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OPERATIONS STRATEGY
Chapter 2
1. 2. 3. 4. 5.
Operations Strategy Model Emphasis on Operations Objectives Linking Strategies Operations Competence Global Scope of Operations
Operations Strategy
Operation Strategy is concerned with the development of long term plan for determining how to best utilize the major resources of the firm so that there is high degree of compatibility between these resources and firms long term goal.
Corporate strategy
Business strategy
Operations Strategy Internal analysis Mission Distinctive Competence External analysis Objectives (cost, quality, flexibility, delivery) Policies (process, quality systems, capacity, and inventory) Functional strategies in marketing, finance, engineering, human resources, and information systems
Corporate Strategy
Defines what business the company is in.
Business Strategies
Business Strategy
How the a particular business will compete.
External Analysis
External environment includes
Competition (Global Competition) Customer (Changing attitude of customers) Economics (Inflation rates, currency fluctuations) Social Conditions (Social awareness, Changing demands of workforce labours not servants)
Internal Environment
Internal Environment includes
Availability of Resources Skills and ability of workforce Location (Place) Control Systems SWOT Analysis
PEST Analysis
Operation Mission
What we want to do Defines the purpose of operation function with respect to business and corporate strategies Giving the priority among the operation objectives
Cost Quality Delivery Flexibility
Distinctive Competence
Something an organization does better than any competing organization that adds value for the customer.
Distinctiveness Competence
Leads to
Competitive Advantage Not easily to intimate (Copy) Requires operations to concentrate on what it must do Distinctiveness Can be Skilled Workers Cheap labour
Operations Policies
How the objectives of the operation achieved. Operation Policy should be developed for each of the five decision categories Quality Process Capacity Inventory Work Force Policy can emphasis on Highly skilled work force Develop a superior control system
Process
Policy Area Span of process Automation Process flow Job specialization Supervision Approach Training Suppliers Facility size Location Investment Amount Distribution Control Systems
Strategic Choices Make or buy Handmade or machinemade Flexible or specialized Project, batch, line, or continuous Centralized or empowered workers Prevention or inspection Technical or managerial training Selected on quality or cost One large or several small facilities Near markets, labor, or materials Permanent or temporary High or low levels of inventory Centralized or decentralized warehouses Control in great detail or less detail
Inventory
Operations Competence
To be sustainable, distinctive competence must not only be unique, it must be difficult to imitate or copy.
Strategy Formulation
Defining a Primary Task What is the firm in the business of doing. Example: Amazon-Fastest, Easiest and most Enjoyable Shopping Experience. Paramount-Business of Communication: Not Making Movies. Core Competence What does the firm do better than others Order Qualifiers What qualifies an item to be considered for purchase Order Winners What wins the order Positioning of the Firm
How will firm compete- Where we will serve
Skills of employees Equipment or processes Rapid continuous improvement Well developed partnerships Location Organizational knowledge Proprietary information or control systems
Competitive Priorities
Competing on Cost Elimination of Waste e.g. Wall Mart, Southwest Airlines Quality Minimizing defect rates, meet the requirements of design Flexibility Is the ability to adjust to changes-high volume of existing, new product development Speed Fast delivery. e.g. Dell, Wall Mart
Strategic Decisions
Products and Services Process and Technology Capacities and Facilities Human Resource Quality Sourcing Operating Systems
Sourcing
Vertical Integration
Is the degree to which a firm produces the parts that go into its products. Outsourcing
Here the operations function compares its performance with competitor organizations. Benchmarking its performance against its competitors enables it to identify the best ideas to copy. In trying to match the benchmarks it has identified, the operations function is attempting to be externally neutral.
Operations Contribution
Operations as follower
Strategy
Operations as leader
Ops
Implementing
be Dependable Operationalise (to put something to use or into operation) strategy be Appropriate Understand strategy Contribute to decisions
Supporting
Ops Ops Strategy
Driving
Stage 1
Stage 3 Objective is for operations to provide credible support for the business strategy. Stage 4 Objective is for operations to provide a source of competitive advantage.
Internally
Externally
Objective is for operations to help the business maintain parity with its competitors.
Internally supportive
Global Markets, Global Sourcing, Global Operations Virtual Companies Business organization collaborates with one another Strategic alliances Organizations Boundaries are hard to define Emphasis on Service
Manufacturing & Service Companies both concentrate on service delivery
Externally neutral
Supply Chain
Managing the supply chain, virtual integration
Competitiveness:
How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services
Technological Advancements
IT, Telecom, e-Commerce etc
Knowledge
R&D, Learn from the mistakes, learn outside the organization.
Mission/Strategy/Tactics
Mission Strategy Tactics
How does mission, strategies and tactics relate to decision making and distinctive competencies?
Strategy
Strategies
Plans for achieving organizational goals
Mission
The reason for existence for an organization
Mission Statement
Answers the question What business are we in?
Goals
Provide detail and scope of mission
Tactics
The methods and actions taken to accomplish strategies
Strategy Example
Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably Live a good life Mission: Goal: Successful career, good income Strategy: Obtain a college Education Tactics: Select a college and a major Operations: Register, buy books, take courses, study, graduate, get job
Examples of Strategies
Low cost Scale-based strategies Specialization Flexible operations High quality Service
Operations Strategy
Operations strategy The approach, consistent with organization strategy, that is used to guide the operations function.
Strategy Formulation
Distinctive competencies Environmental scanning SWOT Order qualifiers Order winners
Strategy Formulation
Order qualifiers
Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase
Order winners
Characteristics of an organizations goods or services that cause it to be perceived as better than the competition