Operations and Supply Chain Strategies

Operations and Supply
Chain Strategies
2008 Pearson Prentice Hall --- Introduction to Operations and Supply
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Chapter 2, Slide 2

Chapter Objectives
Be able to:
Explain the relationship between business and functional strategies and the
difference between structural and infrastructural elements.
Describe some of the main operations and supply chain decision categories.
Explain the customer-value concept and calculate a value-index score.
Differentiate between order winners and qualifiers. Explain why this difference is
important to developing operations and supply chain strategy.
Discuss the concept of trade-offs and give an example.
Define core competencies and give an example of how they can be used in the
operations and supply chain areas for competitive advantage.
Explain the importance of strategic alignment and describe the four stages of
alignment between the operations and supply chain strategy and the business
strategy.
Chapter 2, Slide 3

Business Elements
Structural
Difficult to change:
Buildings
Equipment
Computer systems
Other capital assets

Infrastructural
Relatively easy to
change:
People
Policies
Decision rules
Organizational
structure
Chapter 2, Slide 4

Definitions
Business Strategy
Long-term master plan for the company;
establishes the general direction
Functional Strategies
Further develop the business strategy in
segments of the business must be aligned
and coordinated
Core Competencies
Organizational strengths that provide
focus and foundation for the companys
strategies
Chapter 2, Slide 5

A Top-Down Model of
Strategy
Business
Strategy
Marketing
Strategy
Financia
l
Strategy
Operations
Strategy
Operations and Supply Chain Decisions ...
Goals
Mission
Statement
Supply Chain
Strategy
R&D
Strategy
Chapter 2, Slide 6

Operations and Supply Chain
Strategies
Design, operation, and improvement of the
operations and supply chain systems and
processes
What mix of structure and infrastructure?
Is the mix aligned with the business strategy?
Does it support the development of core
competencies?
Chapter 2, Slide 7

Functional Strategy
Translates the business strategy into
functional terms.
Assures coordination with other
areas.
Provides direction and guidance for
operations and supply chain
decisions.
Chapter 2, Slide 8

Key Interactions
Supply Chain
and
Operations
Finance
Budgeting.
Analysis.
Funds.
Marketing
What products?
What volumes?
Costs? Quality?
Delivery?
Human
Resources
Skills? Training?
# of Employees?
Accounting
Performance measurement systems.
Planning and control.
MIS
What IT solutions
to make it all work
together?
Design
Sustainability.
Quality.
Manufacturability.
Chapter 2, Slide 9

Decisions Guided by the
Structural Strategy
Capacity

Size?
Timing?
Type?
Facilities
Size?
Location?
Technology
Equipment?
Processes?
Information systems?
Vertical
Integration
Direction?
Extent?

Chapter 2, Slide 10

Decisions Guided by the
Infrastructural Strategy
Organization

Control/reward systems?
Centralization/decentralization?
Workforce skilled/semi-skilled?
Sourcing and
Purchasing
Supplier selection/performance metrics?
Procurement systems?
Sourcing strategy?
Planning and
Control
Forecasting?
Inventory management?
Production planning/control?
Process and Quality
Continuous improvement processes?
Business process management
SPC/Six Sigma
Product and Service
Design
Development process?
Organization/supplier roles?
Chapter 2, Slide 11

Value Analysis
A process for determining the best
choice when there are no unambiguous
formulas for doing so.
Helps maintain focus in gathering and
assessing relevant data.

(also called a preference matrix).
Chapter 2, Slide 12

Value Index Determination
n
N
n
n
P I V
1
Where:
I
n
= Importance of value dimension (criteria) n
P
n
= Performance of candidate with regard to dimension n
N = total number of value dimensions evaluated
(Higher values represent higher importance or performance)
Chapter 2, Slide 13

Value Analysis Thoughts
Requires definition of criteria and their
importance beforehand to avoid bias
It is useful if the importance or weighting values
add up to 100%
A threshold score can set by evaluating the
current situation, if it exists, using the selected
analysis criteria
Requires careful definition of scoring values for
performance assessment (highest value
represents most desirable result)
Chapter 2, Slide 14

Value Analysis:
Introduce new product?
Performance Importance Score Value
Criteria (A) (B) (A x B)
Market potential 30
Unit profit margin 20
Operations compatibility 20
Competitive advantage 15
Investment requirement 10
Project risk 5
100%

Threshold score = 720
Chapter 2, Slide 15

Value Analysis:
Criterion (A) (B) (A x B)
Market potential 30 6
Unit profit margin 20 10
Operations compatibility 20 6
Competitive advantage 15 10
Investment requirement 10 3
Project risk 5 4

Threshold score of current product = 720
Chapter 2, Slide 16

Value Analysis:
Criterion (A) (B) (A x B)
Market potential 30 6 180
Unit profit margin 20 10 200
Operations compatibility 20 6 120
Competitive advantage 15 10 150
Investment requirement 10 3 30
Project risk 5 4 20

Value Index = 700
Threshold score = 720
Not at this time!
Chapter 2, Slide 17

Prioritizing:
Where Must We Excel?
Potential dimensions of distinct
competence
Quality (performance, conformance, reliability)
Time (delivery speed and reliability, development
speed)
Flexibility (mix, changeover, volume)
Cost (labor, material, engineering, quality-related)
Chapter 2, Slide 18

Order Winners and
Qualifiers
Winners:
Differentiators performance not yet duplicated
by competitors
Competitive advantage performance better
than all or most of the competitors
Qualifiers
Minimum acceptable level of performance

Over time, Differentiators Winners
Qualifiers as competition intensifies.
Chapter 2, Slide 19

Best in
Class
Minimum
Needs
Cost Design
Quality
Speed Flexibility
The Idea Behind Prioritizing:
Chapter 2, Slide 20

Best in
Class
Minimum
Needs
Cost Design
Quality
Speed Flexibility
Comparing Two Software
Development Firms
Chapter 2, Slide 21

Measurements
Performance against:
Customer needs
Business objectives or standards
Comparisons to competitors
Comparisons to best in class.
Chapter 2, Slide 22

Priority Trade-Offs
Generally very difficult to excel at all four
performance dimensions.
Some common conflicts
Low cost versus high quality
Low cost versus flexibility
Delivery reliability versus flexibility
Conformance quality versus product flexibility

Chapter 2, Slide 23

Stages of Alignment between Supply
Chain and Operations Strategies
Stage 2
Industry Practice
Stage 4
Actively Engaged
Stage 1
Not linked
Stage 3
Participation
(Closing the loop)
External
Internal
Neutral Supportive
Operations and Supply Chain
Strategies Case Study
Catherines Confectionaries

Operations and Supply Chain Strategies

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