Strategic and Tactical Decisions in Operations Management

Study Notes

Manufacturing organizations produce tangible goods that can be stored in inventory before they are needed.
Service organizations produce intangible products that cannot be produced ahead of time and typically have high customer contact.
There is much overlap between manufacturing and service organizations, with most companies providing some service operations as part of their offering.
Managing service operations is of especially high importance because the service sector constitutes a dominant segment of the world economy.
Operations managers have to make decisions for the whole company that are long term in nature.
Long-term decisions that set the direction for the entire organization are called strategic decisions.
They address questions such as: What are the unique features of our product? What market do we plan to compete in?
What do we believe will be the demand for our product?
Short term decisions that focus on specific departments and tasks are called tactical decisions.
Tactical decisions focus on more specific day-to-day issues, such as the quantities and timing of specific resources.
Strategic decisions are made first and determine the direction of tactical decisions, which are made more frequently and routinely.
Therefore, we have to start with strategic decisions and then move on to tactical decisions.
Tactical decisions must be aligned with strategic decisions, because they are the key to the company’s effectiveness in the long run.

Description

Learn about the importance of managing service operations and the distinction between strategic and tactical decisions in the context of manufacturing and service organizations. Understand how strategic decisions set the direction for the entire organization, while tactical decisions focus on specific day-to-day issues.