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Operations Management

Putting The Pieces Together

Typically an organization will commit over 80% of its human and financial assets to operations. The organization that understands how operations can deliver competitive advantage will be able to gain market share and increase profit. Operations can become a weapon. In the past operations management has been less than scientific - more organic with isolated decision making - leading to internal conflicts. These conflicts allow the competition to win. To turn your operations into a coherent competitive business you need a holistic approach towards operations management. Aligning the operations strategy with the competitive priorities for your business is vital.

What Are Your Competitive Priorities?

The world of business revolves around nine primary competitive priorities: - Low cost operations, Top quality, Consistent quality, Delivery speed, On-time delivery, Development speed, Customization, Variety and Volume flexibility.

Whilst all businesses, service and manufacturing, may need to consider all of the 9 competitive priorities it is only one or two that will deliver a competitive advantage. For example consider insurance companies - they all aim to have low cost operations, all aim to deliver consistent quality in their claims processes, all aim to allow the customer to establish an insurance policy quickly etc etc, however the leading companies have created an operation that is the lowest cost operation possible, that can deliver policies and claims at the highest speed. The insurance companies that have planned a business wide operations strategy around low cost operations and delivery speed have the largest market share.

Understanding which competitive priorities can deliver success for your business is the first step in transforming a sluggish or under performing business into a leading light. If you would like help with understanding your competitive priorities and how to assess if your business is capable of delivering them contact me right now.

Costco - an example of operations strategy successfully aligned to competitive priorities Costco is a wholesale club with some 300 stores generating $31 billion in sales and $542 million annual profits. Their closest competitor is Wal-mart's Sam's Club which has 200 more stores, but generates $1 billion less in annual revenue.

Ignore Operations At Your Peril "Need to boost performance? Just innovate the way your organization handles operations. That's right, operations. Companies that create new ways of doing work--think Dell with its direct business model--can trounce competitors and even change their whole industry. That's because time, cost, and customer satisfaction all get major boosts from operational innovations. To make operations a strategic weapon for your company: 1) Convince your managers of its untapped potential and bake an innovative mind-set into your corporate culture; 2) streamline your core internal processes--combining related activities from separate units and cutting ones that don't add value--and then build management structures to support those activities; and 3) rigorously coordinate processes with your suppliers and customers to eliminate wasteful duplication of work." Source Harvard Business Review April 2004

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