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Strategic Management - Strategy Formulation

Operations Strategy - Functional Strategies

   Posted On :  26.06.2018 09:55 pm

This strategy adds value to the raw materials to create a product or service.

Operations Strategy
This strategy adds value to the raw materials to create a product or service. This value addition should be cost effective, fast and without quality rejects or reworks. The emphasis should be on cost-reduction while enhancing quality. Areas like safety, breakdown, downtime, inventory control scheduling etc. should be adequately covered with policies and strategies at functional level.
Table 14-1: Categories of Strategy Decisions in Manufacturing Operations
            Capacity – amount, timing, type
            Facilities – size, location, specialization
            Technology – equipment, automation, linkages
            Vertical integration – direction, extent, balance
            Work force – skill level, wage polices, employment security
            Quality – defect prevention, monitoring, intervention
            Production planning materials control – sourcing polices, centralization, decision rules
            Organization – structure, control/reward systems, role of staff groups.


India is known for high cost of inventories. Companies spend huge amounts on storage and warehousing in this country unlike countries like Japan which follow ‘Just in time (JIT) in production and operations.
Raw materials arrive eight hours before they are put in process for making finished goods in Japan. This is true with M/S Toshiba of Japan, where they can get the required plates from just across the waters from M/S Nippon steels unlike many companies in India who have to order thick plates at least eight to ten months in advance.

Training to workers

Many Japanese manufacturers have also provided extensive training and cross training of their workers so that they will have multi- skilled workers. This versatile work force, coupled with plant arrangements and equipment that can easily changed over from one product to another, provides greater flexibility without a significant increase in cost.


Low cost materials by strategic location

Regarding procurement of materials, strategies on right qualities of material, at the right qualities of material, at the right time and price, the number of sources, their reliability and price patterns analysis and decision, vendor relationships, forward buying etc. must be chalked down to enable managers to work according to them.
Industries like Bharat Heavy Plates and Vessels which are strategically located closer to steel plant in Visakhapatnam in Andhra Pradesh have the advantage to get raw materials like steel and coke with less carrying cost and storage cost. Industries located closer to ports like Chennai, Mumbai and Calcutta have also strategic advantage of location not only for getting raw material but also for shipping finished products.

Product Design – Technology and Marketing Concerns

The product, or output, desired from the operations system will certainly affect the type of inputs needed and the capabilities that must be available to transform the inputs into the desired goods or services. As the product is designed, a cost-benefit evaluation should be performed, taking into account the kind and amount of materials, labour and processing equipment that each alternative design will require.
The company must also recognize that the potential consumer will also perform some sort of cost-benefit evaluation before deciding whether to purchase the product. Some processes and materials are more expensive and should be used only if the functions of the product make them necessary or the aesthetic appeal of the results justifies the expense.
Myriad alternative designs for a product are usually possible, and alternative production methods may be possible even after the product is designed. Production engineers often serve as advisers to designers, helping them develop product designs that are reasonably economical to produce.
Here is an example of retail firm design of products and operations for consumer acceptance The Loft, the first of its kind multi brand footwear store in India, is based in Mumbai. The Loft is a one-stop shop for anyone who is looking for a good pair of footwear. It has found favour with many first time, visitors, thanks to its unique services, intensely trained sales men who understand shoes and customer preferences intimately and all that it takes to give the right footwear to the discerning customer.
Spread over 18,000 sq.ft of space, The Loft stocks almost 100 plus brands, has facilities like pedicure, cobbler, and jogging track. It also boasts of the biggest socks shop which houses a staggering 15,000 pairs of stocks from over ten brands and all price points. The Loft also stocks numerous footwear accessories like, shoe polishes, shoe trees, brushes, shoe cleaners, shoe shiners, insoles, laces, shoe norms, shoe bags etc. In short, The Loft is the destination if one is looking for anything in footwear or foot care. (Source: www.thelofitnindia.cpm ) 
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