The three levels of operations strategy process
Increasing
complexity
Level 1 - Fit
Align resources with
requirements
Level 2 - Sustainability
Develop sustainable
competitive advantage
Level 3 - Risk
Include impact of
uncertainty
© Nigel Slack and Michael Lewis 2003
Operations Strategy Formulation
Putting an operations strategy together presents some
particular difficulties:
Senior operations managers are often
geographically dispersed
The operation still needs running
Predominance of line management
Complexity of operations resources
Inertia of operations resources
© Nigel Slack and Michael Lewis 2003
Operations Strategy Formulation
There are many formulation process stage models.
They often include:
Links between competitive strategy objectives and operations
objectives (strategic fit)
The use of ‘competitive objectives’ as the translation device
between strategic and operations objectives
Judging the importance of competitive objectives against
customer/market requirements
Current performance judged against competitor performance
An iterative process
The concept of an ‘ideal’ of ‘greenfield’ operation against which
to compare current operations.
A gap-based analysis
© Nigel Slack and Michael Lewis 2003
Level of market
requirements
In operations strategy ‘fit’ is the alignment between
market and operations capability
Alignment
between market
and operations
capability
Y
X
© Nigel Slack and Michael Lewis 2003
Level of operations
resource capability
‘Fit’ means that the operations resources and processes are
aligned with the requirements of its markets.
Market requirements
‘Fit’ can also mean that market requirements are moved to
exploit operations resource capabilities
Operations resource capability
© Nigel Slack and Michael Lewis 2003
Market
Segmentation
Market
Positioning
Operations
Performance
Objectives
Operations
Strategy
Decision
Areas
Operations
Capabilities
State market
requirements
in terms of
operations
performance
objectives
Make
strategic
operations
decisions
… to
enhance
core
capabilities
Competitor
Activity
Understand
markets
Define
competitive
position
‘Fit’ operations resources to market requirements ‘fit’
© Nigel Slack and Michael Lewis 2003
Tangible and
Intangible
Resources
Potential
Market
Positioning
Operations
Performance
Operations
Strategy
Decision
Areas
Operations
Capabilities
Operations
Processes
Determine
competitive
position
Define
market
potential of
operations
performance
Make
appropriate
strategic
operations
decisions
Identify
core
capabilities
‘Fit’ market positioning to operations
resources capabilities
© Nigel Slack and Michael Lewis 2003
Understand
resources and
processes
Critical
Critical
Critical
Critical
Critical
Critical
Critical
Capacity
Supply
Network
Quality
Market
Competitiveness
Performance objectives
Resource Usage
Speed
Dependability
Flexibility
Cost
Process Development
and
Technology
Organization
Decision areas
IBM operations strategy matrix
(1970-1985)
© Nigel Slack and Michael Lewis 2003
Ideal
Minimum
resource resource
capability capability
B
Level of market
requirements
y2
Y
Tight
fit
y1
A
‘Ideal’ market
requirements
Minimum
market
requirements
x1
X
x2
Level of operations resource capability
The level of ‘fit’ may not always be ‘tight’
© Nigel Slack and Michael Lewis 2003
‘Fit’ is concerned with ensuring comprehensiveness,
correspondence, coherence and criticality
Speed
Dependability
Flexibility
Cost
Critical
Critical
Critical
Capacity
Critical
Supply
Network
Process
Technology
Decision areas
Comprehensive?
© Nigel Slack and Michael Lewis 2003
Critical
Market
Competitiveness
Coherence
Quality
Correspondence
Performance objectives
Resource Usage
Development
and
Organization
Quality
• Provide
• Continuous
• Built-in quality • Long-term
resources to
support
quality
•Use quality as
performance
criteria
quality
emphasis with
suppliers
•Purchase
using quality
criteria
•Work on
functional
barriers
in processes
•Statistical
process
control
•Enhance
quality
capability
•Quality as a
performance
criteria
plans
•Quality culture
•Continuous
improvement
•Quality
performance
measurement
and control
•Operational
supervision is
important
•Communication
•Appropriate
org. structure
Speed
Dependability
Flexibility
Cost
Capacity
Supply
Network
Process Development
and
Technology
Organization
Decision areas
To be strategic, quality initiatives need to comprehensively cover all
decision areas
© Nigel Slack and Michael Lewis 2003
Market
Competitiveness
Performance objectives
Resource Usage
Step 1
Step 2
Step 3
Corporate
objectives
Marketing
strategy
How do products
or services win
orders?
• Growth
• Profit
• ROI
• Other ‘financial’
measures
• Product/service • Price
markets and
segments
• Range
• Mix
• Volumes
• Standardisation
or
customisation
• Innovation
• Leader or
follower
• Quality
• Delivery speed
• Delivery
dependability
Step 4
Operations strategy
Process choice
• Process
technology
• Trade-offs
embodied in
process
• Product/service • Role of
range
inventory
• Product/service • Capacity, size,
design
timing, location
• Brand image
• Technical
service
The Hill framework of operations strategy
formulation
© Nigel Slack and Michael Lewis 2003
Step 5
Infrastructure
• Functional
support
• Operations
planning and
control systems
• Work structuring
• Payment
systems
• Organisational
structure
OPPORTUNITIES
AND THREATS?
THE EXISTING OPERATION
WHAT THE
MARKET WANTS?
• Features
• Quality
• Delivery
• Flexibility
• Price
HOW THE
OPERATION
PERFORMS
• Facilities
• Capacity
• Span of process
• Processes
• Human resources
• Quality
• Control policies
• Suppliers
• New Products
• Features
• Quality
• Delivery
• Flexibility
• Price
The Platts-Gregory procedure
© Nigel Slack and Michael Lewis 2003
WHAT DO WE NEED
TO DO TO IMPROVE
THE REVISED
OPERATIONS
STRATEGY?
Market requirements
Product
family
Delivery
lead-time
Achieved performance
Ex-stock
Short
Not significant
Long
Into stock point
Variable
Critical: Project delay
Good
Fit for purpose
Few features
Many features/
High absolute level
Acceptable at price
Acceptable
Total reliability essential
High
Reliability
Features
Quality
Flexibility
design
Standard range only
Standard only
Volume
All designs customer specified
All products customised
Stable market
Little variation required
Volume variations low
Highly cyclic variable market
Volume variations high
Price competition
dominant
Low
Non-price competition
dominant
High
Price cost
Uses of profiling in the Platts-Gregory procedure
© Nigel Slack and Michael Lewis 2003