Framework Operations is one function within the larger organization of the firm. As such, operations strategy should be part of the larger corporate strategy. The corporate strategy points toward what business the company is pursuing. The following was found at Proctor and Gamble’s web site www.pg.com as an example of corporate strategy. We will provide branded products and services of superior quality and value that improve the lives of the world's consumers. As a result, consumers will reward us with leadership sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper.
Framework So, P&G will provide superior quality and value in its branded consumer products. It’s operations strategy better deliver, or it will be toast! Closely related to the corporate strategy is the business strategy and this strategy is a statement about how the company will compete. The author of the text cites some work that defines generic types of business strategy as: 1) Customer intimacy, 2) Product leadership, or 3) Operational excellence.
Elements of Operations Strategy The operations strategy should include the following parts: 1) A mission statement, 2) A distinctive competence, 3) Operations objectives, and 4) Operations policies. The following is the mission of WSC (found on web): Wayne State College is a comprehensive institution of higher education dedicated to freedom of inquiry, excellence in teaching and learning, and regional service and development. Offering affordable undergraduate and graduate programs, the College prepares students for careers, advanced study, and civic involvement. The College is committed to faculty-staff-student interaction, public service, and diversity within a friendly and collegial campus community.
Mission Statement When you think about Wayne State College and you look at the mission it is obvious we are about learning. But what type of learning? Here it is student learning (hinted at by the idea of teaching and learning)! Other colleges and universities may be interested in learning, but the focus may be on learning in the sense of developing new knowledge as at a major research university. At WSC we will be happy if new knowledge is developed here, but the mission of student learning guides us in what types of tools we provide faculty, what types of books we purchase for the library, and so on. So, the mission statement provides a guide for the actions of the organization.
Distinctive Competence The author suggests that successful organizations will have a distinctive competence that distinguishes the org from others. The competence is a capability that the org has and the successful org will do it better than others. At WSC our competence is affordable undergraduate and graduate programs! The author points out that Wal-Mart has competencies in shipping and inventory control.
More on Competence You may recall from economics that firms may be in a competitive or monopoly environment. The monopoly environment was seen as giving the firm greater leverage to generate profit because at the very least it did not have to compete with other firms for customers. While this view may be idealistic in that sense that whenever profits exist many may attempt to capture that profit, the section on competencies reinforces the monopoly idea. The author notes that for distinctive competencies to be sustainable (and thus fend off competitors) they must be difficult to imitate of copy. On page 27 there is a list of these competencies.
Competencies Why did Gateway as a computer company not make it while Dell has prospered? The author suggests Dell has several competencies that are difficult for others to overcome. Perhaps Gateway developed differently as a company than did Dell and Gateway couldn’t make the transition. For many reasons it can be difficult to change.
Operations Objectives These objectives make the mission quantifiable and measureable. In other words they provide benchmarks or guideposts for performance. Common objectives deal with: 1) cost, 2) quality, 3) delivery, 4) flexibility. Page 23 has many examples of objectives.
Operations Policies Policies are statements about how the objectives will be achieved. As you may know WSC is part of the Nebraska State College System. As such, the system has policies. To be able to offer education at an affordable price there is a policy about how many classes a faculty member must teach each term. If we didn’t follow this policy and faculty taught only 1 class then we would need more faculty to meet our offerings, or we would not be able to offer as many classes. Neither of the these would be good for student enrollment.
An idea the chew on Can on organization offer products at an “affordable” price while at the same time having “high” costs? Affordable and high are somewhat subjective. So, these terms need to be given context and more specific meaning to be useful.
Global Perspective I want to reproduce a couple of lines from the book that I find especially interesting: A basic product or service is designed, whenever possible, to fit global tastes. When a local variation is needed, it is handled as an option rather than a separate product. The point being made here is that even more now than ever before we are in a global economy. This is vastly different for the majority of human history when most production was very local.
Supply Chain Strategy A supply chain is defined by the author as a sequence of business processes and information that provides a product or service from suppliers through manufacturing and distribution to the ultimate consumer. There has been a lot of press and media attention with how Wal-Mart has an influence on the folks who supply it. Other supply chains exist (Affiliated Foods in Norfolk, for example is part of a broadly defined chain), but Wal-Mart has been especially noted for how it manages the chain. Proctor and Gamble as a company that makes consumer products often has been a controlling agent in its supply chain. But now with Wal-Mart it seems retail establishments have had some ability to dictate to producers.
Summary So, this chapter is still about getting warmed up to the ideas in production and operations management. Please take note of the definitions introduced here!