Operations Strategy and Competitiveness - Review Notes

For a company to be considered world class, it must recognize that the ability to compete in the marketplace depends on developing an operations strategy aligned with the mission of serving the customer. This chapter describes a company's competitiveness and its relative position to other firms in both local and global markets. The competitive dimensions of operations are cost, product quality and reliability, delivery speed, delivery reliability, coping with demand change, flexibility, and new product introduction speed. Central to the concept of operations strategy is the notion of operations focus and trade-offs.

The interface between marketing and operations is necessary to provide a business with an understanding of its markets from both perspectives. Operations strategy must be linked vertically to the customer and horizontally to other parts of the enterprise. Chapter two describes the steps for prioritizing competitive dimensions. Operations strategy is also considered in service firms. An example of Southwest Airlines profiles the fitting of operational activities to overall strategy, while the example of Wal-Mart profiles ways to attack the market by using operations. Finally, productivity measures are presented including partial measures, multifactor measures, and total measures of productivity. These measures provide benchmarks to indicate how well the company is doing and are used to measure improvement.

What is Operations Strategy?

Operations strategy involves decisions that related to the specifications and design of the product or service, design of a production process and the infrastructure needed to support the process, the role of inventory in the process, and locating the process. Operations strategy decision are part of corporate planning process that coordinates the goals of operations with those of marketing and that of larger organization.

Strategic opeation decisions have to win the customer approval in absolute sense and they have to win in the competitive scenario, that means they have to win the customer approval in a relative sense (their offer must be superior to the target market customers relative to the offers of competitors).

Quality (which includes product benefits and features, relialility, durability) price and ease of purchase and servicing are the three operations related categories that customers use to evaluae before puchasing. Price is related to operations to the extent cost influences the price. Otherwise price is a marketing decision based on customer demand schedules and operations is not directly involved in pricing decision. But whenever operations is able to reduce costs, pricing decision is reconsidered.

Competitive operations strategy development calls for research and improvement of operations processes on continuous basis and also monitoring of developments in competitor organizations. Benchmarking needs to be done periodically to understand the progress made by others and to initiate actions to catch up on parameters where there is a gap. Cost, product scope, product quality, delivery speed, delivery reliability, new product introductions are some of the operations related parameters in which competitors try to improve and gain competitive advantage.

Order qualifiers and Order winners

Terry Hill coined these terms. Order qualifiers are criteria that place a company's products in consideration for purchase. If order qualifiers are not present in a company's product they do not enter the purchase evaluation process of significant number of customers. Order winners are the features which results in getting orders. Order winners are given as reasons for purchase by the buyers from among the alternatives considered for purchase. Both these criteria keep changing and operations people have to redesign their processes to match them.

Operations Strategy
What is Operations Strategy?
Operations Strategy Defined

Operations Competitive Dimensions
Competitive Dimensions
The Notion of Trade-Offs
Plant-within-a-Plant (PWP) Defined
Straddling Defined
Order Winners and Qualifiers
Order Winner Defined
Order Qualifiers Defined
The Marketing-Operations Link

The Corporate Strategy Design Process
The Financial Perspective
The Customer Perspective
The Internal Perspective
The Learning and Growth Perspective

Strategic Fit—Fitting Operational Activities to Strategy
Activity-System Maps Defined
A Framework for Operations Strategy in Manufacturing
Core Capabilities Defined
Developing a Manufacturing Strategy
Operations Strategy in Services
Internet Compliments Strategy

Attacking Through Operations

Productivity Measurement
Key Performance indicators (KPI) Defined
Productivity Defined
How Does Wall Street Evaluate Operations Performance?


Case: Custom Fabricators, Inc.—From Lean Manufacturing Partner to Contract Manufacturer

Case: Lasik Vision Corporation


Presentation Slides - Operations Strategy

Strategic Role of Operations - Slack's Book chapter summary
Operations Strategy - Slack's book chapter summary - chapter 3

Updated 10.2.2012
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