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Summary operations strategy and technology Slack & Lewis
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Summary of the book operations strategy written by N. Slack & M. Lewis Chapter 1-Chapter 10 (Whole book)
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Summary Operations strategyNigel Slack
Michael Lewis
4th edition
, 2
Table of contents
Chapter 1 Operations strategy .................................................................................................... 5
1.1 Summary answers to key questions ................................................................................. 5
1.2 Why is operations excellence fundamental to strategic success?..................................... 7
1.3 What is strategy? .............................................................................................................. 8
1.4 What is operations strategy and how is it different from operations management? ........ 8
1.5 What is the ‘content’ of operations strategy? ................................................................... 9
1.6 What is the ‘process’ of operations strategy? ................................................................. 11
Chapter 2 Operations performance .......................................................................................... 12
2.1 Summary answers to key questions ............................................................................... 12
2.2 How can operations performance ‘make or break’ the organization ............................. 13
2.3 The five generic performance objectives ....................................................................... 13
2.3.1 Quality ..................................................................................................................... 13
2.3.2 Speed ....................................................................................................................... 14
2.3.4 Dependability .......................................................................................................... 14
2.3.5 Flexibility ................................................................................................................ 14
2.3.6 Cost.......................................................................................................................... 14
2.4 The relative importance of performance objectives changes over time ......................... 16
2.5 Trade-offs – are they inevitable? .................................................................................... 16
2.6 Targeting and operations focus ...................................................................................... 17
Chapter 3 Substitutes for strategy ............................................................................................ 18
3.1 Summary answers to key questions ............................................................................... 18
3.2 How does total quality management fit into operations strategy? ................................. 19
3.3 How do lean operations fit into operations strategy? ..................................................... 20
3.4 How does business process reengineering fit into operations strategy? ........................ 22
3.5 How does Six Sigma fit into operations strategy? ......................................................... 23
3.6 What place do these new approaches have in operations strategy? ............................... 24
Chapter 4 Capacity strategy ..................................................................................................... 26
4.1 Summary answers to key questions ............................................................................... 26
4.2 What is capacity strategy? .............................................................................................. 27
4.3 How much capacity should an operation have? ............................................................. 27
4.4 How many separate sites should an operation have? ..................................................... 28
4.5 What issues are important when changing capacity levels?........................................... 28
4.6 Where should capacity be located? ................................................................................ 29
4.6.1 Market requirements influence on locating sites..................................................... 30
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4.6.2 Operations resources influence on locating sites .................................................... 30
Chapter 5 Purchasing and supply strategy ............................................................................... 31
5.1 Summary answers to key questions ............................................................................... 31
5.2 What is purchasing and supply strategy? ....................................................................... 32
5.3 What should we ‘do’ and what should we ‘buy’? .......................................................... 33
5.4 How do we buy; what is the role of contracts and/or relationships? .............................. 34
5.5 How do we manage supply dynamics? .......................................................................... 35
5.6 How do we manage suppliers over time? ....................................................................... 35
5.7 How do we manage supply chain risks? ........................................................................ 36
Chapter 6 Process technology strategy..................................................................................... 37
6.1 Summary answers to key questions ............................................................................... 37
6.2 What is ‘process’ technology strategy? .......................................................................... 38
6.3 What are suitable dimensions for characterizing process technology? .......................... 39
6.4 How do market volume and variety influence process technology? .............................. 40
6.5 What are some of the challenges of information technology? ....................................... 42
6.6 How can process technology be evaluated strategically? .............................................. 43
Chapter 7 Improvement strategy .............................................................................................. 44
7.1 Summary answers to key questions ............................................................................... 44
7.2 What are the differences between managing large ‘breakthrough’ improvement and
managing continuous improvement? ................................................................................... 45
7.3 How do the needs of the market direct the ongoing development of operations processes?
.............................................................................................................................................. 46
7.4 How can the ongoing management and control of operations be harnessed to develop
their capabilities?.................................................................................................................. 47
Chapter 8 Product and service development and organization ................................................ 50
8.1 Summary answers to key questions ............................................................................... 50
8.2 Why is the way in which companies develop their products and services so important?
.............................................................................................................................................. 51
8.3 What process do companies use to develop products and services? .............................. 52
8.4 How should the effectiveness of the product and service development process be judged
in terms of fulfilling market requirements? .......................................................................... 53
8.5 What operations resource-based decisions define a company’s product and service
development strategy? .......................................................................................................... 54
Chapter 9 The process of operations strategy formulation and implementation ...................... 56
9.1 Summary answers to key questions ............................................................................... 56
9.2 What is the ‘formulation’ of operations strategy? .......................................................... 57
9.3 What analysis is needed for formulation? ...................................................................... 57
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9.4 How do we know when the formulation process is complete? ...................................... 59
9.5 What is operations strategy implementation .................................................................. 60
Chapter 10 The process of operations strategy – Monitoring and control ............................... 62
10.1 Summary answers to key questions ............................................................................. 62
10.2 What are the differences between operational and strategic monitoring and control? 64
10.3 How is progress towards strategic objectives tracked? ................................................ 64
10.4 How can the monitoring and control process attempt to control risks? ....................... 65
10.5 How does learning contribute to strategic control? ...................................................... 66
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Chapter 1 Operations strategy
1.1 Summary answers to key questions
Why is operations excellence fundamental to strategic success?
‘Operations’ is the activity of managing the resources and processes that produce and deliver
goods and services. All operations transform resource inputs into outputs of products and
services and can be analyzed at three levels: that of the business itself, as part of a greater
network of operations, and at the level of individual processes within the operation. Operations
management contributes to the success of any organization by reducing costs, by increasing
revenue by reducing capital employed, and by providing the basis for future innovation.
