3.1
Chapter 3
Operations strategy
Photodisc. Cartesia
3.1
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.2
Slack et al.’s model of operations management
Operation’s
performance
Operations
strategy
Design
Operations
management
Operations
strategy
Improvement
Planning and
control
3.2
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.3
Key operations questions
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 an ‘operations resources’ view
of operations strategy?
• How can an operations strategy be put together?
3.3
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.4
Operations strategy at Flextronics and Ryanair
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?
3.4
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.5
Operations strategy at Flextronics
Operations strategic
decisions
• Industrial parks, with
– low cost but close
locations
– and co-located
suppliers
3.5
Flextronics
Market
requirements
• Low costs
• Responsiveness
• Flexibility
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.6
Operations strategy at Ryanair
Operations strategic
decisions
• Stripped down service
• One technology
• Cheap airport
locations
• Fast turnround
3.6
Ryanair
Market
requirements
• Low prices
• Reliability
• Basic service
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.7
What is strategy?
• 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.
3.7
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.8
Strategic decisions
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.
3.8
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.9
‘Operations’ is not the same as ‘operational’
‘Operations’ are the resources that create products and
services.
‘Operational’ is the opposite of strategic, meaning day-today and detailed.
So, one can examine both the operational and the
strategic aspects of operations.
3.9
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.10
How is operations strategy different to operations management?
Operations management
1–12 months
3.10
Long-term
for example,
capacity decisions
Demand
The time
scale is
longer
Demand
Short-term
for example,
capacity decisions
Operations strategy
1–10 years
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.11
How is operations strategy different to operations management?
(Continued)
Operations management
Micro-level
of the process
Operations strategy
Macro-level
of the total operation
The level of
analysis is
higher
3.11
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.12
How is operations strategy different to operations management?
(Continued)
Operations management
Detailed
For example:
The level of
aggregation
is higher
3.12
‘Can we give tax services
to the small business
market in Antwerp?’
Operations strategy
Aggregated
For example:
‘What is our overall
business advice
capability compared with
other capabilities?’
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.13
How is operations strategy different to operations management?
(Continued)
Operations management
Concrete
The level of
abstraction
is higher
3.13
For example:
‘How do we improve out
purchasing procedures?’
Operations strategy
Philosophical
For example:
‘Should we develop
strategic alliances with
suppliers?’
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.14
3.14
What is the role of the operations function?
Operations as
implementer of
strategy
Operations as
supporter of
strategy
Operations as
driver of strategy
Operations
implements strategy
Operations
supports strategy
Operations
drives strategy
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.15
The strategic role of the operations function
The 3 key attributes
of operations strategy
Implementing
Operations contribution
be Dependable
Operationalize strategy
explain Practicalities
3.15
Supporting
be Appropriate
Understand strategy
Contribute to decisions
Driving
be Innovative
provide Foundation of strategy
Develop long-term Capabilities
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.16
The 4 stage model of operations contribution
Increasing strategic impact
Redefining
industry
expectations
STAGE 4
Give an
operations
advantage
Clearly the
best in the
industry
STAGE 3
Link strategy
with
operations
STAGE 2
Adopt best
practice
As good as
competitors
Holding the
organization
back
STAGE 1
Correct the
worst
problems
Internally
neutral
After Hayes and
Wheelwright
3.16
Driving
strategy
Supporting
strategy
Implementing
strategy
Externally
neutral
Internally
supportive
Externally
supportive
Increasing operations capabilities
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.17
The four perspectives on operations strategy
Top-down
perspective
What the
business wants
operations to do
Operations
resources
perspective
What operations
resources can
do
Operations
strategy
Market
requirement
perspective
What the market
position requires
operations to do
What day-to-day
experience
suggests operations
should do
Bottom-up
perspective
3.17
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.18
Top-down and bottom-up perspectives of strategy
Corporate strategy
Business strategy
Operations strategy
Emergent sense of what the
strategy should be
Operational experience
3.18
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.19
The strategy hierarchy
Key strategic
decisions
3.19
Influences on
decision-making
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
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
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
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
The effects of the product / service life cycle
Sales
volume
3.20
Time
Introduction
Growth
Maturity
Decline
Slow growth
in sales
Rapid growth in
sales volume
Sales slow and
level off
Market needs
largely met
Customers
Innovators
Early adopters
Bulk of market
Laggards
Competitors
Few/none
Increasing
numbers
Stable number
Declining
numbers
Customization
or frequent
design
changes
Increasingly
standardized
Emerging
dominant types
Possible move
to commodity
standardization
Volume
Variety of
product/
service
design
3.20
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
The effects of the product / service life cycle (Continued)
Sales
volume
3.21
Time
Introduction
Likely order
winners
Likely
qualifiers
Dominant
performance
objectives
3.21
Product/
service
characteristics
Growth
Availability
quality
Maturity
Decline
Low price
dependable
supply
Low price
Quality
range
Price
range
Quality
range
Dependable
supply
Flexibility
quality
Speed
dependability
quality
Cost
dependability
Cost
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.22
3.22
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)
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.23
Order-winning, qualifying and less important
competitive factors
Order-winning factors
+ve
Competitive
benefit
Neutral
–ve
Performance
3.23
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.24
Order-winning, qualifying and less important
competitive factors (Continued)
Qualifying factors
+ve
Competitive
benefit
Neutral
–ve
Performance
3.24
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.25
Order-winning, qualifying and less important
competitive factors (Continued)
Less important factors
+ve
Competitive
benefit
Neutral
–ve
Performance
3.25
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.26
Mintzberg’s concept of emergent strategy
Intended
strategy
Unrealized
strategy
3.26
Deliberative
strategy
Realized
strategy
Emergent
strategy
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.27
Reconciling market requirements and operations resources
Market
requirements
Operations
resources
What you
HAVE
in terms of
operations
capabilities
What you
DO
What you
WANT
to maintain
your
capabilities
and satisfy
markets
from your
operations to
help you
‘compete’
What you
NEED
to ‘compete’
in the
market
Strategic
reconciliation
3.27
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.28
The challenge of operations strategy formulation
An operations strategy should be:
Appropriate…
Comprehensive…
Coherent…
Consistent over time…
3.28
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.29
An implementation agenda is needed
When to start?
Where to start?
How fast to proceed?
How to co-ordinate the implementation
programme?
3.29
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
3.30
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.
3.30
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010