1. Operations and Supply Strategy Chapter 1

2.  10 seconds’ break  Close your eyes  Keep silent

3. Notice  If you choose English exercise option  Join a study group  Meet once a week  One student (in turn) give out quizzes for 14 sentences : 10 sentences with one blank (one or two vocabulary for each blank), produce score 0-10  submit the score of each member and test sheets once a month  Any group submitting ‘wrong’ score gets F grade  Share knowledge of studying English.  Memorize two sentences everyday  Every morning print two sentences  Memorize sentences while you are walking or you are on a bus  Write down your name in the seat sheet

4. IKEA’s Bang mug  IKEA: Swedish furniture retailer  Success factor: Good quality at a low price  Redesign of Bang mugBang mug  3 times so far  Not because of its design  But for storage amount  # of mugs on a pallet: 864 -> 2024  60% of shipping cost has been saved

5. OSM  OSM is  Doing work which has value to customers (e.g. works relevant to producing goods sellable to customers)  about getting work done  quickly, efficiently, without error,  at low cost  with lower inventory.  “Operations”: the processes that are used to transform resources into products and services  “Supply”: how materials and services are moved to and from the processes

6. OM vs. OSM

7. Topics in OSM  Transformation processes (design, types, capacity, quality) in various production and service industries  How the operations are supplied  Input side: parts and raw materials supply  Output (or customer) side: finished good distribution  Related topics: Location, Sourcing and outsourcing, Managing the supply inventories

8. Importance of OSM  Saving $1 results in extra $1 profit!  Providing services and products at low cost and at a customer’s expected quality level is essential for business success.  IKEA is a good model of operations and supply efficiency.

9. Progressive Insurance  An automobile insurance company  11-fold growth in over a decade  3 rd largest insurer  Combined ratio around 96 percent  Secret of success  Out-operated its competitors with lower prices and better services  Immediate Response claims handling  Compare rates via phone and Web

10. Efficiency and Effectiveness  Efficiency: doing something at the lowest possible cost  Effectiveness: doing the right things to create the most value for the company  Trade-off between efficiency and effectiveness

11. Value  Value: can be defined as quality divided by price  Increasing value  Better quality at the same price  Lower price at the same quality

12. Why study OSM? Complete Business Education Systematic Approach to Org. Processes Career Opportunities Cross-Functional Applications Operations And Supply Management

13. America West’s new boarding system

14. OSM definition  OSM: the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.  OSM is a field of management

15. Scope of OSM OSM is concerned with the management of the entire system. OSM is concerned with managing all of these individual processes as efficiently and effectively as possible

16. Operations and Supply Strategy  Operations and supply strategy is concerned with  setting broad policies and plans  for using the resources of a firm  to best support its long-term competitive strategy

17. Strategy and OSS  OSS is comprehensive through its integration with corporate strategy  OSS involves decisions about  the design of a process  Selecting technology  Sizing the process over time  Role of inventory in the process  Locating the process  the infrastructure  Planning and control system logics  Quality assurance and control  Work payment structures  Organization of the operations function

18. OSS in Strategy Process ExampleStrategy Process Customer Needs Corporate Strategy Operations and Supply Strategy Decisions on Processes and Infrastructure More Product Increase Org. Size Increase Production Capacity Build New Factory

19. 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 Criteria : Support It

20. Trade-offs  Operation cannot excel on all dimensions simultaneously.  Delivery speed ↔ Flexibility  Low-cost ↔ Delivery speed, Flexibility, High quality  A strategic position is not sustainable unless there are compromises with other positions

21. Straddling  Straddling occurs when a company seeks to match the benefits of a successful position while maintaining its existing position  Continental Airlines’ failure  Launching new service Continental Lite while maintaining a full-service airline.

22. Order Winners & Order Qualifiers The Marketing-Operations Link  Order Winners: the criteria that differentiates the products and services of one firm from another  Order Qualifiers: the basic criteria that permit the firms products to be considered as candidates for purchase by customers  Order Winners and Order Qualifiers may change over time Terry Hill

23. Strategic Fit: Fitting Operational Activities To Strategy  A combination of operational activities affects a company’s strategy.  Need to find connections between operational activities and strategic positions of a company  Activity-system maps  Can be useful in understanding how good the fit is

24. Strategic Fit: Fitting Operational Activities To Strategy

25. A Framework For Operations and Supply Strategy

26. The Strategic Vision  Target market  A target market must be chosen  Core capabilities  Skills that differentiate the service or manufacturing firm from its competitors

27. Evaluating Operational Performance

28. Summary  OSM (Operations and Supply Management)  Definition  Importance (success of the firm)  OSS (Operations and Supply Strategy)  Strategy of the firm and OSS  Operational competitive dimensions  Order winners and qualifiers  Strategic fit between “operations and supply activities” & “competitive priorities of the firm”

29. Summary  IKEA  New integrated process  Progressive  Internet and mobile network  Harley-Davidson  Offering many options

30. Summary  For a firm to remain competitive, all of the operational activities must buttress the firm’s strategy.  Companies that are strong operationally are able to generate more profit for each dollar of sales, thus making them attractive investments.