Strategic Operations Management

The New Competitive Advantage

Robert H. Lowson

• Publisher: Routledge
• Year: 2003
• Print ISBN:
  9780415256544
• eBook ISBN:
  9781134519019
• Topic: Business
• Subtopic: Business General
• Index: Business

This indispensable text offers students a high quality treatment of strategic operations management. It provides the reader with a clear understanding of the importance and nature of operations strategy by determining exactly which management activities, core competencies, resources and technologies underpin an operational strategy. The book demonstrates how various operational elements and components can be combined and customised into unique operational strategies. When these strategies are correctly implemented, they provide sustainable competitive advantage and allow firms to provide a diverse range of services and goods in their increasingly demanding, complex and dynamic marketplaces and spaces. Includes chapters covering customising operational strategies for retail, manufacturing, services and SMEs, and sections on eBusiness and complexity theory in relation to operations theory. Features include: *extended case-studies including several from Europe and the USA *case vignettes *learning objectives *key terms *chapter introduction and 'maps' to aid reader accessibility *'time out' boxes to prompt the reader to reflect on what has been learnt *'critical reflection' boxes that analyse theories and models.

Part I
Understanding

Owl hasn’t exactly got Brain, but he Knows Things.
A.A. Milne (1973)

The first part of this book is devoted to understanding. In the immortal words of A.A. Milne, understanding and knowledge are vital to the development of an academic critique. In this first section, we aim to provide the reader with a full appreciation of operations management and its importance for the modern organization. Thereafter, in chapter 2, the reader is provided with three important frameworks. These give differing academic perspectives, each an important, although contrasting, contribution to the analysis of any operational situation.

Part I concludes with an examination of business strategy, and in particular the different approaches and viewpoints currently evident in the corporate strategy debate.

The understanding of these perspectives allows us to locate the role of operations strategy within a strategic hierarchy and genealogy, and to demonstrate its contribution to competitive advantage for any organization.

CHAPTER MAP

Before embarking upon the first chapter, the following ‘chapter map’ describes the locus of each particular part of the book, the chapters involved and their interconnection. It is suggested that the reader refer back to this as and when necessary throughout the text.

CHAPTER MAP

Chapter 1
An introduction to operations management

This first chapter is an introduction to operations management. It provides both new and experienced students with some key and basic concepts that they will carry with them throughout the rest of the book.

LEARNING OBJECTIVES

After considering this chapter, the reader will be able to:

• Appreciate the importance of operational management for all firms, whether they offer services or manufacture tangible goods
• Identify operational activities both from a narrow and broad perspective using the three definitions provided
• Be able to locate modern operations management perspectives and have an understanding of their historical evolution and the various important trends
• Explain the main differences between, and classifications of, products and services
• Understand the various types of operation that are used and the strong link between them and the demands upon the organization for flexibility
• Understand the main theoretical frameworks used to study operational management as well as appreciating their advantages and disadvantages

KEY TERMS

• Operations management
• Supply and demand
• Product and service combinations and ‘servitization’
• Consumer demand, variety, diversity, flexibility, responsiveness and operational types

INTRODUCTION

The value that is added by both operations management and operations strategy is fundamental to most organizations. Operational activities are central to the provision of services and/or goods. Every organization provides a product and service combination. A meal in a restaurant, a visit to the hospital, buying a pair of Levi 501s, making a pair of Levi 501s, Woodstock Festival, insuring an automobile, staying in an hotel, going to the cinema, even the workings of a prison; all have operations activities and their management is central to the successful provision of goods and services. Even Government departments can draw heavily upon operational initiatives and strategies when they talk about supply chain management, lean supply, just in time and total quality management.

This first chapter sets the scene for the rest of the book. It aims to offer the reader an insight into the importance of operations management and gives a firm platform for the study of operations strategy. Those with a comprehensive understanding of the main tenets of operations management might like to skim through this first section and then move directly to chapter 2.

THE CONTRIBUTION OF OPERATIONS MANAGEMENT

Operations management has its origins in the study of ‘production’ or ‘manufacturing management’. These terms still very much apply to manufacturing organizations that will have distinct operational activities that convert say, beans and rich tomato sauce into cans of baked beans to be sold by a retailer. Thus, we can initially think of operations management as being part of a distinct function producing a product and service combination, just as we have marketing and accounting functions in many organizations. Our first definition of operations management is therefore:

Definition 1
The design, operation and improvement of the systems that create and deliver the firm’s primary product and service combinations.

