Developing an Operations Strategy:

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Developing an Operations Strategy Deploying
Resources, Processes and Operations
Dr Simon Croom. Smartlink Fellow, University of
South Australia
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Overview

• We tend to see strategic success as all about
  markets, products and services.
• We forget that we rely on our processes, as well
  as those of our suppliers, collaborators and
  distributors.
• Many businesses now recognise that strategic
  capabilities are determined by HOW they develop,
  produce and deliver goods and services to their
  customers.
• This session focuses on strategic development
• It will provide some basic Principles to help you
  improve strategic performance

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What is OPERATIONS Strategy?
The strategic direction and development of the
resources and processes which produce and deliver
products and services to customers.
Operations Strategy, By Nigel Slack Michael
Lewis Pearson Publishing http//www.booksites.net/
download/slack/download.htm
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The clash between the nature of external markets
and the nature of internal resources
BT3
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The strategic role of operations can be defined
by its aspirations (after Hayes and Wheelwright)
Redefine the industrys expectations
Give an Operations Advantage
Externally supportive
Be clearly the best in the industry
Link Strategy With Operations
Internally supportive
Increasing contribution of operations
Be as good as competitors
Adopt best Practice
Externally neutral
Stop holding the organisation back
Correct the Worst Problems
Internally neutral
STAGE 1
STAGE 2
STAGE 3
STAGE 4
The ability to Drive strategy
The ability to Implement
The ability to support Strategy
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The Strategic Role of the Operations Functions
The 3 key attributes of operations
Operations Contribution
Implementing
be Dependable Operationalise strategy explain
Practicalities
Supporting
be Appropriate Understand strategy Contribute to
decisions
Driving
be Innovative provide Foundation of
strategy Develop long-term Capabilities
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Operations can kick-start two virtuous cycles
Internal
and
External
Understanding of the processes
Strong marketing
Competitiveness
Competencies embedded in the operation
World Class Operations
High margin
Capabilities enhance innovation and improvement
Investment
Developing the resources which let the
operations performance stay ahead of the
competition
Developing customers competitors and
stockholders perceptions and expectations
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The operations function can provide a competitive
advantage through its performance at the five
competitive objectives
Quality
Being RIGHT
Being FAST
Speed
Dependability
Being ON TIME
Competitiveness
Flexibility
Being ABLE TO CHANGE
Cost
Being PRODUCTIVE
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How is each performance objective being viewed?
The onset of Total Quality Disillusionment ISO
9000 sweeps the world (except Japan!)
Quality
Value added methodology increasingly
powerful Major benefit of BPR Return of the JEDI
Speed
Dependability
Being monitored by customers
Competitiveness
Long term technology flexibility proving
difficult to achieve More closely defined -
rigid flexibility
Flexibility
Increasing cost pressures Overcoming the volume
and variety effects New ways of looking at costs
Cost
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The first task of an Operations Strategy is to
clarify the relative priorities of the
competitive objectives
Quality
Speed
Competitive Objectives are prioritized by
Dependability
CUSTOMERS and COMPETITORS
Competitiveness
Flexibility
Cost
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Operations Strategy Decision Areas Determine
Resource Deployment
Resource Deployment
Capacity Structure
Process Technology
Supply Network
Development and Organisation
ISSUES -

• VERTICAL INTEGRATION
• SUPPLIER DEVELOPMENT
• DEVELOPMENT CHAINS
• STRATEGIC VALUE FACILITATION

ISSUES -

• DEVELOPMENT RATE
• AUTOMATION
• SIZE
• INTEGRATION
• IN OR OUT-HOUSE DEVELOPMENT

ISSUES -
ISSUES -

• RESPONSIBILITY RELATIONSHIPS
• IMPROVEMENT STRATEGIES
• PERFORMANCE CONTROL

• CAPACITY
• LOCATION
• FOCUS SEGMENTATION
• L/T FORECASTS

Operations Policies are shaped by
COMPETENCIES and CONSTRAINTS
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Operations strategy is defined by the
intersections of performance objectives and
substrategies
Resource Deployment
Quality
Speed
Operations Strategy
Competitive Objectives are prioritized by
CUSTOMERS and COMPETITORS
Dependability
Market Competitiveness
Flexibility
Cost
Development and Organization
Supply Network
Process Technology
Capacity Structure
Operations Policies are shaped by
COMPETENCIES and CONSTRAINTS
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Operations strategy is defined by the
intersections of performance objectives and
substrategies
Resource Deployment
Quality
Speed
Competitive Objectives are prioritized by
CUSTOMERS and COMPETITORS
Dependability
Market Competitiveness
Flexibility
Cost
Development and Organization
Capacity Structure
Process Technology
Supply Network
Operations Policies are shaped by
COMPETENCIES and CONSTRAINTS
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How to ensure a strategic Fit
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Prioritizing Objectives
Priorities should be determined by ......
IMPROVEMENT PRIORITIES
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Positive
Competitive Benefit
Neutral
Negative
Low
High
Achieved Performance
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A method for identifying our strategic
operations priorities

• Identify what is important to customers
• Assess how well we perform
• Relate our performance to customers or market
  requirements

