)
New systems not Internet-based
New service includes:
Bank terminals
Downloading games
Downloading music to MD
Internet ordering and collection

42. 7-11 JAPAN RESOURCE DEPLOYMENT Market Competitiveness  Pivotal
Distribution centre grouping by temperature 
Distribution centres and inventory management systems give fast stock replenishment 
TIS allows trends to be forecast and supply adjustments made 
Common distribution centers give small frequent deliveries from fewer sources
Number and type of distribution centres
Order and stock replenishment
Information sharing and parenting system spreads service ideas 
Field counsellors with sales data help stores to minimise waste and increase sales 
Franchisee relationships
New product/service development
Approach to operations improvement
QUALITY of products and services
Speed and dependability combined to indicate AVAILABILITY
TIS gives comprehensive and sophisticated analysis of sales & supply patterns daily

The Total Information System (TIS)
Market Competitiveness
FLEXIBILITY of response to sales and customer trends
COST in terms of minimising…
operating cost
capital cost
working capital
Area dominance reduces distribution and advertising costs 
Location of stores
Size of stores
7-11 JAPAN
 Pivotal
 Critical
 Secondary
DEVELOPMENT AND ORGANISATION
PROCESS TECHNOLOGY
SUPPLY NETWORKS
CAPACITY

43. Specifics of operations strategy

45. The Hill Framework