Operation Strategy

The environment of organizations is becoming more and more complex because of increased rate of environmental, social and technological change, the increased internalization of business organizations and increased scarcity and cost of natural recourses. An analysis of the competitive scenario in our country in the last ten years reveals that it is inevitable for organizations to have a good operation strategy. Due to the liberalization and globalization policies of the Union Government, Indian manufacturing and service firms have faced competition from other parts of the world. They are new and required to have a global outlook as opposed to the traditional domestic outlook.

It also signaled the end of an era when customer orientation and the need for cost cutting were not all that important. Today the primary goals are related to market opportunities and customer satisfaction. The general thrust of the operation management is guided by competitive and market condition of the industry, which provides the basis for determining the organization’s strategy. Where is the industry now, and where will it be in future? What are existing and potential markets? What market gap exists and what competencies do we have for filling them? A careful analysis of market segments and the ability of our competitors and ourselves to meet the needs of these segments will determine the best direction for focusing an organization’ efforts After assessing the potential within the industry, an overall organizational strategy must be developed, including some basic choices of the primary basis for competing. In doing so, priorities are established among the following four characteristics;

  • Quality ( Product performance)
  • Cost efficiency ( Low product price )
  • Dependability ( Reliable; timely delivery of orders to customers )
  • Flexibity ( Responding rapidly with new products or changes in output volumes )

The manufacturers need to devise methods to remain competitive in the market following the four characteristics. Better cost management practices are often required in the manufacturing and service organizations to handle the threat of competition. Time is emerging as a critical dimension of competition in both manufacturing and service industries. In any industry the firm with the fastest response to customer demands has the potential to achieve an overwhelming market advantage. Developing superior capabilities to cut down lead time is an important requirement today. Another area of operation strategy is the proliferation of variety. Some of the key inferences from the changes in the last ten years can be summarized as follows:

  • Due to several factors, the competitive dynamics will change and the expectation of the customers will also change on account of this.
  • Organizations need a structured approach to scan the market and distill the changing needs at the market place. Moreover they also need a mechanism to chalk out a plan for responding to these changes in the most effective way.
  • With the changes in the market place, the competitive priorities for an organization must also change. Organizations need to tune their operations to match the competitive priorities?
  • The above processes are expected to repeat several times in the future and the organization must be in a position to respond to the changes every time it is called for.

These basic strategic choices, then, set the tone for the shape and content of the operation function and what it accomplishes. Therefore it is important for organizations to develop the capabilities to devise strategies for operations. This strategic planning exercise enables an organization to respond to the market needs in the most effective manner by aligning the resources and various activities in the organization to deliver products and services that are likely to succeed in the market place.

The process of formulating operation strategy in any organization involves a sequential and structured set of activities. There are three steps in the process. The first step is to identify the strategic options for sustaining the competitive advantage. Once the options are known, based on the firm’s strengths and weaknesses, the overall corporate strategy could be devised. In the last step, the corporate strategy provides the basis for arriving at the appropriate operation strategy for the organization.

Any strategy making exercise begins with scanning the marketplace and understanding the dynamics of the marketplace. The market dynamics informs an organization of the relevant issues to be considered for the strategy formulation process. It provides useful information about competitors, the nature of offerings that they make to the current customers, the customer’s expectations, any missing links between expectations and the current offerings and intensity of competition. The expectations of the customers can be manifold. It can include price, performance, quality, ease of use, delivery commitments, technological superiority of products, critical post sales service and so on.

Customer expectation changes with time on account of several reasons. Technological improvements, evolution of market and infrastructure may cause a shift in customer expectations about a product or service. The demographic profile of the customer base may also shift over the years. Moreover customers are exposed to newer choices either by a smart competitor or due to entry of the foreign firms into the market therefore, it is important for the organization to prioritize the alternatives and understand what is likely to make greater impact on the market. Customer’s expectations and the competitive priorities that an organization needs to pursue could be better understood using order winning attitudes.

Decision Making in Production Management: The production strategy can be planned in a number of ways and the organization wants to select the best course of action. The decision making process involves proper analysis of these alternatives and then to select the most suitable alternative .The decision making is an art of taking rational decisions using various scientific and analytical techniques. Here a rational decision for any organization is one with which the management can achieve its goals with minimum efforts of time and money. The management should be able to evaluate the risks associated with each alternative and the one with minimum risk should be preferred. In the opinion of Herbert Simon decision making and management appears to synonymous terms. Decision making approach in production management mainly consists of following steps:

  • Comprehension: A step unified awareness is derived from sensory processes about the phenomenon under consideration
  • Conception: It is the scheme of design of formulating ideas or concepts about the phenomenon generated from comprehension.
  • Investigation: The idea or concepts from conception provides many alternative choices. The procedure of collected information about the possible outcomes from these alternatives and then to compare their merits and demerits is known as investigation
  • Deliberation: This implies the mental weighing and assessment of merits and consequences of various schemes.
  • Selection: Investigation and deliberation provides the guidelines to select the best alternative for the given situation keeping in view the overall interest of the organization.
  • Implementation: This is the final stage of decision making process. The information about the alternative selected is communicated to the concerned people for using it to get the desired solution.

In recent years a production manager is generally involved in making decisions under unpredictable and uncertain situation. There are many considerations or factors associated with the final choice and the decision maker must be fully acquainted with these factors. The decision making process can be divided into two categories:

  • Based on judgment and intuition
  • Based on some quantitative methods

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