Operations Strategy

1
Operations Strategy

• Strategy The science and art of conducting a
  military campaign on a broad scale
• A plan or technique to achieve some end.
• Greek strategos general
• (stratos army) (agein to lead)

2
Corporate Strategy

• To be successful, a company must attain and
  sustain a competitive advantage over other
  companies in the same industry.
• How?
• The essence of strategy is what to do and what
  not to do (M. Porter, 1996).
• Mission
• Long term Goals
• Complementary Functional Strategy
• Supporting Management Practices

3
Corporate Strategy

• Long term future
• defines the business the firm will pursue
• opportunities and threats
• strengths and weakness
• growth and business strategies

4
Corporate Strategy

• defines the business the firm will pursue
• opportunities and threats
• strengths and weakness
• growth and business strategies

• Mission?
• What business are we in?
• Who are our customers?
• What are our beliefs?
• How do we measure success?

5
Corporate Strategy

• defines the business the firm will pursue
• opportunities and threats
• strengths and weakness
• growth and business strategies

• Environmental Scanning
• Monitor trends in
• industry (technological change and competitors)
• market place (changing customer preferences)
• society (political conditions)
• vital resources (availability)

6
Corporate Strategy

• defines the business the firm will pursue
• opportunities and threats
• strengths and weakness
• growth and business strategies

• Core competencies
• workforce
• facilities, location
• market, financial and operational know-how
• systems and technology

7
Corporate Strategy

• defines the business the firm will pursue
• opportunities and threats
• strengths and weakness
• growth and business strategies

• Global alliances?
• Joint venture
• licensing of technology
• franchise
• off-shore production
• logistics partnership

8
Strategic Positioning

• Defines those positions that a firm wants to
  occupy in the competitive product space.
• Competitive Dimensions
• Cost
• Quality
• Time
• Flexibility/Variety

9
Operational Effectiveness

• process infrastructure and management for
  expedient production and delivery of goods and
  services
• Strategic Fit
• business strategy
• operational strategy
• management policies
• Strategic fit means consistency between the
  competitive advantage that a firm seeks and the
  process capabilities and managerial policies that
  it uses to achieve that advantage.

10
Corporate Strategy, Competitive Priorities and
Functional Inter-relationships

• Market analysis
• segmentation
• needs assessment

Socioeconomic and business environment

• Corporate strategy
• missions
• goals
• distinctive

• Future directions
• global strategy
• new products/services

• Competitive priorities
• cost
• quality
• time
• flexibility

• Capabilities
• current
• needed
• plans

Functional area strategies
11
The Strategic Hierarchy

• Corporate/Business Strategy
• SWOT
• Functional Strategies
• marketing
• identify customers, products and competitors
• finance
• acquisition and allocation of resources
• operations
• configure and develop business processes for
  production and delivery of products
• process capabilities must be aligned with desired
  product attributes

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Matching Products and Process

• Hayes and Wheelwright (1979)

13
Developing an Operations Strategy (Terry Hill)

• 1. Define corporate objectives.
• 2. Determine marketing strategies (strategic
  positioning).
• 3. Assess how different products qualify in their
  respective markets and win orders against
  competitors.
• 4. Establish appropriate operational processes
  for product manufacture and delivery.
• 5. Provide the operational infrastructure to
  support production/delivery.

14
Corporate Objectives

• Reflect nature of economy, markets, opportunity
  and company preference
• Well-thought out, consistent, provide strategic
  direction
• Sets boundaries and parameters against which
  inputs and targets can be measured
• profit vs sales and investment
• absolute growth
• market share growth
• employee policies
• environmental/social issues

15
Marketing Strategy

• Establish market plans and control units
• bundle products with closely related market
  targets and similar marketing characteristics
• shared marketing programmes
• Situational analysis of markets
• current and future volumes
• define end-user characteristics
• assess patterns of buying behaviour
• examine industry practices and trends
• identify key competitors and review the business
  relative strategic position
• Identify target markets and objectives
• in co-ordination with other functional strategies
  (operational support, investment needs)
• product market segments range, mix, volume
• competitive priorities
• innovation? Market-leader?

16
Order Winners Qualifiers

• Order Qualifiers are those (minimum) criteria
  that a company must meet to be considered as a
  possible supplier (e.g. ISO 9000).
• Order winners are those criteria that wins the
  orders.
• Invariably due to re-directing competitive
  priorities
• Define relative importance (allocate weights)
  among order winning criteria
• Monitor changing weights and criteria over time

17
Procedure for Establishing Order-winners and
Qualifiers

• Separate business into different segments
• Focus on a sample product and/or customer from
  each segment and focus on two future time periods
• Provide actual and forecast sales volume
• Identify qualifiers and order winners (with
  weights) for each sample product/customer
• identify qualifiers that are potential
  order-winners
• identify qualifiers that are order-losing
  sensitive
• iterative
• integrative

18
Process Choice

• Design and choice of operational process for
  manufacture and delivery of products
• Choice should reflect the volume and
  order-winning criteria involved
• reflect current and future trade-offs

19
Infrastructure

• Procedures,systems, controls, organizational
  issues

20
Outputs of Manufacturing Strategy

• Review of implications for manufacturing
  processes and infrastructure support for current
  and future products
• Assess degree of match between capabilities and
  order-winning and order-qualifying needs
• Continual monitor changes in match and mismatch
• Necessary operational re-design, infrastructure
  investments, change schedule integrated into
  corporate strategy in co-ordination with other
  functional strategies

21
Strategy Drivers

• Market-driven
• starts with key competitive priorities and then
  develops processes to support them
• Process-driven
• starts with given set of process capabilities and
  then identifies market positions that can be
  supported
• Focussed strategy
• targeting limited but congruent set of objectives
  in terms of demand and supply
• broad corporate strategy focussed business
  strategies

22
Historical Evolution of Strategy and Process
Management

• B.C. to 1765
• commerce limited by transportation (slow) speed
  and costs
• artisan system, guilds
• 1765 industrial revolution
• factory system
• Adam Smith division of labour, functional
  specialisation
• James Watt steam engine, machines replace labour
• 1810 - 1913 mass production
• Eli Whitney interchangeable parts, no more
  custom fitting
• Ford assembly line (Model T 12.5 -gt 1.5 hrs)
• 1930 product variety
• General Motors A car for every purpose and
  every price
• 1970 quality
• Toyota kanban, TQM
• 2000 supply chain management
• delivery speed, availability, customization

23
Operations Management as a Competitive Weapon

• Dell vs. IBM
• HP
• modular design
• re-designed production/distribution process
• Michael Hammer
• re-engineering the supply chain is the key to
  manufacturing success in the new millennium
• inventory is a substitute for information

24
Summary

• Tool kit
• Linear optimisation (Solver)
• Integer linear optimisation (Solver)
• Multi-objective
• goal programming (Solver)
• AHP (Excel, ExpertChoice)
• Decision Analysis (TreePlan)
• Queuing (Excel worksheet)
• Simulation (Excel, CrystalBall)
• Implementation
• Strategic Fit