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Sustainable Operations
Sustainability – the ability to meet current resource needs without compromising
the ability of future generations to meet their needs.
The firm’s strategy describes how it will create and sustain value for its current
shareholders.
• Shareholders – individuals or companies that legally own one or more shares
of stock in the company.
Chapter 2
• Stakeholders – individuals or organizations who are directly or indirectly
influenced by the actions of the firm.
STRATEGY AND SUSTAINABILITY The goal of sustainability means that the scope of the firm’s strategy must focus
on three areas (the triple bottom line).
• Social responsibility – business practices should be fair to labor, the
community, and the region where the firm conducts business.
• Economic prosperity – shareholders must be compensated via a competitive
return.
• Environmental stewardship – the company should protect the environment as
much as possible.
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APPHARVEST: An example of a Sustainable

farming Triple Bottom Line
APPHARVEST was launched as a Sustainability and technology focused venture Exhibit 2.1
in 2018 to radically improve growing vegetables.
APPHARVEST is a tech start up based in Appalachia region of eastern Kentucky
formed by merger with a SPAC (Novis capital corp.).
• This high-tech farm grows tomatoes and other veggies efficiently year-round.
• Uses computer controlled lighting, water and nutrient application.
• Grows 30 times more per acre compared to an open farm.
• Has 700000 tomato plants, 500 beehives for pollination.
• Plans to ship 49000 pounds of tomatoes per hour using automatic cart harvest
through pre-programmed routes.
• Quality inspections track weight, color, sugar content and softness.
• Takes strategic advantage of the fact that 70% of the US population lives
within one-day drive from the farm.
• Will this be a significant part of future farming?
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Triple Bottom Line (People, planet, profit) Operations and Supply Chain Strategy
Social responsibility. Setting broad policies and plans for using the resources of a firm –
• Fair and beneficial business practices towards labor, community and the region it must be integrated with corporate strategy.
operates.
• Forbid child labor, safe work environment, fair salaries, sustainable work hours.
• Corporate strategy provides overall direction and coordinates
operational goals with those of the larger organization.
• Giving back to the community through health care, education, special programs.

Environmental stewardship. Operations effectiveness – performing activities in a manner

• Protect the environment to the greatest extent possible. that best implements strategic priorities at a minimum cost.
• Cause no harm at a minimum.
• Manage ecological footprint by managing resource consumption and reducing waste.
• Assess and act on cradle-to-grave cost.

Economic prosperity.
• Meet firm’s obligation to the investors through competitive ROI.
• Promote growth and long term value.
• Beyond profit, provide lasting economic benefit to society.
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Formulating Operations and Supply Chain

Strategy
Competitive Dimensions 1

Exhibit 2.2 Cost or Price

• Make the product or deliver the service cheap.

Quality
• Make a great product or delivery 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.

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Competitive Dimensions 2

Walmart Stores, Inc.

Flexibility and New-Product Introduction Speed www.walmartstores.com
• Change it (offer a wide variety of existing products and introduce new products
quickly).
 10,482 retail units in 19 countries (as of 31 July 2023)
Other Product-Specific Criteria  2.1 million associates worldwide
• Support it (technical assistance, meeting launch dates, after-sale support,  1.6 million associates in the U.S.
environmental impact).  0.5 million international associates
 Approx. 70% full-time
 U.S. population: 334.2 million (January 2023)
 210 distribution centers (DCs)
 Every DC supports 90 to 100 stores in a 150+ mile radius
 Walmart's transportation has a fleet of 9,000 tractors,
80,000 trailers and more than 11,000 drivers.

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Walmart Stores, Inc.

Five-Year Summary 2019 – 2023 Walmart International
Walmart Stores, Inc.
Five-Year Summary of Operations
Operations currently in 19 countries outside the US
FYE 1/31/19 FYE 1/31/20 FYE 1/31/21 FYE 1/31/22 FYE 1/31/23  International markets:
Net Sales (US$ Billion) $510.329 $519.926 $555.233 $567.762 $605.881
% Increase
Operating Income (US$ Billion)
2.9%
$21.957
1.9%
$20.568
6.8%
$22.548
2.3%
$25.492
6.7%
$20.428  Africa
As % of Net Sales 4.3% 4.0% 4.1% 4.5% 3.4%
% Increase over Previous FY 7.4% -6.3% 9.6% 13.1% -19.9%  Canada
Store Counts
Walmart U.S. 4,769 4,756 4,743 4,742 4,717  Central America
Walmart International 5,993 6,146 6,101 5,251 5,306
Sam's Clubs
Total Worldwide
599
11,361
599
11,501
599
11,443
600
10,593
600
10,623  Chile
Note: Walmart sold its retail operations in the U.K. and Japan in February 2021 and March 2021, respectively.
 China
2022 GDP [in US$ Billion; source: World Bank]  India
#22 Argentina $632.770
#23 Sweden $585.939  Mexico

