The three levels of operations strategy process

Increasing
complexity

Level 1 - Fit

Align resources with

requirements

Level 2 - Sustainability

Develop sustainable
competitive advantage

Level 3 - Risk

Include impact of
uncertainty

Nigel Slack and Michael Lewis 2003

Operations Strategy Formulation

Putting an operations strategy together presents some
particular difficulties:
Senior operations managers are often
geographically dispersed
The operation still needs running
Predominance of line management
Complexity of operations resources
Inertia of operations resources

Nigel Slack and Michael Lewis 2003

Operations Strategy Formulation

There are many formulation process stage models.
They often include:
Links between competitive strategy objectives and operations
objectives (strategic fit)
The use of competitive objectives as the translation device
between strategic and operations objectives
Judging the importance of competitive objectives against
customer/market requirements
Current performance judged against competitor performance
An iterative process
The concept of an ideal of greenfield operation against which
to compare current operations.
A gap-based analysis
Nigel Slack and Michael Lewis 2003

Level of market
requirements

In operations strategy fit is the alignment between

market and operations capability

ne
i
L

X
Nigel Slack and Michael Lewis 2003

f
f
o

it

Alignment
between market
and operations
capability

Level of operations
resource capability

Fit means that the operations resources and processes are

aligned with the requirements of its markets.

Market requirements

Fit can also mean that market requirements are moved to

exploit operations resource capabilities

Li

ne

it
f
f

Operations resource capability

Nigel Slack and Michael Lewis 2003

Market
Segmentation

Market
Positioning

Operations
Performance
Objectives

Operations
Strategy
Decision
Areas

Operations
Capabilities

State market
requirements
in terms of
operations
performance
objectives

Make
strategic
operations
decisions

to
enhance
core
capabilities

Competitor
Activity

Understand
markets

Define
competitive
position

Fit operations resources to market requirements fit

Nigel Slack and Michael Lewis 2003

Tangible and
Intangible
Resources

Potential
Market
Positioning

Operations
Performance

Operations
Strategy
Decision
Areas

Operations
Capabilities

Operations
Processes
Determine
competitive
position

Define
market
potential of
operations
performance

Make
appropriate
strategic
operations
decisions

Identify
core
capabilities

Fit market positioning to operations

resources capabilities

Nigel Slack and Michael Lewis 2003

Understand
resources and
processes

Critical

Critical

Critical

Critical

Critical

Critical

Critical

Capacity

Supply
Network

Quality

Market
Competitiveness

Performance objectives

Resource Usage

Speed
Dependability
Flexibility
Cost

Process Development
and
Technology
Organization
Decision areas

IBM operations strategy matrix

(1970-1985)
Nigel Slack and Michael Lewis 2003

Ideal
Minimum
resource resource
capability capability
ne
i
L

y2
Level of market
requirements

it
f
of

Tight
fit

y1
A

Ideal market
requirements
Minimum
market
requirements

x1
X
x2
Level of operations resource capability

The level of fit may not always be tight

Nigel Slack and Michael Lewis 2003

Fit is concerned with ensuring comprehensiveness,

correspondence, coherence and criticality

Speed
Dependability
Flexibility
Cost

Critical
Critical

Critical
Capacity

Critical
Supply
Network

Process
Technology

Decision areas

Comprehensive?
Nigel Slack and Michael Lewis 2003

Critical
Market
Competitiveness

Coherence

Quality
Correspondence

Performance objectives

Resource Usage

Development
and
Organization

Resource Usage

Quality

resources to
support
quality
Use quality as
performance
criteria

Continuous

quality
emphasis with
suppliers
Purchase
using quality
criteria
Work on
functional
barriers

Built-in quality Long-term

in processes
Statistical
process
control
Enhance
quality
capability
Quality as a
performance
criteria

plans
Quality culture
Continuous
improvement
Quality
performance
measurement
and control
Operational
supervision is
important
Communication
Appropriate
org. structure

Speed
Dependability
Flexibility
Cost
Capacity

Process Development
and
Technology
Organization
Decision areas

Supply
Network

To be strategic, quality initiatives need to comprehensively cover all

decision areas
Nigel Slack and Michael Lewis 2003

Market
Competitiveness

Performance objectives

Provide

Step 1

Step 2

Step 3

Corporate
objectives

Marketing
strategy

How do products
or services win
orders?

Growth
Profit
ROI

Product/service Price
markets and
segments

Range

Other financial Mix

measures

Volumes
Standardisation
or
customisation

Innovation
Leader or
follower

Quality
Delivery speed
Delivery
dependability

Step 4

Operations strategy
Process choice

Process
technology

Trade-offs
embodied in
process

Product/service Role of
range

inventory

Product/service Capacity, size,

design

timing, location

Brand image
Technical
service

The Hill framework of operations strategy

formulation
Nigel Slack and Michael Lewis 2003

Step 5

Infrastructure

Functional
support

Operations
planning and
control systems

Work structuring
Payment
systems

Organisational
structure

OPPORTUNITIES
AND THREATS?
THE EXISTING OPERATION
WHAT THE
MARKET WANTS?

Features
Quality
Delivery
Flexibility
Price
HOW THE
OPERATION
PERFORMS

Facilities
Capacity
Span of process
Processes
Human resources
Quality
Control policies
Suppliers
New Products

Features
Quality
Delivery
Flexibility
Price

The Platts-Gregory procedure

Nigel Slack and Michael Lewis 2003

WHAT DO WE NEED
TO DO TO IMPROVE
THE REVISED
OPERATIONS
STRATEGY?

Market requirements

Product
family
Delivery
lead-time

Ex-stock
Short

Not significant Long

Into stock point

Variable

Critical: Project delay

Good

Fit for purpose

Few features

Many features/
High absolute level

Acceptable at price
Acceptable

Total reliability essential

High

Reliability

Features

Quality
Flexibility
design
Volume

Price cost

Achieved performance

Standard range only

Standard only

All designs customer specified

All products customised

Stable market
Little variation required
Volume variations low

Highly cyclic variable market

Volume variations high

Price competition
dominant
Low

Non-price competition
dominant
High

Uses of profiling in the Platts-Gregory procedure

Nigel Slack and Michael Lewis 2003