The three levels of operations strategy process

Increasing complexity

Level 1 - Fit

Align resources with requirements Develop sustainable competitive advantage Include impact of uncertainty

Level 2 - Sustainability Level 3 - Risk

Nigel Slack and Michael Lewis 2003

Operations Strategy Formulation

Putting an operations strategy together presents some particular difficulties: Senior operations managers are often geographically dispersed

The operation still needs running

Predominance of line management Complexity of operations resources

Inertia of operations resources

Nigel Slack and Michael Lewis 2003

Operations Strategy Formulation

There are many formulation process stage models. They often include:

Links between competitive strategy objectives and operations objectives (strategic fit)
The use of competitive objectives as the translation device between strategic and operations objectives

Judging the importance of competitive objectives against customer/market requirements

Current performance judged against competitor performance An iterative process The concept of an ideal of greenfield operation against which to compare current operations. A gap-based analysis
Nigel Slack and Michael Lewis 2003

In operations strategy fit is the alignment between market and operations capability

Level of market requirements

Alignment between market and operations capability

Level of operations resource capability

Nigel Slack and Michael Lewis 2003

Fit means that the operations resources and processes are aligned with the requirements of its markets. Fit can also mean that market requirements are moved to exploit operations resource capabilities

Market requirements

Operations resource capability

Nigel Slack and Michael Lewis 2003

Market Segmentation Operations Strategy Decision Areas

Market Positioning

Operations Performance Objectives

Operations Capabilities

Competitor Activity State market requirements in terms of operations performance objectives

Understand markets

Define competitive position

Make strategic operations decisions

to enhance core capabilities

Fit operations resources to market requirements fit

Nigel Slack and Michael Lewis 2003

Tangible and Intangible Resources Operations Strategy Decision Areas

Potential Market Positioning

Operations Performance

Operations Capabilities

Operations Processes Determine competitive position Define market potential of operations performance Make appropriate strategic operations decisions Identify core capabilities Understand resources and processes

Fit market positioning to operations resources capabilities

Nigel Slack and Michael Lewis 2003

Resource Usage

Performance objectives

Quality Speed Dependability Flexibility

Critical

Critical

Critical Market Competitiveness

Cost

Critical

Critical Supply Network

Critical

Critical

Capacity

Process Development and Technology Organization Decision areas

IBM operations strategy matrix (1970-1985)

Nigel Slack and Michael Lewis 2003

Ideal Minimum resource resource capability capability

y2 Level of market requirements

Tight fit
y1 A

Ideal market requirements Minimum market requirements

x1 X x2 Level of operations resource capability

The level of fit may not always be tight

Nigel Slack and Michael Lewis 2003

Fit is concerned with ensuring comprehensiveness, correspondence, coherence and criticality

Resource Usage

Performance objectives

Quality Correspondence Speed Dependability Flexibility Cost

Coherence

Critical Market Competitiveness Critical

Development and Organization

Critical Critical

Critical
Capacity Supply Network Process Technology

Decision areas

Comprehensive?
Nigel Slack and Michael Lewis 2003

Resource Usage

Provide
resources to support quality Use quality as performance criteria

Continuous
quality emphasis with suppliers Purchase using quality criteria Work on functional barriers

Built-in quality Long-term

in processes Statistical process control Enhance quality capability Quality as a performance criteria plans Quality culture Continuous improvement Quality performance measurement and control Operational supervision is important Communication Appropriate org. structure

Performance objectives

Quality

Speed Dependability Flexibility Cost

Capacity

Supply Network

Process Development and Technology Organization

Decision areas

To be strategic, quality initiatives need to comprehensively cover all decision areas

Nigel Slack and Michael Lewis 2003

Market Competitiveness

Step 1
Corporate objectives

Step 2
Marketing strategy

Step 3
How do products or services win orders?

Step 4

Step 5

Operations strategy Process choice Infrastructure

Growth Profit ROI Other financial

measures

Product/service Price
markets and segments

Process
technology

Functional
support

Quality Delivery speed Delivery

dependability range

Range Mix Volumes Standardisation

or customisation

Trade-offs
embodied in process inventory

Operations
planning and control systems

Product/service Role of Product/service Capacity, size,

design timing, location

Work structuring Payment

systems

Organisational
structure

Innovation Leader or
follower

Brand image Technical

service

The Hill framework of operations strategy formulation

Nigel Slack and Michael Lewis 2003

OPPORTUNITIES AND THREATS? THE EXISTING OPERATION WHAT THE MARKET WANTS?

Features Quality Delivery Flexibility Price

HOW THE OPERATION PERFORMS

Facilities Capacity Span of process Processes Human resources Quality Control policies Suppliers New Products

WHAT DO WE NEED TO DO TO IMPROVE THE REVISED OPERATIONS STRATEGY?

Features Quality Delivery Flexibility Price

The Platts-Gregory procedure

Nigel Slack and Michael Lewis 2003

Product family
Delivery lead-time Reliability
Into stock point Variable Ex-stock Short

Market requirements Achieved performance

Not significant Long Critical: Project delay Good Many features/ High absolute level Total reliability essential High All designs customer specified All products customised

Features
Fit for purpose Few features

Quality
Acceptable at price Acceptable

Flexibility design Volume

Standard range only Standard only Stable market Little variation required Volume variations low

Highly cyclic variable market Volume variations high

Price cost
Price competition dominant Low Non-price competition dominant High

Uses of profiling in the Platts-Gregory procedure

Nigel Slack and Michael Lewis 2003