The Operations Challenge Key Questions Business Essays

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• Why should organizations have an operations strategy?

• How does ethics come into operations strategy?

• What are the main international issues faced by organizations formulating their operations strategies?

• How can operations strategies be creative?

• What influences the successful implementation of operations strategies?

Topics covered

• The challenges of operations strategy formulation.

• How the decisions resulting from operations strategies have an ethical dimension.

• Why operations strategies need to be considered from an international perspective.

• Why challenging the trade-off paradigm of operations involves creative operations strategies.

• How an implementation agenda is needed to put operations strategies into practice.

Summary

Why should organizations have an operations strategy?

• Because the evidence seems to show that an effective operations strategy helps organizations to compete more effectively. It does this by helping policies to be more coherent, helping to prioritize internal conflict and giving structure to the internal debate on which direction to choose.

• However, there are a number of difficulties in formulating successful operations strategies. Operations managers tend to be geographically dispersed;

Operations managers operate in real time and so therefore need to manage the operation;

Operations resources are difficult to change; Operations managers are often not in the habit of contributing to strategic change.

• Operations strategies can be classified into categories of generic strategies. One such classification distinguishes between caretaker strategies, marketeer strategies, reorganiser strategies and innovator strategies.

How do ethics come into operations strategy?

• Practically all decisions made by operations managers have some kind of ethical dimension. These ethical considerations affect one or more of the following groups:

the operation's customers;

the operation's staff;

the operation's suppliers;

the community in which the operation exists;

the operation's shareholders and owners.

• Some companies make their ethical stance explicit through a statement of mission and values.

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What are the main international issues faced by operations strategies?

• The first is how to configure their resources throughout the world. There are four configurations. These are:

Home country configuration;

Regional configuration;

Global co-ordinated configuration;

Combined regional and global co-ordinated configuration.

International operations need to address the problems of managing their operations across national boundaries. An issue here is how to balance competition and co-operation.

• Different regions in the world often develop different operations practices depending on the economic, social and political circumstances. However, some of these practices developed in one part of the world can be transferred (often in a modified form) to other parts of the world.

How can operations strategies be creative?

• One of the main concepts which helps to explain creativity in operations is that of the 'trade­off'. Originally theories of operations suggested that operations managers needed to merely manage the extent of trade-offs between performance objectives. More recently theories suggest that overcoming the long-term effects of trade-offs is a useful way of ensuring creativity in organizations.

What influences the successful implementation of operations strategies?

• Partly ensuring that any change is accompanied by a worked-through 'implementation agenda'. This will deal with such basic questions as:

When should the implementation start?

Where should the implementation start?

How fast should the implementation proceed?

How should the implementation programme be co-ordinated?

• In addition studies tend to show that successful implementations have top management support, are business driven, make technology decisions driven by the strategy itself, have changes which are integrated, invest in people as well as technology and manage technology as well as people.

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The challenges of operations strategy formulation

Points to make

1 It is important to distinguish between the content of an operations strategy and the process by which it is formulated.

Content is the output of the operations strategy process. Content addresses the question -what is your operations strategy? Process addresses the question - how did you develop your operations strategy?

2 Operations is complicated by the fact that it has many elements.

Putting these together into a coherent whole so that they all help the business compete is a challenging task, but this is what we seek to do when formulating an operations strategy.

3 What are the advantages of having an operations strategy?

A formal operations strategy helps ensure that the policies adopted in the operations function fit together in a coherent manner. The strategy provides a framework for future decision making and gives the operations function direction.

4 What are the difficulties in formulating an operations strategy?

In addition to the complexity there are four particular problems that have to be faced. Operations managers are central to the strategy formulation process and yet within any organization they are likely to be scattered around the world. Operations managers operate in real time. They cannot afford to leave the operation unattended for long periods. Constraints on what is possible are inevitable given the nature of the operation's resources. The previous three items have been problems for years. Hence operations managers are not used to thinking strategically.

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How operations strategies have an ethical dimension

Points to make

1 Ethics can be considered as the framework of moral behaviour which determines whether we judge a particular decision as being right or wrong.

2 An operation's ethical stance impacts various groups.

These groups include customers, staff, suppliers, the community and the shareholders.

3 An operation's ethical stance is often summarized in a statement of vision, mission or values.

4 The ethical implications of operations strategies include:

Product/service design - customer safety, recyclability of materials, energy consumption.

Network design - employment implications and environmental impact of location, employment implications of plant closure, employment implications of vertical integration.

Layout of facilities - staff safety, disabled customer access, energy efficiency.

Process technology - staff safety, waste and product disposal, noise pollution, fumes and emissions, repetitive/alienating work, energy efficiency.

Job design - staff safety, workplace stress, repetitive/alienating work, unsocial working hours, customer safety (in high contact operations).

Planning and control - priority given to each customer, materials utilization and wastage, unsocial working hours, workplace stress, restrictive organizational cultures.

Capacity planning and control - hire and fire employment policies, working hour fluctuations, unsocial working hours, service cover in emergencies, relationships with subcontractors, dumping of products below cost.

Inventory planning and control - price manipulation in restricted markets, energy management, warehouse safety, obsolescence and wastage.

Supply chain planning and control - honesty in supplier relationships, transparency of cost data, non-exploitation of developing country suppliers, prompt payment to suppliers, minimizing energy consumption in distribution, using recycled materials.

