Strategy and Sustainability

 Chapter 02
Learning Objectives
1. Concept and framework of operations strategy
2. Good operations system
3. Key competitive dimensions of operations
4. See how strategy is implemented through
operations and supply chain activities
5. Understand the parameters of a sustainable
operations and supply chain strategy
6. Case discussion
I. Operations SC Strategy
“Operations”
 Opus – work (Latin), anywhere work is performed
 Operations – planning and execution of work,
creation and delivery of products and services to
customers
 Manufacturing operations – service operations
 Zara – retail chain (fast fashion)
 Health care
Different Strategies
 Compare operations – who has better operations
 USPS (18billion loss in 2015) vs. FedEX

 USPS: price, ship everywhere

 FedEx – overnight delivery, guaranteed, high quality

service
 Hub and Spoke (inbound and outbound)
 Excess capacity: 5 empty planes, 10% of planes fly half
empty
 Each package is inspected by 3 employees
 What is good for one company may not be good for another.
Concept of Operations Strategy
 Operations Strategy
 Competencies (what is the distinguish feature)
 Assets (who is doing the work, main resources)
 Processes (what is the structure of activities, how the
work is performed)
 Setting broad policies and plans for using the
resources of a firm and must be integrated
with its corporate strategy
Good Operating System
 Maximize value creation
 Delivered value of operations = benefit to customers –
total process cost
 Benefit: prices, quality, time, variety
 Alignment
 Competitive strategy (strategic position)
 Operational competencies (what ops must do well)
 Cost, time, quality, flexibility
 Assets and Process (how to structure ops process)
Competencies
Southwest Airline vs. American

Southwest airlines American

 Competitive strategy  Competitive Strategy
 Price
 Variety of origins and
 On time performance
destinations
 Process  Process
 Direct flight
 Smaller airport (less congested, low
 VIP lounge
fee)  Hub and spoke
 Quick turn around (boarding, no  Different types of aircrafts
assigned seats)
 Bags fly free
 Complicated baggage
 Standard aircraft
checking process – baggage
 No frills
fee
 Check in kiosk
 Agency
Trade-Offs
 No operations is good at everything, have to make
trade-offs.
 Management must decide which parameters of
performance are critical and concentrate resources
on those characteristics
 Hospitals (ER, specialty hospital) – trade-offs
between flexibility and cost
Straddling
 Straddling occurs when a company seeks to match
the benefit of a successful position (by adding
features, services, or technology) while maintaining
its existing position
 Often a risky strategy
 Create problems if certain trade-offs need to be made
 Continental Lite
 Key Operations Decisions
12

 Structural decisions  Infrastructure decisions

 Process design  Quality assurance
 Capacity  Practices & policy
 Location  Organizational culture
 Technology  Workforce management
 Inventory
Sustainable Operations
Sustainability
 Air pollution
 One planet living
 Energy saving
 Carbon neutral
 Waste control
 Reduce, reuse, recycle
 Corporate social responsibility
 Triple bottom line
Sustainable Strategy
 The firm’s strategy describes how it will create and
sustain value for its current shareholders and stakeholders
 Shareholders – individuals or companies that legally own one
or more shares of stock in the company
 Stakeholders – individuals or organizations who are directly or
indirectly influenced by the actions of the firm
 Adding a sustainability requirement means meeting value
goals without compromising the ability of future
generations to meet their own needs
 Triple bottom line – evaluating the firm against social,
economic, and environmental criteria
Triple Bottom Line
Impact of Operations on Sustainability
 Product design (materials, design for environment,
design for disassembly)
 Process (necessary, standard, simplified….)
 Packaging (Heinz has saved £404K/yr by using
lightweight can ends, 1400 tons of steel, fit 18% more
cans on each pallet)
 Transportation/logistics (fuel saving, CO2 reduction,
move more load, truck utilization)
 Product returns/disposition (reuse, refurbish,
remanufacturing, recycle…..)
Fast Fashion and Sustainability

https://www.youtube.com/watch?v=iq0--DfC2Xk
&t=262s

https://www.youtube.com/watch?v=tLfNUD0-8ts
 Case Discussion – IKEA Mug
Design
 What are IKEA’s targeted customers?
 What are IKEA’s operational priorities?
 Describe IKEA’s process for developing a new
product.
 How does IKEA incorporate sustainability into
the overall supply chain?
 What are additional features of IKEA that
contribute to creating exceptional value for the
customers?
19
Bang Mug
 50-cent coffee mug.
 “Bang” mug, redesigned three times, in ways to
maximize the number of mugs that could be stored on
a pallet.
 Originally, only 864 mugs would fit. A redesign added
a rim such as you would find on a flowerpot so that
each pallet could hold 1,280 mugs. Another redesign
created a shorter mug with a new handle, allowing
2,024 to squeeze onto a pallet. These changes reduced
shipping costs by 60 percent.
 Design Improvement
 A small notch cut out of the bottom,
so that when its in the dishwasher or
while drying upside down, the
excess water has a way to escape.
For 50¢ each, this is an extremely
affordable example of good design.
(They are stackable too!)
Guest Speaker
John D. Puglisi
Associate Vice President, Facilities
Management
 Responsibility
23  Responsible for daily operations, custodial services,
grounds keeping, facilities maintenance, repair,
capital improvement design and construction for 4.0
million square feet at Fordham University's 85 acre
Rose Hill and Lincoln Center campuses. Supervises
a department of over 290 tradesmen, laborers, and
administrators with an annual operational budget of
over $45 million. Commissioned a new $260
million School of Law and residential facility.