An operations strategy usually has a particular focus area wherein it concentrates on one aspect of operations. An organisation can focus on any area of operations, related to cost, product differentiation, niche or specialised products, materials management, timing, productivity improvement, human resource management or a range of other factors.
It is necessary for an operations strategy to focus on a particular area of operations as it is difficult to perform all activities equally well. Therefore, some strategic focus is required. This helps in taking definite decisions to develop distinctive capabilities for performing specific operations, which, in turn, helps in building competitiveness.
Table of Content
- 1 Focused Operations Strategy
- 1.1 Focus on Cost
- 1.2 Focus on Product Differentiation
- 1.3 Focus on Niche or Specialised Products
- 1.4 Focus on Material Management
- 1.5 Focus on Timing
- 1.6 Focus on Productivity Improvement
- 1.7 Focus on Human Resource Management
- 1.8 Focus on Other Factors
- 2 Benefits and Drawbacks of Focused Operations Strategy
Focused Operations Strategy
Apart from this, a strategic focus also provides a unified approach to operations. It gives managers a direction to focus on completely for achieving their aims.
- Focus on Cost
- Focus on Product Differentiation
- Focus on Niche or Specialised Products
- Focus on Material Management
- Focus on Timing
- Focus on Productivity Improvement
- Focus on Human Resource Management
- Focus on Other Factors
Focus on Cost
The focus on cost operations strategy aims to reduce operational cost. The strategy is generally adopted by organisations that sell products at low cost in small markets. Organisations, following this strategy aim at producing products at the lowest cost.
This helps the organisation to gain a competitive advantage as a cost leader in the market by producing standardised products in high volumes. This leads the organisation to gain economies of scale or efficiency. An organisation needs to continuously search for low cost factors of production to achieve and maintain this strategy.
Focus on Product Differentiation
An organisation, following focus on the product differentiation strategy aims to offer differentiated products in the market to attain competitive advantage. Unlike the focus on cost strategy, where the focus is on cost control, this strategy completely aims to give customised products to its customers to satisfy their needs.
Differentiation allows organisations to focus on value creation of the product, which allows them to charge premium prices. In focus on the product differentiation strategy, the organisation should continuously focus on innovation and improvement of the available product mix.
In addition, the organisation is required to segment the target market in such a way that it targets products and services in a profitable manner.
Market segmentation can be done by the differentiation of products in terms of design, brand image, technology, features, dealers, network or customer’s service.
Focus on Niche or Specialised Products
Focus on the niche or specialised products strategy is adopted by organisations that concentrate on selecting a specific customer segment to cater to its specific needs by customising the marketing mix and product mix. Markets serving very specific customer segments are called niche markets.
This type of the focus strategy is suitable for smaller organisations that neither focus on the cost operations strategy nor a differentiation strategy. It allows organisations to streamline their efforts and resources on a narrow and specifically defined segment of a market. Every market segment or niche has its own competitive advantage.
Focus on Material Management
The cost associated with materials may constitute 20–50% of the total cost. Thus, efficient procurement and handling of materials is vital to the successful completion of business operations. Material management is concerned with the planning, procuring, storing and distribution of materials in an efficient manner.
It has an impact on all business functions, particularly finance, marketing and operations. The finance department tries to keep the level of inventories low for saving the capital. Marketing department tries to maintain a high level of inventories for ensuring good services to customers.
The operations department requires an adequate inventory level for efficient production and smooth employment levels. Now, above-mentioned conflicting objectives can be met by proper management of materials.
Focus on the material management strategy aims to achieve an integrated approach towards the management of materials in an organisation. The major objective is the reduction of cost and efficient handling of materials at all stages and in all sections of the organisation.
Focus on the material management strategy also has several other important aspects connected with material, such as purchasing, storage, inventory control, materials handling, standardisation, etc.
The strategy also states that the planning, acquiring, storing, moving and controlling of materials should be conducted in such a manner so that the usage of facilities, personnel and capital funds can be optimised and quality service can be provided to customers.
Focus on the material management strategy aims at getting the right quality and quantity of materials at the right time from the right source to carry out the production process effectively. This ultimately results in increased sales, improved customer service and reduction in the manufacturing cost of an organisation.
Apart from this, the main objective of focus on the material management strategy is to:
- procure an adequate amount of materials for production at a low cost
- obtain the least possible price for purchased materials
- reduce the levels of inventory to save the capital tied up in inventories
- improve the efficiency of materials handling so that the real cost of material gets reduced
- ensure an uninterrupted supply of materials, because the shortage of supply leads to an increase in the cost of production
- supervise the quality of the material, as the quality of the end product depends on materials that are used to produce it
- maintain cordial relations with suppliers, which benefit the buying company in more than one way
Focus on Timing
Focus on the timing strategy aims at moving materials quickly through the supply chain. The strategy focuses on the speed factor that helps in ensuring fast response and short lead times. Organisations that focus on timing, aim to deliver products/services when required (in the market). This not only improves the credibility and reliability of the organisation in the market but also helps the organisation in gaining competitive advantage over others.
