chapter 2 supply chain management
DESCRIPTION
University of Toledo BUAD 3020TRANSCRIPT
Chapter 2
Strategy and Sustainability
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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Learning Objectives
• Compare how operations and supply chain strategy relates to marketing and finance.
• Understand the competitive dimensions of operations and supply chain strategy.
• Identify order winners and order qualifiers.• Understand the concept of strategic fit.• Describe how productivity is measured and
how it relates to operations and supply chain processes.
• Explain how the financial markets evaluate a firm’s operations and supply chain performance.
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A Sustainable Strategy
• Shareholders: Those individuals or companies that legally own one or more shares of stock in the company
• Stakeholders: Those individuals or organizations who are influenced, either directly or indirectly, by the actions of the firm
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Triple Bottom Line
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Triple Bottom Line Continued
• Social: pertains to fair and beneficial business practices toward labor, the community, and the region in which a firm conducts is business
• Economic: the firm’s obligation to compensate shareholders who provide capital via competitive returns on investment
• Environmental: the firm’s impact on the environment
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What is Operations and Supply Strategy?
• Operations and supply strategy: setting broad policies and plans for using the recourses of a firm to best support its long-term competitive strategy– Part of a planning process that coordinates
operational goals with those of the larger organization
• Operations effectiveness relates to the core business processes needed to run the business
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Closed-Loop Strategy Process
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Closed-Loop Strategy Process Continued
• Activity 1 is performed at least yearly and is where the overall strategy is developed
• Activity 2 is where the overall strategy is refined and updated as often as four times a year
• Activity 3 is where operational plans that relate to functional areas such as marketing, manufacturing, and so on, are coordinated
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Competitive Dimensions
• Price: make the product or deliver the service cheap
• Quality: make a great product or deliver a great service
• 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
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Other Product-Specific Criteria
1. Technical liaison and support
2. Meeting a launch date
3. Supplier after-sale support
4. Environmental impact
5. Other dimensions
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Dealing with Trade-offs
• For example, if we reduce costs by reducing product quality inspections, we might reduce product quality
• For example, if we improve customer service problem solving by cross-training personnel to deal with a wider-range of problems, they may become less efficient at dealing with commonly occurring problems
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Order Qualifiers and WinnersDefined
• Order qualifiers: the basic criteria that permit the firms products to be considered as candidates for purchase by customers
• Order winners: the criteria that differentiates the products and services of one firm from another
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Strategic Fit: Fitting Operational Activities to Strategy
• All the activities that make up a firm’s operation relate to one another
• To be efficient, must minimize total cost without compromising on customer needs
• Activity-system maps show how a company’s strategy is delivered through a set of tailored activities
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Mapping Activity Systems at IKEA
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Productivity Measurement
• Productivity is a common measure of how well an organization is using its resources– Fundamental to understanding operations-
related performance
• In its broadest sense productivity is outputs divided by inputs– To increase productivity, we want to make
this ratio as large as practical
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Productivity Measurement Continued
• Productivity is a relative measure– Can be compared with similar operations
within its industry– Can be compared over time
• Productivity may be expressed as:1. Partial measures: output to one input
2. Multifactor measures: output to a group of inputs
3. Total measures: output to all inputs
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Examples of Productivity Measures
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Partial Measures of Productivity
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How Does Wall Street Evaluate Operations Performance?
• Comparing firms from an operations view is important to investors– Earnings growth is a function of profitability– Profits can increase through higher sales or lower
costs– Highly efficient firms shine during recession periods
• When evaluating large productivity, it is important to look for unusual explanations– Want to avoid one-time events
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Efficiency Measures Used by Wall Street