Chapter 2' Operations and Supply Strategy

1
Chapter 2. Operations and Supply Strategy

• Operations Strategy Competitive Dimensions
• Order Qualifiers and Winners
• Strategy Design Process
• A Framework for Manufacturing Strategy
• Service Strategy Capacity Capabilities
• Productivity Measures

2
Operations Strategy Competitive Dimensions

• Setting broad policies and plans to utilize the
  firms resources optimally to support its longer
  term competitive strategy.

3
Competitive Dimension

• Competitive Dimensions include
• Cost or Price
• Make the Product or Deliver the Service Cheap
• Quality
• Make a Great Product and (not or) deliver a
  Great Service ( X vs Mercedes)
• Delivery Speed
• Make the Product or Deliver the Service Quickly
• Delivery Reliability
• Deliver It When Promised
• Coping with Changes in Demand
• Change Its Volume
• Flexibility and New Product Introduction Speed
• Change It, more frequently then GM or Ford, who
  is this company?
• Other Product-Specific Criteria
• Support It

4
Trade-Offs

• Focus and trade-offs, cant do it all at the same
  time
• Lexus cant be made and sold for 25,000. T or F?
• A few examples
• Generally low-cost strategy is not compatible
  with flexibility or speed of delivery
• High quality and low cost tend to be incompatible
• Straddling occurs when a firm seeks to mimic a
  competitors position while trying to maintain
  their original (successful) position.

5
Order Qualifiers and Winners

• Order qualifiers are the basic criteria that
  permit the firms products to be considered as
  candidates for purchase by customers
• Through the 1980s ? nobody got fired buying IBM
  products
• Order winners are the criteria that differentiate
  the products and services of one firm from
  another
• Caterpillar ? 48 hours parts/service guarantee
• Class examples

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Steps in Developing a Manufacturing Strategy

• Segment the market according to the product group
• Identify product requirements, demand patterns,
  and profit margins of each group
• Determine order qualifiers and winners for each
  group
• Convert order winners into specific performance
  requirements

7
Service Strategy Capacity Capabilities

• Process-based
• Capabilities derived from activities that
  transform material or information and provide
  advantages on dimensions of cost and quality
• Systems-based
• Operating capabilities that are broad-based
  involving the entire operating system and provide
  advantages of short lead times and customize on
  demand
• Organization-based
• Organizational ability to master/implement
  (learn) new technologies, faster new
  plant/product introductions
• These capabilities are more difficult to
  replicate thus provide a strong operations-based
  competitive advantage

8
Productivity

• A common, seemingly simple but very complicated
  measure
• How a country, region, industry, company,
  business unit, department, ... uses its resources
  (relative to others).
• Broadly defined as the ratio of OUTPUTS to INPUTS
• Total, partial, or multifactor measures

9
Productivity Example
10
Some Partial Productivity Measures

• Business
• Restaurant
• Retail Store
• Chicken Farm
• Utility Plant
• Paper Mill

• Productivity Measure
• Meals per hour
• Sales per square foot (meter)
• Kilo of meat per Kg. of feed
• Kilowatt per ton of coal
• Tons of paper per cord of wood