With increasing competitiveness, customers have higher expectations from organisations and suppliers. They do not like to wait and want product/service delivery in the minimum possible timeframe. In other words, customers prefer suppliers, who can deliver the product/service on time or when promised. Thus, timeliness is the focal point of the customer-supplier relationship. For example, big E-retailers, such as Amazon or Flipkart focus heavily on accelerating their delivery times to keep up with the delivery time promises made to customers.
An organisation with a focus on the timing strategy aims to minimise the time between the production and the delivery of products/services to customers. For example, Domino’s Pizza, an international franchise pizza delivery corporation is associated with the credibility of delivering pizzas in 30 minutes. For late delivery, the product is provided free-of-charge.
In order to manage time, organisations focus on reducing cycle time. Cycle time is the amount of time involved in the execution of a specific activity. Sourcing goods for inventory, filling and shipping a customer order, responding to an emergency call, and resolving a client problem are examples of tasks that have cycle times.
Apart from the cycle times, reducing wait time is also necessary for ensuring the speedy delivery of products/services. Wait time is the non-productive time of a team when it has to wait for its inputs to execute its tasks. For example, consider a pizza delivery process. There is one person who prepares dough and another person who applies the toppings.
Now, till the person preparing the dough does not deliver the dough to the pizza topper, the pizza topper will have to wait to execute his task. This wait time is an addition to the overall pizza delivery time. In addition, an organisation also should focus on whether a task is completed by a specified time, as in a due date. Delivering orders when they were promised, increases the credibility of an organisation and helps it in achieving a competitive edge.
Focus on Productivity Improvement
Productivity has become a crucial aspect these days for everyone. In an organisational context, productivity refers to an amount of work done in a given time. Higher productivity leads to lower costs, improved competitiveness and high profits for an organisation. Therefore, an organisation deploys various techniques and methods to enhance its productivity.
Focus on productivity improvement strategies aim at organising and implementing a series of activities, such as product design, forecasting, organising physical facilities and materials management in a manner that the productivity of an organisation can be improved. It is the productivity of men and other resources that decides the substantiality of an organisation and the growth of an economy further.
It should be noted that different industries consider productivity differently. For example, in the manufacturing sector, productivity is measured on the basis of the number of hours taken by labour and machines to produce the output. On the other hand, in the service sector, productivity is measured on the basis of the total revenue generated by employees.
Focus on productivity improvement strategies aim at improving the overall performance of an organisation over a period of time by identifying the areas of development.
Apart from this, productivity focused strategies also emphasise on:
- Increasing reserve funds that can be used for expansion and modernisation
- Reducing overheads and various other costs per unit of the output
- Improving the quality of products
- Increasing the competitive strength of the organisation
- Maintaining a fair compensation system
The productivity-focused strategies bring a competitive advantage for an organisation in terms of higher and improved productivity.
These strategies also help in:
- Tracking an operating unit’s performance over time
- Scheduling equipment
- Conducting financial analysis
- Planning workforce requirements
Focus on Human Resource Management
In today’s highly competitive environment, organisations need to continuously explore different ways of gaining a competitive edge over other organisations.
Traditional differentiating factors, such as technological advantage, product quality, low cost structure and distribution system of organisations can be easily imitated by competitors. However, competent and motivated workforce cannot be emulated. Therefore, organisations have started emphasising on the potentiality of employees to deliver high quality products and to gain a unique competitive advantage.
Today, most of the highly competitive organisations, such as General Electric, FedEx, Google, Southwest Airlines, Boeing and Starbucks have been highly successful in utilising the potentiality of employees in delivering excellent products and services.
According to David Ulrich, the Author of Human Resource Champions (1996), “Employee contribution becomes a critical business issue because in trying to produce more output with less employee input, companies have no choice but to try to engage not only the body but the mind and soul of every employee.”
Focus on human resource management strategies aim at attracting, appraising and retaining employees for utilising their knowledge and skills to improve the overall performance of the organisation.
