Operations Strategy is

the decisions which shape the long-term

capabilities of the companys operations and
their contribution to overall strategy through

the on-going reconciliation of market

requirements and operations resources

The 4 Perspectives On Operations Strategy

Top - down
Perspective

Operations
resources
Perspective
What
operations
resources can
do

What the
business wants
operations to
do

Operations
strategy

What day-to-day
experience
suggests
operations should
do
Bottom - up
Perspective

Market Reqd
Perspective
What the
market
position
requires
operations to
do

Corporate strategy

Business strategy

Top-Down and
Bottom-Up
Perspectives
of Strategy

Operations strategy

Emergent sense of what

the strategy should be

Operational experience

Mintzbergs Concept of
Emergent Strategy
Intended
Strategy

Un-realized
Strategy

Deliberative
Strategy

Realised
Strategy

Emergent
Strategy

Operations Can Kick-Start 2 Virtuous

Cycles
Internal

and

Understanding
of the
processes

Competencies
embedded in
the operation

External

Competitiveness

Strong
marketing

World Class
Operations

Capabilities enhance
innovation and
improvement

Developing the resources

which let the operations
performance stay ahead of
the competition

High
margin
Investment

Developing customers,
competitors and
stockholders perceptions
and expectations

5 Steps for Strategy Formulation

1. Defining a primary task
What is the firm in the business of doing?
2. Assessing core competencies
What does the firm do better than anyone else?
3. Determining order winners and order qualifiers
What qualifies an item to be considered for
purchase?
What wins the order?
4. Positioning the firm
How will the firm compete?
5. Deploying the strategy

Market Req & Operations Resources

Perspectives of Operations Strategy
Strategic
Reconciliation
Operations
Resources

OPERATIONS
STRATEGY

Market
Requirements

Operations strategy reconciles the

requirements of the market with the
capabilities of operations resources

Tangible and
Intangible
Resources

Operations
Capabilities

Customer
Needs
Operations
Strategy
Decision
Areas

Performance
Objectives

Operations
Processes
Understanding
resources and
processes

Market
Positioning

Competitors
Actions
Strategic
decisions

Required
performance

Understanding
markets

Operations strategy is the strategic reconciliation of

market requirements with operations resources

Market
Requirements

Operations
Resources

What you
HAVE

What you
DO

in terms of
operations
capabilities

to maintain
your
capabilities
and satisfy
markets

What you
WANT
from your
operations to
help you
compete

Strategic
Reconciliation

What you
NEED
to compete
in the market

Strategic Decisions in Operations

Products

Capacity

Facilities

Services

Human
Resources

Sourcing

Processes
and
Technology

Quality

Operating
Systems

Products & Services

Maketoorder

Made to customer specifications

after order received

Maketostock

Made in anticipation of demand

Assemble
to-order

Add options according to customer

specification

Processes & Technology

Project
Continuous

Batch
Mass

How
much?

Capacity
Changes

Excess
Demand

Capacity

Facilities
Workers

Facilities

Best Size
2

3
4
5

Large or Small
Focus
Location

Global

People Systems

Skill level required

Supervision methods

Freedom

Individual or Teamwork

Policies

Mgt. Levels

Profit sharing

Training

Quality

Target level

QA Systems

Measurement

Awareness

Empowerment

Evaluation of Efforts

Training

Customer Perception

Supplier
1

Vertical integration

Supplier selection

Supplier relationship

Supplier quality

Supplier coorperation

Operating System
Execute strategy
daily

IT Support
Alignment of
inventory levels
and schedule

Effective planning and

control systems

The Nature and Content of

Operations Strategy
The content of
operations strategy

A statement of the
principles and policies
which guide the operations
activities

Prioritized performance
objectives for each
product/service group

The process of
operations strategy

The way in which the

guiding principles and
policies are developed

Strategies for each

decision area

Design

Planning and
control

Improvement

Different competitive factors imply

different Performance Objectives
Competitive factors

Performance objectives

If the customers value these

...

