OPERATIONS and SUPPLY CHAIN

STRATEGY
Chapter 2

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 Outline
• Operations Strategy Model
• Emphasis on Operations Objectives
• The Goal of Operations
• Linking Strategies
• New Strategies in Operations
• Focused Operations
• Global Scope of Operations

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 Operations Strategy Model (Figure 2.1)
Corporate and
business strategy

Internal Operations Strategy

analysis
Mission
Functional strategies in
marketing, finance,
Distinctive
engineering, human
Competence
External resources, and
analysis Objectives information systems
(cost, quality, flexibility, delivery)
Policies
(process, quality systems, capacity,
and inventory)

Consistent pattern of decisions

Results
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 Distinctive Competence

“Something an organization does better

than any competing organization that adds
value for the customer.”
Operations Strategy should be developed by taking into
account:
• The company’s mission
• The company’s internal env’t
• The company’s external env’t

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 Operations Strategic Objectives
• Improve Quality
• Maintain Flexibility
• Improve Delivery
• Cost efficiency/minimization
• Service excellence

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 Views of strategy formulation
Traditional View
• Try to excel in one or two of the above objectives based
on your distinctive competency.
• Have focused on operations by making necessary trade-
offs.
Current View
• International competition requires that companies be
cost-effective, have a high quality standard, short delivery
time, be flexible enough to meet the customer’s special
needs, and offer excellent service.
• Hence, all the above FIVE are important. Companies must
seek to achieve the above based on their competitive
priorities.
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 Examples of Important Policies in Operations (Table 2.2)

Policy Type Policy Area Strategic Choices

Process Span of process Make or by
Automation Handmade or machine –made
Process flow Flexible or hard automation
Job specialization Project, batch, line, or continuous
Supervision Highly decentralized or centralized
Quality Systems Approach Prevention or inspection
Training Technical or managerial training
Suppliers Selected on quality or cost
Capacity Facility size One large or several small facilities
Location Near markets, low cost, or foreign
Investment Permanent or temporary
Inventory Amount High levels or low levels of
Distribution inventory
Control Systems Centralized or decentralized
warehouses
Control in great detail or less
detail

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 Goals of Operations
• TOC and operations goals
• Key elements of “goals” according to TOC:
– Throughput
– Inventory
– Operating expenses

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 Linking Strategies
• Linking operations strategy to business
strategy
• Business Strategy alternatives (See Table 2.3)
– Product imitator: operations must focus on
keeping costs low.
– Product innovator: operations must maintain
flexibility in processes, labor and suppliers.

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 Order Qualifiers and winners
• Qualifiers: why you consider the product; for
required pdt.
• Winners: why you choose the product; make
the product available for use.
Operations Competence
To be sustainable, a distinctive competence
must not only be unique, it must be difficult to
imitate or copy.

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 Examples of Operations Distinctive
Competence
• Skills of employees
• Proprietary equipment or processes
• Rapid continuous improvement
• Well developed partnerships
• Location-in relation to facility
• Organizational knowledge/unique culture
• Proprietary information or control systems

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 Operations as a Competitive Weapon

• Not only support the business strategy

consistently, but also use operations as a
competitive weapon.

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 New Strategies in Operations
• Time-based competition
• Agile(alert/responsive) manufacturing
• Cost reduction strategies
• Mass customization

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 Mass Customization and Strategic Process Choices

HIGH/
LONG
Make to
Order (MTO) Psychiatric
Counseling

Internet-
based
Education

Volume
Pre-

Lead Time
fabricated

COST/
homes
Assemble to
Order (ATO)
Subway

Dell
Computers MASS
CUSTOMIZATION
TV Customization
producer
Make to Stock
(MTS) LOW/
SHORT
Degree of
LOW HIGH
Customization
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 Global Scope of Operations
• “Traditional” versus “Global” company, i.e.
companies operating in one country Vs those
operating in many country.
• Characteristics of “Global Corporation”
– World-wide facilities
– Products
– Global sourcing
– Transportation capability
– Global product/process design
• Implications of “global”corporation for operations
management
• Operations must have a global distinctive competence.

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 Definitions of supply chain management
• Managing upstream and downstream value
added flow of materials, final goods and
related information among suppliers;
company; resellers; final consumers are supply
chain management.
• is the systematic, strategic coordination of the
traditional business functions and the tactics
across these business functions within a
particular company and across businesses
within the supply chain,

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 Supply chain strategy
• Nowadays, OM must be viewed globally.
• A global distinctive competency should be
development in all areas.
• The entire supply chain should seek to
achieve a competitive advantage.

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 Important Features of World class
Companies
• Dedicated to product excellence
• Close to their customers
• Manage change effectively
• Have frequent, innovative product introductions
• Have short design to manufacture cycle
• Empower their workers and utilize them
effectively
• Emphasize continuous improvement in every
thing they do.
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 THE SUPPLY CHAIN LINK: Illustration

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 The End!

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