To effectively channel the competency of employees towards the fulfilment of organisational goals, the focused strategy tends to:
- Identify the desired objectives of the organisation and how to reach there by improving the current situation
- Communicate organisational strategies to employees explicitly
- Encourage the employees to behave pro-actively
- Motivate employees to participate in critical thinking and brainstorming
- Create a sense of belongingness among employees
- Align employees with the values and beliefs of the organisation
- Identify and solve human resource related issues
- Identify skill gaps and training needs of employees
- Relate the overall growth of the organisation with the individual goals of employees
- Identify opportunities to reward and motivate employees
Human resource management focused strategies help an organisation to:
- treat employees as internal customers
- ensure an energised and fearless workplace
- give flexibility to balance family life and work life
- encourage employees to come up with suggestions and opinions
- create a supportive and learning organisational culture
- empower employees to take independent decisions
- focus on the strengths of employees rather than their weaknesses
- inform and update employees about the latest happenings in the industry
- identify skill gaps and bridge them through training and development
Today, most organisations are focusing on human resource management for improving performance, competence and organisational efficiency and thereby, creating a competitive advantage for the organisation.
Focus on Other Factors
Apart from cost, product differentiation, niche or specialised products, materials management, timing, productivity improvement and human resource management, an organisation may focus on several other factors to achieve competitiveness. Some of these factors are as follows:
In today’s competitive environment, if an organisation wants to survive, it has to produce goods and services exceeding the minimum required quality. The level of quality should be decided in accordance with other important factors so that the product is well absorbed in the market.
Now, the question arises that what quality standards are. Standards refer to the specification of the manufactured product, according to which, the product has to perform. This may include performance, appearance, dimension, etc.
The quality of a product or service is affected by a number of factors such as availability of resources, manufacturing conditions, total capital; management policy related to quality level and production methods. To win in today’s competitive business environment, it is important for every organisation to manage the quality of its products/services.
Quality management helps an organisation to increase its sales and market share and achieve a competitive advantage. On the contrary, if the quality of products and services is not satisfactory, it may incur huge costs for inspection, testing, scrap, rework and handling of complaints.
Customer Relationship Management (CRM)
CRM may be defined as a business strategy that focuses on customer satisfaction and retention. Nowadays, organisations use CRM systems for storing and analysing information related to customers, like their name, contact history, needs and preferences and repeat purchases.
This information enables organisations to take sound business decisions by identifying customer needs and expectations and fulfilling them. This in turn helps to strengthen relationships with customers, improve the level of service quality and achieve greater customer satisfaction.
Service Process Management
Services include people, technology and processes required to achieve customer satisfaction. Service processes include all those activities that are designed to provide services as per customer satisfaction. Managing service processes is a complex and difficult task.
This is due to the fact that service-oriented business deals with intangibles and being intangible, it is subjected to individual preferences. In order to deal with intangibles, separate strategies are required to be developed and executed. Same strategy cannot be used for each and every customer because each customer wants customisation in services.
Managing customisation in services as per the demands of customers may require new and specialised resources. Therefore, there should be a constant supply of resources in a minimum amount of time to accomplish customer demands.
Service process management helps in:
- providing a clear roadmap of roles and responsibilities for each and every individual in an organisation
- enabling employees to learn quickly and get on to the process of doing the job because everything is documented and well-maintained; this approach reduces learning time and enables employees to quickly become productive
- minimising operating cost, as the cost involved in rework, redesign and defects is greatly reduced
- assisting an organisation in business expansion with little time for scalability because most of the processes are in control
- bringing transparency in operational processes
- enabling an organisation to work with increased efficiency because the roles, responsibilities and the authority are clearly defined and documented
- providing a competitive advantage to an organisation as rework time is greatly reduced
A brand is a set of assets that contains uniqueness, values and longterm relationship with customers. These help in establishing an emotional connection with the target audience. Brand management is a process of creating and sustaining the brand. It makes customers committed to the business.
A strong brand not only differentiates your products/services from competitors, but also gives a quality image to your business. It aims at fulfilling the commitment of defining, positioning and delivering the brand to the customer.
Brand management involves creating a promise, making that promise and maintaining it. In other words, it means defining the brand, positioning the brand and delivering the brand.
Let us understand the three stages in brief:
- Creating a promise: This step focuses on defining the brand and making it memorable and desirable for customers.
- Making the promise: This step assures the delivery of product/ service with set quality standards to a customer.
- Keeping the promise: This step aims at sustaining the promise of delivering a quality product/service.
Brand management involves several key aspects, such as customer satisfaction, cost, competition, values and quality. Proper brand management not only accelerates the sale of a product/service, but also helps in providing a competitive edge to the organisation.
Decision making is involved in almost every task, be it small or big. You need to make decisions even in day-to-day activities, such as which movie to watch and which restaurant to dine in. Such decisions are trivial in nature and do not have much impact on our lives. However, in case of business, decision making plays a very crucial role. The profitability and growth of a business depend on decisions taken by the management. Decisions can make or break a business. Therefore, business decisions should be taken after a thorough analysis.
