7OUTSOURCE

Operations strategy is the total pattern of decisions, which set the role, objectives, and activities of the operations so that they contribute to and support the organisation’s business strategy.

In the light of the foreign statement, analyse the relationship between business strategy and operations strategy and discuss the impact of effective operations strategy on the attainment of strategic objectives. Support your analysis with relevant models, concepts, examples and authorities on operations management.

Introduction

Any organizations have operations; the core factor in an organization, the skills and techniques of operations management can be applied in different diverse businesses, authorities, institutions and other sectors. This means that the skills learnt in one sector can be applicable in others, as well, that is why operations and logistics management is an important study.

Operation means actions/ activities that are done to transform inputs into goods and services. The definition of operations management according to Naylor (1996) is creating, operating and controlling a transformation system, which takes inputs of a variety of resources and produces outputs of goods and services, which are needed by customers.

INPUTS

Money/ capital
Time
Materials
Human resources
Technology
Information
Equipment

TRANSFORMATION PROCESS

OUTPUT

Goods
Sservices

To improve the actions and activities, it’s essential that firm has good business strategy and operational strategy.

Strategy

“A strategy is a long-term plan of action designed to achieve a particular goal”

“A strategy is a description of the manner in which a company or enterprise intends to gain a competitive advantage”

Business strategy

“A business strategy describes: the business direction for the future in terms of a vision, strategic themes and a portfolio of planned changes to which every programme and project contributes.”

“Business strategy is the sets of various plans to gain a specific success in business in a specific period with specific expanses”

You must be able to think strategically about your organisation’s business direction and future plans. If there is no business strategy, you will be at risk of:

• Lack of ownership by the business of its programmes of change
• Missed opportunities to exploit new ways of working for business benefit
• Lack of coherence in HR planning
• Lack of coherence in investment in workplace, infrastructure and IS-related projects
• Inability to share assets, information and electronic service delivery with others
• Inflexibility when faced with changes in the business and its environment.

In today’s business environment, there will be periods of major change, often change that cannot be forecast; thus your approach to strategic thinking must produce robust results to cope with uncertainty. The business strategy helps to ensure that plans for investment in business change (including IS/IT and workspace) are integrated with the business strategy and support the business, whatever the changes ahead. It provides clarity of purpose, common understanding and a framework for detailed planning; it gives the organization a focus on the strategic developments it should be pursuing and a view of the future towards which it is moving.

Operations strategy

“Operations strategy is the total pattern of decisions, which set the role, objectives, and activities of the operations so that they contribute to and support the organisation’s business strategy”

“Operations Strategy is concerned with setting broad policies and plans for using the resources of the firm to best support the firm’s long-term competitive strategy.”

“The strategic directions and development of the resources and processes which produce and deliver products and services to customers is called operation strategy”

Operations strategy has emerged as an important area for managers in service organizations. The impetus for this phenomenon can be traced back to the focus on quality and the fact that services no longer form the tertiary sector of the economy. In fact, services play an increasingly significant role in the economy and for company with their contribution rate surpassing even that of manufacturing sector. In this context, managers in service organizations face a tremendous challenge in terms of raising customer satisfaction in services to the same levels attained by manufacturers, or possibly outshine them.

• Operations Strategy mainly deals with the manufacturing operations, and should fit into the corporate strategy.
• Operations Strategy involves decisions that relate to the design of a process. This strategy should be flexible enough to change with the future needs of the firm.

Operations Priorities

These priorities include: cost, product quality and reliability (product and process quality), delivery speed, delivery reliability, coping with changes in demand, flexibility and new product introduction speed, and other criteria particular to a given product.

Cost - Customer focuses on price.

Product Quality and Reliability - There are two components of this:

Product quality - quality of product depends on who the customer is

Process quality - relates directly to the reliability of the product.

Delivery Speed - Timelines of deliveries are critical for customers (Example: Jacuzzi tubs)

Delivery Reliability - Relates to firm’s ability to supply the product or Service on or before a promised delivery due date.

Changes in Demand - With high demand, cost is reduced. With low demand, cost goes up.

Flexibility and New Product Intro. Speed - Refers to a company’s ability  to offer a wide variety of products to its customers.

Other Criteria
- Technical Support
- Meeting Launch Date
- Support from Supplier After-Sale Date.

How operations strategy helps to develop business strategy

You must play an active role in the identification of strategic issues, and in confirming that the business strategy adequately addresses the issues facing the organisation. The way we decide how we are going to achieve specific target and the various ways of doing various thing are distinct thing which are very important for the success of business strategy.

