The strategic role of Operations and

Operations Strategy

By: Munyao MulwaDept of Management Science

DOM 511 : Operations Management Practice

Concerned with meeting existing market needs as well as exploiting opportunities for potential market segments

Making the best use of resources & leveraging these resources either alone or with partners

Devising and implementing processes that will enable the enterprise to compete & ideally create competitive advantage

Concerned with developing capabilities within the firm’s operations that are superior to other competitors and that other competitors either cannot copy or will find it extremely difficult to copy

While a vision unifies an Organization, a mission states what the firm is about and strategy is says how the organization will achieve the mission

Provides Consistency in Decisions

Keeps an Organization moving in the right Direction

Example ( Kai-Z household Pride Ltd)

The mission (the ‘what’ element) : ‘to crush, squash and slaughter selling of household utensils and appliances in supermarkets’

(The ‘How element ‘, ->> by locating low cost, variety led utensils & appliances outlets in all major cities & towns in Kenya within 18 months Consider Operations Capabilities Consider capabilities outside the firm

An Operations Strategy must include at least the following; amounts of capacity required by the organization to achieve

its aims; the range and locations of facilities; technology investment to support process and product

developments; formation of strategic buyer–supplier relationships as part

of the organization’s ‘extended enterprise’; the rate of new product or service introduction; organizational structure – to reflect what the firm ‘does

best’, often entailing outsourcing of other activities.

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Customer Needs Corporate Strategy

Operations Strategy

Alignment

CoreCompetencies

Decisions

Processes, Infrastructure, and Capabilities

What is the role of the operations function?

Operations as effector

Operations as follower

Operations as leader

Ops

Strategy

Operationsimplements strategy

Operationssupports strategy

Operationsdrives strategy

Strategy Ops

Strategy

Ops

The 3 key attributes of operations Operations Contribution

Implementing

Supporting

Driving

Be Dependable

Operationalise strategy

Explain Practicalities

Be Appropriate

Understand strategy

Contribute to decisions

Be Innovative

Provide Foundation of strategy

Develop long-term Capabilities

The Strategic Role of the Operations Functions

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Cost Quality Delivery Flexibility Delivery Speed Delivery Reliability Coping with Changes in Demand Flexibility and New Product Introduction

Speed Other Product-Specific Criteria

Eliminate all wasteEliminate all waste Invest inInvest in

Updated facilities & equipmentUpdated facilities & equipment Streamlining operationsStreamlining operations Training & developmentTraining & development

Please the customerPlease the customer Understand customer Understand customer

attitudes toward and attitudes toward and expectations of expectations of quality quality

Produce wide variety Produce wide variety of productsof products

Introduce new Introduce new productsproducts

Modify existing Modify existing products quicklyproducts quickly

Respond to customer Respond to customer needsneeds

Fast movesFast moves Fast adaptationsFast adaptations Tight linkagesTight linkages

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Cost

Quality

DeliveryFlexibility

FOCUS FOCUS

FOCUSFOCUS

Plant within a Plant (PWP)

TraditionalApproach

Advanced Approaches

World Class Manufacturing

Trade-offs

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World-class manufacturers no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs. They are order qualifiers & order winners.

Order qualifiers - a screening criterion that permits a firm’s products to be considered as possible candidates of purchase e.g on time delivery

Order winners – A criterion that differentiates the products or services of one firm from another e.g price, quality & reliability

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Service can be an “order winner”

Warranty

RoadsideAssistance

LoanVehicles

Leases

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Customer Needs

New and CurrentProducts

Performance Prioritiesand Requirements

Quality, Dependability,Speed, Flexibility, and Price

Operations & Supplier Capabilities

Technology PeopleSystems R&D CIM JIT TQM Distribution

Support Platforms

Financial Management Human Resource Management Information Management

Enterprise Capabilities

Strategic Vision

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Consider the case of a personal computer manufacturer.

1. How would we segment the market according to product group?

2. How would we identify product requirements, demand patterns, and profit margins for each group?

3. How do we identify order winner and order qualifiers for each group?

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4. How do we convert order winners into specific performance requirements?

