1. Operations and Supply Chain Strategy
CHAPTER 2
Operations and Supply Chain Strategy
McGraw-Hill/Irwin
Copyright © 2014 McGraw-Hill Higher Education. All rights reserved.

2. Learning Objectives
LO2-1 Describe link between operations and strategic planning LO2-2 Describe the links between the essential elements of operations strategy LO2-3 Describe customer desired outcomes LO2-4 Explain product- and process- priorities and links to competitive advantage LO2-5 Explain the use of various performance metrics

3. Strategic Planning: Operations Strategy Defined
Operations Strategy: A set of competitive priorities coupled with supply chain structural and infrastructural design choices intended to create capabilities that support a set of value propositions targeted to address the needs of critical customers
LO2-1

4. Levels of Strategic Planning
Environment
Corporate Culture
Strategic Questions
What business(es) should we be in?
How do we compete?
How do we best support the SBU strategy?
Structure
Infrastructure
Corporate Strategy
Business Strategies
SBU
SBU
SBU
Operations Strategy
Finance, Marketing, etc. Strategies
Figure 2-1
LO2-2

5. Levels of Strategic Planning: Corporate Strategy
Corporate Strategy: overall mission and target businesses
Long time horizon
Overall values, direction and goals
Acquisitions and divestitures
Performance metrics
Risk management
LO2-2

6. Levels of Strategic Planning: Strategic Business Unit
Strategic Business Unit (SBU): semi-independent organization for different products or markets
Identification of customer or market segments
Appropriate competitive priorities
Constrained by corporate strategy
More detailed
Shorter time horizon
LO2-2

7. Levels of Strategic Planning: Functional Strategy
Functional strategy: determines how functions support business unit strategies
Management of critical resources
Key metrics
Identification of capabilities
Coordination of activities
SBU to attain its overall objectives?
LO2-2

8. Developing an Operations Strategy
Critical Customer: critical to firm’s success and receives firm’s focus
Value Proposition: tangible and intangibles that customers expect from a firm
Capabilities: what a firm does well, defines types of problems a firm can proficiently address
address proficiently.
Figure 2-2
LO2-3

9. Product-Related Competitive Priorities
How customer’s problem is ‘solved’
Quality: fitness for consumption in terms of meeting customer needs & desires
Timeliness: delivery or availability when customer wants
Cost: expenses incurred is acquiring or using the product
LO2-4

10. Competitive Priorities: Quality
Quality: How ‘fit’ is your product according to your customers needs? 
Performance
Aesthetics
Features
Service/support
Conformance
Perceived quality
Reliability
Durability
LO2-4

11. Competitive Priorities: Timeliness
Timeliness: Is your product delivered to your customers when they want it?
Reliability
Speed
Availability
LO2-4

12. Competitive Priorities: Cost
Cost: How much does it cost to acquire and use your product?
Purchase
Transaction
Maintenance/repair
Operating
Salvage/disposal
LO2-4

13. Capabilities Defined
Capabilities: unique and superior abilities based upon the firm’s routines, skills and processes
Key areas for capability-building investment and development efforts:
Processes
Planning systems
Technology
People and culture
Supply chain relations
LO2-4

14. Strategic Areas in Operations Management: Structure
Decision Domain
OM Issues Considered
Other Functional Groups
Capacity
Amount, timing and type
Finance, Marketing
Facilities
Size, location, specialization
Technology
Hardware, software, IS
Finance, Engineering, IT, HR
Supply Chain Network
Supply network
Customer network
Finance, Engineering, Marketing, Sales
From Table 2-3
LO2-4

15. Strategic Areas in Operations Management: Infrastructure
Decision Domain
OM Issues Considered
Other Functional Groups
Workforce
Skills, training, policies, etc.
Human Resources
Production Planning and Control
Procedures, workflow, costs, controls, metrics, etc.
Finance, Human Resources
Product/Process Innovation
Improvements, NPI, intellectual property, etc.
Engineering, Human Resources
Organization & Management
Centralization, hierarchy, relationships, metrics, etc.
Human Resources, Marketing
From Table 2-3
LO2-4

16. Strategic Profit Model
LO2-5

17. OM and SC Strategy Summary
Strategic planning happens at multiple levels
Strategic planning begins with the customer
OM strategy brings together: critical customers, value propositions and operations capabilities
Competitive priorities address product and process issues
Future capabilities depend on existing core competencies
Strategy involves multiple functions and SC partners
Must be fit between the elements of #3 above
Strategic assessment tools are needed