Lecture 3: Strategy in Operations Management & Performance Objectives

Lecture3Strategy in Operations Management & PerformanceObjectivesModule Leader: Dr [email protected] VALUE CREATION IN ORGANISATIONS–MANAGING OPERATIONS ANDMARKETING •Recap Lecture & Seminar 2 –ServiceOperations•Understanding Factors that Impact on Ty p i c a l Corporate/Organisations or Business Operations -PESTLE•Black Box View of OperationsManagementoBlack Box View of Corporate (Organisation’s)EnvironmentoOrganisation’s Stakeholders and theirEffectsoVision, Mission andStrategy•Understanding Strategy in the Context of Operations inOrganisationsoDefinitionoImplications ofStrategyoCorporate vs OperationsStrategy•StrategyAlignment•Strategic Ops Management Process: GenericModel•An Examination of Organisation’sEnvironment•Strategic Roles and Contribution of OperationsFunctionsLessonOutline2•Operations Demand Requirements and PerformanceObjectives TheBlackBoxView ofOperationsManagementINPUTSThe Transformation ProcessOUTPUTS•Staff•Materials•Energy•Capital•Information•Tasks•Flows•Storage•Volume•Variety•Variation•Visibility•Customercontact3 The Organisation’s Environment: (Black Box Internal & ExternalView)SuppliersCustomersINPROCESSOUTThe Organisation6 Typical Corporate (Organisation)Stakeholders5 Strategy can be defined in many ways, including thefollowing;.....thepatternofactivitiestobefollowedbyanorganisationinpursuitofitslong-termpurpose,includingits‘placing’withinthemovement.Insimpleterms:‘Wherewearenow,wherewewanttogoandhowweintendtogetthere......an agreed-upon course of action and direction that helps manage the relationship between an organization and its environment. The goal is to achieve alignment or synergy so that an optimal flow of resources to the institution is achieved......as the process of identifying, protecting, leveraging and renewing the strategic capabilities of an organisation through its definition of purpose its organisation and processes, and its choice and support ofpeople.’What isStrategy?6 Strategy Implications on Organisation’s Operations?•What these definitions have in common are:-–An understanding/assessment of the organisation’s resources andcapabilities–An understanding/assessment of the externalenvironment–From these, a decision on the best way to use and apply the former to achieve an agreed aim in thelatter.•... Strategy is concerned with deciding the nature, domain and scope of an organisation’s activities (essentially, what it is like, its values, the areas it covers and the direction it is going in), and the way its success will be evaluated.•The pattern of activities in strategy arisesfrom–the acquisition, allocation and commitment of a set of resources and capabilities by the organisation, in an effective match with the challenges of its environment, and from the management of the network of relationships with and between stakeholders.7 Corporate Structure & Operations StrategyAlignment10 •The decisions taken at thetop•The general direction to gain advantage overcompetitors•The general areas of attack in the marketplace in order to satisfyclients•Sets the broad objectives -profitability, market shareetc.•Achieve objectives by meeting customerrequirementsCorporatestrategy Understanding Vision, Mission &Strategy•Vision –A realistic, credible, attractive future for yourorganisation.–Alonger-range vision ofsuccess–Sets the fundamental purposes for which the organisation has beenformed–Purpose –why the organisation exists –goals andobjectives.–Programme –how you will achieve yourpurpose–Principle –what your valuesare•Mission Statement –A declaration of an organisation’s purpose; its raison d'être.–engages both the hearts (culture) and minds (strategy) of the organisation’s internal stakeholders.–A good mission, used well can be inspirational in developing a strong, shared organisationalculture.–helps to ensure that employees’ are emotionally tied to the organisation, and that their goals are synchronised with those of theorganisation.12 13Mission/VisionObjectivesStrategyGoalsProgramsIntervention Programmes (Business Improvement Building blocks to Fulfil individual Strategicintent)Corporate & Operations StrategyFormulation Hierarchy of Corporate Strategy PlanningProcessStrategiesTacticesCORPORATE MISSION•Long Te r m Goals (Typically about 5 to 10years)Objectives•Medium Te r m Goals (Typically about 1 to 3years)•Annual Budget/StrategicPlans•Intervention Programmes(projects)/Campaigns of Operations Improvement•Short Te r m Goals (Typically about 1 month to upto 1yearperiod)•Individual Strategic Plans for Campaigns of Operations Improvement project / phases of interventionprogrammesEach has Element(s) Of Strategy Formulation14 The Organisation’sEnvironmentSuppliersCustomersExternalenvironmentPoliticalEnvironmentalSocialTe c h n o l o g i c a lLegislationEconomicCompetitorsCorporatestrategyThe Organisation14 OperationsMarketingHRMFinanceThe Organisation’s InternalEnvironment21 OperationsMarketingHRMFinancee.g. pricing involves -operationsmarketing financeThe Organisation’s InternalEnvironmentIs HRM a factorof Pricing22 Internal Resources, Capabilities & Competitive AdvantageView18 External Resources, Capabilities & Competitive AdvantageView19 Strategic Operations Management Process: A GenericModelOperations18 What is StrategyManagement?