Chapter 2
Operations and Supply Strategy
OBJECTIVES
Operations and Supply Strategy
Competitive Dimensions
Order Qualifiers and Winners Strategy Design Process A Framework for Manufacturing Strategy Service Strategy Capacity Capabilities Productivity Measures
What is Operations and Supply Strategy?
Operations and supply strategy is concerned with setting broad policies and plan for using the resources of a firm to best support its long-term competitive strategy.
Operations Strategy
Strategy Process
Customer Needs
Example
More Product
Corporate Strategy
Increase Org. Size
Operations Strategy
Increase Production Capacity
Decisions on Processes and Infrastructure
Build New Factory
Competitive Dimensions
Cost or Price
Make the Product or Deliver the Service Cheap
Quality
Make a Great Product or Deliver a Great Service
Delivery Speed
Make the Product or Deliver the Service Quickly
Delivery Reliability
Deliver It When Promised
Coping with Changes in Demand
Change Its Volume
Flexibility and New Product Introduction Speed
Change It
Other Product-Specific Criteria
Support It
Dealing with Trade-offs
For example, if we reduce costs by reducing product quality inspections, we might reduce product quality. For example, if we improve customer service problem solving by cross-training Flexibility personnel to deal with a wider-range of problems, they may become less efficient at dealing with commonly occurring problems.
Cost
Delivery
Quality
Order Qualifiers and Winners
Defined
Order
qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customers winners are the criteria that differentiate the products and services of one firm from another
Order
Service Breakthroughs
A
brand name car can be an order qualifier
Repair services can be order winners
Examples: Warranty, Roadside Assistance, Leases, etc.
Strategy Design Process
Strategy Map
Financial Perspective
What it is about!
Improve Shareholder Value
Customer Perspective
Customer Value Proposition
Internal Perspective
Build-Increase-Achieve
Learning and Growth Perspective
A Motivated and Prepared Workforce
Kaplan and Nortons Generic Strategy Map
In the Kaplan and Nortons Generic Strategy Map, under the Financial Perspective, the Productivity Strategy is generally made up from two components:
1. Improve cost structure: Lower direct and indirect costs 2. Increase asset utilization: Reduce working and fixed capital
Kaplan and Nortons Generic Strategy Map (Continued)
In the Kaplan and Nortons Generic Strategy
Map, under the Financial Perspective, the Revenue Growth Strategy is generally made up from two components:
1. Build the franchise: Develop new sources of revenue 2. Increase customer value: Work with existing customers to expand relationships with company
Kaplan and Nortons Generic Strategy Map (Continued)
In the Kaplan and Nortons Generic Strategy
Map, under the Customer Perspective, there are three ways suggested as means of differentiating a company from others in a marketplace:
1. Product leadership 2. Customer intimacy 3. Operational excellence
Kaplan and Nortons Generic Strategy Map (Continued)
In the Kaplan and Nortons Generic Strategy
Map, under the Learning and Growth Perspective, there are three principle categories of intangible assets needed for learning:
1. Strategic competencies 2. Strategic technologies 3. Climate for action
Operations Strategy Framework
Customer Needs
New product : Old product
Competitive dimensions & requirements
Quality, Dependability, Speed, Flexibility, and Price
Enterprise capabilities Operations andSupplier capabilities Operations & Supplier Capabilities R&D R&D Technology Systems Technology Systems People People Distribution Distribution
Support Platforms Financial management
Human resource management
Information management
Steps in Developing a Manufacturing Strategy
1. Segment the market according to the product group 2. Identify product requirements, demand patterns, and profit margins of each group 3. Determine order qualifiers and winners for each group 4. Convert order winners into specific performance requirements
Service Strategy Capacity Capabilities
Process-based
Capacities that transforms material or information and provide advantages on dimensions of cost and quality
Systems-based
Capacities that are broad-based involving the entire operating system and provide advantages of short lead times and customize on demand
Capacities that are difficult to replicate and provide abilities to master new technologies
Organization-based
What is Productivity?
Defined
Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio: Outputs Inputs
Total Measure Productivity
Total Measure Productivity = Outputs Inputs
or
= Goods and services produced All resources used
Partial Measure Productivity
Partial
measures of productivity =
Output or Output or Output or Output
Labor Capital Materials Energy
Multifactor Measure Productivity
Multifactor measures of productivity =
Output
Labor + Capital
or
.
+ Energy
Output
Labor + Capital +
.
Materials
Example of Productivity Measurement
You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms. Which productivity measure should be used? Is productivity increasing or decreasing?
Question Bowl
An operations strategy is concerned with which of the following? a. Setting specific policies and plans b. Short-term competitive strategies c. Coordination of operational goals d. All of the above e. None of the above
Question Bowl
Typically a strategy breaks down into what major components? a. Operations effectiveness b. Customer management c. Production innovation d. All of the above e. None of the above
Question Bowl
A criterion that differentiates the products and services of one firm from another can be which of the following? a. An order qualifier b. An order winner c. PWP
d. None of the above
Question Bowl
A travel agency processed 240 customers on Day 1 with a staff of 12, and 360 customers the on Day 2 with a staff of 15. What can be said about the productivity shift from Day 1 to Day 2? a. An increase in productivity from Day 1 to Day 2 b. A decrease in productivity from Day 1 to Day 2 c. The same productivity from Day 1 to Day 2 d. Can not be computed from data above e. None of the above
Question Bowl
In addition to traditional financial measures, what critical questions can a Balanced Scorecard help a company answer?
a. How do customers see us? b. What must we excel at? c. How can we continue to improve and create value? d. All of the above e. None of the above
