Section 13 Operations Strategy Concept

Mass Customisation is an extreme form of Operations Strategy. A holistic approach to running a business that has a particular meaning in business schools. Its key idea is that Businesses can improve performance by looking for markets where there is both a new product opportunity AND this product is something they can produce exceptionally well.

The following summary of Operations Strategy is based on material in Lewis and Slack (2002):

Operations Strategy in Pictures

Operations strategy is shown schematically in figure 13.1 below:

Figure 13.1: Operations Strategy.

In the right-hand box you see the Market Requirements. These are summarised by Performance Objectives such as Quality, Speed, Flexibility, Dependability and Cost. Performance Objectives are influenced by which customer needs the product addresses and how they will attract these customers relative to the their competitors.

The left hand box is called Operations Resources. These include the Assets of the firm (such as Software), the Processes of the firm (eg. Payment processing) and the Capabilities of the firm (eg. know-how of staff).

In the centre is Operations Strategy. The process of reconciling the Resources available to the company with the Performance Objectives it has set.

Mass Customisation is extreme because it treats each individual customer as a separate market whose orders are to be handled with a customised set of resources. Traditionally businesses consider the market for a whole product line and adjust their Operations Resources at this less granular level.

Operations Strategy in Practice

In practice, traditional Operations Strategy is much less granular than what Mass Customisation seeks to do. Porter summarised three distinct approaches: The Low Cost, Differentiation and Focus strategies. Each product is categorised into one of three buckets and the Operations Resources adjusted accordingly (see figure 13.2).

Figure 13.2: Porters Three Strategies

Whilst the company will produce its Low Cost products using different technology to its Differentiation products. Each order of the Low Cost product is produced using the same technology, irregardless of the customer need.

References

Lewis, Michael, and Nigel Slack. 2002. Operations Strategy. Prentice-Hall.