Framework for Operations Strategy Formulation

Hill (2005) provides an iterative framework that links together the corporate objectives; which provide the organisational direction, the marketing strategy; which defines how the organisation will compete in its chosen markets, and the operations strategy; which provides capability to compete in those markets

The framework consists of five steps:
1. Define corporate objectives
2. Determine marketing strategies to meet these objectives
3. Assess how different products win orders against competitors
4. Establish the most appropriate mode to deliver these sets of products
5. Provide the infrastructure required to support operations

Step 1 Corporate Objectives
Step 1 involves establishing corporate objectives that provide a direction for the organisation and performance indicators that allow progress in achieving those objectives to be measured. The objectives will be dependent on the needs of external and internal stakeholders and so will include financial measures such as profit and growth rates as well as employee practices such as skills development and appropriate environmental policies.

Step 2 Marketing Strategy
This involves identifying target markets and how to compete in these markets.

Step 3 How Do Products Win Orders in the Market Place?
This is the crucial stage in Hill‘s methodology where any mismatches between the requirements of the organisation‘s strategy and the operations‘ capability are revealed. This step provides the link between corporate marketing proposals and the operations processes
and infrastructure necessary to support them. This is achieved by translating the marketing strategy into a range of competitive factors (e.g. price, quality, delivery speed) on which the product or service wins orders. These external competitive factors provide the most important indicator as to the relative importance of the internal operations performance objectives. The five basic internal operation‘s performance objectives allow the organisation to measure its operation‘s performance in achieving its strategic goals. The performance objectives are Quality, Speed, Dependability, Flexibility and Cost.

Step 4 Delivery System Choice (Structural Decisions) and Step 5 Infrastructure choice (Infrastructural Decisions)
Steps 4 and 5 of Hill‘s methodology involve putting the processes and resources in place which provide the required performance as defined by the performance objectives. Hill categorises operations decision areas into delivery system choice, (structural decisions) and infrastructure choice (infrastructural decisions). Delivery system choice concerns aspects of the organisation‘s physical resources such as service delivery systems and capacity provision.

Elements of Operations Strategy
• Positioning the production system,
• focus of production
• Product/ service plans,
• Production process and technology plans,
• Allocation of resources to strategic alternatives, and
• Facility plans: capacity, location and layout.

The Role of Operations Strategy

  • Provide a plan that makes best use of resources which;
  • Specifies the policies and plans for using organizational resources
  • Supports Business Strategy as shown on next slide

Developing an Operations Strategy

  • Operations Strategy is a plan for the design and management of operations functions
  • Operation Strategy developed after the business strategy
  • Operations Strategy focuses on specific capabilities which give it a competitive edge – competitive priorities
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