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Module 2

Operations strategy involves decisions related to product specifications, production processes, infrastructure, capacity levels, technology investments, and organizational structure. There are four stages in the strategic role of operations: internally neutral, externally neutral, internally supportive, and externally supportive. Key competitive dimensions for operations include quality, time, flexibility, cost, and product differentiation. Firms must consider trade-offs between prioritizing some dimensions over others to match their capabilities with customer needs.

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47 views6 pages

Module 2

Operations strategy involves decisions related to product specifications, production processes, infrastructure, capacity levels, technology investments, and organizational structure. There are four stages in the strategic role of operations: internally neutral, externally neutral, internally supportive, and externally supportive. Key competitive dimensions for operations include quality, time, flexibility, cost, and product differentiation. Firms must consider trade-offs between prioritizing some dimensions over others to match their capabilities with customer needs.

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isabel payupay
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We take content rights seriously. If you suspect this is your content, claim it here.
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MODULE 2

OPERATIONS STRATEGY AND COMPETITIVENESS

Learning Objectives

1. Define Operations Strategy and competitiveness.


2. Enumerate the four generic performance competitive dimensions that are particularly
relevant to operations and supply chain activities.

Introduction

Operations strategy is critical to operations management success and make a


business more competitive. Everything done in an organization has to add value
towards meeting the needs of the customers - and delivering something of value.
Through consistent checks and metrics against a desired norm, a business can stay
ahead of the competition and achieve success. Strategies within a company's
operations will ensure the customer is continuously satisfied.

⮚ Operations Strategy, Defined

What is operation?

Operation strategy involves decisions that is 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 include the following:

1. Amounts of capacity required by the organization to achieve its aims


2. The range and locations of facilities
3. Technology investment to support process and product development
4. Formation of strategic buyer-supplier relationships as part of the
organization’s extended enterprise
5. The rate of new product or service introduction
6. Organizational structure – to reflect what the firm “does best” often entailing
outsourcing of other activities.

The four-stage model of the strategic role of operations according to Steven C


Wheelwright and Robert H Hayes
1. Internally Neutral
2. Externally Neutral
3. Internally Supportive
4. Externally Supportive

The four-stage model of operations contribution

Strategic operations dimensions


✔ Improved responsiveness in terms of:
● Minimizing time to respond
● Timely response
● Accessibility through better locations, better geographical proximity,
improved logistics and better systems of communication
● Wider products/service choice through flexible operations/manufacturing
system, reduced throughput times, reduced cycle times, reduced set-up
times, flexible manpower, better trained manpower, flexible machines and
improved product designs and processing capabilities
● increased proactivity.

✔ Reduced prices through:


● Overall improvements in the production-delivery value chain
● Better designs of products /services

✔ Improved quality through:


● Better skills, better knowledge and better attitudinal orientation of all
production and service providers.
● Improved technology
● Reduced complexity and confusion
● Reduced problem generators

Competitive dimensions

The major competitive dimensions that form the competitive position of a firm


include following: 

1. Quality – the characteristics of the product or service that bear on its ability to
satisfy stated or implied needs. It is an alternative definition for features and freedom
from defects.
● Performance quality – addresses the basic operating characteristics
● Conformance quality – addresses whether the product was made or the
service performed to specification.
● Reliability quality – addresses whether a product will work for a long time
without failing or requiring maintenance.

2. Time – refers to a number of different aspects of an organization.


● Delivery speed – how quickly the operations or supply chain function can
fulfill a need once it has been identified.
● Delivery reliability – ability to deliver products or services when promised
● Delivery window – acceptable time range in which deliveries can be made.
3. Flexibility – how quickly operations and supply chain can respond to the
unique needs of customers.
● Mix Flexibility – ability to produce a wide range of products or services.
● Changeover Flexibility – ability to provide a new product with minimal
delay.
● Volume flexibility – ability to produce whatever value the customers’ needs

4. Cost – the ability to manufacture a product to a required cost. Typical cost


management categories are:
● labor
● material
● engineering
● failure cost
● quality related
● Appraisal cost
● Prevention cost

5. Product Differentiation – any special features like design, cost, quality, ease of
use, convenient location or warranty among others that causes a product or service to
be perceived by the buyer as more suitable than the competitor’s product or service.

The notion of trade-offs

Trade-off – is the decision by a firm to accentuate one performance dimension over


another, based on the recognition that superiority on some dimensions that may conflict
with superiority on others.

Trade-off takes place for 3 reasons:


1. inconsistencies in image or reputation.
2. it arise from activities themselves
3. it arise from limits on internal coordination and control

Plant-within-a-plant (PWp)

It is a concept where different locations within the facility are allocated to different
product lines, each with their own operations strategy.

This approach makes it easier to perform realignment of essential operations and


system elements over time as the task change.

Straddling
It is an effort by one manufacturer to copy the activities or the features of another
organization or its product.

This may cause many problems that it solves, as new processes which had not
been well developed within the organizations are squeezed into the operations.

Order qualifiers and winners

This are terms introduced by Terry Hill.

Order qualifiers – are criteria that situate a company’s products in consideration


for purchase.
Order winners – are those factors that win orders in the market-place over other
competitor.
When a firm’s perception of order winners and qualifiers match the customer’s
perception of the same, there exists a “fit” between two perspectives which can lead to
a positive sales performance.

The corporate strategy design

● Strategic Fit
It exists when value chain of different business are related. When these different
value chains allow transferring skills and expertise from one business to other, and their
combined performances work to reduce cost.

● Operational Fit
Arises when different businesses work along in order to explore opportunities for
cost-sharing or skill transfer. This includes:
1. Procurement or purchased input
2. R&D/technology
3. Manufacture & Assembly
4. Administrative support functions
5. Marketing & Distributions

Activity Number 1

List down five (5) business establishments and identify their products and competitive
dimensions (there could be one or more dimensions) used in order to sustain their
operations.

Business Establishment Product/s Competitive


Dimension/s
SAQ.
1. Explain the 4 stage model of the strategic role of operations according to
Wheelwright and Hayes.
2. Choose at least 2 operational strategies and explain.

Rubrics for SAQ


96-100 91-95 86-90 81-85
Well-organized Well-organized Well-organized Well-organized
thoughts and thoughts and thoughts and ideas thoughts and ideas
ideas are very ideas are are fairly evident are not evident
satisfactorily satisfactorily
evident evident
Grammar and Grammar and Grammar and Grammar and
format are very format are highly format are fairly format are not
highly observed observed observed observed

References
Rastogi MK, (2012) Production and Operation Management, New Delhi, University
Science Press

RD Reid and NR Reid. (2010). Operations Management: An Integrated Approach 4 th


Edition. Auburn USA. Retrieved from
http://www.sap-project.ca/SCMP/OM-
REID%20AND%20SANDERS.pdf

https://www.chriswirz.com/management/an-introduction-to-operations-strategy

Prepared by:

NERY T VIVAS, DBA CAR


Associate Professor I

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