OPERATIONS and SUPPLY CHAIN STRATEGY

Chapter 2

McGraw-Hill/Irwin

The McGraw-Hill Companies, Inc. 2007, All Rights Reserved

Outline
1. Operations Strategy Model

2. Emphasis on Operations Objectives

3. Linking Strategies

4. Operations Competence
5. Global Scope of Operations

2-2

Operations Strategy Model

(Figure 2.1)
Internal analysis

Corporate strategy

Business strategy

Operations Strategy
Mission Distinctive Competence Functional strategies in marketing, finance, engineering, human resources, and information systems

External analysis

Objectives (cost, quality, flexibility, delivery) Policies (process, quality systems, capacity, and inventory)

Consistent pattern of decisions Results

2-3

Distinctive Competence
Something an organization does better than any competing organization that adds

value for the customer.

2-4

Operations Strategic Objectives

Quality Flexibilityschedule or product change Delivery
Time Reliability

Cost efficiency

How does a firm use them to gain a competitive advantage, and how do they trade-off?
2-5

Examples of Important Policies in Operations (Table 2.2)

Policy Type

Process

Policy Area Span of process Automation Process flow Job specialization Supervision Approach Training Suppliers Facility size Location Investment Amount Distribution Control Systems

Strategic Choices Make or buy Handmade or machinemade Flexible or specialized Project, batch, line, or continuous Centralized or empowered workers Prevention or inspection Technical or managerial training Selected on quality or cost One large or several small facilities Near markets, labor, or materials Permanent or temporary High or low levels of inventory Centralized or decentralized warehouses Control in great detail or less detail

Quality Systems Capacity

Inventory

Policy types = decisions in Chapter 1.

2-6

Linking Operations to Business Strategies

Business strategy alternatives
Product imitator
Operations must focus on keeping costs low.
(generic drugs)

Product innovator
Operations must maintain flexibility in processes, labor and suppliers. (Rubbermaid)

Order qualifiers and Winners

Qualifiers: why you consider the product Winners: why you choose the product
2-7

Operations Competence
To be sustainable, a distinctive competence must not only be unique, it must be difficult to imitate or copy.

2-8

Examples of Operations Distinctive Competence

Skills of employees Proprietary equipment or processes Rapid continuous improvement Well developed partnerships Location Organizational knowledge Proprietary information or control systems
2-9

Global Scope of Operations

Traditional versus Global company, i.e. companies operating in one country vs. those operating in many. Characteristics of Global Corporation: facilities, products, suppliers, transportation Operations must have a global distinctive competence.
2-10

Summary
Operations Strategy Model Emphasis on Operations Objectives Linking Strategies Operations Competence Global Scope of Operations

2-11

End of Chapter Two

2-12