Formulating the Operations Strategy

Every enterprise has a strategy.  Not all have an operations strategy. 

A strategy is not a vision nor is it a mission.  A strategy is also not a goal and nor is it an action plan. 

A vision is a desired future state.  Where do we want to be 1 to 5 years from now?

Example:  We want to be a publicly listed corporation that sells a billion dollars of widgets annually. 

A mission is a statement of purpose. What is it that we do or want to do?  What and who for? 

Example:  We sell state-of-the-art widgets for families to use to clean their homes.   

Goals are objectives and targets.  They are accomplishments we aim for on the way to meeting our missions and fulfilling our visions. 

Example:  We will sell a million dollars of widgets in the first year of our business. 

Action plans are the things to do, the steps to achieve goals.  They are defined methods to get something specific done by a certain time by an individual or group. 

Example:  The marketing team will finalise an advertisement proposal for approval by Monday

A strategy is a game plan.  How are we going to do the mission and achieve the vision?  Strategy narrates the how in getting what we want and to where we want to be.  How are we going to make our dreams come true?

When we do a strategy, we outline a methodical plan that considers challenges and realities.  As visions describe our dreams, strategies bring us back down to Earth. 

A strategy is the path we take to reach milestones and achieve our goals on the way towards fulfilling our vision, mission, and ultimate objectives.  Milestones are the points on the strategic path that tell us how far we’ve reached towards our vision, our destination.  Goals are what we aim to achieve or attain at every milestone we reach. 

Selling a million cases of product, for example, is a milestone.  Selling a million cases of product at 10% profit margin is a goal.  The next milestone could be selling two (2) million cases.  Selling two (2) million cases at a 12% profit margin one (1) year from the first milestone could be the succeeding goal. 

We can reach a milestone but don’t meet a goal.  If we sold a million cases at 5% profit margin, instead of the targeted 10%, we didn’t meet the goal.  We’d have to do better before the next milestone and goal of two (2) million cases at 12% margin.  If we believe it’s too hard, we’d have to revise our strategy. 

We formulate overall strategies that cover functions such as marketing, finance, operations, and people—the four basic (4) pillars of management.  Aside from these, we may have strategies for research & development, engineering, sustainability, and governance. 

For those of us who are entrepreneurs, we tend to break into our markets by first and foremost developing marketing strategies.  Naturally, this is because we want to seize market share and grow sales quickly as we start up our businesses.  Strategies for finance and people would follow as we accumulate wealth and grow our organisations. 

What often is last on our list in strategic planning is operations.  Sometimes, we don’t even form one.

Operations consists of those activities that fulfil demand.  Whereas marketing works toward creating or generating demand, the operations function is about fulfilling it.  Fulfilment happens when the segment of the trade the enterprise serves expresses satisfaction and an ongoing preference for its products and services. 

The operations strategy is not a mere offshoot of an overall strategy.  It is not subordinate to marketing or the other pillars of the business. It’s a key component in which without it, the strategy becomes incomplete and meaningless. 

Some of us treat operations as subservient to sales, finance, marketing, and research & development.  This is specifically typical when we sell in competitive markets such as consumer goods, insurance, and banking.  But it can also be prevalent in industries which are heavy in operations. 

An energy generation corporation, for example, emphasised financial performance even though it was heavily invested in operations to source fuel and generate electrical power.  Management’s mandate for operations was to scrimp on expenses to maximise profits.  The corporation’s purchasing department, therefore, favoured cheap supplies and parts which resulted in frequent equipment breakdowns. 

A conglomerate that manufactures an assortment of appliances, industrial equipment, and elevators had detailed strategies in selling and marketing but very little in demand fulfilment.  The company mandated lower costs in its operations but neglected action on inventory management and customer orders processing.  To this day, it has a warehouse full of non-moving equipment & parts that have become obsolete and ripe for scrapping. 

An absence of an operations strategy causes the enterprise to react to demand, not plan for it.  It’s one thing to market products & services and attract customers; it’s another thing to serve them. 

The method to make an operations strategy does not differ from that of formulating an enterprise’s overall strategy or those for marketing, finance, and people.  The operations strategy narrates how we will fulfil demand consistent with the provisions of the overall strategy. 

For most products and services, a supply chain strategy is the best model for an operations strategy.  Supply chains encompass all the activities from the procurement of raw materials at their origin to the deliveries of products & services to end-users. They cover all enterprises, from vendors, manufacturers, traders, retailers, to delivery services.  A supply chain strategy considers all parties and thus consists of not only how we manage our internal operations but also how we collaborate with those that we transact with. 

Operations strategies vary per the products and services of different enterprises in different industries, and to the manner of marketing each enterprise undertakes.

An operations strategy of a multinational consumer goods corporation, for instance, may focus on a build-to-stock strategy, in which operations gear towards buying materials and mass-producing & distributing products to build inventories that ensure items will always be available. 

On the other hand, a small upstart enterprise may resort to same-day deliveries of food and non-food items via customers ordering through an e-commerce portal or smartphone app.  The upstart enterprise would procure goods that match demand to save on working capital and conserve cash.  The upstart enterprise would compete with established multinationals via price and speed of delivery. 

An important facet of the operations strategy is its comprehensiveness.  The operations strategy is effective only as far as its coverage.  Leave an activity out and the operations strategy would be deemed incomplete and in risk of failure. 

For example, a dental laboratory has an operations strategy that stresses product quality excellence.  The laboratory’s organisation from the technicians who painstakingly assembled dental products to the general manager who personally inspected and approves every finished product for shipment made sure that every item delivered will meet customer specifications.  The laboratory’s strategy, however, failed to factor in maintenance of its facilities.  Air-conditioning and machines broke down and caused downtime and delays in operations.  As much as the laboratory made excellent quality products, it suffered cost overruns in repairs. 

The operations strategy lays the foundation for policies and procedures in the demand fulfilment activities of the enterprise.  Policies in inventories, customer services, and quality assurances stem from the operations strategy.  They provide guidelines for operations professionals in their day-to-day decision-making.

The absence of a clear comprehensive operations strategy practically explains why our supply chains get messed up whenever there are disruptions.  An operations strategy is after all a plan for progress in anticipation of challenges.  Many of us have lost a lot of money because we didn’t develop operations strategies. 

Every enterprise has a strategy.  Strategies are methodical plans that answer how we will execute our mission, accomplish its objectives, and realise our vision.  

Operations strategies differ from enterprise to enterprise, industry to industry.  They rank just as important as those for marketing, finance, and people. 

We cannot have a strategy without provisions for operations.  An operations strategy at least should mention how activities to fulfil demand will be structured, developed, supported, and executed. 

When we make an operations strategy, it is highly recommended we consider the supply chain operations we oversee and relate with. 

It should encompass everything that directly involves the fulfilment of demand. 

About Ellery’s Essays

Published by Ellery

Since I started blogging in 2019, I've written personal insights about supply chains, operations management, & industrial engineering. I have also delved in topics that cover how we deal with people, property, and service providers. My mission is to boost productivity via offering solutions and ideas. If you like what I write or disagree with what I say, feel free to like, dislike, comment, or if you have a lengthy discourse, email me at ; I'm also on LinkedIn:

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