Operation Strategy(LECT 2)[1]

8/3/2019 Operation Strategy(LECT 2)[1]

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OS is concerned with settingbroad policies and plans forusing the resources of a firm to

best support its long termcompetitive strategy.

Strategy specifies howthe firm will employ itsproduction capabilitiesto support its corporate

strategy.

Operations Strategy is the toolthat helps to define the methodsof producing goods or a service

offered to the customer


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Slack and Lewis, Operations strategy is the totalpattern of decisions which shape the long-termcapabilities of any type of operations and theircontribution to the overall strategy, through thereconciliation of market requirements with operationsresources.

A plan to transform an organization's overallstrategic objectives into operationaldeliverables.It involves the design of the product or service and

the processes by which the product or service isproduced; the way in which production is managedand controlled; and the design of processes forthe constant improvement of the operations


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ExampleStrategy Process

Customer Needs

Corporate Strategy

OperationsStrategy

Decisions on Processesand Infrastructure

More Product

Increase Org. Size

Increase ProductionCapacity

Build New Factory


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Given the choices customers face today, how do theydecide which product or service to buy?

Different customers are attracted by differentattributes.

Some customers are interested primarily in the cost ofa product or service and, correspondingly, somecompanies attempt to position themselves to offer thelowest prices.


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COSTORPRICE:Make the product or deliver theservice cheap: within every industry, there is usually asegment of the market that buys solely on the basis of lowcost. To successfully compete in this niche, a firm must be thelow cost producer, but even this does not guarantee

profitability and success.

Price , however is not only basis on which a firm cancompete. For example, we do buy premium shirts from

Louis Philippefor their performance or features andthey definitely not the cheapest available.


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QUALITY :Make a great product or deliver a great service:there are two characteristics of a product or service that define quality:

Design quality & Process quality.

Design quality:Relates to the set of features the product or servicecontains.

thehigher- quality productcommands a higher price in the market placedue to its special features

over designed products and services with too many or inappropriatefeatures will be viewed as prohibitively expensive.

under-designed products and serviceswill lose customers to productthat cast a little more.

Process quality:it relates to thereliabilityof the product & service.the goal of process quality is to produce defect free products &

services


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Delivery speed: Make the product or deliverthe service quickly:A firms ability to deliver more quickly than its competitors may be

critical . A company that can offer an on site repair service in only 1 or 2has a significant advantage over a competing firm that guaranteesservice only within 24 hours

Coping with changes in demand: Changeits VolumeA company ability to respond to increases and decreases in demand isimportant to its ability to compete.

When demand is increasing and strong= costs are continuously reducedBut when demand decreases it led to laying off employees and relatedreduction in assets.


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Flexibility and new- product introductionspeed: CHANGE IT

Refers to the ability of a company to offer a wide variety ofproducts to its customers. An important element of this abilityto offer different products is the time required for a companyto develop a new product and to convert its processes to offerthe new product.

Delivery reliability: Deliver it whenpromised

This dimension relates to the firms ability to supply product orservice on or before a promised delivery due date.

For a service firm such as Federal Express, delivery reliability isthe cornerstone of its strategy.


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In the Kaplan and Nortons Generic Strategy Map,under the Financial Perspective, theProductivity Strategy is generally madeup from two components:

1. Improve cost structure: Lower direct andindirect costs

2. Increase asset utilization: Reduce working andfixed capital


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In the Kaplan and Nortons Generic Strategy Map, under theFinancial Perspective, the Revenue Growth Strategy isgenerally made up from two components:

1. Build the franchise: Develop new sources ofrevenue

2. Increase customer value: Work with existingcustomers to expand

relationships with company


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In the Kaplan and Nortons Generic Strategy Map,

under the Customer Perspective, there arethree ways suggested as means of differentiating

a company from others in a marketplace:1. Product leadership

2. Customer intimacy3. Operational excellence


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In the Kaplan and Nortons Generic Strategy Map,under the Learning and Growth Perspective,there are three principle categories of intangible

assets needed for learning:

1. Strategic competencies

2. Strategic technologies3. Climate for action


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Customer Needs

New product : Old product

Competitive

dimensions & requirements

Quality, Dependability, Speed, Flexibility, and Price

Operations & Supplier capabilities

R&D Technology Systems People Distribution

Support Platforms

Financial management Human resource management Information management

Enterprise capabilities


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Strategy Map

Financial Perspective

Customer Perspective

Internal Perspective

Learning &

Growth Perspective

Improve Shareholder Value

Customer Value Proposition

Build-Increase-Achieve

A Motivated and Prepared

Workforce

What it is about!


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Objectives of manufacturingstrategy development are1) To translate required competitive

dimensions(typically obtained frommarketing) into specific performancerequirements for operations and

2) To make plans necessary to ensurethat operations(and enterprise)

capabilities are sufficient toaccomplish them.

Steps for prioritizing thesedimensions are as follows:a) Segment the market according to the

product group

b) Identify the product requirements,demand patterns, and profit marginsof each group

c) Determine the order winners andorder qualifiers for each group

d) Convert order winners into specificperformance requirements


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Process-based Capacities that transforms material or information and

provide advantages on dimensions of cost and quality

Systems-based Capacities that are broad-based involving the entire

operating system and provide advantages of shortlead times and customize on demand

Organization-based Capacities that are difficult to replicate and provide

abilities to master new technologies

Documents

Operation Strategy(LECT 2)[1]