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Chapter 3Operations strategyPhotodisc. CartesiaSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#1DesignPlanning and controlOperations performanceOperations strategyImprovementOperations managementOperations strategySlack et al.s model of operations managementSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#2Key operations questionsIn 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 an operations resources view of operations strategy?How can an operations strategy be put together?Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#3

Operations strategy at Flextronics and RyanairFor 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? Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#4Operations strategic decisions

Industrial parks, withlow cost but close locationsand co-located suppliersMarket requirements

Low costsResponsivenessFlexibilityFlextronicsOperations strategy at FlextronicsSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#5Operations strategic decisions

Stripped down serviceOne technologyCheap airportlocationsFast turnroundMarket requirements

Low pricesReliabilityBasic serviceRyanairOperations strategy at RyanairSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#6Setting 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?Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#7Strategic 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 decisionsSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#8Operations is not the same as operationalOperations 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. Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#9How is operations strategy different to operations management?The time scale is longerShort-termfor example, capacity decisions112 monthsDemandLong-termfor example, capacity decisions110 yearsDemandOperations managementOperations strategySlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#10The level of analysis is higherOperations managementOperations strategyMicro-levelof the processMacro-levelof the total operationHow is operations strategy different to operations management? (Continued)Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#11The level of aggregation is higherOperations managementOperations strategyDetailedFor example:Can we give tax services to the small business market in Antwerp?AggregatedFor example:What is our overall business advice capability compared with other capabilities?How is operations strategy different to operations management? (Continued)Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#12The level of abstraction is higherOperations managementOperations strategyConcreteFor example:How do we improve out purchasing procedures?PhilosophicalFor example:Should we develop strategic alliances with suppliers?How is operations strategy different to operations management? (Continued)Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#13What is the role of the operations function?Operations as implementer of strategyOperations implements strategy StrategyOperationsOperations drives strategy Operations as driver of strategyStrategyOperations Operations supports strategyOperations as supporter of strategyStrategyOperationsSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#14The 3 key attributes of operations strategyOperations contributionImplementingbe DependableOperationalize strategyexplain PracticalitiesSupportingbe AppropriateUnderstand strategyContribute to decisionsDrivingbe Innovativeprovide Foundation of strategyDevelop long-term CapabilitiesThe strategic role of the operations functionSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#15The 4 stage model of operations contribution Increasing contribution of operationsIncreasing strategic impactIncreasing operations capabilitiesExternally supportiveRedefining industry expectationsSTAGE 4Give an operations advantage Driving strategyAfter Hayes and WheelwrightInternally supportiveClearly the best in the industrySTAGE 3 Link strategy with operationsSupporting strategyExternally neutralAs good as competitorsSTAGE 2 Adopt best practiceImplementing strategyInternally neutralSTAGE 1Correct the worst problems Holding the organization backSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#16Top-down perspective

What the business wants operations to doOperations resources perspective

What operations resources can doWhat day-to-day experience suggests operations should do

Bottom-up perspectiveMarket requirement perspective

What the market position requires operations to doOperations strategyThe four perspectives on operations strategySlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#171Corporate strategyBusiness strategyEmergent sense of what the strategy should beOperational experienceTop-down and bottom-up perspectives of strategyOperations strategySlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#18The strategy hierarchyKey strategic decisions Influences on decision-makingBusiness strategyWhat is the mission?What are the strategic objectives of the firm?How to compete?Customer/market dynamicsCompetitor activityCore technology dynamicsFinancial constraintsCorporate strategyWhat business to be in?What to acquire?What to divest?How to allocate cash?Economic environmentSocial environmentPolitical environmentCompany values and ethicsFunctional strategyHow to contribute to the strategic objectives?How to manage the functions resources?Skills of functions staffCurrent technologyRecent performance of the functionSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#19IntroductionGrowthMaturityDeclineSales volumeVolumeCustomersCompetitorsVariety of product/ service designSlow growth in salesInnovatorsFew/noneCustomization or frequent design changesRapid growth in sales volumeEarly adoptersIncreasing numbersIncreasingly standardizedSales slow and level offBulk of marketStable numberEmerging dominant typesMarket needs largely metLaggardsDeclining numbersPossible move to commodity standardizationThe effects of the product / service life cycleTimeSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#206IntroductionGrowthMaturityDeclineSales volumeThe effects of the product / service life cycle (Continued)TimeLikely order winnersLikely qualifiersDominant performance objectivesProduct/ service characteristicsQualityrangeFlexibilityqualityAvailability qualityPrice rangeSpeeddependabilityqualityLow pricedependable supplyQualityrangeCostdependabilityLow priceDependable supplyCostSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#216Different competitive factors imply different performance objectivesCompetitive factorsIf the customers value these Performance objectivesThen, the operations will need to excel at these Low priceCostHigh qualityQualityFast deliverySpeedReliable deliveryDependabilityInnovative products and servicesFlexibility (products/services)Wide range of products and servicesFlexibility (mix)The ability to change the timing or quantity of products and servicesFlexibility (volume and/or delivery)Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#223Order-winning, qualifying and less importantcompetitive factorsNeutral+vevePerformanceCompetitive benefitOrder-winning factorsSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#23Order-winning, qualifying and less importantcompetitive factors (Continued)Neutral+vevePerformanceCompetitive benefitQualifying factorsSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#24Neutral+vevePerformanceCompetitive benefitLess important factorsOrder-winning, qualifying and less importantcompetitive factors (Continued)Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#25Intended strategyRealized strategyDeliberative strategyMintzbergs concept of emergent strategyUnrealized strategyEmergent strategySlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#26What you HAVEin terms of operations capabilitiesWhat you NEEDto compete in the marketOperations resourcesMarket requirementsWhat you WANTfrom your operations to help you competeWhat you DOto maintain your capabilities and satisfy marketsStrategic reconciliationReconciling market requirements and operations resourcesSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#27The challenge of operations strategy formulationAn operations strategy should be:Appropriate Comprehensive Coherent Consistent over timeSlack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#28An implementation agenda is neededWhen to start?Where to start?How fast to proceed?How to co-ordinate the implementation programme?Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#29The five Ps of operations strategy implementationPurpose 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.Slack, Chambers and Johnston, Operations Management, 6th Edition, Nigel Slack, Stuart Chambers, and Robert Johnston 20103.#3.#30