Brunel School of Business and Management
BOLA : Business Open Learning Archive
Prev

Operations Strategy

The operational side of a business directly contributes to competitiveness and market leadership. Management of operations therefore needs specified, consistent and achievable objectives and sound implementation strategies.

If we know where we are and where we want to get to, we have some chance of getting there - otherwise we are lost.

If a footwear manufacturer decides to move from being a safe, conservative design manufacturer to being a market/fashion leader then its production and service operations must deliver the quality and responsiveness that this requires. Production processes, supplier relationships, uses of technology and design capabilities are key factors. Yet sometimes there is a failure to give sufficient attention to the strategic aspects of operations functions.

One operations strategy is to be driven by sales and manufacture whatever quantity the customer wants. But this strategy is often, from the customer-point-of-view is linked with the lowest cost for the highest quality. Within the firm desperate for business this disappointingly often translates to "lowest cost with the lowest quality that we can get away with". In a buyers market - this may be the cul-de-sac the company is forced into.

Crisis management versus
Visionary Operations

Macho operations managers, ( "brought up the hard way" types who argue for "gut-feel" decision-making) see themselves as fire-fighters. "Just get the goods out of the factory gate. Whatever sales want, we'll deliver - eventually". They tackle crises and neglect to develop measured strategies and they too frequently fail on delivery, price and quality.

Tthis prospect highlights the need(strategically) for informed, systematic development and intelligent implementation. The rhetorical of this line of argument is for well-reserached, logical decision-making by managers able to control events. For operations managers such an "ideal, rational" approach calls for detailed planning, balancing of constraints, evaluation and co-ordination of people, machinery and information systems. The planning, organising, monitoring, motivating and controlling aspects of the managerial message are readily apparent. The situation demands decision analysts and implementors, information scientists and team managers.

Corporate and marketing strategy and operations?

From the late 80's onwards the operations function has received more attention in debates about "the best approaches to management". Probably the main influence in all this has been the success of the japanese industrial machine in winning market share in manufacturing terms. The Japanese or even the Toyota systematic approaches to management have pushed Western businesses to take a closer, more detailed look at operations management and associated techniques and practices. Western business people have been stunned by the ability of Pacific Rim economies to product higher quality goods more quickly at lower prices even forcing domestic producers out of their own markets.

Western managers have been urged to learn from the Japanese experience and to make more proactive contributions to their firm's strategic processes? Are operations managers sufficiently focused on their role and ability to influence the operation of the value added chain of the firm as a whole?

The Value-added Chain

Operations managers must address every activity they are engaged with on the value added chain. Their performance-related, value-added objectives include

NB: production can be in-house but production and service activity in the value-added chain can be bought-in/out-sourced. Value-added stages include

Peters and Waterman (In Search of Excellence) argued for strategists to focus their attention on the core business ("stick to the knitting"). The Sunday Times (22 Sept 96) reported British Airways interest in cost cutting (£1 billion over 3 years by sub-contracting out baggage handling aand ticket processing. This was presented as a necessary business response by the profitable market leader to anticipate the effects of deregulation of air travel, lower fares and new competition. The suggested programme would strip the company down (the lean organisation) that focuses on transporting passengers and cargo. Such a focus means that aircraft engineering maintenance, baggage handling, business computer services etc can be bought in services.

But how are "core operations" defined and is out-sourcing the best policy? An acid test of operations manager contribution to strategic management is their involvement in these decisions. It may be that organisations - previously vertically integrated - become too lean and that quality and flexibility objectives are undermined by over-zealous out-sourcing.

Programmes in an operations strategy

We see a strategy in

....operations managers are directed/choose to pursue. But strategies may be covert - merely evident through managerial actions.

Key elements in an operations strategy may cover:

This list foolishly omits people- the skills and committment of those employed in operations may give the firm special competitive advantage.

Evolution versus radical change

Markets and corporate environments are dynamic and operations strategies may reflect compromise more than radical (quantum) leaps into new product/service areas. Existing facilities, processes and control structures are seldom ideal and may be patched to roughly fit requirements. Evolution (one step at a time) is more likely unless there are funds for major long-term investment.

Orders/contracts can only be met from within available (or sub-contracted) capacity, funding and expertise. Piece-meal change may be too little too late - post-hoc and reactive not proactive (anticipated) systematic development.

Telling proactive investment demands vision and willingness. Glossing over inefficiencies may compound problems.

References

© maintained and developed by C. Jarvis