Learning Outcomes: Lecture 2 - Strategic Thinking For Operations Strategic Operations Management

Lecture 2 Strategic Thinking for Operations
Strategic Operations Management
Strategic Operations
Management
Lecture 2 Strategic Thinking for
Operations
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NCC Education Limited
Strategic Thinking for Operations Lecture 2 - 2.2
Learning Outcomes
Strategic Thinking for Operations
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Overview of This Lecture

Strategy and Operations
Stages of Operations Strategy
Operations Performance Objectives
Manufacturing vs Service Operations
Conclusions
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Visuals Handout Lecture 2 Page 1
Introduction to Strategic Thinking

for Operations
Operations are inexorably linked with
strategy at the early stages of growth as a
supporter
As the organisation develops, operations
can become the main driver for strategy, as
you will see
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The Nature of Strategy

Not an exact science
Predicting the future - choosing an appropriate
direction
Matching organisation's activities to environment
and resource capabilities
Values, goals, and beliefs of organisation
Long-term direction of organisation
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Operations and Strategy

Strategic Operations Management can make or
break a business
Make the business competitive by providing the
ability to respond to customers
OR
Handicap the business by not producing products
and services effectively
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Stages of Strategic Operations

Implementing business strategy role of Strategic
Operations Management is to put the business
strategy into operation
Supporting business strategy role of Strategic
Operations Management is to develop the
capabilities to improve and refine strategic business
goals
Driving business strategy role of Strategic
Operations Management is to drive business
strategy by giving it a unique and long-term
advantage
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Hayes & Wheelwrights Model 1

Four stages of operations contribution
Stage 1: Internal neutrality holding the company back from
competing effectively
Stage 2: External neutrality measures against competitors
and tries to implement best practice
Stage 3: Internally supportive aspiring to be the best in the
market. Provides credible operations strategy
Stage 4: Externally supportive operations provide
foundation for competitive success. Innovative, creative and
proactive strategic operations. One step ahead of
competitors
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Increasing Strategic Impact
Hayes & Wheelwrights Model 2

Redefining
Industry
Expectations
Clearly Best
in the
Industry
As Good as
Competitors
Holding the
Organisation
Back
Inc
r ea
g
sin
n
Co
Stage 1:
Correct Worst
Problems
Internally Neutral
u
trib
tio
O
of
pe
ion
rat
Stage 4: Give
an Operations
Advantage
Stage 3: Link
Strategy and
Operations
Stage 2: Adopt
Best Practice
ng
ivi y
Dr ateg
r
St
ing
ort
pp gy
Su trate
S
ng
nti
me y
ple eg
Im Strat
Externally Neutral Internally Supportive Externally Supportive
Increasing Operations Capability

Source: Slack, et al. (2007, p. 38)
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Operations Performance Objectives

Quality consistent conformance to customers expectations
Speed time elapsed between customer request for service
and receiving the goods/service
Dependability delivering or making available products or
services when they were promised to the customer
Flexibility degree to which operations process can change
what it does, how its doing it, or when it does it
Cost pricing appropriately for the market, while still allowing
for a profit
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Quality
Quality reduces costs and increases dependability. For example:
Hospital
Supermarket
Patients receive most appropriate

treatment
Treatment is carried out in the
correct manner
Goods are in good condition
Patients are consulted and kept

informed
Staff are courteous, friendly and

helpful
Staff are courteous, friendly and

helpful
The store is clean and tidy

Dcor is appropriate and
attractive
Adapted From: Slack, et al. (2007, p. 40)
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Speed
Speed reduces inventories and risks. For example:
Hospital
Time between requiring and

receiving treatment is kept to a
minimum
Time for test results, x-rays, etc.

being returned is kept to a
minimum
Supermarket
Time taken for total transaction

of going to the supermarket,
making purchases and returning
is kept to a minimum
Immediate availability of goods
Internet orders are prepared and

delivered on time
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Dependability
Dependability saves time and money and
gives stability. For example
Hospital
Number of cancelled
appointments kept to a minimum
Keeping to appointment times
Test results, x-rays, etc. are

returned as promised
Supermarket
Predictability of opening hours
Proportion of goods out of stock

kept to a minimum
Keeping to reasonable queuing

times
Constant availability of parking
Internet orders delivered at the

agreed time
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Flexibility 1
Being able to change the operation in some way
The products and services it brings to the market
Product/service flexibility
The mix of products and services it produces at any
one time Mix flexibility
The volume of products and services it produces
Volume flexibility
The delivery time of its products and services
Delivery flexibility
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Flexibility 2
Flexibility speeds up response, saves time and
increases dependability. For example
Hospital
Supermarket
Product/service flexibility:
introduction of new types of
treatment
Product/service flexibility:
introduction of new goods or
promotions
Mix flexibility: wide range of

