OVERVIEW OF OPERATION STRATEGY AND ITS IMPORTANT TO THE FIRM
involves the transformation of inputs to outputs in order to add value.
Managing activities required to produce and deliver a product or a service, including purchasing, warehousing and transportation.
A strategic context to operations management.
Can achieve significant competitive advantage over its rivals through superior operating capabilities of its resources, e.g. assets, workforce skills, supplier relationships.
The objectives for operation should be consistent with the perceived requirements of customer.
Various ‘competitive factors’ can be used to express customer requirements in term of operational performance requirements.
An organisation should establish its priorities for operational performance, and set target levels of achievement as a strategic objective.
Mintzberg’s Effective Organisation
Mintzberg suggested that an organisation is made up of five part:
‘operations’ is the term covering the central core of the organisation.
‘operating core’ refers to those individuals who perform the task rendering the product or service.
Those individuals who formulate and implement strategy in order to serve the owners of the organisation.
The hierarchy of authority from strategic apex to front line supervisors.
Concerned with co-ordinating the work by standardising processes, outputs and skills. Includes human resource (HR) managers and accountants.
Provide assistance outside of operational workflow such as catering services, legal advice and press relations.
Porter’s value chain
Human Resource Management
Porter’s Value chain
Developed VC to determine whether and how a firm’s activities contribute towards its competitive advantage.
“Margin” looks at the difference between the cost of activities and their value, helping the firm to determine whether or not best value product or services are developed.
Break into five ‘primary’ and four ‘support’ activities, and then looking at each to see if they give a cost advantage or a quality advantage.
Activity Description Example
Inbound Logistics Receiving, storing and handling raw material inputs. A just-in-time stock system could give a cost advantage
Operations Transformation of raw materials into finished goods and services. Using skilled craftsmen could give a quality advantage.
Marketing and sales Market research and the marketing mix. Sponsorship of a sport celebrity could enhance the image of a product.
After sales service All activities the occur after the point of sale, such as installation, training and repair. Mark and Spencer’s friendly approach to returns gives it a perceived quality advantage.
Activity Description Example
Firm Infrastructure How the firm is organised. A firm could have a very “lean” structure at head office in contrast to competitors with more staff and more bureaucracy.
Technology development How the firm uses technology. The latest computer controlled machinery gives greater flexibility to tailor product to customer specifications.
Human resource management How people contribute to competitive advantage. Employing expert buyers could enable a supermarket to purchase better wines than competitors.
Procurement Purchasing, but not just limited to materials. Buying a building out of town could give a cost advantage over High Street competitors.
Four Vs of operations
All operations involve transformational process but may differ in 4 different ways:
Differ in the volume of inputs
High-volume operations – more capital-intensive than low-volume operations, and to be greater specialisation of labour skills.
Handle a wide range of different inputs, or produce a wide range of output product or service.
Others are much more restricted in the range of inputs they handle or outputs they produce.
Variation in demand
Demand might vary significantly from one season of the year to another, or from one time of the day to another, with some periods of peak demand and some periods of low demand.
Other operations might handle a fairly constant volume at all time.
Visibility refers to the extent to which an organisation is visible to its customer. When an operation is highly visible, the employees will have to show good communication skills and interpersonal skills in dealing with customers.
Distinctive Features of Service Organisations
Service industries have certain distinguishing features that may make it difficult to reduce cost and increase quality:
Intangible nature -more difficult to measure their quality than it is for a physical product.
Consumed immediately and cannot be stored.
Customers participate directly in the delivery process (in manufacturing – production and purchase are usually physically separated).
Customer when evaluating the quality of the service -take into account the face-to-face contact and the social skills of those providing the service.
Tend to be more labour intensive.
Despite these difficulties managers of service organisations are now having to come to terms with requirement ‘to do more and better with less’ as they face move volatile and competitive markets with better informed and demanding customers.
Some believe that differences between service and manufacturing is overplayed. In common both provide an agreed volume of products or services within an agreed delivery plan at a pre-planned cost and level of quality.
Manufacturing firms also have to achieve targets such as planned return on assets employed, and some of these measures are now starting to take on relevance for service organisations due to changing technologies.
A functional strategy and should be aligned with overall corporate strategy.
Strategic decisions in operations include:
Innovate or copy competitors?
Consider skills/ responsibilities
Innovate or copy competitors?
What is optimum level?
Capacity/flexibility strategy- car forecast/react to demand?
Purchase from single/multiple suppliers?
How many locations?
Vertical integration strategy- operate in how many stage of the supply chain?
New production technology-
Introduce leading edge technology?
END OF CHAPTER 7
N INTRODUCTION TO OPERATION STRATEGY AND WHY IT IS IMPORTANT TO THE FIRM
TOPIC NUMBER 7
In order to add value, inputs must be transformed into outputs.
Management of Operations
Purchasing, warehousing, and transportation are all activities that must be managed in order to produce and deliver a product or service.
Strategy for Operations
Operations management in a strategic setting.
Can gain a considerable competitive edge over competitors by better managing its resources, such as assets, labor skills, and supplier relationships.
Factors that influence competition
The operation’s aims should be in line with the customer’s perceived needs.
Customers’ operational performance expectations can be expressed using a variety of ‘competitive factors.’
As a strategic goal, an organization should determine its operational performance priorities and set target levels of achievement.