Summary – Operations strategy & Technology
Book: Operations strategy – Nigel Slack Michael Lewis
Chapter 1: Operations strategy – developing resources and processes for strategic impact.................2
Chapter 2: Operations performance.....................................................................................................22
Chapter 3: Substitutes for strategy.......................................................................................................40
Chapter 4: Capacity Strategy................................................................................................................55
Chapter 5: Purchasing and supply strategy..........................................................................................64
Chapter 6: Process technology strategy...............................................................................................79
Chapter 7: Improvement strategy........................................................................................................94
Chapter 8: Product and service development and organisation.........................................................112
Chapter 9: The process of operations strategy – formulation and implementation...........................131
Chapter 10: The process of operations strategy – monitoring and control........................................146
1
,Chapter 1: Operations strategy – developing resources and processes for
strategic impact
1.1. Introduction
For some managers, the very idea of an ‘operations strategy’ is a contradiction in terms. To be
involved in the strategy process is the complete opposite of those detailed and day-to-day task and
activities that are associated with being an operations manager. Operations can have a real strategic
impact. For many enduringly remarkable enterprises, the way they manage their operations
resources and processes is central to long-term strategic success.
All enterprises, and all parts of the enterprise, need to prevent strategic decisions being frustrated by
poor operational implementation.
Principles of operations strategy can be deployed in all parts of the business, all functions of
business, and all its extended supply network, and that, by using these principles, any type of
enterprise will benefit.
First chapter: meanings of operations strategy and how all parts of the business can be use four
perspectives on operations strategy and how all parts of the business can use four perspectives on
operations strategy to establish a connection between strategy and operational processes and
resources.
Prime purpose: to demonstrate how managing operations strategically can make all types of firms
better, or different, or both, from their competitors
Second: to show that the principles of operations strategy can be deployed in all parts of the
business, all functions of business, and all its extended supply network, and that, by using these
principles, any type of enterprise will benefit.
Key questions:
1. Why is operations excellence fundamental to strategic success?
2. What is strategy?
3. What is operations strategy and how is it different from operations management?
4. How should operations strategy reflect overall strategy?
5. How can operations strategy learn from operational experience?
6. How do the requirements of the market influence operations strategy?
7. How can the intrinsic capabilities of an operation’s resources influence operations strategy?
8. What is the ‘content’ of operations strategy?
9. What is the ‘process’ of operations strategy?
10. How is operations strategy developing?
1.2. Why is operations excellence fundamental to strategic success?
‘Operations’ is the part of the organisation that creates and/or delivers its products and services
any type of organisation has an operations function even if it is not called that.
Every organisation tries to add value by producing some mix of products and services for external or
internal customers.
transforming inputs into outputs that satisfy some customer need.
Input-transformation-output model of operations
Some inputs can actually change or ‘transformed’ usually by combination of physical materials,
information and customers.
Other resource inputs doe the transforming usually classified into the physical facilities and the
people, with their skills, knowledge and experience.
2
,Transforming resources are allocated to various activities in various parts of the operation.
Transformed resources move through these activities until they have transformed into a mix of
products and services.
Arrangement of transforming resources and the way in which transformed resources move through
them called processes
Operations mangers are responsible for managing two interacting sets of issues:
1. Resources what type of materials, information, people (as customers or staff), technology,
buildings and so on, are appropriate to best fulfil the organisation’s objectives
2. Processes how resources are organised to best create the required mix of product and
services.
do we have the right resources and are we using them appropriately?
Most operations produce both product and services the idea of the transformation model applies
to all types of operation, manufacturing and services, for-profit and non-for-profit, those with
external customers and those with internal customers.
Business can be from different sectors, they share very similar issues and problems. There are
often bigger difference within economic sectors then between them.
The transformation model describes functions other than the operations function. Marketing,
finance, information systems and HRM all transform inputs into outputs (usually services) to satisfy
customer needs. customers can be external and internal
The principle holds: All parts of the business and all functions of the business are, in sense,
‘operations.
1.2.1. Operations, networks and ‘levels of analysis’
Figure 1.1 – all operations transform input resources into products and services
illustrated processes within a transformation system as a network of transforming resources.
Network group of two or more sets of resources linked together.
The ide of the network is fundamental to operations because all operations are formed of networks:
Networks of individual staff with their technology, through which information flows
Networks of work centres or departments moving physical product between them
Networks of business trading a complex mix of services.
Networks can describe operations activity of many different types at many different levels of
analysis.
At a detailed micro level networks of individual units of resource (technology and people)
from processes
Slightly higher ‘level of analysis’ these processes themselves are linked together to form
larger operational units that again, are the elements of what is generally called ‘the operation’
Many processes in this internal network will be in the other function of the business. Sales,
marketing, HRM, finance, and all the other functions’ processes will form part of (and hopefully
integrated with) this internal process network.
