Sustainable Operations Management (SOM): Strategy

Sustainable Operations Management (SOM) concerns the procedures, processes, practices,  and systems through which firms, individually or organized in wider inter-organizational structures, initiate, create, and deliver outputs that are both profitable from a business prospective, using the resources at their disposal while at the same time taking preservation or even improvement of the natural and/or social environment into account.

This builds on the recognition that companies must also take sustainability issues into account in order to ensure long-term success and survival. Thus, in a sustainable business context, strategy and management research builds on more general insights from these disciplines but seeks to apply them in the context of sustainability.

Sustainable operations provide an interesting context for exploring the nature of strategizing further. However, concepts and insights from a sustainability focus may also provide important insights to the strategy and management disciplines. 

Sustainable Operational Strategy

A company’s operations are the core activities that produce and deliver a product or service.  Business operations constitute many processes, such as material acquisition. Manufacturing, inventory management, asset management, delivery, etc. Hence, operational strategy focuses on reducing process costs and improving profits for the entire business.  

Operational strategies revolving around the core business processes, such as production,  supply chain, logistics, etc. Operational strategies also include additional parameters, such as the capacity of production facilities, their location, product lines, procurement, etc. Hence,  one may find several operational strategies within the same company, including product development and customer engagement.

Why is Sustainable Operational Strategy Important?

Operational strategy involves refining and specifying a company’s business strategy and developing strategic initiatives and operational plans, aimed at enabling departments and business units to successfully implement the overall business strategy. 

Sustainable operational strategy involves: 

• Providing management with feedback regarding the overall effectiveness of the corporate and business strategies.
• Performing details operational analysis to identify any omissions, problems, and improvement areas in the overarching strategies.
• Developing SMART (Specific, Measurable, Achievable, Realistic, and Time-bound)  plans to deliver the outcomes, Implementing the action plans, and measuring the results against predefined goals and key performance indicators.

Operational risk management

Sustainable operational strategy is important for: 

• Market Penetration 

This focuses on capturing larger segments of the target customer market. An insurance company might define market penetration success by the number of new automobile policies sold. In this regard, it may also decide to hire additional insurance sales agents, open additional branch offices in new locations, partner with online portals, etc. to gain additional customers. 

• Product Strategy 

An operational strategy around product development aims to develop compelling products and services that resonate with a firm’s customers. This strategy goes beyond developing and delivering new products. For example, Apple releases new products each year, but also provides free updates, patches, and software tools for existing products. This is part of Apple’s product strategy. 

• Customer Engagement Strategy 

Through this strategy, a company aspires to improve an existing system for both new and repeat customers. The better this service process is, the higher the company’s customers are. This is reflected in the high satisfaction ratings the company receives. This, in turn, builds referral and loyalty. For example, a rental car that eliminates long lines at the airport is pursuing a customer engagement strategy. 

• Supply Chain Strategy 

This strategy refers to the process of creating excellence through superior delivery capabilities. One strategy might be reduce product costs through bulk purchases pr production line automation. Another might look at offering product customizations to deliver more customer value.

Techniques for Sustainable Operations Management Strategy

Some of the common techniques used to achieve sustainable operational strategy are:

1. Value Chain Analysis 
2. Benchmarking 
3. Value Proposition Analysis 
4. Activity Based Costing 

Operations strategies drive a company’s operations, the core of any business. It is critical for  a company to compete in the ever-changing market. With an effective and sustainable operational strategy, operations management professionals can optimize the use of resources, processes, and technology.