Us(Core competencies)

Competition(Them) Differentiation

Strategy Begins with Priorities

1. Internally Neutral2. Externally Neutral3. Internally Supportive4. Externally Supportive

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Stage 1--Internally Neutral Minimize manufacturing’s negative

potential Management control systems

Stage II--Externally Neutral Achieve parity with competitors Follow industry practice

Stage III--Internally Supportive Support the business strategy

Stage IV-- Externally Supportive Manufacturing-based competitive

advantage

Link Strategy With

Operations

Give an Operations Advantage

Externally supportive

Adopt best Practice

Correct the Worst

Problems

Increasing contri

bution of o

peratio

ns

Internally supportive

Externally neutral

Internally neutral

The strategic role of operations can be defined by its aspirations (Hayes and Wheelwright)

STAGE 1 STAGE 2 STAGE 3 STAGE 4

The ability

to Implement

The ability

to Drive strategy

Stop holding the

organisation back

Be as good as

competitors

Be clearly the best in

the industry

Redefine the industry’s

expectations

The abilityto

support Strategy

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Stage I. Available for Service Reactive, non-performance-based

survival

Stage II. Journeyman

Firm neither sought nor avoided

Reliable but uninspired operation

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Stage III. Distinctive Competence Achieved

Reputation for meeting customers’ expectations

Customer-focused operations--management support

Stage IV. World Class Service Delivery

Firm name synonymous with service excellence--focus on delighting rather than satisfying customers

Continuous learning and improvement of operations

Products Processes and

Technology

Capacity

Human Resources Quality

Facilities Sourcing

Services

Operating Systems

Make-to-orderMake-to-order Made to customer specifications Made to customer specifications

after order receivedafter order received Make-to-stockMake-to-stock

Made in anticipation of demandMade in anticipation of demand Assemble-to-orderAssemble-to-order

Add options according to Add options according to customer specificationcustomer specification

Job shopJob shop Production of product to customer orderProduction of product to customer order

Batch productionBatch production Process many jobs at same time in batchProcess many jobs at same time in batch

Mass productionMass production Produce large volumes of standard product Produce large volumes of standard product

for mass marketfor mass market Mass customizationMass customization

Very high volume unique productsVery high volume unique products Continuous ProductionContinuous Production High volume commodity productsHigh volume commodity products

How much capacity to provideHow much capacity to provide Size of capacity changesSize of capacity changes Handling excess demandHandling excess demand Hiring/firing Hiring/firing

workersworkers Need for new Need for new

facilitiesfacilities

Best size for facility?Best size for facility? Large or small facilitiesLarge or small facilities Facility focusFacility focus Facility locationFacility location Global facilityGlobal facility

Skill levels requiredSkill levels required Degree of autonomyDegree of autonomy PoliciesPolicies Profit sharingProfit sharing Individual or team Individual or team

workwork Supervision methodsSupervision methods Levels of Levels of

managementmanagement TrainingTraining

Target levelTarget level MeasurementMeasurement Employee involvementEmployee involvement TrainingTraining Systems needed to ensure Systems needed to ensure

qualityquality Maintaining quality awarenessMaintaining quality awareness Evaluating quality effortsEvaluating quality efforts Determining customer Determining customer

perceptionsperceptions

Degree of vertical Degree of vertical integrationintegration

Supplier selectionSupplier selection Supplier Supplier

relationshiprelationship Supplier qualitySupplier quality Supplier Supplier

cooperationcooperation

Execute strategy dailyExecute strategy daily Information technology Information technology

supportsupport Effective planning & control Effective planning & control

systemssystems Alignment of inventory Alignment of inventory

levels, scheduling priorities, levels, scheduling priorities, & reward systems& reward systems

CorporateStrategy

MissionVision

MarketingStrategy

FinancialStrategy

OperationsStrategy

BusinessEnvironment

Voice of the Customer

From Formulating => Making it happen A need for breakdown/ translation at

department level A need to go from (long term) Strategic

Goals to daily Tactics & Actions A Strategic Planning Hierarchy is

required

Download two articles from the e-learning portal & read them; Too busy to develop an operations

strategy Operations strategy: genealogy,

classification and anatomy