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Some Other Dimensions

What Makes Walmart Successful?
Technical liaison and support
• A supplier may be expected to provide technical assistance for product
 What is Walmart’s overall competitive strategy? development.
Ability to meet a launch date
 What are the key elements of Walmart’s • Requirement to coordinate with other firms on a complex project.
operations and supply chain strategy?
Supplier after-sales support
• Involves the availability of replacement parts.
Environmental impact
• Related to criteria such as carbon dioxide emissions, the use of
nonrenewable resources, etc.
Other dimensions
• Colors available, size, weight, location, customization.
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Trade-Offs Order Winners and Order Qualifiers

Management must decide which parameters of performance Describe marketing-oriented dimensions that are keys to
are critical and concentrate resources on those competitive success.
characteristics. Order winners are criteria that differentiate the products or
• An operation cannot simultaneously excel on all services of one firm from those of another.
competitive dimensions. • Features that customers use to determine which product to
• For example, a firm that is focused on low-cost production ultimately purchase.
may not be capable of quickly introducing new products.
Order qualifiers are screening dimensions that permit a firm’s
• A strategic position is not sustainable unless there are products to be considered as possible candidates for
compromises with other positions. purchase.
Straddling – seeking to match a successful competitor by • Features customers will not forego.
adding features, services, or technology to existing activities.
• Often a risky strategy.
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Activity-System Maps Assessing Risk

• Diagrams that show how a company’s strategy is delivered through a COVID-19 Supply chain disruptions is the most recent dramatic
set of supporting activities. example of supply chain risk. There have been many less
• I KEA example:
A
dramatic ones and it will always be there.
Exhibit 2.3 It is important to evaluate the relative riskiness of their operations
and strategies in the face of Uncertainty in the environment.
Supply chain risk is the likelihood of a disruption that would impact
the ability of a company to continuously supply products or
services.
• Supply chain coordination risks are associated with the day-to-
day management of the supply chain.
• Disruption risks are caused by natural or manmade disasters or
a pandemic.

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Risk Management Framework Risk Mitigation Strategies

1. Identify the sources of potential disruptions. Exhibit 2.4
• Highly situation-dependent. Risk Risk Mitigation Strategy
Natural disaster Contingency planning (alternate sites, etc.), insurance
• Focus should be on highly unlikely events. Country risks Hedge currency, produce/source locally
Supplier failures Multiple suppliers
2. Assess the potential impact of the risk. Network provider Support of redundant digital networks
failures
• Goal is to quantify the probability and impact.
Regulatory risk Up-front and continuing research; good legal advice, compliance
Commodity price Multisourcing, commodity hedging
3. Develop plans to mitigate the risk. risks
Logistics failure Safety stock, detailed tracking, and alternate suppliers
• Detailed strategy for minimizing the impact of the risk.
Inventory risks Pool inventory, safety stock
Major quality failure Careful selection and monitoring of suppliers
Loss of customers Service/product innovation
Theft and vandalism Insurance, security precautions, knowledge of likely risks, etc.

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Supply Chain Risk Matrix Productivity Measurement

• Different supply chain strategies are exposed to specific types of risk – Productivity - a common measure of how well resources are used.
the supply chain risk matrix shows the level and type of risk for various Outputs
strategies. Productivity =
Inputs
Exhibit 2.4 Productivity is called a relative measure.
• Must be compared to something else to be meaningful.
• Company can compare itself with similar operations within its industry.
• Measuring productivity over time within the same operation.

Partial productivity measures the ratio of some output to a single input.

Multifactor productivity measures the ratio of some output to a group of
inputs.
Total productivity measures the ratio of all outputs to all inputs.

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Partial Measures of Productivity – Example

Productivity Measurement – Example (p. 37) (p.37)
Exhibit 2.5

Business Productivity Measure

Restaurant Customers (meals) per labor hour
Retail store Sales per square foot
Chicken farm Pounds of meat per pounds of feed
Utility plant Kilowatt-hours per ton of coal
Paper mill Tons of paper per cord of wood

Exhibit 2.5
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