You will need to deploy ’strategic thinking’ to answer these questions effectively. The characteristics of strategic thinking can be summarized as:

• an ability to see the ‘whole picture’ – looking across all parts of the organisation and its business, and its relationships with others; understanding the connections between them, both now and in various possible futures

• creativity – thinking outside existing boundaries and constraints; identifying and questioning the assumptions upon which the existing business organisation and operations are based

• Scenario generation and evaluation – consideration of many possible futures for the organisation, through formulation and responses to ‘What if?’questions

• ability to deal with ambiguity and uncertainty

• Identification of strategic issues – the strategy will be driven by your perception of the challenges and opportunities facing the organisation (the issues), and your strategic response to them (the strategic themes).

The business strategy – the agenda for change – should be kept under regular review, and updated when necessary. In identifying the strategic themes for the strategy, you should be aware of the risks involved

Processes (Strategy cycle)

The strategy cycle is made up of the following stages:

• Preparation: planning and scoping

• strategy study or strategy review: radical thinking; identification of strategic themes and strategy definition

• high-level planning: identifying candidates for action

• Programmes of business change

• continuous strategic management: regular review of the strategic themes (with a direct link across the cycle to changes in high-level plans)

• continuous strategic management: regular review of the strategic themes (with a direct link across the cycle to changes in high-level plans

Stages of the strategy study

Stage
• Preparation
• Information gathering

Activities
• Boundaries – what is in and what is out? Single business area,
• Whole organisation, infrastructure?
• Scope – what topics?
• Study plan development
• Validate Terms of Reference
• Look at: documented information, including previous strategies, business aims and objectives, existing tactical plans and contracts;
• What people say in interviews, focus groups etc.; current initiatives;
• Perceptions of where the organisation is now
• Carry out business analysis
• Assess current workspace, information, organisation/management and policies and strategies
• Identify strategic issues – what must the business address?

Products
• Boundaries: organisational view of strategy
• Initial view of scope: topics to be addressed in strategy
• Initial view of business environment
• Preliminary interview list
• Outline study plan
• Validated TORs.
• Business drivers, priorities
• Strategic issues
• Models of the business
• Information about processes
• Assessments of current position, risks and scope for change
• Assumptions and the business scope

Comments
• Essential to have thorough planning – successful outcome of study depends on this
• Focus on where to find information, who to tell, who to confirm
• What is possible?
• Strategic thinking about the scope for change, following
• information gathering and analysis: early thinking about strategic issues, opportunities, collaboration with others, partnerships etc.

Example of one Restructured company which changed its structure and management to gain more profit and customers

Telergos, a remote word processing agency in northern England

Teleworking, according to the hoary old media stereotype, was going to be all about shifting work out from the cities to remote and beautiful areas of the countryside. Forget London, (the story went), get your modem plugged in, and do the work remotely - say, from one of those small northern market towns up on the edge of the Pennines.

As we now know, this vision of the future of work has turned out to be rather too simplistic, and the growth of telework hasn’t been accompanied by a mass migration to the hills. But the example of the remote office services company Telergos, which is indeed to be found in a small town in the north Pennines, shows that the old ideas about teleworking are not entirely unfounded. The headline, in fact, writes itself: Goodbye Elephant & Castle, hello Barnard Castle.

Telergos (the name comes from a conflation of the Greek words for distance and work) operates a dictation transcription and word processing service primarily for London-based client companies from one of the most attractive towns in County Durham. The castle which gives Barnard Castle its name is ruined but still a powerful sight on a headland overlooking the Tees, and the town also attracts visitors to the nearby Bowes Museum. But Telergos is up at the top of the town, beyond the tourist shops, in a small unit in a modern estate on the edge of the fields.

This unit is the workplace for Telergos’s fifteen employees (all women), who together make up what effectively amounts to a remote typing pool for the firm’s clients. The letters and documents which need typing arrive at Barnard Castle normally in electronic form, as digital sound files originally recorded on dictation machines supplied by Telergos itself and sent down the wire. These files are then passed to one of the typists to be word processed, with the end result subsequently checked for accuracy by a small proof-reading team before being returned to the client company by e-mail as a word processed file.
Michele Smith, Telergos’s Accounts Manager, says that she does not necessarily expect her clients to outsource all their typing requirements in her direction. “We are used the majority of the time as an alternative to bringing in temps,” she says. “Our hourly rates are very competitive compared with what temps would cost.” However, she adds that one company recently restructured its in-house typing and secretarial support services, so that much more everyday word processing now ends up in Barnard Castle.