3
, Higher level of analysis, any operations can also be viewed as part of a greater network of
operations. it will have operations that supply it with the input products and services it need
to make its own products and services. unless deals directly with the end customer, it will
supply customers who themselves may go on the supply their own customers
Any operation could have several suppliers, several customers and may be in competition with
other operations producing similar services to those it produces itself. This collection of
operations is called the ‘supply network’
At each level of analysis, operations managers must understand the capabilities of the resources that
form each element of their network, and how effectively they are linked together as networks.
Figure 1.2 three levels of analysis hierarchy of operations:
The level of process a network of individual units of resources
The level of ‘operations’ a network of processes
The level of supply network a network of operations
In the study of operations strategy we shall largely (but not exclusively) focus on the higher levels of
analysis.
1.2.2. Not all operations are the same
All operations and processes differ in some way and so will need managing differently.
Some differences are ‘technical’ different products and services require different skills and
technologies to produce them.
Processes also differ in the nature of demand for the products and services.
Four V’s four characteristics of demand have significant effect on how processes need to be
managed:
Volume
A high volume of output means a high degree of repeatability, making a high degree of
specialisation both feasible and economic. This allows for the systemisation of activities and
specialised technology that gives higher processing efficiencies.
Low-volume processes with less repetition cannot specialise to the same degree. Staff
perform a wider range of tasks that are less open to systemisation.
Nor it is likely that efficient, high-throughput technology could be use.
The implication high volume results in lower unit costs than low volume.
Example: volume of standardisation of large fast-food restaurant chains
Variety
Producing a high variety of product and services must involve a wide range of different activities,
changing relatively frequently between each activity.
It must contain a wide range of skills and technology that is sufficiently ‘general purpose’ to cope
with the range of activities and sufficiently flexible to change between them.
Relatively wide range of inputs and the additional complexity of matching customers
requirements to appropriate products or services.
High variety higher cost than low variety.
Example: Taxi company and kilometres
Variation
Processes are generally easier to manage when they only have to cope with predictability
constant demand. Resources can be geared to a level that is just capable of meeting demand. All
activities can be planned in advance.
When demand is variable and/or unpredictable, extra resources will have to be designed into the
process to provide a ‘capacity cushion’ that can absorb unexpected demand.
4
Book: Operations strategy – Nigel Slack Michael Lewis
Chapter 1: Operations strategy – developing resources and processes for strategic impact.................2
Chapter 2: Operations performance.....................................................................................................22
Chapter 3: Substitutes for strategy.......................................................................................................40
Chapter 4: Capacity Strategy................................................................................................................55
Chapter 5: Purchasing and supply strategy..........................................................................................64
Chapter 6: Process technology strategy...............................................................................................79
Chapter 7: Improvement strategy........................................................................................................94
Chapter 8: Product and service development and organisation.........................................................112
Chapter 9: The process of operations strategy – formulation and implementation...........................131
Chapter 10: The process of operations strategy – monitoring and control........................................146
1
,Chapter 1: Operations strategy – developing resources and processes for
strategic impact
1.1. Introduction
For some managers, the very idea of an ‘operations strategy’ is a contradiction in terms. To be
involved in the strategy process is the complete opposite of those detailed and day-to-day task and
activities that are associated with being an operations manager. Operations can have a real strategic
impact. For many enduringly remarkable enterprises, the way they manage their operations
resources and processes is central to long-term strategic success.
All enterprises, and all parts of the enterprise, need to prevent strategic decisions being frustrated by
poor operational implementation.
Principles of operations strategy can be deployed in all parts of the business, all functions of
business, and all its extended supply network, and that, by using these principles, any type of
enterprise will benefit.
First chapter: meanings of operations strategy and how all parts of the business can be use four
perspectives on operations strategy and how all parts of the business can use four perspectives on
operations strategy to establish a connection between strategy and operational processes and
resources.
Prime purpose: to demonstrate how managing operations strategically can make all types of firms
better, or different, or both, from their competitors
Second: to show that the principles of operations strategy can be deployed in all parts of the
business, all functions of business, and all its extended supply network, and that, by using these
principles, any type of enterprise will benefit.
Key questions:
1. Why is operations excellence fundamental to strategic success?
2. What is strategy?
3. What is operations strategy and how is it different from operations management?
4. How should operations strategy reflect overall strategy?
5. How can operations strategy learn from operational experience?
6. How do the requirements of the market influence operations strategy?
7. How can the intrinsic capabilities of an operation’s resources influence operations strategy?
8. What is the ‘content’ of operations strategy?
9. What is the ‘process’ of operations strategy?
10. How is operations strategy developing?
1.2. Why is operations excellence fundamental to strategic success?
‘Operations’ is the part of the organisation that creates and/or delivers its products and services
any type of organisation has an operations function even if it is not called that.
