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B207 Reading 12: Operations Strategy - Coggle Diagram
B207 Reading 12: Operations Strategy
1. Defining Operations Strategy and Development
Definition:
The pattern of strategic decisions and actions that set the role, objectives, and activities of the operation.
Key Decision Areas (Infrastructure Development):
Capacity and Facilities:
Location, size, coordination, building capacity (lead or lag).
Supply Chain Development:
Ownership of the value chain, number of suppliers, global reach, outsourcing non-core activity.
Technology:
Automation level, system integration, dedication, and scale.
Workforce:
Management structure, skills development, and employee discretion.
Development Process (Market Reconciliation):
Operations strategy is defined by reconciling Operations Resources with Market Requirements (the 'fit').
Strategy Drivers:
Market Influence:
Predominant theme, decisions taken based on market position and segment needs.
Capabilities/Competences:
Exploiting unique operations competences (e.g., Honda's engine manufacturing) to enter diverse markets.
Entrepreneurial Vision:
Personal view of operations design, sometimes ignoring conventional theory to create a highly unique service (e.g., Benihana's cooking-at-the-table concept).
2. Market Influence Model and Performance Objectives
Market Influence Model:
Operations Strategy is influenced by:
Competitive Strategy (
e.g., price focus for IKEA, differentiation/quality for Ritz-Carlton).
Marketing Strategy
(choices on markets, positioning, and segmentation).
Example:
The same product (component) has different requirements for OEM (price, quality, reliable supply for large quantities) and Aftermarket (availability and price for short-term purchases) segments.
Six Generic Performance Objectives (Influence Customer Satisfaction):
Quality:
Meeting clear specifications; achieving a lower standard consistently; or conformance quality (getting it right absolutely every time).
Speed:
Performing tasks in the shortest possible time span; measured as throughput time (start to finish) or response time (e.g., ambulance reaching an incident).
Flexibility
: The ability to change what you do.
Types:
Variety (producing more than one type), Mix (coping with different products/customers simultaneously), Volume (adjusting how much you produce).
Sustainability:
Maintaining resource use without depletion or damage. Includes environmental, economic, and social aspects.
Dependability:
Keeping your promises, focusing mostly on delivery promises (e.g., adhering to a tight schedule adherence window).
Cost:
Unit cost is influenced by materials/labour, equipment, and working capital; low-cost producers develop lean processes to minimise waste and working capital.
3. Strategic Importance of Performance Objectives
Order-Winning Criteria:
Aspects of performance that provide the key reason for a customer to buy in preference to competitors. (Appeal increases linearly with performance) .
Order-Qualifying Criteria:
Aspects of performance that are necessary characteristics for the customer to even consider a purchase; they do not provide a competitive advantage. (Appeal plateaus once a minimum standard is met) .
Strategy and Objectives:
Performance objectives are the drivers of operations strategy decisions. Decisions must be consistent with market requirements (e.g., a speed objective requires locating near the customer base, while a quality objective requires better precision technology).
Adaptation over Time:
Objectives change over the product life cycle. In the Introduction, functionality is the order-winner; in Maturity, Cost and error-free Quality become the order-winners.
Trade-Offs:
Operations cannot be good at everything (e.g., quick delivery vs. quality control checkpoints). Managers are confronted with apparent trade-offs that must be acknowledged.
4. Focused Operations
Concept:
Dividing operations into different processes or facilities, allowing each one to concentrate on a narrower range of products, services, or performance objectives.
Goal:
To prevent unfocused operations from suffering by trying to do too many different things ("focused factory").
Four Ways to Focus:
By
Market Segment
(e.g., separate facilities for wholesale vs. retail customers).
By
Concentrating on one specific Performance Objective
(e.g., offering a 'fast track' option separate from the standard process).
By
Volume
(e.g., making prototypes in specialist facilities away from high-volume operations).
By
Technology Speciality
(e.g., separate hospital units for X-ray vs. MRI scans).
Operations Focus:
Designing all processes and systems around a super-speciality (often highly restricted segment) to achieve superior performance benefits (e.g., Shouldice Hospital focusing only on non-smoker, normal-weight hernia patients).