Telergos has built up in the six years since it was first established a range of customers, including firms involved in management consultancy and legal services, a number of insurers and property companies as well as a well-known telecoms business. In each case, the word processing is undertaken using the software being used in-house, so Telergos’s workers make use of AmiPro and Word Perfect as well as various versions of Word. Documents are also produced using each company’s own style and design templates, the idea being that they should be indistinguishable from material produced in-house.
“Our clients very rarely come up here, and I think they can’t really picture how it works,” Michele Smith says. Instead, she visits them: “I make regular trips to London, once or twice a month,” she says. Telergos chooses not to issue formal contractual agreements for customers, preferring to operate on a more flexible basis. Each piece of work is timed, and charged at the appropriate proportion of the hourly rate (Telergos operates a standard hourly tariff, which the firm coyly declines to reveal on the grounds of commercial sensitivity. The normal turnaround time is 24 hours. For 50p an hour more, work will be turned around in four hours.)

All this demands careful management of the work process. Although the firm has undertaken out-of-hours work in the past for an American client, it currently operates only during the standard business hours of 9am to 5.30pm. Seven staff is full-time, but Telergos also makes use of part-time workers, mainly to tie in with school commitments for women with younger children. Some part-time staff works from 9am to 3pm, whilst others come in either for the morning (9am-1pm) or afternoon (1pm-5pm) shifts.

Telergos tries to offset what can be very repetitive work. “When people have been here a certain length of time, we tend to allocate them a client to look after. They are responsible, for example, for creating the templates to be used. We also have three full-time people who share responsibility for the technical side of the operation,” Michele Smith says.

The fifteen employees in Barnard Castle are not the only people, however, who can claim to work for Telergos. Across the English Channel, a French sister company bearing the same name also operates a remote tele-secretarial service. In fact the French operation, which began in 1989, provided the model for the Barnard Castle business and the French are part-shareholders in the UK firm.

The story behind this unusual arrangement is told by Ken Kyle, director of the UK Telergos business and the person who was responsible for suggesting to Telergos’s founder that the company look to establish an English branch. “I was doing work in the telecoms consultancy area at the time, around 1991 and 1992, and said to Telergos ‘why don’t we do this in the UK?’,” he says. “So I set up Telergos here, copying the French model, in late 1993.”

The French Telergos was the brainchild of Denis Haulin, a former insurance company managing director who became aware that secretarial services undertaken in Paris could be undertaken more cheaply in rural parts of France. The firm developed a remote word processing service known as Téléscribe, and set up a network of four telecentres, in the Ardennes and Meuse departments. Staff numbers rapidly grew, so that by 1995 Telergos employed 95 people.

Since then, the company has faced a decline in this original core work, and has diversified by offering conference organising and transcription services and claims handling and other back-office work for insurance companies. The firm has also developed networks of home-based workers to complement the telecentres.

With operations in two countries, Telergos would seem an ideal example of the way in which telework internationalises work and removes national barriers. In practice, however, this isn’t quite the way it works. Although Denis Haulin periodically visits Barnard Castle, in day-to-day work there is no direct contact between the two businesses. There is also little sharing of work, though the UK Telergos has once or twice undertaken conference transcription work for the French Telergos where the conference language being used was English. Both arms of the business use the same logo, but neither has yet got round to putting in links to the other on their web sites: www.telergos.co.uk offers the English story.

BOX OUT

Following on Telergos’s experiences in France, the UK Telergos has recently begun experimenting with the use of home-based workers.

“It’s very early days yet. We’re trialling it with a few people locally, who live in the town, and it seems to be going quite well, “says Michele Smith. The home-workers, who operate as self-employed contractors, are required to have their own e-mail facilities, but Telergos makes its own bespoke software available to them to use on their PCs. Typically, the original sound files are forwarded to them and the finished word processed file returned to Telergos also by e-mail, for proof reading.

“We’re trialling home-working with two particular clients, where the work is very straightforward and doesn’t require formatting. We have come to the conclusion that more complex work is more difficult to give to home-workers,” Michele Smith says.

The home-workers came in to Telergos’s unit for two weeks of initial training, before returning to work from home. Michele Smith says that having workers operating from home gives the company more options in how it schedules work and copes with unexpected work peaks. “For example, if at 5 o’clock we get a sudden influx of work, we might be able to use the home-workers to do it overnight,” she says. “It’s not cheaper to use home-workers, but it is more flexible.”