Page 247 - DCOM506_DMGT502_STRATEGIC_MANAGEMENT

Unit 13: Functional and Operational Implementation

Within the broad framework of corporate and business strategies, production strategy helps in Notes
maintaining full co-ordination with marketing and engineering functions to formulate plans to
improve products and services. It calls upon management to keep in constant touch with finance
and personnel to achieve the optimal use of assets, cost control, recruitment of suitable personnel
and management of labour disputes and negotiations.
13.3.2 Components of Operational Plan and Policies

The different components of a production strategy should ideally consist of the following:

Product Mix

A firm should decide about the product mix (how many and what kind of products to be
produced) keeping in view Objectives such as productivity, cost efficiency, Quality, reliability,
flexibility etc.
Capacity Planning

Capacity Planning is the process of forecasting demand and deciding what Resources will be
required to meet that demand. Meclain and Thomas suggested that capacity Planning involves
the following five sequential steps.
1. Predict future demand and competitive reactions: The firm should forecast the demand
for various products/services as also estimate customer reaction to the products offered
by it. It should also take care of potential countermoves by competitors.
2. Translate above estimates into capacity needs: Based on forecasts, the firm must decide
the quantity that can be manufactured keeping input limitations, such as plant equipment,
manpower etc in mind.
3. Create alternative capacity plans: Depending on what the market might absorb and what
the organisation can produce, management should create alternative capacity plans for
various products/services that are offered to customers.
4. Evaluate each alternative: The firm should identify the opportunities and Threats associated
with each alternative, and carefully evaluate in terms of additional costs involved, payoffs
etc.
5. Select and implement a particular capacity plan: The capacity plan that best serves
organisational Objectives should be selected and implemented.
One of the most vital decisions which has to be made regarding production capacity is whether
the company should build so much capacity to satisfy all demand during peak periods and keep
the production facilities idle during lean periods.

There are some organisations that prefer to build smaller capacity to take care of normal
requirements and meet peak demand by way of imports or subcontracting. Some organisations
employ measures such as off-peak discounts, mail early campaign, etc. to induce customers to
avoid peak periods.

Technology and Facilities Planning

Choosing Machines and Equipments

A strategic decision to be made by a production manager is what type of equipments the
organisation will require for production purposes, how much it will cost, what will be its
operating cost and what services it will render to the organisation and for how long.

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