Competitive Advantage Operations Strategy

Lecturer: Muhammad Naveed OPM-BBA-BAHRIA

Role of Operations
make or break any business.
France

takes Coca-Cola off shelves

Low

cost and big profits from operational

Air navigation equipment failed

efficiency
Korean Rat

in the aisle forces BA to cancel flight out of

Africa

Hayes and Wheelwrights four stages of operations contribution

Redefine industry expectations

Increasing strategic impact

Clearly the best in the industry Stage 2 Adopt best practice

Stage 1 Correct the worst problems

Stage 3 Link strategy with operations

Stage 4 Give an operations advantage

As good as competitors

Driving strategy Supporting strategy

Holding the organization back

Implementing strategy Externally neutral Internally supportive Externally supportive

Internally neutral

Increasing operations capabilities

Where does the business get its competitive advantage?

The way technological specification of its product/service?

Product/Service Technology The way it produces Its goods and services

The way it Positions itself in its market?

Marketing

Operations

Operations as Competitive Advantage

The operations function can provide a competitive advantage through its performance at the five competitive objectives

Quality Speed Dependability Flexibility Cost

Being RIGHT Being Fast Being on Time Being able to Change Being Productive

Different competitive factors imply different performance objectives

Competitive factors If the customers value these Low price High quality Performance objectives Then, the operations will need to excel at these Cost Quality

Fast delivery
Reliable delivery Innovative products and services Wide range of products and services The ability to change the timing or quantity of products and services

Speed
Dependability Flexibility (products/services) Wide range of products and services Flexibility (volume and/or delivery)

Quality means different things in different operations

Hospital

Automobile plant

Patients receive the most appropriate treatment

All parts are made to specification All assembly is to specification

Treatment is carried out in the correct manner

Patients are consulted and kept informed

The product is reliable

The product is attractive and blemish-free

Staff are courteous, friendly and helpful

Quality means different things in different operations (Cont.)

Bus company The buses are clean and tidy The buses are quiet and fume-free The timetable is accurate and userfriendly Staff are courteous, friendly and helpful

Supermarket Goods are in good condition The store is clean and tidy Decor is appropriate and attractive Staff are courteous, friendly and helpful

Speed means different things in different operations

Hospital

Automobile plant

The time between requiring treatment and receiving treatment kept to a minimum The time for test results, Xrays, etc. to be returned kept to a minimum

The time between dealers requesting a vehicle of a particular specification and receiving it kept to a minimum

The time to deliver spares to service centres kept to a minimum

Speed means different things in different operations (Cont.)

Bus Company

Supermarket

The time between a customer setting out on the journey and reaching his or her destination kept to a minimum

The time taken for the total transaction of going to the supermarket, making the purchases and returning kept to a minimum

The immediate availability of goods

Dependability means different things in different operations

Hospital

Automobile plant

Proportion of appointments which are cancelled kept to a minimum Keeping to appointment times Test results, X-rays, etc. returned as promised

On-time delivery of vehicles to dealers On-time delivery of spares to service centres

Dependability means different things in different operations (Cont.)

Bus Company

Supermarket

Keeping to the published timetable at all points on the route Constant availability of seats for passengers

Predictability of opening hours Proportion of goods out of stock kept to a minimum Keeping to reasonable queuing times Constant availability of parking

Flexibility
Flexibility has several distinct meanings but is always associated with an operations ability to change

Change what ?

The products and services it brings to the market Product/service flexibility

The mix of products and services it produces at any one time Mix flexibility The volume of products and services it produces Volume flexibility The delivery time of its products and services Delivery flexibility

Flexibility means different things in different operations

Hospital

Automobile plant

Product/service flexibility the introduction of new types of treatment Mix flexibility a wide range of available treatments Volume flexibility the ability to adjust the number of patients treated Delivery flexibility the ability to reschedule appointments

Product/service flexibility the introduction of new models Mix flexibility a wide range of options available Volume flexibility the ability to adjust the number of vehicles manufactured Delivery flexibility the ability to reschedule manufacturing priorities

Flexibility means different things in different operations (Cont.)

Bus Company

Supermarket

Product/service flexibility the introduction of new routes or excursions Mix flexibility a large number of locations served Volume flexibility the ability to adjust the frequency of services Delivery flexibility the ability to reschedule trips

Product/service flexibility the introduction of new goods or promotions Mix flexibility a wide range of goods stocked Volume flexibility the ability to adjust the number of customers served Delivery flexibility the ability to obtain out-of-stock items (very occasionally)

Cost means different things in different operations

Cost means different things in different operations (Cont.)

Operations Strategy
Operations is not the same as operational.

Operations
are

the resources that create products and services.

Operational
is

the opposite of strategic, meaning day-to-day and detailed.

Operations strategy
is

the specific decisions and actions which set the operations role, objectives and activities.

Four Perspectives

operation strategy is a top-down reflection of what the whole group or business wants to do; operations strategy is a bottom-up activity where operations improvements cumulatively build strategy; operations strategy involves translating market requirements into operations decisions; operations strategy involves exploiting the capabilities of operations resources in chosen markets.

Implementer of Business Strategy

It is operation which puts it into practice For example If an airline strategy is to attract high proportion of business class travelers.
Operations part of each function will operationalize the strategy. Marketing operations Organize promotion and pricing

Personal operations Train its cabin and ground staff

Operational Function Supervise the refitting of the aircraft, organize express ticketing, baggage handling and waiting facilities, and design special food beverages and entertainment

Supporting Business Strategy

Develop resources and capabilities to meet ever changing needs and requirements
For Example A manufacture of PCs has decided to compete by being the first in the market -NPI

Supporting Business Strategy (CONT.)

Operation functions needs to be capable of coping with the changes due to constant NPI.

Flexible develop or purchase process Organize and train staff for change product Develop relationships with buyer for quick response

The better the operation does at the above areas, the more support it is giving to achieve companys strategy.

The Five Ps

The Product
The Plant The Processes The Programmes The People

Structural and infrastructural strategic decision areas

Structural strategic decisions New product/service design Typical questions which the strategy should help to answer How should the operation decide which products or services to develop and how to manage the development process?

Supply network design

Should the operation expand by acquiring its suppliers or its customers? If so, what customers and suppliers should it acquire?
How should it develop the capabilities of its customers and suppliers?

Process technology

What types of process technology should the operation be using? Should it be at the leading edge of technology or wait until the technology is established?

Infrastructural strategic decision areas

Infrastructural strategic decisions Typical questions which the strategy should help to answer Job design and organization How should responsibility for the activities of the operations function be allocated between different groups in the operation? What skills should be developed in the staff of the operation? How should the operation forecast and monitor the demand for its products and services? How should the operation decide how much inventory to have and where it is to be located? How should the operation choose its suppliers? Develop and monitor them? How should the operations performance be measured? How should the operation maintain its resources so as to prevent failure?

Planning and control

Inventory

Supplier development
Improvement

Failure prevention risk and recovery