Category Archives: Operations Strategy

A Short History of Operations Strategy

In the period following World War II corporate strategy in the United States was usually developed by the marketing and finance functions within a company With the high demand or consumer products that had built up during the war years U.S. companies could sell virtually everything they made at comparatively high prices. In addition there was very little international competition. The main industrial competitors of the United States today Germany and Japan. lay in ruins from massive bombings. They could not even satisfy their own markets. let alone export globally. Within the business environment that existed that time the manufacturing or operations function was assigned the responsibility to produce large quantities of standard products at minimum costs. regardless of the overall goals of the firm. To accomplish this the
operations function focused on obtaining low-cost unskilled labor and installing highly automated assembly-line-type facilities. With no global competition and continued high demand the role of operations management (that is. to minimize costs) remained virtually unchanged throughout the 1950 and early 1960 By the late 1960 however Wick Skinner of the Harvard Business School. who is often referred to as the grandfather of operations strategy, recognized this weakness among U.S. manufacturers. He suggested that companies develop an operations strategy that would complement the existing marketing and finance strategies. In one of his early articles on the subject. Skinner referred to manufacturing as the missing link in corporate strategy.” Subsequent work in this area by researchers at the Harvard Business School. including Abernathy. Clark. Hayes. and Wheelwright, continued to emphasize the importance of using the strengths of a firm’s manufacturing facilities and people as a competitive weapon in the marketplace as well as taking a longer-term view of how to deploy them.

Key Terms

Review and Discussion Questions

1. What is meant by competitiveness?
2. Identify the different types of competitive priorities. How has their relationship to each
3. other changed over the years?
4. For each of the different competitive priorities, describe the unique characteristics of the market.niche with which it is most compatible.
5. Describe the difference between order-qualifiers and order-winners. What is the relationship between the two over time?
6. Explain the concept of the core capabilities within an organization.
7. How does understanding a customer’s activity cycle allow a firm to achieve a competitive advantage in the marketplace?
8. In your opinion, do business schools have competitive priorities?
9. Why does the proper operations strategy keep changing for companies that are world class competitors?
10. What is meant by the expression manufacturing is entering the information?
11. Describe the customer’s activity cycle involved in taking a trans Continental right. could be done to facilitate the process for the customer?

Conclusion

The concept of operations strategy plays an important role in determining the overall long term success of an organization. Developing an operations strategy means looking to new ways to add value for the customer in the goods and services that the firm produces and delivers Value can have many meanings  Managers must therefore align the operations strategy
of their firm with the strategies of other functional areas and with the firm’s overall business strategy.

The combination of the globalization of business coupled with advances in technology have created a hyper-competitive environment in which managers must constantly be look- innovative strategies to stay ahead of the competition. In order to properly implement these strategies  managers need to clearly understand the core capabilities of  their firm and focus their resources on maintaining and improving these capabilities.

Successful firms today are looking to develop strategies that integrate goods and services into a single product offering or bundle of benefits which attempts to solve problems for customers rather than just selling them products.

Customer Training

Some manufacturers have recognized the benefits of providing extensive customer training in the use of their products By providing such training their customers quickly become familiar with how the products are used Such training can be
viewed as a competitive advantage in that it acts as a barrier to entry for similar products that are offered by competitors For example why would a firm invest time and money to train workers in how to use another product if they are currently satisfied with the product they are currently using and have already been trained on that product? FedEx provides a good example of a service firm that does an outstanding job of this  Even if a customer  ships only a few packages a day  FedEx will provide that customer with a dedicated computer that is directly linked into the FedEx system and also will teach the customer how to use it This is one of the major reasons FedEx’s competitors have significant difficulty in convincing FedEx’s customers to switch.

As another illustration, Le Grand, which is located in Limoges, France, produces electrical components such as outlets, switches, and junction boxes, all of which are considered to be commodity-type products To provide itself with a competitive advantage, Le Grand has constructed a large training facility in Limoges where architects and electrical contractors
are invited to view its wide variety of products and also to learn how to install them in various settings To accomplish this, the training facility has set up different rooms to demon- ‘mate how the various components should be installed These rooms include a kitchen, a bathroom and a bedroom in a private residence, as well as a patient’s room in a hospital The Foxboro Company which was mentioned previously, also uses training to distance itself from its competition Before its process control products are delivered customers are invited to Foxboro’s manufacturing facility where their equipment is set up and they learn how to it under the guidance of Foxboro instructors This is one of the reason Foxboro experiences a very high percentage of repeat busies from existing customer.

Additional Approaches for Integrating Manufacturing and Services

Demonstration of Knowledge and Expertise

Dick Chase and Dave Gavin point out that firms can achieve a competitive advantage by demonstrating their technical knowledge and expertise in the production process  By showing customers all of the various steps involved in the production process and how quality is ensured at each of these steps customers obtain a certain level of comfort  especially when the specific details of the inner workings of the product itself are difficult to comprehend. as is often the case with sophisticated
high-technology products.

In addition as customers tour the manufacturing facility they can be introduced to new products and options for existing ones Incorporate in Hopkins  Massachusetts a leading manufacturer of electronic storage equipment understands these benefits of providing plant tours to potential as well as existing customers As a result then conduct more than 1,000 tours a year at their manufacturing facilities in Massachusetts  Visitors canon help but be impressed by the great length their products at each stage of the process ensuring that a highly reliable product is shipped to its customers. Employees are
also readily available throughout the plant to answer any questions. According to Gordon Nichols. a senior manager at ENC. the plant tours are very successful with more than 90 percent of the potential customers buying ENC products. and. often. they buy more than they had initially planned.

For similar reasons. the Foxboro Company a leading producer of process control equipment. also encourages both customers and potential customers alike to visit their manufacturing facilities in Foxboro. Massachusetts. As visitors enter the manufacturing facility they are greeted with a display showing the various awards that Foxboro has won through the years including the Shinto Prize the Massachusetts' Quality Award and Industry Week's Plant of the Year Award. During the tours of the manufacturing processes employees will often take time from their work to talk to visitors about specific projects they have worked on to improve the quality of the product and/or to make the processes more efficient These employee presentations again reinforce knowledge and skill about the processes and products.

The benefits' of demonstrating knowledge and expertise are not limited to only higher technology products. Green Giant of Minneapolis Minnesota which produces a wide variety of high-quality canned and frozen-food products had difficulty penetrating the Japanese markets with their products. Only after they invited Japanese food distributors to visit their
production facilities in Minnesota where they were able to show the quality of both their processes and the resulting products were they able to succeed in doing business in Japan. 16