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Managing Trade-Offs and Compromises in Operations Strategy

Explore the concept of trade-offs and compromises in operations strategy, discussing key terminology, decision-making processes, and practical examples. Learn how to navigate conflicting priorities to achieve strategic objectives effectively.

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Managing Trade-Offs and Compromises in Operations Strategy

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  1. Compromise ManagementStrategic Trade-Offs in Operations Management Michel Leseure School of Business Administration Al Akhawayn University, Ifrane, Morocco

  2. Introduction & Key Terminology • Operations management: the design and operations of productive systems • Operations strategy: all long-term decisions related to the nature of investment in productive systems (capacity, facilities, equipment, staffing, etc.) • Four key generic strategies: cost, quality, flexibility, and speed/time

  3. Trade-offs and Compromise • Trading-off means to balance two situations against each other in order to get an acceptable result • A compromise is an agreement between two people or groups in which both sides agree to accept less than they first asked for and to give up something they value

  4. Trade-offs in Operations Strategy • When making decisions relative to operations strategy: • Decisions makers have to reach a compromise • Example: cost vs. quality • Double trouble: • 1 – How should we trade-off one strategic performance dimension for another? • 2- How do we agree on this trade-off, i.e. reach a compromise?

  5. Example

  6. Why Care About Trade-Offs? • Trade-offs decisions are central to operations strategy • Trade-offs are a form of common knowledge: • Embedded in systems and practices • Encultured • Contingent • Trade-offs are important: • To discuss and agree on strategic alternatives • To implement strategic decision in operational systems

  7. Trade-offs in Operations Strategy • Dealt with qualitatively • Controversy regarding their existence • Primarily a UK-based academic debate • Traditionalists vs. new fundamentalists • Case study based research led by Nigel Slack • The marginal rate of substitution is never quantified • Different trade-offs are considered simultaneously

  8. Resolving the Conflict

  9. Hurdles to Applying Quantitative Techniques • Cost • Time • Contextual sensitivity of trade-offs • Time sensitivity of trade-offs • Connectivity of trade-offs • Implicit, latent nature of some trade-offs Trade-offs decision require managerial insight

  10. Example • Case study • Experiment in TBC competition • Experiment was a success in terms of competing for speed • But a total failure quality wise • Broke a latent, unspoken trade-off: • Always prefer quality to leadtime • Use configuration tables to represent and discuss an issue

  11. Configuration Table

  12. Configuration Table

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