•The science and/or act of formulating, implementing and evaluating whole areas of an organisation’s functional decision-making process on the achievement of their statedobjectivesStrategic planning is vital to ensure that your organisation follows the most effective course towards itsmissionSunderland,19 What is the Role of the Operationsfunction?Operationsas implementerStrategyOperationsOperations implements strategyOperationsdrives strategyOperationsas driverStrategyOperationsOperationssupports strategyOperationsas supporterStrategyOperations10 The 3 keyattributes ofOperationsImplementingSupportingDrivingOperationscontributionBe dependable Operationalize strategy ExplainpracticalitiesBe appropriate Understand strategy Contribute todecisionsBeinnovativeProvide foundation of strategy Develop long-termcapabilitiesThe Strategic Role of the OperationsFunction20 MarketstrategyIdentifies “the market” and how tocompete•thecustomers•howmany•who they are -characteristics•where theyare•what they expect from the product, to meet theirneeds•who meets the customer’s needs best,succeeds23 Generic Measures of Product’s/ServiceSuitability•Price•Quality•design•performance•Delivery•reliable•fast•Customisation -ability to respond toeach customer•design•deliveryEach of these applies to goods andservices24 How the market measures the product’ssuitability1.These criteria do not always have equalweight.Their importance is; relative to each other, and depends uponthe market.2.Some are necessary to enable the organisation’s product tobe considered in the market place i.eorder-qualifying.3.Once the product is considered fit for purpose (commoncompetition requirements) there are criteria which must be satisfied in order to make customer choose that particular product i.eorder-winning25 Operations Strategy Formulation Tools and Techniques1.KanoMapping2.Fish-Bone Diagram (IshakawaDiagram)3.House of Quality(HOQ)4.Bell-Curve5.Vo i c e of the Customer(VoC)6.plan Do Check Act (PDCA or Deming’sCycle)7.Statistical Process Capability Charts(SPC)26 Hill’smethodologyStep1Step2Step3Step4Step5Corporate objectivesMarketing strategyHow do products/ services win ordersOperationsStrategyProcesschoiceInfrastructure•Growth•Profitability•RoA•Cashflow•Financial gearing•Markets/ segments•Range•Spec.change•Volumes•Standard/ customisation•Innovation•Price•Quality•Speed•Reliability•Range•Design•Brand•Support•Job•Batch•Line•Serviceshop•Professional•Planning•Payment•Quality systems•Supervision•Organisation27 What Market (Demand) Requirements mean for PerformanceObjectivesPriceQuality of product design Quality of product/serviceperformanceReliabledeliveryFastdeliveryCustomisation of design Customisation of deliveryCOSTDEPENDABILITYFLEXIBILITY•Product/service•Mix•Vo l u m eCLOSE TO CUSTOMERSPEEDDESIGN QUALITY PERFORMANCE QUALITYMarketrequirementsPerformanceobjectives28 Five Competitive Advantage Performance Objectives Using Efficacy in OperationsStrategyQualityBeingRIGHTSpeedBeing ON TIME (FAST?)DependabilityBeing Tr u s t worthy –ON TIME EVERY TIME?CostBeing VA L U E FOR MONEY(PRODUCTIVE)Being ABLE TOCHANGE (ADAPTABILITY)Flexibility29 Fast throughputQuick deliveryMinimum cost, maximumvalueReliable operationError-free processesError-free productsand servicesAbilityto changeFrequent new products,maximum choiceBenefits of Market LeadershipStrategyDependable deliveryDependabilityMinimum price, highestvalueCostSpeedQualityFlexibility30 THE OPERATIONS FUNCTION can have a:NEUTRAL/ SUPPORTIVEROLE:•work to meet its own objectives -beneutral OR•work closely with other functions -besupportiveINTERNAL / EXTERNALPERSPECTIVE:•be unaffected by the customer and theenvironment OR•respond to the demands of thecustomerThe Strategic Role and Contribution of OperationsManagement31 Don’tholdthe organisation backCorrectstheworstproblemsGive a strategic advantageLinksoperations andstrategyAdoptsbest practiceInternally neutralStage1Stage2Stage3Stage4The Strategic Role and Contribution of OperationsManagement32 Give a strategic advantageLinksoperations andstrategyAdoptsbest practiceCorrectstheworstproblemsStage1Stage2Stage3Stage4As good asthe competitionExternally neutralDon’t holdthe organisation backInternally neutralThe Strategic Role and Contribution of OperationsManagement33 Don’tholdthe organisation backCorrectstheworstproblemsAdoptsbest practiceLinksoperations andstrategyGive a strategic advantageInternally neutralAs good asthe competitionExternally neutralInternally supportiveBest in theindustryStage1Stage2Stage3Stage4The Strategic Role and Contribution of OperationsManagement34 The Strategic Role and Contribution of OperationsManagementInternally neutralDon’tholdthe organisation backCorrectstheworstproblemsAdoptsbest practiceLinksoperations andstrategyGive a strategic advantageAs good as the competitionExternally neutralInternally supportiveBestintheindustryExternallysupportiveStage1Stage2Stage3Stage4Redefinethe industry’s expectations35 OpportunitiesOperationstaskOperationEnvironmentProduct/Service conceptParametersfor changeOperations potentialand capabilityValueCorporate objectivesPerformance objectivesOperations Strategy ManagementWheel36 ThankYo u37