Hmm, shall I invest in a cybertron t1000 to reduce my unit costs?
Or relocate my production refinery of vespine gas for higher output capacity? Seems we have some
very important strategic operations decisions to make. Hi there, I'm Laurence Gartside. I'm
a management trainer and consultant in business operations through my site rowtonstraining.com,
helping you and your team to level up your business operations fundamentals. Operations
strategy is a big part of operations management, after the operations role has been defined and
it's clear how the performance of the organization will be evaluated. The operations function needs
to form its core principles that will guide its overall approach and decision making.
Operation strategy can form an essential part of a businesses overall competitive success to
stand out from the competition by aiming to excel in certain key areas of importance to customers.
In this video, we're going to look at three key operations strategy decisions.
Operations management is about making a lot of decisions, some very short term like rescheduling
some jobs because something happened or moving some people around to different tasks because
someone is off sick, then there's the medium term decisions like
an adjustment to the layout or increasing critical inventory safety stock levels. But usually
first of all, there are some really big long term decisions that set the strategic direction for the
operations of the organization. The biggest decision of them all is what to do, what are
we actually going to do to provide this particular good or service versus buying in or outsourcing
it. This might sound silly but it's not, it's huge. Imagine you run a business selling ice
cream, you need to decide what you are actually going to do to provide this product and service,
what you are going to make and do versus what are you going to outsource and buy. So are you going
to just buy in ice creams and do the selling? Or maybe buy them in but also assemble and customize
them with sprinkles and sauce to make sundaes or maybe actually make the ice cream yourself or
start a dairy farm and grow the cows and do the milking and maybe grow the grain to feed.
Ice cream is quite simple but what about a big computer manufacturer, where there are
thousands of micro components that the computer company could try to make or choose to buy in.
Choosing what to make versus what to buy is the essence of choosing what your organization is
actually going to do to add value to the world. Some companies do nothing but add a sticker and
do some good brand marketing, some just buy it and sell it in a new location more convenient to
hire paying customers but for operations intensive businesses, being selective about what you do is
still crucial. The next mega operation strategy decision we'll consider is where to make or do
whatever you're going to make or do. There's a lot of difference competing factors at play,
some organizations choose to locate next to their source of raw materials, you'll always find a coal
power station or a steel factory, next to a coal mine or a port as they like so many organizations
have chosen to locate next to their raw materials or major suppliers. This especially makes sense
for bulk reducing industries where the quantity of stuff going in is much higher than what comes out.
The coal and iron or weigh much more than the steel bars coming out of the steel plant for
example and so minimizing the transport distance and cost of the raw materials makes most sense.
For other industries, they choose to locate closer to their customers especially bulk gaining
industries such as bread baking or beer brewing where the end products are much bigger than their
inputs and so the outputs are the more expensive thing to transport. Also finished product lead
times to the customer can be very important especially with the likes of freshly baked bread.
Other companies locate because of where they can find the particular labor force they need,
either cheap low-skilled workers in countries far far away or a concentration of
specific skills such as web developers in Silicon Valley, or bankers in the city of London usually
where to locate is a complex trade-off of many of these factors and more strategically selecting
your operational competitive advantage be that low transport costs, fast customer delivery, or
an easily available workforce. This brings us on to our third operation strategy decision.
How to compete, I just said several ways how the deliberate choice of just location can bring
an operationally competitive advantage, usually traded off against the loss of another low cost,
high quality personalized service, fast delivery, high availability, high variety of options.
Customers want all of these but by definition in a competitive marketplace, you can't be the best at
all of them being very good at just one or two of them is usually adequate to be a successful
business. A roadside burger van, a mcdonald's or a fancy burger restaurant all fundamentally
do the same thing, take your money and give you food but it's the different ways they compete
that is what defines them. Cost, speed, consistency of product, quality and more. Choosing
what you are going to excel at and compete on is a core operations strategic decision and probably
has to precede the other earlier decisions of what to make slash do and where to do it.
Sure, some businesses compete and find success by being great at entirely different things
and being operationally very average. You can compete through brand and marketing, through
superior product technology or shrewd financial management but operations and operation strategy
present a host of operations to define your organization to your customers and bring
competitive advantage to the marketplace. So, what aspect of operational performance does
your organization compete on? Is this explicitly chosen as a deliberate strategic decision or
do you find that's just what kind of happened or you're not actually sure what your organization's
operational strategy is? It's really hard to pull the rope in the same direction if you're not.
Please share your comments on that below. So three of the biggest strategic operations decisions,
what to make versus what to buy, where to make or do it and that all comes from deciding
how are you going to compete. So what's my angle? Well, that's a very personal question.
All right then, well alongside offering top-notch training courses on Operations Management,
Supply Chain, Logistics, Inventory, Performance improvement on my site
rowtonstraining.com, I also include a host of loosely relevant bad jokes and funny stories.
So here we go, what does a great competitor and laxative both have in common?
They both give you a run for your money!