CASE STUDY [Operations Strategy in Action]
Almost every company seems to be restructuring itself to face the downturn, be it through financial engineering, or by retrenching to core activities. So they sell off foreign subsidiaries (Aviva), recent diversifications (ABB), or in desperate cases almost anything that's worth something and isn't nailed to the floor (Vivendi and Marconi). Oddly, few firms make a thing about going back to the real basics, which is manufacturing or, more accurately, operations. Odd, because competing operationally - making and selling things better and more cheaply than the opposition - is the simplest and best strategy of all. In tough times like these, most other 'strategies' look like sorry substitutes for failing to get the basics right in the first place.
Schefenacker Vision Systems (formerly part of Britax) is a maker of car wing mirrors. Schefenacker has been improving its mirrors for more than 10 years. It can now satisfy the most demanding customers - for example, from its plant in the south of England it delivers a possible 420 permutations of mirror daily direct to Jaguar's assembly line in the Midlands to match each car that comes down the assembly line.
The ability to do this cost-effectively is an entry ticket to lots of international business. Less obviously, the company's virtuosity allows it to design and build better, more sophisticated parts - for instance, with lighting or electronics built in. That allows it to go upmarket, where margins are wider. At the same time, as with Dell, it also gives it the possibility of expanding up and down the value chain. Thanks to relentless emphasis on doing more with less .. . Schefenacker has freed up space on the factory floor for five new production cells. It uses these to manufacture simple O www.wileyopenpage.com parts which it had previously outsourced to others. Strategic result: Schefenacker no longer pays the other guy's profit margin, spreads overheads across a larger base, and can suck waste out of a larger section of the supply chain. Manufacturing director Mickey Love says: 'Lean production gives you an opportunity to make things that you can sell to customers you didn't have before.'
Of all the advantages of operations excellence as a strategy, its impact on people is the most momentous. In firms that take this route, improvement of every aspect of design, manufacture, distribution, delivery and service is by definition strategic. Better product quality or a day sliced off delivery lead time is a strategic, not tactical, move. That means improvement is part of the day job for every individual; which also means 100 per cent participation, with no choice.
The secret is that operating excellence makes strategy easy. As Richard Schonberger, one of the original proselytizers for lean manufacturing, said: 'What makes a great team is the basics. Then almost anything the coach chooses to do makes the coach look like a shrewd strategist.'
1. Read the article and discuss how operations can provide strategic advantage to this organisation.
2. Discuss the performance of the company in terms of the five performance objectives and the relationship among these performance objectives.
3. Discuss a suitable operations strategy approach for these kinds of organisations.