02 - Operations Strategy - Lecture

STRM046: Managing Operations and the Supply Chain

Operations strategy

MBA - MASTER OF BUSINESS ADMINISTRATION

Dr Luciano Batista BSc MSc PhD MILT Senior Lecturer in Operations Management Member of CELAS Centre for Excellence in Logistics and Supply Chain Member of the Chartered Institute of Logistics and Transport UK Editorial Member of the International Journal of Supply Chain and Operations Resilience

What is strategy and operations strategy?

What is the difference between a top-down and a bottom-up view of operations strategy?

What is the difference between a market requirements and an operations resources view of operations strategy?

How can an operations strategy be put together?

Key operations questions

Operations strategy at Ryanair

1. What do they have to be good at to compete in their markets?

2. How do their operations help them to achieve this?

Source: Slack et al. (2010)

Operations strategic decisions

Stripped down service

One technology Cheap airport

locations Fast turnround

Market requirements

Low prices

Reliability

Basic service

Ryanair

Operations strategy at Ryanair

Understanding strategy

What is strategy?

Definition of the future direction and actions of a company defined as approaches to achieve specific objectives. It is about

Setting broad objectives that direct an enterprise towards its overall goal

Planning the path (in general rather than specific terms) that will achieve these goals

Stressing long-term rather than short-term objectives

Dealing with the total picture rather than stressing individual activities

Being detached from, and above, the confusion and distractions of day-to-day activities

Strategic decisions are those decisions which are widespread in

their effect on the organization to which the strategy refers, define

the position of the organization relative to its environment, and

move the organization closer to its long-term goals.

Strategic decisions

Operations is not the same as operational

Operations are the resources that create products and services.

Operational is the opposite of strategic, meaning day-to-day and detailed.

So, one can examine both the operational and the strategic aspects of operations.

How is operations strategy different to operations management?

The time scale is longer

Short-term for example,

capacity decisions

1-12 months

Dem

and

Long-term for example, capacity

decisions

1-10 years

Dem

and

Operations management Operations strategy

The level of analysis is higher

Operations management Operations strategy

Micro - level of the process

Macro - level of the total operation

How is operations strategy different to operations management?

The level of aggregation is higher

Operations management Operations strategy

Detailed

For example.....

Number of customer orders on a specific day

Aggregated

For example.....

Evolution of customer orders over the last 12

months

How is operations strategy different to operations management?

The level of abstraction is higher

Operations management Operations strategy

Concrete

For example

How do we improve our purchasing procedures?

Philosophical

For example

Should we develop strategic alliances with

suppliers?

How is operations strategy different to operations management?

The 4 stage model of operations contribution In

crea

sin

g st

rate

gic

imp

act

Increasing operations capabilities

Externally supportive

Redefining industry

expectations

STAGE 4 Give an Operations Advantage

Driving strategy

Based on Hayes & Wheelwright framework

Internally supportive

Clearly the best in the

industry

STAGE 3 Link strategy with operations

Supporting strategy

Externally neutral

As good as competitors

STAGE 2 Adopt best practice

Implementing strategy

Internally neutral

STAGE 1 Correct the worst problems

Holding the organisation

back

Top - down Perspective

What the business

wants operations to do

Operations resources

Perspective

What operations resources can do

What day-to-day experience suggests operations should do

Bottom - up Perspective

Market requirement Perspective

What the market position requires operations to do

Operations strategy

The four perspectives on operations strategy

Corporate strategy

Business strategy

Emergent sense of what the strategy should be

Operational experience

Top-down and bottom-up perspectives of strategy

Operations strategy

The strategy hierarchy

Key strategic decisions

Influences on decision making

Business strategy

What is the mission?

What are the strategic objectives of the firm?

How to compete?

Customer/market dynamics

Competitor activity

Core technology dynamics

Financial constraints

Corporate strategy

What business to be in? What to acquire? What to divest? How to allocate cash?

Economic environment Social environment Political environment Company values and ethics

Functional strategy

How to contribute to the

strategic objectives?

How to manage the

functions resources?

Skills of functions staff

Current technology

Recent performance of the

function

Introduction Growth Maturity Decline

Sale

s vo

lum

e

Volume

Customers

Competitors

Variety of product/

service design

Slow growth in sales

Innovators

Few/none

Customization or frequent design changes

Rapid growth in sales volume

Early adopters

Increasing numbers

Increasingly standardized

Sales slow and level off

Bulk of market

Stable number

Emerging dominant types

Market needs largely met

Laggards

Declining numbers

Possible move to commodity standardization

The effects of the product / service life cycle

Time

Different competitive factors imply different performance objectives

Competitive factors If the customers value these ...

Performance objectives Then, the operations will need to

excel at these ...

Low price Cost

High quality Quality

Fast delivery Speed

Reliable delivery Dependability

Innovative products and services Flexibility (products/services)

Wide range of products and services Flexibility (mix)

The ability to change the timing or quantity of products and services Flexibility (volume and/or delivery)

Intended Strategy

Realised Strategy

Deliberative Strategy

Mintzbergs concept of emergent strategy

Unrealized Strategy Emergent Strategy

An implementation agenda is needed

When to start?

Where to start?

How fast to proceed?

How to co-ordinate the implementation programme?

Thank you

MBA - MASTER OF BUSINESS ADMINISTRATION

Dr Luciano Batista BSc MSc PhD MILT Senior Lecturer in Operations Management