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Operations Strategy Student Study Guide

CHAPTER 2 THE CONTENT AND PROCESS OF OPERATIONS STRATEGY Introduction


This chapter introduces two key ideas. Each is associated with what is called the content and the process of operations strategy. Content means the actual decisions that are taken over time and shape the operations strategy of a company. A simple model called the operations strategy matrix is used to think about content issues. Operations strategy process is the procedures that a company can adopt to formulate the strategy. In other words the way it goes about making content decisions. A three!level process is proposed in the chapter known as the "fit sustainability risk# model.

Key points
The previous chapter established the idea of the two pressures on operations strategy or the perspectives on the area. $owever it did not attempt to go into any depth on how these two perspectives can be operationali%ed. &ut in order to think about how the two perspectives can be reconciled it is necessary to devise some simple checklist or categori%ation method for each of them.

Perfor !nce o"#ecti$es The main device used to understand market re'uirements are performance objectives. These are the various aspects of performance in which market re'uirements can be expressed. (emember that performance ob)ectives are not the same as the various tools and classifications that marketing professional use to understand markets. They are a set of broad performance measures that have some meaning to the operations function. *any of the concepts and frameworks used within the marketing function although very effective at enabling marketing professionals to understand markets have little meaning when brought within the operations function. Therefore performance ob)ectives are a "translation# into operations speak of a marketing professionals view of the market. The five performance ob)ectives used throughout the book are+ ,uality -peed .ependability /lexibility Cost

Operations Strategy Student Study Guide

1ot everyone who writes on operations strategy uses this particular set. One of the best!known author teams $ayes and 2heelwright of $arvard 3niversity for example do not use speed seeing it as part of flexibility. Other authorities include "innovation# as a performance ob)ective while this chapter sees it as part of flexibility. It really doesn4t matter. In fact all the performance ob)ectives 'uality speed dependability flexibility and cost are really clusters of issues and measures. /or example "dependability# could mean a proportion of services or products delivered late average lateness proportion delivered early etc. Think of each performance ob)ective as a bundle of issues that will need separating out. They are a checklist defined in sufficiently broad terms to be applicable to any kind of business or operation. Of course some of these performance ob)ectives will be more important for some operations than others. The chapter introduces one well!known method of distinguishing between performance ob)ectives 5 classifying them as order winners or qualifiers. Order winners are performance ob)ectives that clearly gain more business for the company as its performance in these areas improves. ,ualifiers are the "givens# of doing business. 1o matter how well an organi%ation performs at it 'ualifiers it is not going to gain great competitive benefit. $owever if it fails to meet the expectations of the market in a 'ualifying performance ob)ective it will suffer disadvantage in the marketplace.

Oper!tions str!te%y decision !re!s /rom the operations resource perspective there is a similar translation process to achieve. Again this involves moving from a broad understanding through to a more specific categori%ation. In this case it is from a broad understanding of what resources processes and 6above all7 capabilities an operation may possess within its resources through to an identification of the key decisions that operations managers will need to take in order to exploit build on and develop these capabilities. In the chapter ratio analysis is used to )ustify the four broad categories of operation strategy decision. Although this categori%ation and the ratio analysis is perfectly "clean# in separating out various decision it does show that four clusters of decisions have a significant effect on the overall financial performance of any organi%ation.

Operations Strategy Student Study Guide

/our decision categories are used. They are+ capacity supply networks process technology development and organi%ation.

(emember a bit like the performance ob)ectives these decision areas are not totally separate and mutually exclusive. /or example no company can make choices of which process technology it will invest in without considering how it will impact on its suppliers and customers elsewhere in the supply network. Again also remember that this categori%ation is not used by everyone. 9rofessors $ayes and 2heelwright at $arvard 3niversity use a different categori%ation as shown in the following table. Also shown are the e'uivalent categories used in this book. Issues Amount timing type Capacity -i%e location specialisation E'uipment automation linkages .irection extent balance -kill level wage policies employment security .efect prevention monitoring intervention -ourcing policies centralisation decisions rules 9rocess technology -upply networks S)!c, & -e*is+ C!te%ories

H!yes & '(ee)*ri%(t+s C!te%ories Capacity /acilities Technology :ertical Integration 2orkforce ,uality 9roduction planning ; materials control

.evelopment and Organisation

-tructure control;reward systems role Organisation of staff groups Adapted from + $ayes (.$. and 2heelwright -.C. <(estoring our Competitive Edge+ Competing through *anufacturing4 2iley 0=>?.

Operations Strategy Student Study Guide

.!nuf!cturin% Str!te%y Decision C!te%ories T(e oper!tions str!te%y !tri/

9erhaps the central point in this chapter is the development of this simple device called the operations strategy matrix. It is simply the result of bringing performance ob)ectives together with operations strategy decision areas. The operations strategy matrix seeks to describe the reconciliation process by understanding how what we want from our operations strategy is affected by what we do in making operations strategy decisions. (emember that the operations strategy matrix does not provide answers in the sense that it formulates a particularly appropriate operations strategy. It is essentially a descriptive device that can be used to sketch out and understand current 6often implicit7 operations strategy and spark a debate on how strategy might be changed.

Fit0 sust!in!"i)ity !nd ris, Again this chapter takes a slightly different view of the process of operations strategy than that taken by many other authors. 3sually the process of formulating operations strategies is seen as one of aligning operations resources with market re'uirements. This process of alignment is usually called fit. In this chapter two further issues are identified these are sustainability and risk. Essentially this idea is that while it is important to achieve fit as a first stage in operations strategy formulation this fit must be sustained over time. This means both coping with the natural dynamics of markets and changes within operations resource capabilities and also attempting to move to a "higher level# of fit. This is the process of sustainability. Aet as operations attempt to cope with the dynamics of business life and achieve fit a higher level they will inevitably move away from perfect fit at times. This will expose them to some degree of risk. -ometimes they will have insufficient resource capability to satisfy market expectations. At other times they may have more capability than the market seems to need 6a waste7 or fail to be able to exploit their capabilities into the marketplace 6another kind of waste7. /it sustainability and risk all have their own chapters at the end of the book.

Operations Strategy Student Study Guide

Hints on !ns*erin% t(e Dresdin% .edic!) c!se e/ercise


This is really an exercise in using the operations strategy matrix to think about how a company4s strategy may have to change. Try drawing an operations strategy matrix that describes the company4s current operations strategy in making its current range of products. In doing this use a simple prioriti%ation system to indicate what you think are the more important performance ob)ectives. /or example use three stars for very important two stars for important one star for kind of important and no stars for not important. .raw a new operations strategy matrix for the new range of products. Think carefully about how the prioriti%ation of the performance ob)ectives will have to change and how therefore the decisions and capabilities in each of the decision areas will have to change.