OPERATIONS STRATEGY: ORIGINS AND NEW DIRECTIONS

Introduction operations: all activities required to create and deliver a product or service, from procurement through conversion to distribution operations function can be a formidable competitive weapon if designed and managed properly operations strategy: set of goals, policies and self-imposed restrictions that describe how the organization plans to direct and develop all the resources invested in operations to best fulfill its mission mission: survival, profitability or growth through competitive advantage operating effectiveness is a key competitive advantage managers believe that marketing, sales or R&D can provide a more effective basis for achieving a competitive advantage dont realize the force operations play into this managers make makeshift measures that are indirectly linked to broader issues of general management concern Concept of Strategy establishment of objectives, the setting of direction and the development and implementation of plans with the goal of achieving victory must operate over an extended time horizon and comprise a wide variety of activities requires a company to make trade-offs corporate strategy: decisions regarding the industries and markets in which the organization participates, how it structures itself in order to attack those markets and how it acquires and allocates key resources

SBU strategy: specifies the scope of the business and its relationship to the overall organization and how it proposes to position itself within its particular industry to achieve a sustainable competitive advantage

functional strategy: supports the competitive advantage, marketing/sales or operations or financial control or R&D defined by the pattern of decisions actually made

vertical activities: activities that relate a given function to the business as a whole horizontal activities: activities that cut across multiple functions at fairly low levels in the organization, require more coordination and consistency

Company Values The Foundation for Strategy

strategy should be based on a set of values that are widely shared and expected to endure create a culture that ties people together, guides their efforts and gives meaning and purpose to their work operations organization is a major keeper of the companys values if managed properly, the operations function can contribute to the competitive success of a business and can play an important role in helping to support and enhance the values that provide the foundation for its strategies

The Operations Edge: Creating a Competitive Advantage Through Operations operations strategies help an operations organization in assembling and aligning the resources that will enable it to implement the companys competitive strategy too easy to develop an operations strategy based on the best practices of other companies

The American System: Mass Production for Mass Markets

mass markets, standard designs and mass production keys to low cost: o standardization and high volume, o work was done most efficiently when divided up and assigned to specialists o managers and staff experts should do the thinking for the workers o every process was characterized by an innate amount of variation o communication within an organization should be tightly controlled best manufacturing process was based on long runs, specialized equipment for each stage of process, matching capacities downsides were realized in 1980s and new approaches to competitiveness were evolving

The Japanese System: Lean Production

lean production system: characterized by an emphasis on reliability, speed and flexibility rather than volume and cost trained workers not specialized, working in teams, no rejects, communication horizontal rather than vertical, general purpose equipment, production throughput time was more important than labor or equipment utilization, inventory was waste, long-term and cooperative supplier relationships is it appropriate in all situations? adopting lean production does not enable operations to create an enduring strategic advantage

A Contingency Theory of Operations Strategy: Fit and Focus

different companies/SBUs have different strengths and weaknesses compete in different ways

different operating characteristics, making it easier or harder for a company to achieve a given form of differentiation seek fit between its SBUs chosen approach to competition and the way the operations function is designed, organized and managed

Different Approaches to Competitive Differentiation most critical element of competitive strategy that effects operations strategy is how it chooses to differentiate its products and services lowest price, higher quality, dependability, flexibility, speed/responsiveness devote resources to achieving one or two competitive dimensions not all Different Operating Systems Have Different Performance Characteristics different uses imply different designs coherent and consistent with the priorities required by the vehicles primary use An Operations Organizations Priorities Should Reflect Its SBUs Competitive Strategy an effective operations organization is one that meets the needs of its SBUs competitive strategy mgmt. must ensure that its operations organization is configured and managed in such a way that it can provide that form of differentiation Key Decisions Involved in Operations Strategy Implementation structural decisions: represent decisions regarding the organizations physical bricks-and-mortar attributes, require substantial capital investment, are difficult to alter or reverse

infrastructural policies and systems: describe the systems, policies and practices that determine how the organizations structural aspects are to be managed

Structural Decisions
capacity sourcing and vertical integration: how much of the total work required to create and deliver its products/services will be done internally and how much will be purchased from outside organizations facilities: how the total operating capacity is to be broken up into individual operating units information and process technology: choices among different types of equipment and how it should be located, connected together and coordinated