OPERATIONS STRATEGY: The Forgotten Link

You did the research. You did the footwork. You did the strategizing. Now your company has an airtight plan for sales and marketing. So why doesn’t it work?

Every day, it seems, there’s a crisis. The new product comes out later than planned, service is falling short, promises aren’t kept, margins are not as high as they should be. Marketing and Sales are doing their best to protect and grow the business but, for some reason, the plans are not falling into place. So the hardworking folk in Operations find themselves forever expediting, fighting problems with new products and explaining why orders are late and costs are higher than planned. You are not alone. Most companies define their business and sales/marketing strategies, but few have an equally well-defined operations strategy. The key to long-term success is to get one–now.

WHY HAVE AN OPERATIONS STRATEGY?

The answer is that, without one, an organization is constantly in reaction mode, with no overriding plan for success. Operations personnel often don’t talk or think strategically. However, although the "just roll up your sleeves and put out the fire" approach may make for heroes and great stories, it doesn’t engender profitability and smooth, effective operations. Operations must have a plan for how to meet customer demands profitably while avoiding constant crisis.

An operations strategy is as integral to long-term profitability and success as any other element of corporate strategy.

A succinct and well-communicated operations strategy provides a consistent context for the decisions made throughout the company. Without a definition of where the company is going and how it intends to get there, how can any operational decision be deemed good or bad? An operations strategy that addresses production (process technology, layout, facilities, planning and control), supply chain (suppliers and customers) and integration of Operations with the rest of the organization (HR, IT, R&D, Finance, Sales/Marketing, etc.) can provide that missing link.

The right operations strategy, well-implemented, enhances an organization’s competitive position in its chosen markets.

DEVELOPING A SUCCESSFUL OPERATIONS STRATEGY

What does the creation of a successful operations strategy entail?

Do your homework. Do you know in which areas the market requires you to excel, and in which you merely need to be competitive? This input drives operations strategy. If customers are buying flexibility and fast delivery and you are selling lowest cost, your strategy is driving the company in the wrong direction.

The operations strategy is successful only if it enables the organization to profitably and routinely meet the needs of the markets the company chooses to serve. The first step, therefore, is to understand the needs of the market. You must begin by identifying and then prioritizing the requirements of the markets. These include cost, quality, speed of delivery, accuracy of promise date, pre- and post-sales support, flexibility, technical leadership, rapid product introductions, integration with other systems and participation by customers in product design.

Each company has its own goals, its own business and market strategies, its own current status, its own skill pool, its own philosophy, its own ability to change. Successful operations strategy and execution requires understanding each of those. The major components of operations strategy-production, supply chain and integration with the rest of the organization-must reflect those realities.

Production considerations. Invest several days in observing your operations-not the people, but the process. What do you see that interferes with profitably meeting market-prioritized requirements? Now, imagine how the physical attributes, the process technology, the production processes and the planning and control can be changed to make for profitable success in the marketplace.

Do walls and hallways unnecessarily separate related operations? Are employees spaced so far apart that they have to waste time getting to one another? How much time is lost as they wait for information, for decisions, for required materials? Is unplanned downtime of critical equipment adding to costs and elapsed time? Are employees always chasing parts and changing schedules? How far does product travel while being converted into finished goods?

Define the process outputs that success requires. Focus the organization on what matters, giving proper attention to secondary issues. Define the production strategy that you are capable of implementing and that supports your markets.

Strengthen the weakest link. The supply chain goes in both directions and is more than one level deep. As the concept of the weakest link clearly communicates, your company’s success in the marketplace is limited by the capabilities of the weakest link in the chain. "Poor quality" suppliers preclude your success. Overpowering their ineptitude costs time and money. Similarly, if your customers are not willing to participate in enhancing the effectiveness of the chain, they may well be the wrong customers.

Each company in the supply chain has the right-in fact, the responsibility-to demand excellence. But each must also be willing and able to contribute to the overall success.

Who are your key suppliers? Who do they depend on? Who are your key customers? Do they have a strong plan in place? Can the critical components of the supply chain work together for mutual success? The supply chain component of your operations strategy defines how you intend to ensure that they can.

Integration within your own company. The operations strategy cannot be created or exist in a vacuum. Integration of the philosophy and the capabilities of the business processes, human resources, information systems, research and development, sales and marketing and other functional areas within the organization is crucial.

Examine your policies for any discrepancies with your planned strategy.

PULLING IT ALL TOGETHER

Implementing an operations strategy is vital to your company’s long-term success. Though the prospect may be daunting, there are just three steps to take for accomplishing this critical objective:

  1. Define an operations strategy that reflects the market and your organization’s realities
  2. Make sure your employees, key suppliers and key customers understand the strategy.
  3. Behave in accordance with that strategy

Discuss it, decide it, document it, communicate it. But above all, do it.

Rebecca A. Morgan is president of Fulcrum ConsultingWorks, Inc., a firm specializing in helping companies define and implement appropriate operations strategy. Her expertise has been tapped by publications ranging from Fortune Magazine to BusinessWeek to Industry Week. She served in senior management positions for Stouffers and TRW prior to founding her consulting business in 1990. E-mail Morgan at morgan@fulcrumcwi.com, call 216-486-9570, or visit www.fulcrumcwi.com.