Glossary 1.10 THE STRATEGIC ROLE OF OPERATIONS Primary goals of the organisations are related market opportunities. Economy and efficiency of conversion operations are the secondary goals, which will be predominant with the study and practice of operations management. A STRATEGIC PERSPECTIVE In figure 1.1 provides the basic downward flow of strategy influence leading to managing conversion operations and results. The general thrust of the process is guided by competitive and market conditions in the industry, which provide the basis for determining the organization's strategy. Where is the industry now, and where it will be in the future? What are the existing and potential markets? What market gaps exist, 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's efforts. After assessing the potential within an 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). Flexibility (responding rapidly with new products or changes in volume). In recent years, most organizations cannot be best on all these dimensions and, by trying to do so, they end up doing nothing well. Furthermore, when a competency exists in one of these areas, an attempt to switch to a different one can lead to a downfall in effectiveness (meeting the primary objectives). 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. In an era of time-based competition, a firm's competitive advantage is defined by the total time required to produce a product or service. Firms able to respond quickly have reported growth rates over three times the industry average and double the profitability. Thus the pay-off for quick response is market dominance. These basic strategic choices set the tone for the shape and content of the operations functions. OPERATIONS OBJECTIVES The overall objective of the operations subsystem is to provide conversion capabilities for meeting the organization's goals and strategy. The sub-goals of the operations subsystem, must specify the following: 1. Product/service characteristics. 2. Process characteristics. 3. Product/service quality. 4. Efficiency Effective employee relations and cost control of labour. x Cost control of material. * Cost control in facility utilization. 5. Customer service (schedule) x Producing quantities to meet expected demand. * Meeting the required delivery date for goods or services. 6. Adaptability for future survival. The priorities among these operations' sub-goals and their relative emphases should be direct reflections of the organization's mission. Relating these six operations sub-goals to the broader strategic choices above, it is clear that quality, efficiency, and dependability (customer service) are reflected in the sub-goals. Flexibility encompasses adaptability but also relates to product/service and process characteristics: Once choices about product and process are made, boundaries for meeting the other operations objectives are set. OPERATIONS ALTERNATIVES AND TRADEOFFS The operations sub-goals can be attained through the decisions that are made in the various operations areas. Each decision involves important tradeoffs between choices about product and process versus choices about quality, efficiency, schedule and adaptability. Once a decision is made, it leads to many choices. Where should facilities be located? How large should they be? What degree of automation should be used? How skilled must labour be to operate the automated equipment? Will the product be produced on site? How do these decisions impact quality, efficiency, schedule (customer service), and adaptability? Are we prepared for changes in product or service, or do these decisions lock in our operations? These are examples of the tough, crucial tradeoffs that are at the heart of understanding the choices that must be made when planning strategically and tactically.