Senior Writer: Joydeep Das
We all have heard the term operations strategy, but only a fraction of us understand it completely. On the surface, it may look like a set of codes or practices followed by manufacturing firms for their well-being and profitability. However, the scope and scale of operation strategies can be much broader.
Through this article, we will have an in-depth look at operational strategies, their role, and their importance to companies. We will also try to answer some frequently asked questions on the topic.
Let’s start by answering a simple question – ‘What is operations strategy?’
What is Operations Strategy?
Operations strategies are guiding principles organizations follow for planning, analyzing, and executing business operations. Operational strategies recognize and implement cost-effective processes for manufacturing and distributing products and services.
Operations strategy concerns itself with the long-term planning of an organization’s customer service, procurement, and planning of business strategies. Such effective and efficient systems are created according to organizational goals and objectives to identify opportunities for improvement in processes, technologies, and best practices.
What is the Role of Operations Strategy?
Operations strategy plays a vital role in organizations, ensuring that resources and processes are managed optimally. It continuously updates business operations and strategies, allowing companies to reduce risks, save money, adopt the latest technologies and remain profitable.
A good operations strategy can safeguard the quality of a firm’s products or services and significantly improve customer experiences. In addition, it can help enhance products, curb decreasing returns and ensure greater reliability.
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What are the Benefits of having an operations strategy?
Operations strategies can offer several advantages to organizations, which are described below:
1. Employee efficiency
An operations strategy can help define the objectives of multiple departments, allowing employees and their managers to know the business goals they are working towards. An decent operations strategy ensures that employees can use their skills and time efficiently. Additionally, leaders can learn which of their departments are operating more efficiently and which require improvements.
2. Resource management
All organizations operate with a finite amount of resources, which makes it crucial to use them efficiently. Well-defined operations strategies can help the operation management understand where resources are needed in departments, how they are sourced, and the best possible ways to deliver them. Employers can also learn about the cost of running multiple departments, identify opportunities for cost reduction and check if they are in line with the overall organizational goals.
3. Departmental cooperation
Organizational strategies also define how multiple departments and business units work together. The hierarchy, relationships, and procedures to be followed are clearly outlined to foster better cooperation between other departments and avoid any confusion. It also allows departments to understand how their goals tie up with the greater organizational objectives. This improves decision-making and unifies the organization as a whole.
5 Types of Operations Strategies
Companies employ multiple types of operations strategies based on specific market needs, some of which are described below:
1. Core competency strategies
Core competency revolves around the primary strengths of a company’s business model. It identifies the best core business processes within a company to leverage existing strengths and boost profitability.
2. Corporate strategies
A corporate strategy adheres to an organization’s mission and aligns with a much larger corporate strategy. By developing key performance indicators, production initiatives, and decision-making processes, companies and their stakeholders strengthen their footing and ensure that their corporate mission is fulfilled well.
3. Competitive strategies
Such a business strategy helps organizations distinguish their products or services from their competitors through better operational processes. In addition, they help identify competitive priorities within an economy to gain competitive advantage, e.g., faster production lead times or higher-quality products.
4. Product or service strategies
Such strategies revolve around the quality control of a firm’s present products or services. They also focus on developing new services and services based on research and ideas from product or service managers.
5. Customer-driven strategies
Such strategies involve making operations decisions based on customer experiences and expectations. Such strategies align with marketing and sales strategies to manage, fulfill and surpass customer expectations.
What is Operations Strategy Framework?
Operations strategy allows organizations to improve their products, processes, and services. First, they must combine corporate strategies with a needs or market analysis to develop such a strategy. Then, they also have to consider the competitive priorities of quality, cost, time, and flexibility – and how to handle them.
To exist in any market today, an organization must have an acceptable price, quality, reputation, and reliability. However, winning more orders in the market would require winning quality, cost, delivery speed, consistency, and credibility. Such factors combine to form an operations strategy framework.
Operations strategy frameworks encompass all practices and processes in an organization to ensure the fulfillment of its objectives, be it corporate, marketing, product design, or manufacturing.
7 Key Elements of an Operations Strategy
Below are some of the typical elements contained within an operational strategy:
1. Product design and assembly
Product operations management in manufacturing firms look for ways to streamline processes like product assemblies and team communication through better strategies. Additionally, they analyze data about their products to prioritize tasks. Product operations management works closely with departments such as customer support, supply chain, sales, and manufacturing to optimize the processes consumers go through with a product, from the research phase to becoming repeat customers.
2. Packaging, delivering and storing inventory
An inventory operations strategy allows businesses to decide how to maintain, process, and order their stock. It looks for better and more efficient ways to store and deliver inventory while reducing wastage and costs. Inventory operational strategies also aim to order an optimal number of goods that maximize storage capabilities without wasting resources.
3. Supply chain optimization
The supply chain portion of an operations strategy looks for ways to optimize the movement of goods from suppliers to the distributors of a firm. The company management chooses the supply structure and activities at each stage of the supply chain. They also choose where the products would be manufactured, assembled, and stored.
4. Quality of the final product
Quality operations aspire to produce a satisfactory final product or service through popper testing and analysis of consumer feedback. They also check products for consistency, ensuring that customers can receive the same quality level. Operations that are under production are scrutinized to ensure that the best quality materials are used with impeccable quality for perfectly finished products.
5. Scheduling the use of resources
Orchestrating the timing of purchase and usage of resources is a must for all manufacturing firms. This includes the best times to send shipments, which activities must be completed by employees, which departments need the resources, and how they would be segregated.
6. Facilities management
It involves planning and managing facilities to understand how the current facilities tie up with the organizational goals. It also determines if your present facilities are performing as needed. Facilities management also finds out if your company needs new facilities and, if so, searches for the most appropriate replacements.
7. Forecasting for planning
Forecasting operations also involve planning for the future. Organizational data is used to make future predictions about the company and implement effective changes to ensure that it moves towards its goals.
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Example of Operations Strategy
The operations strategy of an organization works in tandem with its overall business strategy. This helps companies achieve their goals, improve competitiveness in the market, build on their strengths and expand significantly.
To give you an example of operations strategy, let’s see the operations of a company that manufactures computers. Here’s what their key functions would look like:
- Procuring raw materials
- Working with vendors & suppliers
- Designing new products (computers)
- Manufacturing computer designs
- Managing the workforce
- Delivering finished products to sellers and consumers
Organizations like Amazon, FedEx, Apple, and Walmart have excelled in recent years through solid operations strategies that have helped them thwart competitors, create an impeccable market reputation, respond to market needs and constantly innovate to stay ahead of the game.
Operations Strategy FAQ's
Operational strategies ensure competitiveness and business success by helping the management determine specific areas that need improvement. It identifies where most resources are used, how they can be delivered properly, and how the resources can be used most effectively.
A good operational strategy helps the organization grow and gain competitive advantage. Such a strategy must support the organization to improve, innovate and update itself for higher returns, customer satisfaction, and market dominance.
Here are seven great ways to improve your operational strategy:
- Streamline company operations
- Manage resources intelligently
- Balance workloads
- Analyze operational data
- Invest in the latest technologies
- Monitor utilization rates
- Reduce administrative burden
Operational strategies are referred to as a decision-making system that molds the long-term operational capabilities of a firm for overall growth and facilitates the overall fulfillment of an organization's objectives.
Strategies define how and when specific operations are performed within a company. Strategies are devised to streamline and improve business operations and meet organizational goals.
Operations strategy is related to the day-to-day operations that run the business and are short-term. Business strategies encompass the overall vision of a company, which looks ahead and provides direction as to where the business wants to be in the future.