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Operations and Supply Chain Strategies

Operations and Supply Chain Strategies. 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.

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Operations and Supply Chain Strategies

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  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: 0131791036

  3. Structural Difficult to change: Buildings Equipment Computer systems Other capital assets Infrastructural Relatively easy to change: People Policies Decision rules Organizational structure Business Elements © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  4. Definitions • Business StrategyLong-term master plan for the company; establishes the general direction • Functional StrategiesFurther 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: 0131791036

  5. Goals MissionStatement Business Strategy Marketing Strategy R&D Strategy Supply Chain Strategy Operations Strategy Financial Strategy Operations and Supply Chain Decisions ... A Top-Down Model of Strategy © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  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: 0131791036

  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: 0131791036

  8. Key Interactions MIS What IT solutions to make it all work together? Finance Budgeting. Analysis. Funds. Human Resources Skills? Training? # of Employees? Supply Chain and Operations Design Sustainability. Quality. Manufacturability. 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: 0131791036

  9. Decisions Guided by the Structural Strategy © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  10. Decisions Guided by the Infrastructural Strategy © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  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). © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  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: 0131791036

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

  14. Threshold score = 720 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% Value Analysis:Introduce new product? © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  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: 0131791036

  16. Threshold score = 720 Performance Importance Score Value 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 Value Analysis:Introduce new product? Not at this time! © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  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: 0131791036

  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  Qualifiersas competition intensifies. © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  19. “Best in Class” Minimum Needs Cost Design Quality Speed Flexibility The Idea Behind Prioritizing: © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  20. “Best in Class” Minimum Needs Cost Design Quality Speed Flexibility Comparing Two Software Development Firms © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

  21. Measurements • Performance against: • 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: 0131791036

  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: 0131791036

  23. Stages of Alignment between Supply Chain and Operations Strategies Neutral Supportive External Internal © 2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036

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

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