operations and supply chain bozarth_ch02

Operations and Supply Chain Strategies

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

Chapter ObjectivesBe 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.


Business ElementsStructuralDifficult to change:BuildingsEquipmentComputer systemsOther capital assets

InfrastructuralRelatively easy to change:PeoplePoliciesDecision rulesOrganizational structure


DefinitionsBusiness StrategyLong-term master plan for the company; establishes the general directionFunctional Strategies Further develop the business strategy in segments of the business must be aligned and coordinatedCore Competencies Organizational strengths that provide focus and foundation for the companys strategies


A Top-Down Model of Strategy


Operations and Supply Chain StrategiesDesign, operation, and improvement of the operations and supply chain systems and processesWhat mix of structure and infrastructure?Is the mix aligned with the business strategy?Does it support the development of core competencies?


Functional StrategyTranslates the business strategy into functional terms.Assures coordination with other areas.Provides direction and guidance for operations and supply chain decisions.


Key InteractionsSupply Chain and OperationsFinanceBudgeting.Analysis.Funds.MarketingWhat products?What volumes?Costs? Quality?Delivery?HumanResourcesSkills? Training?# of Employees?AccountingPerformance measurement systems.Planning and control.MISWhat IT solutionsto make it all worktogether?DesignSustainability.Quality.Manufacturability.


Decisions Guided by the Structural Strategy


Decisions Guided by the Infrastructural Strategy


Value AnalysisA 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).


Value Index DeterminationWhere:In = Importance of value dimension (criteria) nPn = Performance of candidate with regard to dimension nN = total number of value dimensions evaluated(Higher values represent higher importance or performance)


Value Analysis Thoughts Requires definition of criteria and their importance beforehand to avoid biasIt 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 criteriaRequires careful definition of scoring values for performance assessment (highest value represents most desirable result)


Value Analysis:Introduce new product?


Value Analysis:Introduce new product?PerformanceImportanceScoreValueCriterion(A)(B)(A x B)Market potential306Unit profit margin2010Operations compatibility206Competitive advantage1510Investment requirement103Project risk54

Threshold score of current product = 720


Value Analysis:Introduce new product?Not at this time!


Prioritizing: Where Must We Excel?Potential dimensions of distinct competenceQuality (performance, conformance, reliability)Time (delivery speed and reliability, development speed) Flexibility (mix, changeover, volume)Cost (labor, material, engineering, quality-related)


Order Winners and QualifiersWinners:Differentiators performance not yet duplicated by competitorsCompetitive advantage performance better than all or most of the competitorsQualifiersMinimum acceptable level of performance

Over time, Differentiators Winners Qualifiers as competition intensifies.


The Idea Behind Prioritizing:


Comparing Two Software Development Firms


MeasurementsPerformance against:Customer needsBusiness objectives or standardsComparisons to competitorsComparisons to best in class.


Priority Trade-Offs Generally very difficult to excel at all four performance dimensions.Some common conflictsLow cost versus high qualityLow cost versus flexibilityDelivery reliability versus flexibilityConformance quality versus product flexibility


Stages of Alignment between Supply Chain and Operations StrategiesExternalInternalNeutralSupportive


Operations and Supply Chain Strategies Case StudyCatherines Confectionaries


Some examples are:Choosing which home to buy or apartment to rentPicking a location for a new factorySelecting the best person for a new positionDeciding which supplier to use other than for lowest priceDeciding which features to include in a new product

People may not be comfortable with this but, that may be exactly whats required!Encourages identification of less important factors. A higher score to reflect the more desirable outcome and to avoid biasing a choice.A potential problem that can be solved by eliminating any alternative that fails to meet the minimum acceptable score for that criterion.Threshold score is value determined by existing product to these criteria.Discussion about how todays exceptional performance becomes tomorrows standard customer expectation.

operations and supply chain bozarth_ch02

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