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/services)

Wide range of products and

services

Flexibility (mix)

The ability to change the timing or

quantity of products and services

Flexibility (volume and/or

delivery)

Relative Importance of Performance

Objectives
The influence of
the organizations
customers

The influence of
the organizations
competitors
The relative
importance of each
performance objective
to the operation

The stage of the organizations

products and services in its life
cycle.

Performance Objectives
(Operational Priorities)
Cost

Quality

Other
product
specific
criteria

Delivery
Flexibility

Concept
Speed
of Prod
Dev

Coping
with
Changes
in Demand

Delivery Speed

Delivery
Reliability

Competing On Cost
Eliminate
All Waste

Training and
Development

Invest in
Latest
Tech

Streamline
Operations

Competing On Quality
Please

The

Customer

Understand
customer
attitudes toward
and expectations
of quality

Competing on Flexibility

Modify existing products quickly

Produce wide variety of products

Introduce new products

Respond to customer needs

Competing on Speed

Rapid Prod Dev

Fast moves
Fast adaptations
Tight linkages

Strategy Process
Environmental
Analysis

Company
Mission
Business
Strategy

SWOT
Analysis

Functional Area
Strategies
Marketing
Decisions

Operations
Decisions

Fin./Acct.
Decisions

Mission
Organizations purpose for
being
Provides boundaries & focus
Answers How can we satisfy
peoples needs?
Expressed in mission statement

Factors Affecting Mission

Philosophy
Environment

Profitability

Mission

Values

Growth
Public Image

Benefit To Society

What Is
Strategy?

Action plan to achieve mission

Shows how mission will be achieved

Company has a business strategy

Functional areas have strategies

Operations Decision Areas

Cost

Location

Supply Chain

Product Design

Layout

Inventory

Process Design

HRM

Scheduling

Functional Strategy

To Recap: Strategies are put

together.
Identify how the operation could
do these things better
Identify what the operation
needs to do better
how well the operation
performs versus its
competitors
what is wanted
in the
marketplace

Analyze
Evaluate

Compare

Identify

The Challenge of Operations

Strategy Formulation

Strategy

Appropriate Comprehensive

Coherent

Consistent

An Implementation Agenda Should

Answer:
When

When to
start?

Where

Where to
start?

How Long

How fast
to
proceed?

Who

How to coordinate
the
implement
ation
program?

Implementation Steps
Key
Tasks

If done well, help provide competitive

advantage. Reflect unique internal
strengths. Distinctive competencies

Create
Org

Project team

Staff
Org

Assign task responsibilities & deadlines

Balanced Scorecard
Balanced scorecard
measuring more than financial performance

finances
customers
processes
learning and growing

Key performance indicators

a set of measures that help managers evaluate
performance in critical areas

Balanced Scorecard
Finance How should we look to our shareholders?
Customer How should we look to our customers?
Processes At which business processes must we
excel?
Learning and Growing How will we sustain our
ability to change and improve?

Company Issues & Product Life Cycle

Product
Life Cycle
Introduction

Issues
Focus on getting product out the door with
consistent quality. R&D & engineering are
critical

Growth

Focus on price, quality, delivery. Marketing is

critical: differentiate product from competitors

Maturity

Focus on costs & new products. Maintain

image, price, & quality

Decline

Cost control critical

Operations Issues & Product Life Cycle

Product
Life Cycle
Introduction

Issues
Product design & development critical; many
process changes. High production costs.

Growth

Forecasting critical. Improve product; increase

capacity & distribution.

Maturity

Standardize product. Long production runs

Decline

Reduce product line, lower costs

How Do The Industry Winners Do It?

They have the basics down pat

They believe quality drives profit

They know their customers
Focused moments of truth operations

They have whatever it takes attitude

How Do The Industry Winners Do It?

Service inside well as outside
Management support
Care about employees
Skillful recovery from blunder

Continuous improvement