Quality planning and control - customer safety, staff safety, workplace stress, scrap and wastage of materials.

Failure prevention and recovery - environmental impact of process failures, customer safety, staff safety.

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The international perspective

Points to make

1 Most operations buy from or sell to business overseas.

Hence operations strategies have to be international.

2 There are four basic decisions that need to be made regarding international operations strategies.

Where should the operations facilities be located?

How should the operations network be managed across national boundaries?

Should operations in different countries be allowed to develop their own way of doing business?

Should an operations practice which has been successful in one part of the world be transferred to another?

3 Where should the operations facilities be located?

• Home country configuration. This is by far the simplest option. Plants are located only in the operation's home country. Goods and services are exported or imported as appropriate.

• Regional configuration. The market is divided into regions. Each region is served by its own operation(s). This configuration is adopted if customers want speedy delivery and good after-sales service.

• Global co-ordinated configuration. Operations are located so that they can exploit particular advantages of sites or regions. Products and services are exported. This configuration requires central co-ordination.

• Combined regional and global co-ordinated configuration. The regions are reasonably autonomous, but certain products or services are still made in certain areas.

4 How should the operations network be managed across national boundaries?

International businesses encounter various problems caused by language, culture and the local environment. Having said this, a major advantage of being multinational is that the business can begin to develop a multi-cultural perspective, which helps it understand new markets and ways of working.

5 Should operations in different countries be allowed to develop their own way of doing business?

If left alone, operations will develop their own ways of doing things. The question is - is this desirable?

6 Should an operation's practice which has been successful in one part of the world be transferred to another?

This is a complex question, made more difficult by the fact that even if it is desirable, it is not always possible to transfer 'best practices'. While it is often relatively straightforward to transfer the technical aspects of a practice, implementation usually involves tailoring the practice so it suits the local environment.

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The trade-off relationship between performance objectives

Points to make

1 Procedures give structure to the strategy formulation process.

They do not provide the single best solution.

To create a 'good solution' you have to be innovative. Often this involves breaking free from the trade-off model of operations. The trade-off model holds that one way in which performance can be improved with regard to one objective is to trade-off performance with some other objective.

2 There is no such thing as a free lunch!

Wickham Skinner, one of the leading lights in operations strategy, said, 'Most managers will readily admit that there are compromises or trade-offs to be made in designing an aeroplane or truck. In the case of an aeroplane, trade-offs would involve matters such as cruising speed, take-off and landing distances, initial cost, maintenance, fuel consumption, passenger comfort and cargo or passenger capacity. For instance no one today can design a 500 passenger plane that can land on an aircraft carrier and also break the sound barrier. Much the same thing is true in manufacturing1.

3 Some firms appear to get the best of both worlds.

'Good food costs less at Sainsbury's'. In some industry sectors the model has changed. People appear to be able to overcome some trade-offs. Take, for example, cars. At one time high quality, reliable cars were inevitably expensive. Now, in most cases, even the cheapest cars are error-free.

4 What has changed?

Largely the attitude of operations managers. For years the prevailing wisdom was 'you can either have something that is good, or you can have something that is cheap'. Now people recognise that making things better does not have to cost more. In fact, making things better can reduce scrap, thereby reducing, rather than increasing, cost.

5 What has prompted this attitude change?

Pioneering Japanese firms have questioned the prevailing logic and over a period of time have been able to minimize the impact of various trade-offs. Others have seen this example and followed suit.

6 Over a period of time.

A key issue is timescale. It might be possible for a production manager to double volume overnight, but it would almost certainly be expensive. Over a six- or twelve-month period the story might be different because it might be possible to reconfigure the manufacturing system so that the worst of the trade-off could be overcome.

7 By attacking the pivot.

Imagine a supermarket. One of the key trade-offs is the number of tills operating versus the length of the queues. Customers do not like waiting. The supermarket does not want to have till operators standing idle. Hence there must be a trade-off. Some supermarkets have sought to overcome this problem by keeping a register of people who live locally and are willing to come to work at very short notice. Labour flexibility like this cannot be developed overnight, but once available, these 'extra' staff can be asked to come in as and when queues build up, thereby minimizing the impact of the trade-off.

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An 'implementation agenda' is needed

Points to make

1 Operations strategies have to be implemented.

For this to happen an implementation agenda is needed. The implementation agenda should explore: (a) when to start; (b) where to start; (c) how fast to proceed; and (d) how to co-ordinate the implementation programme.

2 When to start?

The key rule is that implementation should not be started until all the issues on the implementation agenda have been addressed.

3 Where to start?

There are two schools of thought here. Some people argue that implementation should start where most impact will be felt. Others argue that implementation should start wherever success is most likely.

4 How fast to proceed?

The implementation programme can be continuous, breakthrough, or a combination of the two.

5 How to co-ordinate the implementation programme?

Implementation needs to be managed. It requires resources and the implementation programme should be reviewed as regular milestones are achieved.

6 Key elements to successful implementation can be identified.

These include:

• Top management support.

• Business driven.

• Strategy drives technology.

• Change strategies that are integrated.

• Investment in people as well as technology.

• Management of technology as well as people.

• Everybody on board.

• Clear explicit objectives.

• Time-framed project management.

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