Operational Strategy – With increasingly fierce competition in every industry, a company must have a strategy to carry out its operations. A strategy to compete is developed based on various considerations, including a company’s relationship with the environment around it. This term is called operations strategy.
The use of this strategy has long been developed and implemented by global companies, one of which is in Japan. They can utilize and maximize their manufacturing operations or factory operations to compete internationally. In this way, they can design and manufacture a wide range of quality products at a more affordable price.
For most businesses, success is not a coincidence, but a series of right decisions made at the right time. Careful planning, preparation and execution are essential to the success of most companies, and it all starts with determining the right operating strategy.
But what is an operations strategy and how do you implement the right strategy for your company? Do Sinaumed’s friends know? In this article, we will discuss it in more depth to make your business more productive.
Definition of Operations Strategy
Operations strategy ( operational strategy ) is the vision of the operations function that sets the overall direction for decision making. This vision must be incorporated into a business strategy and is often reflected in a formal plan. The operations strategy must create consistent decision patterns in operations and provide a competitive advantage for the company.
Many other definitions are given to complement the above definition, some of which are:
Schroeder, Anderson and Cleveland (1986) define an operations strategy consisting of four components, namely: mission , objectives , distinctive competence and policies . These four factors explain what operational objectives must be achieved and how to achieve these objectives. The resulting strategy will help guide decision making across all parts of its operations.
Each activity must have a mission that is aligned with the business strategy and aligned with other functional strategies. The operating mission is part of the main business strategy selected for the business unit. For example, your company’s business strategy is to become a product manager. Thus, the operational mission that can be carried out is to highlight the introduction of new products and product flexibility to adapt to the evolution of market demand.
2. Distinctive Competence
The existence of distinctive competence allows operations to outperform competitors. This is made possible by the existence of unique resources that are not owned by competitors and are difficult to imitate. These distinctive skills must also align with the company’s operating mission. This component is not only important in determining the main business strategy but is also the key to the success of your business.
3. Operational Objectives
Operations has four main goals, namely cost, flexibility, quality, and delivery. All of these goals must be set according to their main mission and can be measured quantitatively and qualitatively.
Policy or operation policy explains how the objectives of the operation will be achieved. operation policy must be made by developing every key decision, namely process, quality system, capability, and inventory.
In addition, Hayes and Wheelwright (1984) define operations strategy as a consistent pattern of operating decisions. The more consistent these decisions and the higher the level of support for the business strategy and the better the results.
Wickham Skinner (1985 ) defines operations strategy in relation to the relationship between operating decisions and corporate strategy (corporate strategy) . He believed that when operations were not aligned with corporate strategy, executive decisions were often inconsistent and short-term. As a result, these activities are segregated from the business and their link to corporate strategy is weak.
The operations strategy has three main inputs, namely business strategy, internal analysis and internal analysis. This strategy must be able to assist companies in adjusting to existing external factors such as changing consumer needs, technological developments, availability of raw materials, conditions of competitors to situations related to social and legal conditions.
Operations Strategy Function for a Business
Now that you know what an operations strategy is, you can have some idea of what it does. This strategy basically helps in gaining the competitive advantage of the company over its competitors. What can a company achieve with the right operating strategy?
1. Enabling Companies to Compete in Differentiation
To be able to attract the attention of customers, a company must be different. In other words, the product you produce must be different from your competitors or other company’s goods. Even though it’s different, it doesn’t mean your product is weird. The existence of this point of difference allows products to be more attractive and valuable while still being able to meet consumer needs.
The differentiation strategy that can be realized in operations can be a way for companies to gain competitive advantage. One way is to pursue a customer-focused operations strategy. You can start by analyzing the market to find out the needs of your customers and the strengths of your competitors.
The results of the analysis are then built into the company’s strategy which is then used as a framework for overall objectives. Through the strategic planning process, each functional area will be responsible for identifying and developing ways to achieve company goals.
2. Allows Companies to Compete at the Lowest Cost
A strategy that works well can benefit the company in the form of low production costs. This achievement requires a series of efforts, one of which is focusing on customer needs in product design and operating activities by eliminating rework (removal may require rework), scrap, inspection and other items that cannot add value to the final product.
Fixed cost reduction strategy must be carried out by considering the maximum value expected by consumers. Not only during production, but also during delivery. The faster the product reaches the consumer after production, the better the quality. In addition, you can also reduce operating time and simplify operating processes.
3. Enabling Companies to Compete on Response
The response in question is a set of values associated with fast performance, flexibility, and skill. Quick response covers various plans, including in the product design process, from production to distribution.
Meanwhile, response refers to the company’s ability to respond to possible market changes, starting from fluctuations in production volume to changes or updates to market product designs.
The corporate environment can change quickly, including the needs and expectations of consumers for the products you manufacture. The company’s ability to adapt to all these changes through a skilled operating strategy will set it apart from other companies. This ability is called flexibility.
There are two types of flexibility known in business, namely product flexibility and volume flexibility. Product flexibility refers to a company’s ability to offer a wide variety of products, both goods and services, to meet unique customer needs.
The existence of a flexible system in this strategy allows companies to quickly add new products or remove products that are not valued. The goal, of course, is to achieve maximum profit and satisfy customers.
Another aspect that is no less important is the ability to adjust the quantity or volume of production according to existing demand. When demand increases, the quantity produced must also increase.
