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The production or operations strategy refers to the model of decisions or courses of action that the organization needs to produce goods and services. The production strategy shows the direction that the production or the operational function of a company should take. This has important consequences for the way in which the means of production are selected, implemented and managed.
Types of Production Strategy
The production or operations strategy can be focused on the following objectives:
1) Quality: A company with a quality focus must provide goods or services that are fit for purpose and meet the client’s requirements. Quality can be achieved through a qualified workforce, the appropriate technology and the effective use of quality standards.
2) Speed: This strategy involves the delivery of goods and services as quickly as customers want. Speed can be achieved by provisions such as spare capacity, fast supplies and effective control of workflow.
3) Confidence: This means doing things on time and keeping the delivery schedule promised to the customer. This is achieved through effective programming, reliable equipment and employee commitment.
4) Flexibility: This implies being able to respond to changes in product design, production volume and the variety and delivery time required by the customer.
5) Costs: Cost efficiency is achieved through better utilization of capacity, reduction of overhead costs, multipurpose equipment and increased productivity.
Formulation Process
A popular method for formulating the production strategy is called the Hill methodology (by its developer). It is essentially a sequential process of five steps.
1) Understand corporate objectives: The strategy of operations is intended to contribute to corporate objectives. The common corporate objectives are growth, profitability and return on investment (ROI).
2) Study the marketing strategy: This helps to understand the markets that the strategy of operations must satisfy. The characteristics of the product, such as the degree of personalization and the amount of production can come out of this phase.
3) Adjust the marketing strategy to the types of operations strategy: The strategies of quality, speed, reliability, Flexibility and cost are divided into order winners and order qualifiers. The winners of orders are those characteristics of a product that forces the customer to make a purchase; Order qualifiers are the characteristics that the customer expects the product to have, but they do not differentiate their product from competitors. For example, in a certain market, the personalization of products can be the decisive factor for the customer to make a purchase, but at the same time, the customer also expects a certain level of quality and delivery time.
4) Choice of a process: In this step, a set of characteristics of the operations are developed to satisfy the requirements of the operations strategy. This step consists of decisions about process technology, capacity, the size and location of the facilities.
5) Infrastructure needs: This step resembles Step 4, but refers to issues unrelated to the process, such as operations planning and control systems and the organizational structure.