Operational Strategies

G.VENKATAKRISHNAN

OPERATIONS deals with the functions and procedures involved in the day-to-day processes of manufacturing goods and products,

STRATEGY deals with the direction and scope of an organisation over a long period of time on how they deliver to their clients.

Operational Priorities- The Edge

Four Important Operations Questions: Will you compete on –

Cost? Quality? Time? Flexibility?

Competing on Cost?Offering product at a low price relative to

competition

Typically high volume products

Often limit product range & offer little

customization

May invest in automation to reduce unit costs

Can use lower skill labor

Probably use product focused layouts

Low cost does not mean low quality

Competing on Quality?Quality is often subjectiveQuality is defined differently depending on

who is defining itTwo major quality dimensions include

High performance design: Superior features, high durability, & excellent customer service

Product & service consistency: Meets design specifications Close tolerances Error free delivery

Quality needs to addressProduct design quality – product/service meets

requirementsProcess quality – error free products

Competing on Time?Time/speed one of most important

competition priorities

First that can deliver often wins the race

Time related issues involveRapid delivery:

Focused on shorter time between order placement and

delivery

On-time delivery: Deliver product exactly when needed every time

Competing on Flexibility?Company environment changes rapidly

Company must accommodate change by being flexible Product flexibility:

Easily switch production from one item to another Easily customize product/service to meet specific

requirements of a customer

Volume flexibility: Ability to ramp production up and down to match market

demands

DEVELOPMENT OF OPERATION STRATEGY

Importance of Operations StrategyCompanies often do not understand the

differences between operational efficiency and strategyOperational efficiency is performing tasks well,

even better than competitorsStrategy is a plan for competing in the

marketplaceOperations strategy is to ensure all tasks

performed are the right tasks

Develop an Operations Strategy -What products can be produced in which

facility and how much?-Which products are going to be produced

internally, and which ones will be purchased?-How many facilities are needed?

Develop an Operations Strategy-Where will the facilities be located, with how

much capacity?-What type of processes will be utilized to

produce products?-How much flexibility is required from each

process and each product?

Develop an Operations Strategy-What level of technology (automation, etc.)

will be used?-Are the resources going to be owned or

bought?-How will the products be distributed to the

end customers?

Develop an Operations Strategy-Which suppliers will provide materials, and

how much?-What kind of human skills are needed?-And so on.

Develop an Operations StrategyOperations decisions given regarding these

issues must be consistent with the firm’s corporate strategy.

These decisions made by operations managers are going to be viewed in detail throughout this course.

OPERATIONS STRATEGYSTRATEGY PROCESS

CUSTOMER NEEDS

CORPORATE STRATEGY

OPEARTIONS STRATEGY

DECISIONS ON PROCESSES AND INFRASTRUCTURE

ROLE OF OPERATION STRATEGY

Operations’ Role in Corporate Strategy

Operations provides support for a differentiated strategy

Operations serves as a firm’s distinctive competence in executing similar strategies better than competitors

Operations Strategy at Wal-Mart

Operations Strategy: Products and Services

Make-to-Orderproducts and services are made to customer

specifications after an order has been receivedMake-to-Stock

products and services are made in anticipation of demand

Assemble-to-Orderproducts and services add options according to

customer specifications

Operations Strategy: Human Resources

What are the skill levels and degree of autonomy required to operate production system?

What are the training requirements and selection criteria?

What are the policies on performance evaluations, compensation, and incentives?

Will workers be salaried, paid an hourly rate, or paid a piece rate?

Will profit sharing be allowed, and if so, on what criteria?

Operations Strategy: Human Resources (cont.)

Will workers perform individual tasks or work in teams?

Will they have supervisors or work in self-managed work groups?

How many levels of management will be required?

Will extensive worker training be necessary?

Should workforce be cross-trained?What efforts will be made in terms of

retention?

Operations Strategy: Quality

What is the target level of quality for our products and services?

How will it be measured? How will employees be involved

with quality?What will the responsibilities of

the quality department be?

Operations Strategy: Quality (cont.)

What types of systems will be set up to ensure quality?

How will quality awareness be maintained?

How will quality efforts be evaluated?How will customer perceptions of

quality be determined? How will decisions in other functional

areas affect quality?

Operations Strategy: Sourcing

Vertical Integrationdegree to which a firm produces parts

that go into its productsStrategic Decisions

How much work should be done outside the firm?

On what basis should particular items be made in-house?

When should items be outsourced?How should suppliers be selected?

Operations Strategy: Sourcing (cont.)

What type of relationship should be maintained with suppliers?

What is expected from suppliers?How many suppliers should be

used?How can quality and dependability

of suppliers be ensured?How can suppliers be encouraged to

collaborate?

THANK YOU