Why flexibility is critical when planning an operations strategy

Operational excellence can only be achieved if a robust operations strategy is in place – a strategy that truly integrates an organization’s people, processes and systems. One of the more difficult aspects is how to plan for flexibility. Better responsiveness enables both savings and sales opportunities.

Under ideal conditions, developing an efficient operations strategy would be relatively easy. However, in the real world, operations managers and business owners face many challenges, including the need to plan for different flexibility aspects and options. Typically, operations frameworks fail to sufficiently address the challenges that arise when creating an operations strategy.
One major challenge that operations managers need to deal with when developing an operations strategy is balancing cost, quality and time. A typical operational framework requires operating costs to be kept as low as possible, or at least on a par with, or lower than, those of its competitors. However, operations managers must simultaneously ensure that quality standards remain high and at a consistent level, and that delivery and development speeds are also at optimum levels.

What about Flexibility?

Operations managers should, to a much greater extent, include flexibility as a key component when developing their operations and manufacturing strategies. Flexibility is costly, but allows a business to respond effectively and efficiently to fluctuations from the norm. In fact, many studies have shown the beneficial impact an operations strategy can have on performance, provided flexibility is included in the strategy.

Most managers consider flexibility to be a complex process. This is because of the lack of generally accepted definitions and concepts relating to operational flexibility. However, in the context of developing an operations strategy, flexibility refers to certain key elements. These may include:

– Flexibility in coping with incoming materials of varying quality levels
– Flexibility in satisfying the market demand for products of varying quality levels
– Flexibility in competing against new products introduced by competitors
– Flexibility in modifying existing products
– Flexibility in changing delivery and development schedules
– Flexibility in accepting demand volumes of varying levels
– Flexibility in making changes to the product mix
– Flexibility in coping with changes to the resource mix

In my opinion, technology and costs sometimes play too large a part in the overall strategy, especially because they fail to sufficiently emphasize the value of superior outsourcing partners, flexibility in external operations, and the mission to cut overall lead times.

For example, one leading company looked at end-customer behavior to better understand the impact of the demand pattern on the supply chain. Another company in Finland measured their “micro-flexibility”, i.e. how rapidly their manufacturing process responded in real-time when a truck arrived late, a machine went off-line, or an unexpected order came in. This has created real savings and extra sales for the company.

The above-mentioned challenges can easily be overcome. With the right tools and methodologies, realistic planning and smart people, any organization can improve their operational flexibility.

Berndt Wickholm is a director in KPMG’s Global Strategy Group enhancing performance in Strategic and Operational areas in a wide array of industries. He has 18 years of international experience in Strategy execution and supply-chain consulting. Offline, Berndt is a foodie, spending time in the kitchen and balancing with a bit of snowboarding and golf.

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