MNC Consulting Group Newsletter
July 2015
Strategic Competitiveness

 

Every leader knows that strategy is important and, especially, that operations strategy is critical to an organization's success. Operations strategy allows an organization to better position itself in the marketplace by focusing on competitive priorities.

 

These "priorities" include cost, quality, delivery and flexibility. To be competitive, a company must be able to position itself on at least one of these competitive measures.

 

If a company competes on cost, its focus is on keeping its unit costs of production low. This may also include such things as ensuring a high inventory turnover and high labour productivity. In short, because the company is able to keep its operations costs low, it is able to pass on savings to the consumer. These savings are in the form of low prices. For example, big box stores are competing on cost in the marketplace - Walmart, Costco, and Superstore, among others.

 

A company competing on quality aims for a low percentage of defective products (both produced and returned) and appropriate costs of quality. For instance, both internal and external failure costs are kept low (the goal is elimination of both), while appropriate expenditures are incurred for appraisal and prevention costs. To produce high quality products or services, companies must ensure that they are undertaking appropriate inspections with preventive measures in place to eliminate defects. Examples of companies competing on quality include Lexus and Toyota.

 

Companies that compete on delivery are able to get their product or service to the customer within the time promised. Think FedEx or Domino's Pizza. Another aspect of on-time delivery is "lead time." How long is customer waiting time from when order is placed until receipt/delivery? The shorter the lead time; the happier the customer. And the more competitive the organization.

 

Flexible organizations also hold a strategic advantage. They are able to respond quickly to requests for product or quantity changes. For instance, Dell Computers is a company that is very flexible to product variety fluctuations - it is able to deliver customized product to its customers very quickly and because of this, they hold a strategic advantage in relation to flexibility in the marketplace.

 

If your organization is competitive, it has found its niche in at least one of these market advantages. If it is thriving, it is efficiently executing its competitive advantage. 

The Operations Link

 

Whether you are in the business of selling products or services, the business of selling requires an effective operations strategy. Such a strategy enables action plans to boost your sales.

 

When determining your organization's best operations strategy, here are six considerations that you need to include:

 

  1. Identify your major customers. These are customers with whom your company has an established relationship or with whom your company wishes to form a business relationship. These customers need personal attention because they likely comprise the biggest amount of your annual sales. Other customers likely do not need as much of your attention, but they are also important. For each category of customer, determine what competitive priority is important and emphasize that priority for each customer group. For instance, do your major customers buy from you because of your low cost, quality products/services, fast delivery, or customized services?  
  2. Does your company offer more than one product or service? If so, then classify your products/services into lines of either low or high volume. Knowing the volume of your products/services helps you determine what types of facilities you need, how much capacity you need to handle production, whether flexibility is important, what type of technology is required to manage the volumes, the type of process to use, and so on. All of these determinants will add cost to your company's products/services, but they are important for operations competitiveness.  
  3. Determine your company's strengths and weaknesses. Do this not only for your existing operations strategy, but also for your current line of products and services. What products/services do your customers choose most often? Why? Knowing the answer to these and similar questions will help you hone your company's strategy for maximum sales and profit potential. 
  4. Evaluate how your company is producing its products/services. Do you have the correct "mix" of process to product? For example, if your company is producing high-end customized yachts in very low volume, then an assembly line is not an efficient or productive process type - consider switching to a job shop model. 
  5. For each product or service line you wish to offer to customers, develop its operations strategy. This should include objectives, policies, and action plans for each of the decision categories that affect your operations - for instance, how to focus each of your production facilities, capacity planning, type of vendor relations, human resources, etc. 
  6. Deploy your policies and action plans. 

Having a good operations strategy in hand will help your organization achieve a profitable operation - but only if you successfully deploy. Also, conduct regular audits of your operations strategy to ensure that your deployment continues to match your plan.

In My Humble Opinion (IMHO)
I'm vacationing in Croatia - a democratic country in the making for almost 25 years now and part of the EU for the past two. What I've noticed most about the "systems" here is that they are heavy in lip service. The old communist mentality and way of doing business is still alive and well in Croatia's government institutions - at all levels (sadly, I've also witnessed heavy bureaucracy even in private shops). Their idea of providing good customer service is to open the door for you and then make you wait in hallways for hours (standing room only). When you finally do get to speak to the person in charge, you are told that they don't do that here, you have to go there. So you go there. But there they tell you that you need to go here to get the information and then come back there to finish up the work. In the old days, communism frustrated people "on purpose" to the point that people gave up - citizens simply stopped trying to improve things. Sadly, these leftover systems are still inhibiting investment and growth. Instead of having a population influx, Croatia continues to experience an outflow - especially of its educated young. At what point of collapse do institutions and countries start to realize the importance of customer service in its operations? IMHO.
 

"The only thing that saves us from the bureaucracy is inefficiency. An efficient bureaucracy is the greatest threat to liberty."

- Eugene McCarthy

 

About MNC Consulting Group
Our goal is to help you to dramatically increase efficiencies that immediately boost your profit margins.

 

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