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	Once a business strategy has been developed, an organization strategy must be formulated.
	This will provide a plan for the design and management of the operations function in ways that support the business strategy.
	The operations strategy relates the business strategy to the operations function.
	The operations strategy focuses on specific capabilities of the operation that give the company a competitive edge.
	These capabilities are called competitive priorities.
	By excelling in one of these capabilities, a company can become a winner in its market.
	These competitive priorities and their relationship to the design of the operations function are shown in Figure 5-1.

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Each part of this figure is discussed next.

Figure 5.1: Operations strategy and the design of the operations function

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Competitive priorities

Operations managers must work closely with marketing in order to understand the competitive situation in the company's market before they can determine which competitive priorities are important. There are four broad categories of competitive priorities:

Cost:

			Competing based on cost means offering a product at a low price relative to the prices of competing products.
			The need for this type of competition emerges from the business strategy is to develop a plan for the use of resources to support this type of completion.
			Note that a low-cost strategy can result in a higher profit margin, even at a competitive price.
			Also, low cost does not imply low quality.
			Let's look at some specific characteristics of the operations function we might find in a company competing on cost.
			To develop this competitive priority, the operations function must focus primarily on cutting costs in the system, such as costs of labor, materials, and facilities.

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			Companies that compete based on cost study their operations system carefully to eliminate all waste.
			They might offer extra training to employees to maximize their productivity and minimize scrap.
			Also, they might invest in automation in order to increase productivity.
			Generally, companies that compete based on cost offer a narrow range of products and products features, allow for little customization, and have an operations process that is designed to be as efficient as possible.

Quality:

			Many companies claim that quality is their top priority, and many customers say that they look for quality in the products they buy.
			Yet quality has a subjective meaning; it depends on who is defining it, as we discussed in Topic 3.
			Quality as a competitive priority has two dimensions.
			The first is high-performance design.
			This means that the operations function will be designed to focus on aspects of quality such as superior features, close tolerances, high durability, and excellent customer service.

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			The second dimension is goods and services consistency, which measures how often the goods or services meet the exact design specifications.
			Companies that compete on quality must deliver not only high-performance design but goods and services consistency as well.
			A company that competes on this dimension needs to implement quality in every area of the organization.
			One of the first aspects that needs to be addressed is product design quality, which involves making sure the product meets the requirements of the customer.
			A second aspect is process quality, which deals with designing a process to produce error-free products.
			This includes focusing on equipment, workers, materials, and every other aspect of the operation to make sure it works the way it is supposed to.
			Companies that compete based on quality have to address both of these issues: the product must be designed to meet customer needs, and the process must produce the product exactly as it is designed.

Time:

			Time or speed is one of the most important competitive priorities today.
			Companies in all industries are competing to deliver high-quality products in as short a time as possible.

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			Today's customers don't want to wait, and companies that can meet their need for fast service are becoming leaders in their industries.
			Making time a competitive priority means competing based on all time-related issues, such as rapid delivery and on-time delivery.
			Rapid delivery refers to how quickly an order is received; on-time delivery refers to how often deliveries are made on time.
			Another time-competitive priority is development speed, which is the time needed to take an idea to the market this is especially critical in technology and computer software fields.
			When time is a competitive priority, the job of the operations function is to critically analyze the system and combine or eliminate processes in order to save time.
			Often companies use technology to speed up processes, rely on a flexible workforce to meet demand periods, and eliminate unnecessary steps in the production process.

Flexibility:

			As a company's environment changes rapidly, including customer needs and expectations, the ability to readily accommodate these changes can be a winning strategy.
			This is flexibility. There are two dimensions of flexibility.

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			One is the ability to offer a wide variety of goods or services and customize them to the unique needs of clients.
			This is called product flexibility.
			A flexible system can quickly add new products that mat be important to customers or easily drop a product that is not doing well.
			Another aspect of flexibility is the ability to rapidly increase or decrease the amount produced in order to accommodate changes in the demand.
			This is called volume flexibility.
			Companies that compete based on flexibility often cannot compete based on sped because it generally requires more time to customized products.
			Also, flexible companies typically do not compete based on cost because it may take more resources to customize the product.
			However, flexible companies often offer greater customer service and can meet unique customer requirements.

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			To carry out this strategy, flexible companies tend to have more general-purpose equipment that can be used to make many different kinds of products.
			Also, workers in flexible companies tend to have higher skill levels and can often perform many different tasks in order to meet customer needs.

The need for trade-offs

	You may be wondering why the operations function needs to give focus to some priorities but not all.
	Aren't all the priorities important?
	As more resources are dedicated to one priority, fewer resources are left for others.
	The operations function must place emphasis on those priorities that directly support the business strategy.
	Therefore, it needs to make trade-offs between the different priorities.
	For example, consider a company that competes on using the highest quality component parts in its products.
	Due to the high quality of parts, the company may not be able to offer the final product at the lowest price.

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	In this case, the company has made a trade-off between quality and price.
	Similarly, a company that competes on making each product individually based on customer specifications will likely not be able to compete on speed.
	Here, the trade-off has been made between flexibility and speed.
	It is important to know that every business must achieve a basic level of each of the priorities, even though its primary focus is only on some.
	For example, even though a company is not competing on low price, it still cannot offer its products at such a high price that customers would not want to pay for them.
	Similarly, even though a company is not competing on time, it still has to produce within a reasonable amount of tome; otherwise, customers will not be willing to wait for it.
	One way that large facilities with multiple products can address the issue of trade-offs is using the concept of plant-within-plant (PWP).
	The PWP concept suggests that different areas of a facility be dedicated to different products with different competitive priorities.
	These areas should be physically separated from one another and should even have their own separate workforce.

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As the term suggests, there are multiple plants within one plant, allowing a company to produce different products that compete on different priorities.

Translating competitive priorities into production requirements

	Operations strategy makes the needs of the business strategy specific to the operations function by focusing on the right competitive priorities.
	Once the competitive priorities have been identified, a plan is developed to support those priorities.
	The operations strategy will specify the design and use of the organization's resources; that is, it will set forth specific operations requirements.
	These can be broken down into two categories.

		Structure – Operations decisions related of the production process, such as characteristics of facilities used, selection of appropriate technology, and flow of goods and services through the facility.
		Infrastructure - Operations decisions related to the planning and control systems of the operation, such as organization of the operations function, skills and pay of workers, and quality control approaches.

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	Together, the structure and infrastructure of the production process determine the nature of the company's operations function.
	The structure and infrastructure of the production process must be aligned to enable the company to pursue its long-term plan.
	Suppose we determined that time or speed of delivery is the order winner in the marketplace and the competitive priority we need to focus on.
	We would then design the production process to promote speedy product delivery.
	This might mean having a system that does not necessarily produce the product at the absolutely lowest cost, possibly because we need costlier or extra equipment to help us focus on speed.
	The important thing is that every aspect of production of a product or delivery of a service needs to focus on supporting the competitive priority.
	However, we cannot neglect the other competitive priorities. A certain level of order qualifiers must be achieved just to remain in the market. The issue is not one of focusing one priority to the exclusion of the others. Rather, it is a matter of degree.
	So, we need here to discuss several main points: types of operating processes, process planning, process analysis, process innovation, and customer focused process, technology decisions, and capacity decisions.

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