Summary questions chapter 1, 2 & 3
Why is operations excellence fundamental to strategic success?
'Operations' is the activity of managing the resources and processes that produce and deliver goods and services. All operations transform resource inputs into outputs of products and services and can be analysed at three levels: - that of the business itself; - as part of a greater network of operations; - at the level of individual processes within the operation. Operations management contributes to the success of any organisation by reducing costs, by increasing revenue by reducing capital employed and by providing the basis for future innovation.
are trade-offs between operations performance objectives inevitable, or can they be overcome?
Again, both are true. Yes, trade-offs are always, to some extent, inevitable in that pushing an operation to extremes in one aspect of performance will inevitably mean some sacrifice in other aspects of performance. Yet trade-offs can, at the margin, be overcome. In fact, the whole concept of operations performance improvement is, in effect, an attempt to overcome trade-offs. It is therefore the responsibility of all operations managers to seek ways of overcoming trade-offs. This also holds true when broader trade-offs are being considered, such as those between corporate social responsibility (CSR) performance and more obviously commercial aspects of performance.
how is operations strategy developing?
Although the 'mainstream' view of operations strategy is straightforwardly the strategic management of the operation's resources and processes, the subject can still be interpreted in different ways. For example, operations strategy can be interpreted as being equivalent to 'supply strategy', or 'functional strategy', or as the firm's 'operating model', and as 'strategy execution'.
how can operations strategy learn from operational experience?
An alternative view to the top-down perspective (one that is based on observing how strategy happens in practice) is the bottom-up perspective, which stresses how strate- gic ideas emerge over time from actual experiences. Companies adopt strategies partly because of their ongoing experience, sometimes with no high-level decision making involved. The idea of strategy being shaped by experience over time is also called the concept of emergent strategies. Shaping strategy from the bottom up requires an ability to learn from experience and a philosophy of continual and incremental improvement.
how should operations reflect overall strategy?
An operations strategy will be one of several functional strategies that are governed by the decisions that set the overall strategic direction of the organisation. This is called the 'top-down' approach. So, corporate strategy should be reflected in the strategies of each business unit, which should, in turn, inform the strategy of each business function.
how is operations performance judged at a strategic level?
At the strategic level, operations measures tend to be aggregated from, and strongly influenced by, the operational measures. These aggregated measures are cost, revenue, the use of capital, risk and the operations ability to build capabilities.
how does business process reengineering fit into operations strategy?
BPR is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed. The approach strives for dramatic improvements in performance by radically rethinking and redesigning the process using 'end-to-end' processes and by exploiting the power of IT to integrate processes.
how is operations performance judged at an operational level?
Because operations strategy is always concerned with addressing customers' needs, at the operational level the focus is primarily on the five generic performance objectives of quality, speed, dependability, flexibility and cost. Each of these performance objectives has both internal and external effects. Externally, their relative importance will differ depending on the nature of the markets served by the operation and/or its products and services. Internally, these objectives can be mutually dependent. One way of distinguishing between the relative importance of each performance objective is by classifying them as order-winners and qualifiers, and, more recently, as 'delights'.
Do the role and key performance objectives of operations stay constant or vary over time?
Both are true. Markets change, and the capabilities of operations resources develop over time. Therefore, not only does operations strategy change, but also the relative importance of its performance objectives will change. In fact, over the long term, the operations strategies of most enterprises can be seen to vary, either in response to deliberate attempts to change overall strategic direction or in a more emergent sense, where a consensus of the most appropriate strategic direction forms through accumulated operational experience.
how is operations performance judged at a societal level?
Operations should be judged in terms of how they satisfy the various (and varied) objectives of their stakeholders. One idea that tries to capture the idea of a broader approach to assessing an organisation's performance is the 'triple bottom line' (TBL, or 3BL), also known as 'people', plant and profit'. It holds that organisations should measure themselves not just on the traditional economic profit, but also on the impact their operations have on society broadly, and their ecological impact on the environment.
What is operations strategy?
Operations strategy is the total pattern of decisions that shape the long-term capabilities of any kind of operation and their contribution to overall strategy, through the ongoing reconciliation of market requirements and operation resources. All businesses have markets, all businesses own or deploy resources; therefore, all businesses are concerned with the reconciliation of markets and resources.
how can the intrinsic capabilities of an operation's resources influence operations strategy?
Over time, an operation may acquire distinctive capabilities, or competences, on the basis of its resources and the accumulation of its experiences. These capabilities may be embedded within a company's intangible resources and its operating 'routines'. So, they concern both what the operation has and what it does. 'Operations' shapes these capabilities (consciously or unconsciously) through the way it makes a whole series of decisions over time. These decisions can be grouped under the headings of - capacity, - supply network, - process technology - development and organisation.
how does Six Sigma fit into operations strategy?
Six Sigma is a disciplined methodology of defining, measuring, analysing, improving and controlling the quality in every one of the company's products, processes and transactions - with the ultimate goal of virtually eliminating all defects. Although it started as a statistical process control-based concept, it is now a broad improvement concept rather than a simple examination of process variation. It stresses the use of (preferably quantitative) evidence in decision making, systematic problem solving and the use of improvement specialists called Black Belts, Green Belts and so on.