Every organisation tries to add value by producing some mix of products and services for external or
internal customers.
transforming inputs into outputs that satisfy some customer need.
Input-transformation-output model of operations
Some inputs can actually change or ‘transformed’ usually by combination of physical materials,
information and customers.
Other resource inputs doe the transforming usually classified into the physical facilities and the
people, with their skills, knowledge and experience.
2
,Transforming resources are allocated to various activities in various parts of the operation.
Transformed resources move through these activities until they have transformed into a mix of
products and services.
Arrangement of transforming resources and the way in which transformed resources move through
them called processes
Operations mangers are responsible for managing two interacting sets of issues:
1. Resources what type of materials, information, people (as customers or staff), technology,
buildings and so on, are appropriate to best fulfil the organisation’s objectives
2. Processes how resources are organised to best create the required mix of product and
services.
do we have the right resources and are we using them appropriately?
Most operations produce both product and services the idea of the transformation model applies
to all types of operation, manufacturing and services, for-profit and non-for-profit, those with
external customers and those with internal customers.
Business can be from different sectors, they share very similar issues and problems. There are
often bigger difference within economic sectors then between them.
The transformation model describes functions other than the operations function. Marketing,
finance, information systems and HRM all transform inputs into outputs (usually services) to satisfy
customer needs. customers can be external and internal
The principle holds: All parts of the business and all functions of the business are, in sense,
‘operations.
1.2.1. Operations, networks and ‘levels of analysis’
Figure 1.1 – all operations transform input resources into products and services
illustrated processes within a transformation system as a network of transforming resources.
Network group of two or more sets of resources linked together.
The ide of the network is fundamental to operations because all operations are formed of networks:
Networks of individual staff with their technology, through which information flows
Networks of work centres or departments moving physical product between them
Networks of business trading a complex mix of services.
Networks can describe operations activity of many different types at many different levels of
analysis.
At a detailed micro level networks of individual units of resource (technology and people)
from processes
Slightly higher ‘level of analysis’ these processes themselves are linked together to form
larger operational units that again, are the elements of what is generally called ‘the operation’
Many processes in this internal network will be in the other function of the business. Sales,
marketing, HRM, finance, and all the other functions’ processes will form part of (and hopefully
integrated with) this internal process network.
3
, Higher level of analysis, any operations can also be viewed as part of a greater network of
operations. it will have operations that supply it with the input products and services it need
to make its own products and services. unless deals directly with the end customer, it will
supply customers who themselves may go on the supply their own customers
Any operation could have several suppliers, several customers and may be in competition with
other operations producing similar services to those it produces itself. This collection of
operations is called the ‘supply network’
At each level of analysis, operations managers must understand the capabilities of the resources that
form each element of their network, and how effectively they are linked together as networks.
Figure 1.2 three levels of analysis hierarchy of operations:
The level of process a network of individual units of resources
The level of ‘operations’ a network of processes
The level of supply network a network of operations
In the study of operations strategy we shall largely (but not exclusively) focus on the higher levels of
analysis.
1.2.2. Not all operations are the same
All operations and processes differ in some way and so will need managing differently.
Some differences are ‘technical’ different products and services require different skills and
technologies to produce them.
Processes also differ in the nature of demand for the products and services.
Four V’s four characteristics of demand have significant effect on how processes need to be
managed:
Volume
A high volume of output means a high degree of repeatability, making a high degree of
specialisation both feasible and economic. This allows for the systemisation of activities and
specialised technology that gives higher processing efficiencies.
Low-volume processes with less repetition cannot specialise to the same degree. Staff
perform a wider range of tasks that are less open to systemisation.
Nor it is likely that efficient, high-throughput technology could be use.
The implication high volume results in lower unit costs than low volume.
Example: volume of standardisation of large fast-food restaurant chains
Variety
Producing a high variety of product and services must involve a wide range of different activities,
changing relatively frequently between each activity.
It must contain a wide range of skills and technology that is sufficiently ‘general purpose’ to cope
with the range of activities and sufficiently flexible to change between them.
Relatively wide range of inputs and the additional complexity of matching customers
requirements to appropriate products or services.
High variety higher cost than low variety.
Example: Taxi company and kilometres
Variation
Processes are generally easier to manage when they only have to cope with predictability
constant demand. Resources can be geared to a level that is just capable of meeting demand. All
activities can be planned in advance.
When demand is variable and/or unpredictable, extra resources will have to be designed into the
process to provide a ‘capacity cushion’ that can absorb unexpected demand.
4
