B207A Big ideas in organizations

1. B207ABig ideas in organizations Shaping Business Opportunities I

2. Block 1- Reading 12 Operations Strategy

3. Operations strategy • Operations strategy: ‘the pattern of strategic decisions and actions that set the role, objectives and activities of the operation’. • These decisions are mainly taken in the development of four key areas (Key operations strategy ): capacity and facilities,supply chain development, technology and workforce. Reading 12: Operations strategy

4. Defining operations strategy (Table 1, page 102) Reading 12: Operations strategy

5. Operations strategy • In practice, the process of operations strategy development is often seen as one of market reconciliation. How are resources best configured and managed to fit market requirements? Reading 12: Operations strategy

6. Operations strategy • Three general themes about how operations strategy is defined and reconciled: • The predominant theme is one of market influence. Operations strategy decisions are taken in the context of the market position of the organization, taking into consideration any differing requirements based on different markets or segments. • Some authors link operations strategy to the ideas used in the strategic management literature of competences or capabilities. Can organizations exploit their operations’ competences or performance capabilities in the marketplace? • Some operations strategies can be driven by a corporate or entrepreneurial vision. Many entrepreneurs take a very personal view of how to configure their operations, ignoring the theory of how operations should be designed. Reading 12: Operations strategy

7. Performance objectives Operations requirements are classified by six generic types of performance objectives that influence how the operation affects customer satisfaction: • Quality • Speed • Flexibility • Sustainability • Dependability • Cost Reading 12: Operations strategy

8. Quality • Conformance quality: High-performance products often need to have their quality defined by clear specification, either in terms of what they can do or in terms of a product characteristic. • It must also be considered that customers judge quality just through perception. Reading 12: Operations strategy

9. Speed • Operations need to perform a task in the shortest possible time span. • This speed measure is referred to as throughput time, which is defined as the time taken for a resource to work through a process from start to finish. Reading 12: Operations strategy

10. Flexibility Flexibility: the ability to change what you do. There are three main types of flexibility that operations might possess as a performance characteristic: • Variety flexibility is the ability to produce more than one type of product or service. • Mix flexibility is the ability to cope with different types of customers or products at the same time or in a close sequence. • Volume flexibility is the ability to adjust how much you produce dependent on market demand. Response flexibility: a change is needed very quickly, for example to respond to a sudden rush of customers into a shop. Range flexibility: a change of great magnitude is needed, but this can be done over time in a planned way. (See table 2 page 107 ) Reading 12: Operations strategy

11. Sustainability • One widely used definition of sustainability is: • (A) Capable of being maintained at length without interruption, weakening or loss in power or quality. • (B) Of, relating to, or being a method of harvesting or using a resource so that the resource is not depleted or permanently damaged. • There are three well-known aspects of sustainability: ◦ Environmental sustainability ◦ Economic sustainability ◦ Social sustainability. Reading 12: Operations strategy

12. Dependability • Dependability is about keeping your promises, focusing mostly on delivery promises. • Don’t’ confuse dependability with quality; good products that don’t break down are dependable- but this is not what is meant with dependability. Schedule adherence is a key issue with dependability. Reading 12: Operations strategy

13. Cost • It seems obvious that, in the majority of markets, customers will consider price as one of the main buying criteria. • Although there isn’t always a link between unit cost and price, producers in markets that are price-sensitive will have to adjust their operations strategy to take account of the cost impact of their decisions. • The total unit cost is influenced directly by factors such as the cost of materials and labour, but can also be influenced by factors such as the cost of equipment or working capital. It should be no surprise that many low-cost producers try to develop lean processes where work-in-progress is minimised, reducing the need for working capital. Reading 12: Operations strategy

14. Polar representation of performance objective • In most practical situations, the process of determining the importance of performance objectives is largely subjective rather than scientific. • One practical approach is to consider all the performance objectives and allocate scores that add up to 100 across each of the objectives. Reading 12: Operations strategy

15. Polar representation of performance objective Reading 12: Operations strategy

16. Block 1 Session 10: Marketing and operations

17. Block 1- Reading 13 Marketing and operations coordination

18. Marketing and operations coordination • The relationship between marketing and operations functions within many organizations an often be quite difficult. • A commonly used term is ‘siloed working’ which represents a lack of communication between management functions. Reading 13: Marketing and operations coordination

19. The importance of strategic coordination • Companies driven by marketing planning could allow operations strategy to drift through lack of attention. • The cause of conflicts between marketing and operations: • A difference in the way marketing managers and operations managers were evaluated and rewarded. • Inherent complexity, with marketing managers relying on ‘soft’ (qualitative) data for marketing activities and operations managers using ‘hard’ (quantified) data for manufacturing purposes. The two can be difficult to match up. • Cultural differences, with marketing and operations managers having different task orientations and social concerns. Reading 13: Marketing and operations coordination

20. The importance of strategic coordination • Complicating factors include: • The need to interface not only with each other but other functions such as research and development and engineering. • The need for cooperation being greater for companies undergoing rapid growth. • Technological change putting greater strain on product demand and processes. • The difficulty of changing increasingly automated operations. • The greater visibility of poor performance from capital costs and constraints. (see table 1 page 118 for examples of conflict between the two functions) Reading 13: Marketing and operations coordination

21. The importance of strategic coordination • Situations where marketing and operations strategies inadvertently diverge during product life cycles include: • Where the nature of competition changes • Where customers’ needs adapt • Where the operations requirements change • Where marketing strategies enter new markets with different performance objectives • Where subtle changes to market positioning require operations to adapt its strategy • Where competitors may force change on both marketing and operations Reading 13: Marketing and operations coordination

22. Improving coordination Signs of improved coordination between marketing and operations: • New roles are being created that combine the two functions into ‘marketing operations managers. • Traditional management of marketing channels is also beginning to be replaced by holistic approaches which prioritize: • Speed – to increase responsiveness and reduce the cost of life cycle times . • Insight - to improve understanding of customers, target segments and use the best mix of media to reach them. • Access – to provide dynamic capability through continuous input facility (including data, creative assets and business decisions) . • Flexibility – to adapt to changing needs, priorities, preferences and demand. Reading 13: Marketing and operations coordination

23. Improving coordination • The activities of demand creation and demand fulfilment should be brought closer together. One example of this is from Christopher and Ryals (2014), who propose a new discipline of demand chain management (see Figure 1 page 120). • This framework shows how there might be degrees of coordination between marketing and operations functions. In some cases this could be limited to short-term collaboration on activities such as promotionsthat create demand surges. At the fullest extent the process of developing marketing and operations plans could be fully integrated. Reading 13: Marketing and operations coordination

24. Block 1 Session 10: Marketing and operations

25. IKEA case study • See IKEA case page 121 • Go to session 10 and browse through the activitiesabout IKEA.