Operations Strategy: 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)
Corporate Strategy: 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
Corporate Strategy: Corporate Strategy Long term future
defines the business the firm will pursue
opportunities and threats
strengths and weakness
growth and business strategies
Corporate Strategy: 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?
Corporate Strategy: 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)
Corporate Strategy: 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
Corporate Strategy: 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
Strategic Positioning: Strategic Positioning Defines those positions that a firm wants to occupy in the competitive product space.
Competitive Dimensions
Cost
Quality
Time
Flexibility/Variety
Operational Effectiveness: 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.
Corporate Strategy, Competitive Priorities and Functional Inter-relationships: 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
The Strategic Hierarchy: 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
Matching Products and Process: Matching Products and Process Hayes and Wheelwright (1979)
Developing an Operations Strategy (Terry Hill): 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.
Corporate Objectives: 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
Marketing Strategy : 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?
Order Winners & Qualifiers: 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
Procedure for Establishing Order-winners and Qualifiers: 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
Process Choice: 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
Infrastructure: Infrastructure Procedures,systems, controls, organizational issues
Outputs of Manufacturing Strategy: 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
Strategy Drivers: 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
Historical Evolution of Strategy and Process Management: 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 -> 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
Operations Management as a Competitive Weapon : 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
Summary: 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