Every organization that offers goods or services has an operations activity. As far as the organization structure is concerned, some firms will have a discrete operations function. This might be called a manufacturing department, an operations system, or have no identifiable name at all. However, like marketing and accounting, it is a fundamental function of the firm with professionally trained operations or production managers responsible for conversion of resources into the required product and service combinations. In some organizations such managers will have different titles, a store manager for a retailer, administrative managers within a hospital or distribution managers in a logistics company. This first definition tends to be rather narrow as it applies to core conversion processes (mostly manufacturing). We need therefore to widen the definition of operations management to a second level:

Definition 2
The design, operation and improvement of the internal and external systems, resources and technologies that create and deliver the firm’s primary product and service combinations.

This definition expands the operations management concept beyond just internal production or manufacturing. Now it will encompass other activities such as purchasing, distribution, product and process design, etc. Further, there will also be external managerial responsibilities at a supply network level, covering a number of interconnections between external firms.

Increasingly, however, modern economies are built around services and experiences, and here operations management is no less important. As Slack et al. (2001) point out, there should be a broader viewpoint that will take into account all activities throughout the firm that have any connection with delivery of a service on a day-to-day, ‘make it happen’ basis. This brings us to the third definition of operations management:

Definition 3
The design, operation and improvement of the internal and external systems, resources and technologies that create product and service combinations in any type of organization.

This definition has subtly changed from the second. It now includes both manufacturing and non-manufacturing firms (the service sector – whether profit or non-profit making) and more importantly, covers operational activities and systems throughout the organization, whether performed by an individual, group, unit or department. For example, a marketing or sales function can also be viewed as an operational activity – this also gives us the notion of internal consumers and suppliers. All activities in an organization will create a product and service combination (the latter might include information) supplied to either an internal or external consumer. Similarly, other internal/external suppliers will also support these activities. We can now see that the broad definition of operations management covers the main activities throughout a firm and its supply network contributing to the delivery of a product and service. These activities and their various interfaces can best be viewed as a number of consumer/supplier linkages.

Now, if one accepts the above definitions, it becomes clear that operations has a strategic contribution to make in supporting the needs of customers and consumers: the purpose of this book. We now examine the nature of operations management in more depth and expand on the need for an operations strategy; partly, an integrating system between these operational activities and the wider business strategy.

TIME OUT BOX I

Traditionally, economic activity is described in stages:

• Primary (extractive)
• Secondary (goods producing)
• Tertiary (domestic services)
• Quarternary (trade and commerce services)
• Quinary (refining and extending human capacities)

To which we can now add:

• Experience

Can you provide examples for each of these, demonstrating the main operational activity?

THE STUDY OF OPERATIONS MANAGEMENT

We now build on the contribution of operations management to an organization. In particular, more detail is given regarding the development of the subject, the types of operation and product and service combinations, and the main frameworks that can be used to analyse operational activities.

The history of operations strategy and management

The study of operations management and operations strategy is a relatively new discipline, when compared with many of the social and natural sciences. However, as Meredith and Amaoaka-Gyampah (1990) remark, when it comes to the study of organizations, business and management, ‘We in the field of operations management consider our field to be one of the oldest in business schools pre-dating the emergence of finance and accounting by decades’. Despite some amazing production feats in ancient civilizations and early modern epochs – the building achievements of the Romans, the pyramids of Egypt and the Great Wall of China – operations management as a discipline is more usually associated with the production of consumer goods. As we can see in Table 1.1, the growth of the subject and its major influences can be traced back to the late eighteenth and early nineteenth centuries. The table shows only the major operations-related concepts during this time (some of which are not always original ideas!).

Table 1.1 The historical growth of operations management and strategy

We can see the large number of influences and significant events, many of them overlapping, upon the discipline of operations management.

TIME OUT BOX II

Forecasting, especially longer term, proves increasingly difficult for organizations. Sometimes we can extrapolate trends, but the future is not always a continuation of the past. Two questions:

1. What operational trends might continue into the next 2–3 decades?
2. What methods can organizations use to attempt to understand future influences, particularly external ones?

Types of product

When discussing a definition of operations management, we used the term ‘product and service combinations’. This is an important point. The type of product and/or service has important implications for operations management, as we shall see in chapter 3, on operations strategy. Types of product and/or service and their different behaviours drive many activities and strategies in an organization. In addition, for the study of operations management, there are clear distinctions between goods and services (although these will in future become increasingly blurred). For example:

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Table of contents

• COVER PAGE
• TITLE PAGE
• COPYRIGHT PAGE
• FIGURES
• TABLES
• CASE STUDIES
• PREFACE
• A GUIDE FOR THE READER
• FOREWORD
• ACKNOWLEDGEMENTS
• PART I: UNDERSTANDING
• PART II: ANALYSIS AND SYNTHESIS
• PART III: APPLICATIONS
• EPILOGUE
• REFERENCES