To make appropriate business decisions, a separate branch of mathematics, commonly known as Operations Research (OR), has evolved. Operations research is an approach that focuses on recommending the best course of action for solving operational problems of an organisation. It provides a quantitative aid to the decision-making process of an organisation and enables managers to select the best course of action from the available alternatives.
Operations research observes the essential features of an operational problem, collects relevant data and carries out quantitative analysis by applying appropriate mathematical and statistical tools. It can be effectively used for problems related to manufacturing, maintenance and installation in organisations. Apart from this, operations research solves problems related to agriculture, public distribution of commodities and railway booking.
JIT is a manufacturing philosophy that focuses on continuous improvement in productivity by eliminating wastes and reducing the level of inventory. According to the Association for Operations Management (APICS), JIT is a “philosophy of manufacturing based on planned elimination of all waste and continuous improvement of productivity.”
The JIT approach is beneficial as it aims at getting the right amount of inventory for producing the right quantity of final products at the right time. However, it requires a careful scheduling of resources so that they can be used as and when required in the production process.
It is a continuous process and seeks to eliminate raw material stocks and finished stocks. This system of manufacturing ensures that the product is delivered at the right time, is of perfect quality and is manufactured in accordance with the right production plans. However, JIT cannot be implemented if the quality components, such as accessibility, effectiveness, efficiency, customer satisfaction and involvement of people, are not continuously made available.
The concept of JIT lays emphasis on the fact that whatever needs to be produced, should be of the highest level of quality. JIT is not restricted to manufacturing, but can be extended to distribution, sales, marketing and finance also. It is applicable to both manufacturing and service industries.
The JIT system of manufacturing aims to meet customer’s requirements of quality, cost and delivery time. If there are any uneconomical factors that affect these requirements and are wasteful, they should be eliminated. For instance, factors such as keeping unnecessary equipment and holding large inventories tend to increase costs, hence and must be eliminated. JIT teaches us an effective method of manufacturing. Broadly speaking, JIT focuses on maintaining an uninterrupted flow of the production process.
Apart from this, the following are some of the major objectives of JIT:
- Producing quality products as per the requirements of customers
- Increasing machine efficiency by eliminating extra load
- Reducing lead time, batch size and inventory levels
- Reducing setup time by maintaining consistency in production and eliminating wastes
- Reducing the idle time of labour and machines
- Achieving the zero-level of inventory
- Ensuring high process reliability
- Aligning JIT goals with overall organisational goals and objectives
Transportation and Distribution
Transportation is a process in which products are moved from one location to another. It plays an important role in a supply chain, beginning from the manufacturing of products to their delivery to customers.
For an organisation, selecting a correct mode of transportation can prove to be a major factor in determining many parameters, such as cost reduction, safe delivery of products, etc. An economical and responsive transportation network helps organisations to reduce costs and increase customer service levels while minimising disruptions in the supply chain flow.
Distribution is another critical aspect in supply chain as it includes the movement of services and products from a source to end customers. This helps in meeting delivery schedules within the definite time. Therefore, organisations focus on building a distribution network that helps them in activities like reducing supply chain costs, delivering products on time and enhancing responsiveness of a supply chain.
A distribution network includes different distribution channels that serve as a route or path through which products move from supply sources to their demand destinations. It includes manufacturers and different members such as agents, wholesalers and retailers who act as a medium of interaction between consumers and manufacturers.
Information Technology (IT)
Information technology can be defined as a set of interconnected components that gathers, stores, processes, creates and disseminates the information required for efficient business decision making. Information technologies and systems used in a supply chain connect different parties into a combined and coordinated system.
As a result, cycle time reduces, cross-functional processes are redesigned and cross-selling opportunities are utilised. Information technology allows a smooth flow of appropriate information between the point of origin of a supply chain and its point of consumption. This information can be about sales forecasts, inventory levels, delivery schedules and order status.
In reality, there is an almost endless list of possible factors or areas on which an organisation can focus. Many organisations focus on a range of factors collectively. For example, an organisation focusing on low cost may also focus on improving productivity and quality, reducing delivery time or creating a powerful brand.
Different focus points often result into common conclusions. For example, focus on time and material management, both results in the quick movement of materials through supply chain. Thus, strategic focus on one operational aspect does not mean that all other areas are unattended.
Benefits and Drawbacks of Focused Operations Strategy
An organisation, with the help of focused operations strategy, can easily achieve the benefits of specialisation. It can also become a market leader by focusing on one operational area and gaining expertise in that area. This ultimately leads the organisation to design highly efficient operations, which result into increased productivity and decreased costs.
On the negative side, the focused operations strategy may lead an organisation to become vulnerable to changes. As the organisation and the employees become too focused or specialised in one particular area of operations, it becomes difficult to shift to another operations flexibly with a change in the market environment.