The document discusses operational strategies. It explains that operations deals with day-to-day processes of manufacturing goods while strategy deals with the long-term direction of an organization. Key operational priorities include competing based on cost, quality, time, and flexibility. Developing an effective operations strategy involves determining production levels, facility locations, technology use, and supplier relationships in a way that supports the overall corporate strategy.

1. Operational Strategies
G.VENKATAKRISHNAN

2.  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.

3. Operational Priorities- The Edge
 Four Important Operations Questions: Will you
compete on –
Cost?
Quality?
Time?
Flexibility?

4. 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

5. Competing on Quality?
 Quality is often subjective
 Quality is defined differently depending on who is
defining it
 Two 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 address
 Product design quality – product/service meets requirements
 Process quality – error free products

6. Competing on Time?
 Time/speed one of most important competition
priorities
 First that can deliver often wins the race
 Time related issues involve
 Rapid delivery:
 Focused on shorter time between order placement and delivery
 On-time delivery:
 Deliver product exactly when needed every time

7. 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

8. DEVELOPMENT OF
OPERATION STRATEGY

9. Importance of Operations Strategy
 Companies often do not understand the differences
between operational efficiency and strategy
 Operational efficiency is performing tasks well, even
better than competitors
 Strategy is a plan for competing in the marketplace
 Operations strategy is to ensure all tasks performed
are the right tasks

10. 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?

11. 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?

12. 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?

13. Develop an Operations Strategy
 -Which suppliers will provide materials, and how
much?
 -What kind of human skills are needed?
 -And so on.

14. Develop an Operations Strategy
 Operations 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.

15. OPERATIONS STRATEGY
STRATEGY PROCESS EXAMPLE
CUSTOMER NEEDS
MORE PRODUCTS
CORPORATE
STRATEGY INCREASE
ORGANIZATION
SIZE
OPEARTIONS
STRATEGY INCREASE
PRODUCTION
CAPACITY
DECISIONS ON
PROCESSES AND
INFRASTRUCTURE BUILT NEW
FACTORY

16. ROLE OF OPERATION
STRATEGY

17. 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

18. Operations Strategy at Wal-Mart

19. Operations Strategy:
Products and Services
 Make-to-Order
 products and services are made to customer
specifications after an order has been received
 Make-to-Stock
 products and services are made in anticipation of
demand
 Assemble-to-Order
 products and services add options according to customer
specifications

20. 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?

21. 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?

22. 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?

23. 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?

24. Operations Strategy:
Sourcing
 Vertical Integration
 degree to which a firm produces parts that go
into its products
 Strategic 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?

25. 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?