OPERATIONS MANAGEMENT-

STRATEGY
Operations Strategy
Why Strategy?
Because of
Today’s competitive market!
• Buyer’s market
• Buyer wants it faster,
better, and
cheaper/customised
• Competitors are global
• Increasing short Life-
cycles
 In 2016 what are the choices?
• Maruti
• Ford • Fiat- Palio?
• GM • Mitsubishi
• Hyundai • Renault
• Honda • TATA- Indica, Nano,
Jaguar
• Mercedes
• Ambassador
• Rover
• Daewoo
• Toyota
• BMW
• Skoda
• V W…Many more..?
• Volvo
• Hence a strategy !
 What is a strategy?

• “Strategy is the determination of the basic

long-term goals and the objectives of an
enterprise, and the adoption of courses of
action and the allocation of resources
necessary for carrying out these goals.”
 Strategic Management

 Strategic management is the process of

formulating, implementing and evaluating
strategies to achieve organisational goals
 Strategic Management Involves Five
Steps
Step 1 : Select the corporate mission and major corporate
goals.
Step 2 :Analyse the opportunities and threats or
constraints that exist in the external environment.
Also analyse the strengths and weaknesses that
exist in internal environment.(SWOT analysis!)
Step 3 : Formulate strategies that will match the
organisation's strengths and weaknesses with the
environment's threats and opportunities.
Step 4 : Implement the strategies.
Step 5 : Evaluate and control activities to ensure that the
organisation's objectives are achieved.
Steps in Strategic Management
 Operations Strategy
An operations strategy is defined by a pattern
of decisions , both structural and infra-structural,
which determine the capability of a
manufacturing/Service system and specify
how it will operate in order to
meet a set of operations objectives which are
consistent with overall business objectives.
 Operations Role In Corporate Strategy

• Provide support for overall strategy of a

firm
• Serve as firm’s distinctive competence
• Must be consistent with overall strategy
 Operations Strategy
Customer Needs Corporate Strategy

Alignment

Operations Strategy Core

Competencies

Decisions

Processes, Infrastructure, and Capabilities

 CORE COMPETANCE….

• HOW TO IDENTIFY ?

• WHAT IT DOES BEST

• WHAT IT CAN DO.. OTHERSCAN NOT DO
• WHAT WILL PERMIT IT TO ACHIEVE THE
BEST IN THE WORLD
• STATUS(GAP) W.R.T . WHAT IT CAN NOT DO
• DEVELOP PLANS TO FULLY EXPLOIT
CAPABILITIES
 Core Competence
• Competitiveness derives from an ability to build, at lower cost
and more speedily than competitors, the core competencies
that spawn unanticipated products.
– Core competencies are the collective learning in the
organization, especially how to coordinate diverse
production skills and integrate multiple streams of
technologies.
– Core competence is about harmonizing streams of
technology.
technology
– Core competence is about the organization of work and the
delivery of value.
value
– Core competence is communication,
communication involvement and a
deep commitment to working across organizational
boundaries.
boundaries
• Companies need to do a better job of leveraging technologies
and offering a wider variety of products on the same
technology platform.
 CORE COMPETANCY…. EXAMPLES

• SONY • MINIATURISATION
• HONDA • MOTORS
• MOTOROLA • WIRELESS
COMMUNICATION
• MCDONALD • LOCALISATION/
HYGENE
RELIANCE
AMUL
HLL
Infosys
 Elements of Production\Operations
Strategy
Operations strategy comprises six components :
1. Positioning the production system,
2. Focus of factories and service facilities,
3. Product/Service design and development,
4. Technology selection and process development,
5. Allocation of resources to strategic alternatives,
and
6. Facility planning.
 Operations - Objectives

Cost: Mfg cost as % of sales(60% to 55%), Inventory

turns(no of times-5.1 to 6.0)
Quality :Customer satisfaction index(CSI)(88% to 95%), %
of scrap and rework(2% to 1%), Warranty cost as % of
sales(1% to .5%)
Delivery: Orders filled from stock(90% to 95%), Lead time
to fill/complete orders(3 weeks to 1 week)
Flexibility: No of months to launch new products (10
months to 8 months), time to increase capacity(3 months to
2 months)
 Dealing with Trade-Offs

Cost

Flexibility Delivery

Quality
 Operations Strategy - Wal-Mart(USA)

Corporate Strategy
(Gain competitive advantage by) providing customers access to
quality goods, when and where needed, at competitive prices

Operations Structure
Operations Strategy – Cross docking
– Short flow times – EDI
– Low inventory levels – Fast transportation system
– Focused locations
– Communication between
retail stores
 Wal-Mart – Operations Strategy

• Inventory at retail stores turned over twice a week

(Industry averages once every two weeks)
• Improved targeting of products to markets
• Sourcing of Products – World-wide
• Sales per square foot increased from $140 in 1991
to $380 in 2016 (Industry average increased from
$110 to $150)
• Deal with suppliers with ethical business
practices.
 OM Decisions
• Strategic Decisions
• Design Decisions
• Operating Decisions
 Strategic Decisions
• Product and Service plans
– What products and services?
• Competitive priorities
• Excel on cost or flexibility?
• Positioning strategy
• Organize around products and processes?
• Quality management
• How to get everyone involved?
• Quality control
• How to best achieve quality goals?
 Design Decisions
• Process Design
– What transformation processes?
• Technology management
– Should we automate?
• Job design
– Should our jobs be specialized or enlarged?
• Capacity
– Is our facility too large or small?
• Location
– Where is a good store location?
• Layout
– What departments should be close?
 Operating Decisions
• Forecasting
– How do we design the best forecasting system?
• Materials management
– Who should be our suppliers?
• Inventory
– How should we control our inventory?
• Aggregate plans
– How big should our workforce be?
• Master production scheduling
– Should we make to stock?
• Production control systems
– When should we release new orders?
 Current POM Challenges

• Speeding product development time

• Developing production systems to enable mass

customization of products and services

• Managing global production networks

• Developing and integrating new process

technologies into existing production systems .