What is strategy?
Strategic decisions are those that set broad objectives that direct an enterprise towards its overall goal, plan the path that will achieve these goals, stress long-term rather than short-term objectives and deal with total picture rather than with individual activities, and are often seen as above or detached from routine day-to-day activities. However, it is not easy to totally characterise strategy or strategic decisions. Some organisations make no explicit strategic decisions, as such. Rather, they develop over time, often with strategies that 'emerge' from their ongoing experience of doing business. Furthermore, the strategy that is espoused by an organisation may not always be reflected in what it actually does. This is why strategy is often taken to be the 'pattern of decisions' that indicate the company's overall path.
how does total quality management fit into operations strategy?
TQM is a philosophy of how to approach the organisation of quality improvement that stresses the 'total' of TQM. It puts quality and improvement generally at the heart of everything that is done by an operation. It provides a checklist of how to organise operations improvement. It has also been developed into a more prescriptive form, as in the EFQM Excellence Model, developed by the European Foundation for Quality Management (EFQM).
What is the 'content' of operations strategy?
The 'content' of operations strategy is the building block from which any operations strategy will be formed. This includes - the definition attached to individual performance objectives, together with a prioritisation of those performance objectives. - an understanding of the structure and options available in the four decision areas of capacity, supply networks, process technology and development and organisation. Performance objectives and decisions areas interact in a way that can be described by the operations strategy matrix. When devising an operations strategy it is important to ensure that, in terms of the matrix, the strategy is comprehensive (all obvious aspects are at least considered) and has the critical intersections identified.
What is the 'process' of operations strategy?
The 'process' of operations strategy are the procedures that are, or can be, used to formulate operations strategy. It determines how an operation pursues the reconciliation between its market requirements and operations resources in practice. The practical reality of putting operations strategies together and making them happen in practice is complex, but, at a simple level, has four stages: formulation, implementation, monitoring and control. The success of effective operations strategy process is also closely linked to the style and skills of the leaders who do it.
What are the advantages and disadvantages of focused operations?
The benefits of focus include achieving a clarity of performance objectives, which aids day-to-day decision making, developing resources in a manner appropriate to achieve a narrow set of objectives, and the enhanced learning and improvement that derives from concentrating on a narrow set of tasks. On the other hand, the problems with focus include the dangers inherent if there are significant shifts in the marketplace, which may leave the operation 'stranded' with an inappropriate performance mix, the reduction in opportunities for economies of scale as operations are segmented internally, and some structural vulnerability because of the first two issues.
how do lean operations fit into operations strategy?
The lean approach aims to meet demand instantaneously, with perfect quality and no waste. It can be seen as having four elements: - customer-based demand triggers, - synchronised flow, - enhanced improvement behaviour - waste elimination. However, the lean concept implies some sacrifice of capacity utilisation. It occurs because when stoppages occur in the traditional system, buffers allow each stage to continue working and thus achieve high-capacity utilisation. There is far less buffering in lean processes.
how can operations performance 'make or break' an organisation?
The way that an organisation's operations strategy is fashioned and implemented determines how its resources are used and, because the operations function is large and, in most businesses, represents the bulk of its assets and the majority of its people, this has a profound impact on the organisation's performance. But it is not only the size of the operations function that determines operations strategy's centrality to competitiveness; it is also its ability to develop the capabilities that will keep it ahead of competitors in the future. And for operations strategy to be effective, its performance must be assessed in terms of all its stakeholders. All operations have stakeholders; they are the people and groups who have a legitimate interest in the operation's strategy. Strongly related to the stakeholder perspective of operations performance is that of corporate social responsibility (generally known as CSR).
What place do these new approaches have in operations strategy?
These approaches are not strategies in themselves (operations strategy specific to one organisation at one point in time), they are generic in nature, but they are strategic decisions. Although none of them is incompatible with operations strategy, they can all be considered as part of a strategy. It is also important to understand fully any approach before it is adopted, because all the approaches are different. Some emphasise gradual change, others more radical change. Some hold a view of the best way to organise resources, others concentrate on how to decide what to do. So, the focus of BPR is what should happen rather than how it should happen, and lean is similar. But both Six Sigma and TQM focus more on how operations should be improved. BPR is explicit in its advocacy of radical and dramatic change. TQM and lean, on the other hand, both incorporate ideas of continuous improvement, whereas Six Sigma can be used for small or very large changes.
how do the requirements of the market influence operations strategy?
Two important elements within markets are customers and competitors. The concept of market segmentation is used to identify target markets that have a clear set of requirements and where a company can differentiate itself from current, or potential, competitors. On the basis of this, the company takes up a market position. This market position can be characterised in terms of how the company wishes to compete for customers' business. By grouping competitive factors into clusters under the heading of generic performance objectives (quality, speed, dependability, flexibility and cost), market requirements are translated into a form useful for the development of the operation.