available treatments
Mix flexibility: wide range of

goods stocked
Volume flexibility: ability to adjust

the number of patients treated
Delivery flexibility: ability to

reschedule appointments
Volume flexibility: ability to adjust

number of customers served
Delivery flexibility: ability to
obtain out-of-stock items
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Cost
Quality reduces costs and increases
dependability. For example Supermarket
10
20
Hospital
30
50
70
Staff Costs
Technology & Facilities Costs
20
Staff Costs
Technology & Facilities Costs
Bought-In Materials & Services
Bought-In Materials & Services
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Performance Objectives 1
Low Price, High
Margin, Or Both
External Effects
of 5 Performance
Objectives
Cost
Short Delivery
Lead Time
Dependable
Delivery
Speed
High Total
Productivity
Dependability
Fast
Internal Effects Reliable
ThroughProcesses
of 5
put
Performance
Objectives
Error-Free
Processes
On-Specification
Products/Services
Ability to
Change
Quality
Flexibility
Frequent New
Products/Services
Wide
Product/Service
Range
Volume and
Delivery
Adjustments
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Benefits of Excelling
Being able to do things right (quality advantage)
Enables doing things on time (dependability advantage)
Enables doing things quickly (speed advantage)
Enables changing whats done (flexibility advantage)
Enables doing things cheaply (cost advantage)
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Polar Representations
Polar representations show the relative
importance of performance objectives
for a product or service
Useful tool for comparing two or more
products/services
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Polar Representation Example

Cost
Speed
DependDependability
Bus Service
Taxi Service
Quality
Flexibility
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Manufacturing/Services
Continuum
All products contain an element of service and all
services contain an element of product
For example:
Buying a vehicle = 90% product 10% service whereas
buying a haircut = 90% service and 10% product
Buying a meal in a restaurant is about 50% service & 50%
product
All products/services lie somewhere on this

continuum. Determining where a particular
product/service lies is useful for organisations when
considering the 5 performance objectives
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Manufacturing vs Service Operations

Front Office
Goods to the
Customer
Sales and
Marketing Activities
Back Room
Production
Operations
Activities
Manufacturing Operations
Customer comes
to the Service
Service comes to
the Customer
Front Office
Marketing and
Operations
Activities
Back Room
Operations
Activities
Service Operations
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Characteristics of Service Operations

Consumer as a participant in the service process
Production and consumption occur simultaneously
Time perishable capacity
Site selection dictated by location of consumers
Labour intensiveness
Intangibility
Difficulty of measuring output
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Conclusions
There are four stages of strategic operations
contribution to the organisation
Operations performance objectives (quality, speed,
dependability, flexibility and cost) vary in individual
importance from organisation to organisation and
from sector to sector
Manufacturing and services operate on a continuum
from (theoretically) 100% manufacture to 100%
service. In reality, ALL services are a combination
of the two its just where on the spectrum they
reside that differs
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Bibliography
Slack, N., Chambers, S. & Johnston, R.
(2007) Strategic Operations
Management, 5th Edition: Harlow: FT
Prentice Hall.
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Learning Outcomes: Lecture 2 - Strategic Thinking For Operations Strategic Operations Management

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Lecture 2 Strategic Thinking for Operations

Strategic Operations Management

NCC Education Limited

Strategic Thinking for Operations Lecture 2 - 2.2

NCC Education Limited

Strategic Thinking for Operations Lecture 2 - 2.3

Overview of This Lecture

NCC Education Limited

Visuals Handout Lecture 2 Page 1

Lecture 2 Strategic Thinking for Operations

Strategic Operations Management

Strategic Thinking for Operations Lecture 2 - 2.4

Introduction to Strategic Thinking

NCC Education Limited

Strategic Thinking for Operations Lecture 2 - 2.5

The Nature of Strategy

NCC Education Limited

Strategic Thinking for Operations Lecture 2 - 2.6

Operations and Strategy

NCC Education Limited

Visuals Handout Lecture 2 Page 2

Lecture 2 Strategic Thinking for Operations

Strategic Operations Management

Strategic Thinking for Operations Lecture 2 - 2.7

Stages of Strategic Operations

NCC Education Limited

Strategic Thinking for Operations Lecture 2 - 2.8

Hayes & Wheelwrights Model 1

NCC Education Limited

Strategic Thinking for Operations Lecture 2 - 2.9

Increasing Strategic Impact

Hayes & Wheelwrights Model 2

Increasing Operations Capability

NCC Education Limited

Visuals Handout Lecture 2 Page 3

Lecture 2 Strategic Thinking for Operations

Strategic Operations Management

Strategic Thinking for Operations Lecture 2 - 2.10

Operations Performance Objectives

NCC Education Limited

Strategic Thinking for Operations Lecture 2 - 2.11

Patients receive most appropriate

Treatment is carried out in the

Goods are in good condition

Patients are consulted and kept

Staff are courteous, friendly and

Staff are courteous, friendly and

The store is clean and tidy

Adapted From: Slack, et al. (2007, p. 40)

NCC Education Limited

Strategic Thinking for Operations Lecture 2 - 2.12

Time between requiring and

Time for test results, x-rays, etc.

Time taken for total transaction

Immediate availability of goods

Internet orders are prepared and

Adapted From: Slack, et al. (2007, p. 42)

NCC Education Limited

Visuals Handout Lecture 2 Page 4

Lecture 2 Strategic Thinking for Operations

Strategic Operations Management

Strategic Thinking for Operations Lecture 2 - 2.13

Keeping to appointment times