Saturday, December 24, 2011

The Content and Process of Operations Strategy - Revision Notes

The chapter introduces two key ideas: the content and the process of operations strategy. Content means the actual decisions that are taken over time as part of the operations strategy of a company. Operations strategy process is the procedures that a company can adopt (alternatives are available) to formulate the strategy. In other words, the process is the way or the framework with details for every stage on how it goes about making content decisions. A three-level process is proposed in the chapter, known as the “fit, sustainability, risk” model.

Performance objectives for operations function
• The market requirements related to products or services are the performance objectives for the operations function. These performance measures are specified so that they have some meaning to the operations function. Performance objectives are a “translation” into operations terminology of a marketing professionals view or understanding of the market.

• The five performance objectives highlighted by Slack and Lewis are:

• Quality
• Speed
• Dependability
• Flexibility
• Cost

• Authors on operations strategy use slightly different sets of performance objectives. Hayes and Wheelwright of Harvard University do not use speed, seeing it as part of flexibility. Other authorities include “innovation” as a performance objective, while S & L sees it as part of flexibility. In fact all the performance objectives, quality, speed, dependability, flexibility and cost, are really clusters of issues and measures. For example, “dependability” could mean a proportion of services or products delivered late, average lateness, proportion delivered early, etc.
• Each performance objective thus is a bundle of issues that will need separating out. The set of performance objectives is defined in sufficiently broad terms to be applicable to any kind of business or operation.
• One well-known method of distinguishing between performance objectives regarding their importance or priority is classifying them as order winners or qualifiers.
• Order winners are performance objectives that clearly gain more business for the company as its performance in these areas improves. Qualifiers are the “givens” of doing business. No matter how well an organization performs in objectives classified as qualifiers it is not going to gain great competitive benefit. However, if it fails to meet the expectations of the market in a qualifying performance objective, it will suffer disadvantage in the marketplace and may not even get request for quotations

Operations strategy decision areas

• Four decision categories are important. They are:

• capacity
• supply networks
• process technology
• development and organization.

• These decision areas are not totally separate and mutually exclusive. For 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.
Manufacturing Strategy Decision Categories

The operations strategy matrix
• A simple device called the operations strategy matrix brings toegether performance objectives and operations strategy decision areas.
• It is essentially a descriptive device that can be used to sketch out and understand current (often implicit) operations strategy and spark a debate on how strategy might be changed.

Fit, sustainability and risk
• Usually the process of formulating operations strategies is seen as one of aligning operations resources with market requirements. This process of alignment is usually called fit.
• Two further issues are associated with the fit decisions. These are sustainability and risk.
• Essentially this idea is that, while it is important to achieve fit 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.
• Yet as operations attempt to cope with the dynamics of business life, they will inevitably move away from perfect fit at times. This is the risk that is associated with operations strategy decisions. Sometimes they will have insufficient resource capability to satisfy market expectations. At other times they may have more capability than the market seems to need (a waste) or fail to be able to exploit their capabilities into the marketplace (another kind of waste).
• Fit, sustainability and risk all have their own chapters in the book to discuss them in detail.

Nigel Slack and Michael Lewis, Operations Strategy
2nd Ed. 2009
Pearson Prentice Hall
Textbook and Student Guide

Powerpoint slides of the chapter from the first edition

Originally posted at

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