1. Operations and Supply Chain Strategies

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.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

3. Business Elements Structural Difficult to change: Infrastructural
Buildings
Equipment
Computer systems
Other capital assets
Infrastructural
Relatively easy to change:
People
Policies
Decision rules
Organizational structure
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

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 company’s strategies
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

5. A Top-Down Model of Strategy
Business
Strategy
Marketing
Financial
Operations
Operations and Supply Chain Decisions ...
Goals
Mission Statement
Supply Chain
R&D
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

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?
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

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.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

8. Supply Chain and Operations
Key Interactions
MIS
What IT solutions
to make it all work
together?
Finance
Budgeting.
Analysis.
Funds.
Human
Resources
Skills? Training?
# of Employees?
Design
Sustainability.
Quality.
Manufacturability.
Supply Chain and Operations
Marketing
What products?
What volumes?
Costs? Quality?
Delivery?
Accounting
Performance measurement systems.
Planning and control.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

9. Decisions Guided by the Structural Strategy
Capacity
Size?
Timing?
Type?
Facilities
Location?
Technology
Equipment?
Processes?
Information systems?
Vertical Integration
Direction?
Extent?
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

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?
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

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).
Some examples are:
Choosing which home to buy or apartment to rent
Picking a location for a new factory
Selecting the best person for a new position
Deciding which supplier to use other than for lowest price
Deciding which features to include in a new product
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

12. Value Index Determination
Where:
In = Importance of value dimension (criteria) n
Pn = Performance of candidate with regard to dimension n
N = total number of value dimensions evaluated
(Higher values represent higher importance or performance)
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

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)
People may not be comfortable with this… but, that may be exactly what’s required!
Encourages identification of less important factors.
A higher score to reflect the more desirable outcome and to avoid biasing a choice.
A potential problem that can be solved by eliminating any alternative that fails to meet the minimum acceptable score for that criterion.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

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 %
Threshold score = 720
Threshold score is value determined by existing product to these criteria.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

15. Value Analysis: Introduce new product?
Threshold score of current product = 720
Performance Importance Score Value
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
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

16. Value Analysis: Introduce new product?
Performance Importance Score Value
Criterion (A) (B) (A x B)
Market potential
Unit profit margin
Operations compatibility
Competitive advantage
Investment requirement
Project risk
Value Index = 700
Threshold score = 720
Not at this time!
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

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)
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

18. Order Winners and Qualifiers
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.
Discussion about how today’s exceptional performance becomes tomorrow’s standard customer expectation.
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

19. The Idea Behind Prioritizing:
“Best in Class”
Minimum
Needs
Cost
Design
Quality
Speed
Flexibility
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

20. Comparing Two Software Development Firms
“Best in Class”
Minimum
Needs
Cost
Design
Quality
Speed
Flexibility
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

21. Measurements Performance against: Comparisons to competitors
Customer needs
Business objectives or standards
Comparisons to competitors
Comparisons to “best in class.”
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

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

23. Stages of Alignment between Supply Chain and Operations Strategies
Neutral
Supportive
Stage 2
Industry Practice
Stage 4
Actively Engaged
Stage 1
Not linked
Stage 3
Participation
(Closing the loop)
External
Internal
© 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN:

24. Operations and Supply Chain Strategies Case Study
Catherine’s Confectionaries