The Strategic Nature of Operations Management

The Strategic Nature of Operations Management

In this lesson, you’re expected to learn:
– the difference between operations management and operations strategy
– the factors that influence operations strategy
– how to look at operations strategy from different perspectives
Operations strategy vs Operations management
Operations Strategy is different from Operations Management, as the former is more concerned with the big picture.
• The idea of ”operations strategy” may seem paradoxical because the idea conveyed by ”strategy” is opposite to the day-to-day activities associated with ”operations”.

• However, operations can have real strategic impact. For example, many enterprises such as IKEA, Amazon, Toyota, and Zara have their operations resources as central to their long-term success.

• Earlier, we defined operations management as ’the activity of managing the resources and processes that produce and deliver goods and services’. Operations strategy is concerned more with the macro-level, long-term, aggregate decisions that build operational capabilities.

Operations Management vs. Operations Strategy
Source: adapted from Slack and Lewis (2008)
Enlarged version:
[Optional] 5 Core Operational Strategies
The Strategy Hierarchy
Operations Strategy differs from Business Strategy and acts as its support.

The main factors influencing Operations Strategy are:

• Current technology
• Current performance
• Personnel’s capabilities

Overview of the Strategy Hierarchy
Reference: adapted from Slack and Lewis (2008)
Enlarged version:
The Four Perspective on Operations Strategy
Definition of Operations Strategy

”Operations strategy is the set of decisions that shape the long term capabilities of a company’s operations and their contribution to overall strategy through the ongoing reconciliation of market requirements and operations resources.” 

This definition reflects the four perspectives on operations strategy:
• top-down
• bottom-up
• market requirements
• operations resources

Operations Strategy is concerned with shaping long-term capabilities that contribute to the business strategy and are aligned with market needs.
Source: adapted from Slack and Lewis (2008)
Enlarged version:
Operations strategy can be thought of as a logical bridge between the business strategy and day-to-day operations.
• The traditional view of operations strategy is one that several operations functions (e.g. procurement, manufacturing, logistics etc.) are governed by decisions taken at the top of the organization (i.e. top-down approach).

• An alternative view is that of the bottom-up approach, based on which one observes how strategy takes place in practice, thus shaping the strategy by learning from day-to-day experience.

Enlarged version:

Operations strategy is the reconciliation of market requirements with operations resources.

• An organization’s operations strategy must reflect the requirements of its markets.

• The starting point is understanding the customer needs, the organization’s market positioning and the competitor’s actions, in order to establish the performance objectives (we’ll explore this in the next lesson).

• On the other hand, the organization must build on its operations capabilities.

• Thus, the organization must understand its resources, capabilities and processes in order to be able to take the decisions that will allow it to meet its performance objectives.

Market Requirements & Operations Resources
Enlarged version:
[Optional] Operations and Strategy with Nigel Slack
Watch this 10-minute video by Nigel Slack to learn more:
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