What is strategy?
Strategic decisions are those that set broad objectives that direct an enterprise towards its overall
goal, plan the path that will achieve these goals, stress long-term rather than short-term
objectives, deal with the total picture rather than with individual activities, and are often seen
as above or detached from routine day-to-day activities. However, it is not easy to totally
characterize strategy or strategic decisions. Some organizations make no explicit strategic
decisions as such. Rather they develop over time, often with strategies that ‘emerge’ from their
ongoing experience of doing business. Furthermore, the strategy as espoused by an organization
may not always be reflected in what it actually does. This is why strategy is often taken to be
the ‘pattern of decisions’ that indicate the company’s overall path.
What is operations strategy?
Operations strategy is the total pattern of decisions that shape the long-term capabilities of any
kind of operation and their contribution to overall strategy, through the ongoing reconciliation
of market requirements and operation resources. All businesses have markets, all businesses
own or deploy resources; therefore all businesses are concerned with the reconciliation of
markets and resources.
How should operations strategy reflect overall strategy?
An operations strategy will be one of several functional strategies that are governed by the
decisions that set the overall strategic direction of the organization. This is called the ‘top-down’
approach. So, corporate strategy should be reflected in the strategies of each business unit,
which should, in turn, inform the strategy of each business function.
How can operations strategy learn from operational experience?
An alternative view to the top-down perspective (one that is based on observing how strategy
happens in practice) is the bottom-up perspective, which stresses how strategic ideas emerge
over time from actual experiences. Companies adopt strategies partly because of their ongoing
experience, sometimes with no high-level decision making involved. The idea of strategy being
shaped by experience over time is also called the concept of emergent strategies. Shaping
strategy from the bottom up requires an ability to learn from experience and a philosophy of
continual and incremental improvement.
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How do the requirements of the market influence operations strategy?
Two important elements within markets are customers and competitors. The concept of market
segmentation is used to identify target markets that have a clear set of requirements and where
a company can differentiate itself from current, or potential, competitors. On the basis of this,
the company takes up a market position. This market position can be characterized in terms of
how the company wishes to compete for customers’ business. By grouping competitive factors
into clusters under the heading of generic performance objectives (quality, speed, dependability,
flexibility and cost), market requirements are translated into a form useful for the development
of the operation.
How can the intrinsic capabilities of an operation’s resources influence operations
strategy?
Over time, an operation may acquire distinctive capabilities, or competences, on the basis of
the accumulation of its experiences. These capabilities may be embedded within a company’s
intangible resources and its operating ‘routines’. So, they concern both what the operation has
and what it does. Operations shapes these capabilities (consciously or unconsciously) through
the way it makes a whole series of decisions over time. These decisions can be grouped under
the headings of capacity, supply network, process technology, and development and
organization
What is the ‘content’ of operations strategy?
The ‘content’ of operations strategy is the building blocks from which any operations strategy
will be formed. This includes the definition attached to individual performance objectives,
together with a prioritization of those performance objectives. It also includes an understanding
of the structure and options available in the four decision areas of capacity, supply networks,
process technology, and development and organization. Performance objectives and decision
areas interact in a way that can be described by the operations strategy matrix. When devising
an operations strategy it is important to ensure that, in terms of the matrix, the strategy is
comprehensive (all obvious aspects are at least considered) and has the critical intersections
identified.
What is the ‘process’ of operations strategy?
The ‘process’ of operations strategy is the procedures that are, or can be, used to formulate
operations strategy. It determines how an operation pursues the reconciliation between its
market requirements and operations resources in practice. The practical reality of putting
operations strategies together and making them happen in practice is complex, but, at a simple
level, has four stages; formulation, implementation, monitoring and control. The success of
effective operations strategy process is also closely linked to the style and skills of the leaders
who do it.
How is operations strategy developing?
Although the mainstream view of operations strategy is straightforwardly the strategic
management of the operations resources and processes, the subject can still be interpreted in
different ways. For example, operations strategy can be interpreted as being equivalent to
supply strategy, or functional strategy, or as the firms operating model and as strategic
execution.
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1.2 Why is operations excellence fundamental to strategic success?
Transforming resources are allocated to various activities in various parts of the operation.
Transformed resources move through these activities until they are transformed into some mix
of products and services. The arrangement of transforming resources and the way in which
transformed resources move through them, are called processes. The input-transformation-
output model applies to all activities and functions in an organization (e.g. finance, marketing,
etc.) and has thus a very wide applicability. The principle is that all parts of the business and all
functions of the business are, in a sense “operations”.
Figure 1.1 input-transformation-output model
The Four V’s
All operations are not the same. Processes differ in terms of the nature of demand for their
products or services. Four characteristics of demand, also called the Four Vs, have significant
effect on how processes need to be managed.
1. Volume
A high volume of output means a high degree of repeatability, making a high degree of
specialization both feasible and economic.
2. Variety
Producing a high variety of products and services must involve a wide range of different
activities, changing relatively frequently between each activity.
3. Variation
Processes are generally easier to manage when they only have to cope with predictably
constant demand. Resources can be geared to a level that is just capable of meeting
demand. Worse still, when demand is unpredictable, extra resources will have to be
designed into the process to provide a capacity cushion that can absorb unexpected
demand.
4. Visibility
Process visibility is a slightly more difficult concept to envisage. It indicated how much
of the value added by the operation is experienced directly by customers, or how much
it is exposed to its customers. Generally processes that act directly on customers (such
as retail processes or health care processes) will have higher visibility than those that
act on materials and information.
Figure 1.3 page 6 Figure 1.4 page 7
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