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9 Point Importance Scale
For this product group does this performance
objective ......
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Temperature controlled - Overnight service
IMPORTANCE to Customers
1 2 3 4 5 6 7 8 9
PRICE
X
SERVQUAL (DISN.)
X
SERVQUAL (ORDER TAKE)
X
ENQUIRY LEAD-TIME
X
DROP QUOTE
X
WINDOW QUOTE
X
DELIVERY PERFORMANCE
X
DELIVERY FLEXIBILITY
X
VOLUME FLEXIBILITY
X
DOC. SERVICE
X
1 2 3 4 5 6 7 8 9
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9 Point Performance Scale
For this product group is achieved performance
........
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Temperature controlled - Overnight service
PERFORMANCE against Competitors
1 2 3 4 5 6 7 8 9

COST
X
SERVQUAL (DISN.)
X
SERVQUAL (ORDER TAKE)
X
ENQUIRY LEAD-TIME
X
DROP QUOTE
X
WINDOW QUOTE
X
DELIVERY PERFORMANCE
X
DELIVERY FLEXIBILITY
X
VOLUME FLEXIBILITY
X
DOC. SERVICE
X
1 2 3 4 5 6 7 8 9
Estimated

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1
X
Delivery
Volume Flex
better
2
X
Window Quote
than
Drop Quote
3
X
X
4
Servqual (DISN)
X
same
5
X
Doc Service
as
6
X
X
Delivery Flex
Price/Cost
7
X
Servqual (Order Take)
8
X
worse
Enquiry Lead-Time
than
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1
6
2
3
4
5
7
8
9
less
order
qualifying
important
winning
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CUSTOMERS
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Budget Hotel Chain
Today
Tomorrow
Central reservation
Delights
Order Winners
Central reservation
Location (autoroutes)
Location (autoroutes)
Location (restaurants)
Price
Loyalty cards
Location (restaurants)
Qualifiers
Price
Loyalty cards
Cleanliness
Cleanliness
Decor
Decor
Service
?
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Budget Hotel Chain
Today
Tomorrow
Central reservation
Delights
Price
Order Winners
Central reservation
Location (autoroutes)
Location (autoroutes)
Location (restaurants)
Location (restaurants)
Price
Loyalty cards
Location (restaurants)
Qualifiers
Price
Loyalty cards
Cleanliness
Cleanliness
Decor
Decor
Service
?
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Budget Hotel Chain
What aspects of service will form tomorrows
delights, order winners and qualifiers?
What new capabilities will operations need to
develop to deliver these?
Delights
Price
Order Winners
Central reservation)
More, smaller sites
Location (autoroutes)
Partnership deals with restaurants
Location (restaurants)
Location (restaurants)
Qualifiers
Price
Loyalty cards
Cleanliness
Decor
TTT 16
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What performance objectives are Qualifiers, Order
Winners and Delights ?
Today
Tomorrow
Delights
Order Winners
Qualifiers
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Where will you be in the Future?
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Trade-offs
Do you want it good, or do you want it Tuesday?
No such thing as a free lunch.
You cant have an aircraft which flies at the
speed of sound, carries 400 passengers and lands
on an aircraft carrier. Operations are just the
same. (Skinner)
Trade-offs in operations are the way we are
willing to sacrifice one performance objective to
achieve excellence in another.
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Driving Learning Improvement whilst avoiding
Strategic Vulnerability

• Be Clear about your current performance in terms
  of
• Process Capability
• Alignment of resources to customers markets
• Responsiveness of your resources to external
  variations
• Performance measurement and objectives
• Service level agreements, specifications and
  targets
• Consistency of purpose
• Appropriate relationships across your supply
  chain and operations network

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How can we carry out such a Health Check?

• Benchmarking against others
• Validation against best practice
• Evaluation of Strategic Criteria
• Audit of the pressures and stresses faced by your
  organisation

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What is Stress Point Analysis?

• A research tool developed to accommodate the
  individual context and conditions facing an
  organisation
• A methodology for highlighting key areas of
  strategic weakness
• A comparative analysis benchmarking against
  others and against best practice
• A customised methodology for an individual audit

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Strategic Performance - Responsiveness of Your
Operation
Response curve
Stress Point
Performance
Failure Point
KEY To ZONES
Desired Capability
Force
Operating Capability
STRESS
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The Causes of Supply Chain and Operations Stress

• Congruence
• Alignment to customer needs, potential
  degradation of delights
• Mismatched relationships with customers and
  suppliers
• Confusion over needs
• Capabilities
• Processes are not able to meet the performance
  targets
• Service levels are inappropriate
• Capability Not Measured
• No laid down process maps or procedures
• Capacity
• Poor utilisation, slow response to demand, too
  many set ups, high or increasing variety
• Low Value Adding content
• Low T/E (throughput efficiency)
• Control
• High Forecasting Errors
• Bullwhip across the chain (Forrester Effect)
• Resource Scheduling and Inventory inaccuracies

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To AUDIT your Business

• Logon to http//www.supply-chain.org.uk
• Click on the SPA Methodology link
• Login to the ht2 site using
• Username SPA
• Password SPA (Same as your username)
• I will allocate your number
• Complete the survey
• Your results will be emailed to you in early
  April as a benchmark report

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