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Operations Management 8th edition

Chapter 3

Operations Strategy

Slack et al.’s model of operations management

In Chapter 3 – Operations strategy – Slack et al. identify the

following key questions…

 What is strategy and what is 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 ‘operations resources’ view of operations strategy?

 How can operations strategy form the basis for operations

improvement?

 How can an operations strategy be formulated? The

process of operations strategy

Key questions

 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.

What is strategy?

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.

The three key

attributes

of operations strategy

Operations contribution

Implementing Be dependable

Operationalize strategy

Explain practicalities

Supporting Be appropriate

Understand strategy

Contribute to decisions

Driving Be innovative

Provide foundation of strategy

Develop long-term capabilities

The strategic role of the operations function

The 4 stage model of operations contribution

Figure 3.3

The four perspectives on 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

function’s resources?

Skills of function’s staff

Current technology

Recent performance of the

function

Top-down and bottom-up perspectives on

operations strategy can reinforce each other

Different competitive factors and 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)

Order-winning competitive factors

Neutral

+ve

−ve

Performance

Competitive benefit

Order-winning factors

Qualifying competitive factors

Neutral

+ve

−ve

Performance

Competitive benefit

Qualifying factors

Less important competitive factors

Neutral

+ve

−ve

Performance

Competitive benefit

Less important factors

The effects of the product/service life cycle

Some typical structural and infrastructural

operations strategy decisions

In operations improvement should achieve ‘fit’ between market requirements

and operations performance, but deviation from the line of ‘fit’ between market

requirements and operations performance can expose the operation to risk

(1 of 2)

In operations improvement should achieve ‘fit’ between market requirements

and operations performance, but deviation from the line of ‘fit’ between market

requirements and operations performance can expose the operation to risk

(2 of 2)

For this product/service is achieved performance …

Better than

competitors 1 - Consistently considerably better than our nearest competitor

2 - Consistently clearly better than our nearest competitor

3 - Consistently marginally better than our nearest competitor

Nine-point performance scale

4 - Often marginally better than most competitors

5 - About the same as most competitors

6 - Often close to main competitors

Same as

competitors

7 - Usually marginally worse than main competitors

8 - Usually worse than most competitors

9 - Consistently worse than most competitors

Worse than

competitors

The importance–performance matrix

Strategic resources and sustainable competitive

advantage

Operations resources can give sustainable competitive

advantage if they are…

 Scarce

 Not very mobile

 Difficult to imitate

 Difficult to substitute for

The four stages of the process of operations

strategy

The challenge of operations strategy formulation

(1 of 2)

An operations strategy should pass the following

questions…

Does it identify critical issues?

Is it comprehensive?

Is it coherent?

Does it correspond with strategic objectives?

The challenge of operations strategy formulation

(2 of 2)

An operations strategy should pass the following

questions…

Does it identify critical issues?

Is it comprehensive?

Is it coherent?

Does it correspond with strategic objectives?