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Chapter 2
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.
Apple ipod
Marketing Success Supply Chain Success
Intro Oct 01 ipod dominated market for portable media players Constant renewal of product; new generation every year Partnering with suppliers
Capable of quantity and quality Global Rapid response
Business Elements
Two Major Decision Categories
Structural
Difficult to change:
Buildings Equipment Computer systems Other capital assets Changed infrequently
Infrastructural
Relatively easy to change:
People Policies Decision rules Organizational structure Replaced vs Changed
Definitions
Strategies
The mechanisms by which businesses coordinate their decisions regarding structual & infrastructural elements
Mission Statement
A statement that explains why an organization exists. It describes its core values and identifies the domain
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 companys strategies
Marketing Strategy
R&D Strategy
Operations Strategy
Financia l Strategy
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Functional Strategy
Translates 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.
Key Interactions
Finance
Budgeting. Analysis. Funds.
MIS
What IT solutions to make it all work together?
Human Resources
Skills? Training? # of Employees?
Design
Sustainability. Quality. Manufacturability.
Marketing
What products? What volumes? Costs? Quality? Delivery?
Accounting
Performance measurement systems. Planning and control.
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).
V I n Pn
Where:
n 1
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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)
Quality
The characteristics of a product or service which bear on its ability to satisfy stated or implied needs
Performance Quality
the basic operational characteristics of a product or service
Conformance Quality
to what degree the product or service meets specifications
Reliability Quality
The length of time a product will perform correctly without failing or requiring maintenance
To remain competitive, operations and supply chain must consistently meet or exceed customer expectations on quality dimensions
Time
Delivery 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 shipped
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Flexibility
How quickly OSC can respond to the unique needs of different customers
Mix flexibility
the ability to produce a wide range of products or services
Changeover flexibility
the ability to provide a new product with minimal delay
Volume flexibility
the ability to produce whatever volume the customer needs
Flexibility is of particular importance in Research and Development
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Cost
Cost is always a concern, even if a company primarily competes on a different performance dimension.
There 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 organizations cost.
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All organizations must make trade-offs or decisions among dimensions to emphasize some at the expense of others.
Most OSC decisions will require trade-offs To optimize this decision making, OSC managers must know which dimensions are valued most by their customers
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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
Qualifiers
Minimum acceptable level of performance Over time, Differentiators Winners Qualifiers as competition intensifies.
However some organizations are not as far along towards achieving this than are others.
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Stages of Alignment between OSC strategies and the overall business strategy
Neutral External Supportive
Internal
Stage 1 Internally neutral efforts are to minimize negative potential in OSC areas. No link to business strategy Stage 2 Externally neutral industry practice followed. No link to business strategy Stage 3 Internally supportive OSC areas participate in strategic debate. It is understood that OSC must be aligned with business strategy Stage 4 Externally Supportive OSC areas support business strategy and explore/improve core competencies
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