Process of Operations Strategy

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The process of operations strategy – substitutes for strategy? (Week 9)

Lecture aims

This lecture is a little different from the other lectures in the book. It deals with a number of ‘new’ approaches to the management of operations that are often seen as operations strategies, but are not actually strategies in themselves. Six of the more important ‘new’ approaches are treated in this lecture, namely, Total Quality Management, lean operations, Business Process Reengineering, Enterprise Resource Planning and Six Sigma. They all need to be understood (particularly, the similarities and differences between them) if they are going to help with strategy or strategic implementation. Of course, none of these approaches can transform an organisation overnight, but what really matters in the long run is how these approaches help an organisation to learn from its experiences and build operations capabilities. The lecture aims to include the following.

1. Examine the background and elements of Total Quality Management. 2. Examine the background and elements of lean operations.
3. Examine the background and elements of Business Process Reengineering. 4. Examine the background and elements of Enterprise Resource Planning. 5. Examine the background and elements of Six Sigma.

6. Examine how these approaches can contribute to operations strategy.

The list is not exhaustive
The lecture’s ‘new approaches to operations improvement’ is by no means exhaustive. Almost all academics and consultants in this area will have their own prioritised list of improvement approaches. Other candidates that could have been added to their list include Total Productive Maintenance (TPM), Quality Function Deployment (QFD), Zero Defects, Cycle Process Reduction (CPR), the Work-out Approach, Quality Circles, Value Engineering and so on. Nor is there is much hard evidence as to the extent to which these approaches actually give concrete results in terms of performance improvement. Also, the success of any or all of these new approaches seems to be very much context dependent.

One of the earliest investigations is very interesting.1 The data from the study, when analysed, supported the idea that TQM does provide economic value to a firm. Also, firms that had adopted TQM for long periods reported more satisfaction with the approach than those with less experience. Yet, long-term TQM firms did not seem to have a significantly higher performance level than short-term TQM firms. This may be because long-term TQM firms had more chance to master the core TQM techniques and were therefore more confident in their use, even if the benefits were not particularly evident. More broadly, the conclusions of the survey were reported as follows. ‘The findings support the conclusion that TQM can produce economic value to the firm, but that it has not done so for all TQM adopters. TQM’s success appears to depend critically on executive commitment, open organisation, an employee empowerment and less upon such TQM staples as benchmarking, training, flexible manufacturing, process improvement and improved measurement. Although firms may find these tools indispensable to a fully integrated TQM initiative, they apparently do not produce performance advantage in the absence of the intangibles. This result is consistent with the resource-based notion of complementary resources, and suggests that, rather than merely imitating TQM procedures, firms should focus their efforts on creating a culture within which those procedures can thrive’.

In other words, the tools and techniques of TQM are necessary and valuable, but they depend critically on other intangible and cultural factors. The study goes on to suggest, ‘Although the intangibles were universally important to TQM’s success, other factors were context dependent’. In other words, an organisation may or may not master the detailed tools and techniques of TQM, but even if it does make a perfectly sound set of decisions...
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