This flexibility in production volume is one step towards a sustainable business. The three functions above can be achieved if the company has a well-functioning operating strategy. When all the components of a company’s strategy are linked together, the expected benefits and desired goals can be achieved.
Operations Strategy Planning
The business operations strategy itself takes many different forms in practice. Each type of operations strategy has its own role and function. This is a form of operating strategy that you should know about.
1. Production Planning
As the name suggests, the production planning operations strategy deals with the production process. In particular, production planning is concerned with planning the methods and technology needed by the workforce to complete the production process.
2. Financial Planning
Financial planning deals with planning related to the funds needed to carry out daily business or business operations.
3. Facility Planning
Facilities are an important part of the company’s daily operations. Proper facility planning will ensure that the workforce has the facilities they need to ensure the smooth production of a product or service.
4. Marketing Planning
Marketing planning involves the process of distributing and/or selling goods, both products and services that you produce.
5. Human Resource Planning
Human resource planning deals with issues related to resource management which begins with search or recruitment, from selection to placement of workers in predetermined positions.
Developing an Operations Strategy to Develop the Business
The formulation of an operational strategy must be carried out in accordance with the conditions of the company, so that the goals set can be achieved more easily. So, here’s how to develop an operational strategy as the basis for preparing a work plan.
1. Operations Strategy as the basis for preparing work plans
You can follow two steps to develop a strategy that becomes the basic reference in preparing a work plan, namely adopting a cost-effective development approach, SWOT, systems approach, and gap planning method.
Profitable Development Approach
That is an effort to compile a work program that is able to bring in large profits and profits. Profitable development can strike a very favorable balance between the company environment and available advice.
WOT or Strengths, Weaknesses, Opportunities and Threats aka Strengths, Weaknesses, Opportunities and Threats.
The SWOT method is a form of corporate approach that must balance strengths and weaknesses, see the opportunities that lie ahead and businesses must also understand the threats, disruptions, challenges and obstacles that may be faced in the future.
This approach includes a system-focused approach which is then developed to form a strategic plan.
The Planning Gap Approach
The planning gap approach will start with traditional planning thinking and then be developed further with more advanced, dynamic, and effective thinking.
The target is the final result achieved from business activities. Targets also describe what must be achieved through the operational strategy implemented to achieve business goals (in the form of measurable goals).
In reality, goals are tangible results achieved in a specific, more measurable formula within a year. Here, the formulation of the operating strategy must be aligned with the specifications of the company’s products, markets and marketing, technology, and resources.
3. Strategic Achievements
Company performance indicators are both quantitative and qualitative and describe how well the goals or objectives set have been achieved. Performance metrics should be something that can be calculated, measured, and used as a basis for evaluating or demonstrating how well performance is at the planning, implementation, and post-operation monitoring stages.
Performance indicators can also be a source of certainty if the company’s daily performance shows progress in achieving the goals and objectives that have been set. Without job metrics, it will be difficult for companies to measure the performance (cleanliness or tidiness) of work departments. The steps above need to be carried out sequentially and continuously together so that the goals are more easily achieved.
In the process of operational strategic management, companies must also compare the results obtained with the level of achievement of objectives. This process also includes an evaluation stage and includes four key elements, namely:
- Setting work goals, target tolerance limits, standards, strategies and operational plans.
- Measure the position directly related to the target for a certain period of time. If results fall outside these limits, corrective action is required.
- Analyze deviations from the specified tolerance limits.
- Make changes if needed.
5 Core Operations Strategies that Must Have in Business
1. Corporate Strategy and Cross-Functional Interactions
The company’s strategy makes the business a piecemeal, interconnected system. Just as the heart muscle depends on brain function in the human body, every part of a business depends on others to stay healthy and achieve the desired results. The strategy planned and used by the business must support the company’s strategy and the use of cross-functional interactions.
2. Customer Driven Strategy
The operating strategy must include a customer-focused approach to meeting the needs and wants of target markets.
To do so, companies must develop strategies to assess and adapt to changing environments, continuously improve core competencies, and develop new strengths in a sustainable manner. For example, when evaluating marketing processes, companies must monitor market trends to take advantage of new opportunities and avoid possible threats.
3. Develop Core Competencies
Core competencies are strengths and resources within a company. While core competencies may vary by industry and company, they can include well-trained staff, optimal business locations, and marketing and financial expertise.
By identifying core competencies, companies can develop processes such as customer satisfaction, product development, and build professional relationships with stakeholders.
4. Competitive Priority Development
Developing competitive priorities comes from establishing business strategy, analyzing markets, identifying core processes, and conducting needs analysis. To create competitive priorities, organizations evaluate operating costs, product or service quality, time needed to develop and deliver goods or services, and product or service flexibility based on type, volume, and customization.
Competitive priorities must include the ability to provide a quality product or service at a reasonable cost that consistently meets customer needs.
5. Product and Service Development
Product and service development strategies must consider design, innovation and added value. When developing a product for a new customer, several options can be presented, namely:
- Companies may decide to take the lead in introducing a new product or service.
- Wait for the introduction of the innovation in the market to develop it or, Wait to see if the company’s innovation is successful before proceeding.
- When developing services, companies should consider combining them with support services and immediately observable psychological benefits.
When developing a product or service, a company must consider customer expectations, its position relative to competitors, and the relationship between technical measures and customer needs.
Author: Ziaggi Fadhil Zahran
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