Presentation on theme: "Operations and Supply Chain Strategies Chapter 2"— Presentation transcript:
1 Operations and Supply Chain Strategies Chapter 2
2 Text: Introduction to Operations and Supply Chain Management Custom edition for Farmingdale State CollegeAuthors: Cecil Bozarth & Robert HandfieldWhere appropriate reference text page numbers will be on bottom of slidesOSC may be used as an abbreviation of Operations and Supply Chain
3 Chapter Objectives Chapter 2 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.
4 Apple ipod Marketing Success Supply Chain Success Intro Oct 01 ipod dominated market for portable media playersConstant renewal of product; new generation every yearPartnering with suppliersCapable of quantity and qualityGlobalRapid responsePartnering with logistics & retailersWalmart/Best buysWithout extra costWithout extra inventoryInformational supply chainDownload music & videosDownload software & upgrades
5 Business Elements Two Major Decision Categories Structural InfrastructuralDifficult to change:BuildingsEquipmentComputer systemsOther capital assetsChanged infrequentlyRelatively easy to change:PeoplePoliciesDecision rulesOrganizational structureReplaced vs ChangedTo compete successfully all elements must work together
6 Definitions Strategies Mission Statement The mechanisms by which businesses coordinate their decisions regarding structual & infrastructural elementsMission StatementA statement that explains why an organization exists. It describes it’s core values and identifies the domain
7 DefinitionsBusiness Strategy Long-term master plan for the company; establishes the general directionFunctional Strategies Further develop the business strategy in segments of the business — must be aligned and coordinatedCore Competencies Organizational strengths that provide focus and foundation for the company’s strategies
8 Business Strategy must Identify target customers & marketsSet time frames and performance objectivesDefine the role of supply chain partnersIdentify & support development of core competencies
9 A Top-Down Model of Strategy BusinessStrategyMarketingFinancialOperationsOperations and Supply Chain Decisions ...GoalsMission StatementSupply ChainR&D
11 Operations and Supply Chain Strategies Definition: how structural & infrastructural elements within Operations & Supply Chain will be aquired & developed to support the overall business strategyThe three primary objectivesChoose mix of structure and infrastructure based upon dimensions valued by customerEnsure the mix aligned with the overall business strategyDoes it support the development of core competencies?
12 Functional StrategyTranslates the business strategy into functional terms for other departments or functions.Assures coordination with other departments or functions.Provides direction and guidance for operations and supply chain decisions.
13 Supply Chain and Operations Key InteractionsMISWhat IT solutionsto make it all worktogether?FinanceBudgeting.Analysis.Funds.HumanResourcesSkills? Training?# of Employees?DesignSustainability.Quality.Manufacturability.Supply Chain and OperationsMarketingWhat products?What volumes?Costs? Quality?Delivery?AccountingPerformance measurement systems.Planning and control.
14 Decisions Guided by the Structural Strategy CapacitySize?Timing?Type?FacilitiesSize?Location?TechnologyEquipment?Processes?Information systems?Vertical IntegrationDirection?Extent?
15 Decisions Guided by the Infrastructural Strategy OrganizationControl/reward systems?Centralization/decentralization?Workforce – skilled/semi-skilled?Sourcing and PurchasingSupplier selection/performance metrics?Procurement systems?Sourcing strategy?Planning and ControlForecasting?Inventory management?Production planning/control?Continuous improvement processes?Business process managementSPC/Six SigmaProcess and QualityDevelopment process?Organization/supplier roles?Product and Service Design
16 Value AnalysisA 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 rentPicking a location for a new factorySelecting the best person for a new positionDeciding which supplier to use other than for lowest priceDeciding which features to include in a new product
17 Value Index Determination A measure that used performance & importance scores of various dimensions of performance to calculate a score to indicate the overall value of an item to a customerWhere:In = Importance of value dimension (criteria) nPn = Performance of candidate with regard to dimension nN = total number of value dimensions evaluated(Higher values represent higher importance or performance)
20 Value Analysis – Thoughts Requires definition of criteria and their importance beforehand to avoid biasIt 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 criteriaRequires 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.
21 Prioritizing: Where Must We Excel? Potential dimensions of distinct competence (Four Performance Dimensions)Quality (performance, conformance, reliability)Time (delivery speed and reliability, development speed)Flexibility (mix, changeover, volume)Cost (labor, material, engineering, quality-related)What does the customer value?
22 QualityThe characteristics of a product or service which bear on its ability to satisfy stated or implied needsPerformance Quality the basic operational characteristics of a product or serviceConformance Quality to what degree the product or service meets specificationsReliability Quality The length of time a product will perform correctly without failing or requiring maintenanceTo remain competitive, operations and supply chain must consistently meet or exceed customer expectations on quality dimensions
23 TimeDelivery speed how quickly the OSC can fulfill on order or need once it has been identified.Delivery Reliability the ability to deliver goods or services when promised and the accuracy of he quantity shippedPg 30
24 FlexibilityHow quickly OSC can respond to the unique needs of different customersMix flexibility the ability to produce a wide range of products or servicesChangeover flexibility the ability to provide a new product with minimal delayVolume flexibility the ability to produce whatever volume the customer needsFlexibility is of particular importance in Research and DevelopmentPg 31
25 CostCost is always a concern, even if a company primarily competes on a different performance dimension.Cost covers a wide range of activities, most common categories areLabor CostsMaterial CostsEngineering CostsQuality-related costsThere are many cost categories, many are specific to the issues facing a particular firm. OSC are targets for cost management because they account for much of an organization’s cost.Pg 31
26 Trade-offs between Performance Dimensions No organization can sustain a competitive advantage on all performance dimensions indefinitely….All organizations must make trade-offs or decisions among dimensions to emphasize some at the expense of others.Most OSC decisions will require trade-offsTo optimize this decision making, OSC managers must know which dimensions are valued most by their customersExcellence in one dimension may conflict with excellence in anotherPg 32
27 Priority Trade-OffsGenerally very difficult to excel at all four performance dimensions.Some common conflictsLow cost versus high qualityLow cost versus flexibilityDelivery reliability versus flexibilityConformance quality versus product flexibility
28 Order Winners and Qualifiers Differentiators — performance not yet duplicated by competitorsCompetitive advantage — performance better than all or most of the competitorsQualifiersMinimum acceptable level of performanceOver time, Differentiators Winners Qualifiers as competition intensifies.Discussion about how today’s exceptional performance becomes tomorrow’s standard customer expectation.
30 Alignment between OSC strategies and the overall business strategy The goal is to develop an OSC stategy that supports the business strategyManagement should knowHow each OSC structural & infrastructural choice supports the customer’s order winners & qualifiersWhat trade-offs had to be considered in these decisionsHowever some organizations are not as far along towards achieving this than are others.Pg 33
31 Stages of Alignment between OSC strategies and the overall business strategy NeutralSupportiveStage 2Industry PracticeStage 4Actively EngagedStage 1Not linkedStage 3Participation(Closing the loop)ExternalInternalStage 1 – Internally neutral – efforts are to minimize negative potential in OSC areas. No link to business strategyStage 2 – Externally neutral – industry practice followed. No link to business strategyStage 3 – Internally supportive – OSC areas participate in strategic debate. It is understood that OSC must be aligned with business strategyStage 4 – Externally Supportive – OSC areas support business strategy and explore/improve core competenciesPg 34
32 Operations and Supply Chain Strategies Case Study Catherine’s Confectionaries