Pgbm03 MBA OPERATION MANAGEMENT session 03 operations performance and strategy

Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 20103.1
3.1
PGBM03 Operations Management
Session 03
Operations Performance
and Strategy
Module Leader: Peter Coleman

3.2
Key operations 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 an ‘operations resources’ view
of operations strategy?
• How can an operations strategy be put together?
Key Questions for this Session

3.3
For each of these companies:
• What do they have to be good at to compete in their
markets?
• How do their operations help them to achieve this?
Operations strategy at Flextronics and Ryanair

3.4
Operations strategic
decisions
• Industrial parks, with
– low cost but close
locations
– and co-located
suppliers
Market
requirements
• Low costs
• Responsiveness
• Flexibility
Flextronics
Operations strategy at Flextronics

3.5
Operations strategic
decisions
• Stripped down service
• One technology
• Cheap airport
locations
• Fast turnaround
Market
requirements
• Low prices
• Reliability
• Basic service
Ryanair
Operations strategy at Ryanair

3.6
• 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?

3.7
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

3.8
How is operations strategy different to operations management?
The time
scale is
longer
Short-term
for example,
capacity decisions
1–12 months
Demand
Long-term
for example,
capacity decisions
1–10 years
Demand
Operations management Operations strategy

3.9
The level of
analysis is
higher
Micro-level
of the process
Macro-level
of the total operation
(Continued)

3.10
The level of
aggregation
is higher
Detailed
For example:
‘Can we supply to the
small business market in
Antwerp?’
Aggregated
For example:
‘What is our overall
service package
capability compared with
other capabilities?’
(Continued)

3.11
The level of
abstraction
is higher
Concrete
For example:
‘How do we improve out
purchasing procedures?’
Philosophical
For example:
‘Should we develop
strategic alliances with
suppliers?’
(Continued)

3.12
What is the role of the operations function?
Operations as
implementer of
strategy
Operations
implements strategy
Operations
drives strategy
Operations as
driver of strategy
Operations
supports strategy
Operations as
supporter of
strategy

3.13
The 4 stage model of operations contribution
Increasingstrategicimpact
Increasing operations capabilities
Externally
supportive
Redefining
industry
expectations
STAGE 4
Give an
operations
advantage
Driving
strategy
After Hayes and
Wheelwright
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
organization
back

3.14
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

3.15
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

3.16
Corporate strategy
Business strategy
Emergent sense of what the
strategy should be
Operational experience
Top-down and bottom-up perspectives of strategy
Operations strategy

3.17
What you
HAVE
in terms of
operations
capabilities
What you
NEED
to ‘compete’
in the
market
Operations
resources
Market
requirements
What you
WANT
from your
operations to
help you
‘compete’
What you
DO
to maintain
your
capabilities
and satisfy
markets
Strategic
reconciliation
Reconciling market requirements and operations resources

3.18
The five P’s of operations strategy implementation
Purpose — a shared understanding of the motivation,
boundaries and context for developing the operations
strategy.
Point of Entry — the point in the organization where the
process of implementation starts.
Process — How the operations strategy formulation
process is made explicit.
Project Management — The management of the
implementation.
Participation — Who is involved in the implementation.

3.19
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)

3.20
The five competitive objectives
Quality Being RIGHT
Speed Being FAST
Dependability Being ON TIME
Cost Being PRODUCTIVE
Being ABLE TO CHANGEFlexibility

3.21
Minimum cost,
maximum value
Minimum price, highest value
Fast
throughput
Quick
delivery
Reliable
operation
Dependable
delivery
Error-free
processes
Error-free
products and
services
Ability to
change
Frequent new
products, maximum
choice
The benefits of excelling at the five objectives
Dependability
Cost
Speed
Quality Flexibility
Internal
Benefits
External
Benefits

3.22
Polar diagrams
Polar diagrams are used to indicate the relative
importance of each performance objective to an operation
or process.
They can also be used to indicate the difference between
different products and services produced by an operation or
process. Cost
Quality Flexibility
DependabilitySpeed

3.23
Polar diagrams for a taxi service versus a bus service
Cost
Quality Flexibility
DependabilitySpeed
Taxi
service
Bus
service

3.24
Reassurance
Crime
reduction
Crime
detection
Working with
Criminal justice
agencies
Efficiency
Actual
performance
Required performance
Polar diagrams for a proposed police performance method

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