The three levels of operations strategy process

1. Increasing complexity Align resources with requirements Level 1 - Fit Develop sustainable competitive advantage Level 2 - Sustainability Include impact of uncertainty Level 3 - Risk The three levels of operations strategy process

2. 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

3. 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

4. In operations strategy ‘fit’ is the alignment between market and operations capability Level of market requirements Line of fit Alignment between market and operations capability Y X Level of operations resource capability

5. ‘Fit’ can also mean that market requirements are moved to exploit operations resource capabilities ‘Fit’ means that the operations resources and processes are aligned with the requirements of its markets. Line of fit Market requirements Operations resource capability

6. Market Segmentation Operations Strategy Decision Areas Operations Performance Objectives Market Positioning Operations Capabilities Competitor Activity State market requirements in terms of operations performance objectives Make strategic operations decisions … to enhance core capabilities Define competitive position Understand markets ‘Fit’ operations resources to market requirements ‘fit’

7. Tangible and Intangible Resources Operations Strategy Decision Areas Potential Market Positioning Operations Capabilities Operations Performance Operations Processes Define market potential of operations performance Make appropriate strategic operations decisions Determine competitive position Identify core capabilities Understand resources and processes ‘Fit’ market positioning to operations resources capabilities

8. Critical Critical Critical Critical Critical Critical Critical Resource Usage Quality Speed Market Competitiveness Dependability Performance objectives Flexibility Cost Development and Organization Process Technology Supply Network Capacity Decision areas IBM operations strategy matrix (1970-1985)

9. Ideal resource capability Minimum resource capability Line of fit B y2 ‘Ideal’ market requirements Y Level of market requirements Tight fit Minimum market requirements y1 A x1 X x2 Level of operations resource capability The level of ‘fit’ may not always be ‘tight’

10. Critical Critical Critical Critical Critical Coherence Correspondence Comprehensive? ‘Fit’ is concerned with ensuring comprehensiveness, correspondence, coherence and criticality Resource Usage Quality Speed Market Competitiveness Dependability Performance objectives Flexibility Cost Development and Organization Process Technology Supply Network Capacity Decision areas

11. 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 in processes • Statistical process control • Enhance quality capability • Quality as a performance criteria • Long-term plans • Quality culture • Continuous improvement • Quality performance measurement and control • Operational supervision is important • Communication • Appropriate org. structure Quality Market Competitiveness Performance objectives Speed Dependability Flexibility Cost Development and Organization Process Technology Supply Network Capacity Decision areas To be strategic, quality initiatives need to comprehensively cover all decision areas

12. Step 1 Step 2 Step 3 Step 4 Step 5 How do products or services win orders? Operations strategy Corporate objectives Marketing strategy Infrastructure Process choice • Growth • Profit • ROI • Other ‘financial’ measures • Product/service markets and segments • Range • Mix • Volumes • Standardisation or customisation • Innovation • Leader or follower • Price • Quality • Delivery speed • Delivery dependability • Product/service range • Product/service design • Brand image • Technical service • Process technology • Trade-offs embodied in process • Role of inventory • Capacity, size, timing, location • Functional support • Operations planning and control systems • Work structuring • Payment systems • Organisational structure The Hill framework of operations strategy formulation

13. OPPORTUNITIES AND THREATS? THE EXISTING OPERATION • Facilities • Capacity • Span of process • Processes • Human resources • Quality • Control policies • Suppliers • New Products • WHAT THE MARKET WANTS? • Features • Quality • Delivery • Flexibility • Price WHAT DO WE NEED TO DO TO IMPROVE THE REVISED OPERATIONS STRATEGY? • HOW THE OPERATION PERFORMS • Features • Quality • Delivery • Flexibility • Price The Platts-Gregory procedure

14. Product family Market requirements Achieved performance Delivery lead-time Not significant Long Ex-stock Short Reliability Critical: Project delay Good Into stock point Variable Features Many features/ High absolute level Fit for purpose Few features Quality Total reliability essential High Acceptable at price Acceptable Flexibility design All designs customer specified All products customised Standard range only Standard only Volume Highly cyclic variable market Volume variations high Stable market Little variation required Volume variations low Price cost Non-price competition dominant High Price competition dominant Low Uses of profiling in the Platts-Gregory procedure