Strategy and Sustainability

1. Compare how operations and supply chain strategy relates to marketing and finance.

2. Understand the competitive dimensions of operations and supply chain strategy.

3. Identify order winners and order qualifiers.4. Understand the concept of strategic fit.5. Describe how productivity is measured and

how it relates to operations and supply chain processes.

6. Explain how the financial markets evaluate a firm’s operations and supply chain performance.

How a company can create and sustain value for:

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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For many firms the scope of their strategy relates to:

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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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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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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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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1. Technical liaison and support2. Meeting a launch date3. Supplier after-sale support4. Environmental impact5. Other dimensions

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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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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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Order qualifiers are the basic criteria that permit the firm’s products to be considered as candidates for purchase by customers

Order winners are the criteria that differentiate the products and services of one firm from another

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For autos product quality is now an “order qualifier”

“order winners” for autos vary greatly by the bundle of features desired

In general criteria such as cost or specific features or capabilities could be order winners or qualifiers

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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 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 input2. Multifactor measures: output to a group of

inputs3. Total measures: output to all inputs

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Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio:

Outputs Inputs

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Total Measure Productivity = Outputs Inputs

or

= Goods and services produced

All resources used

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Partial measures of productivity =

Output or Output or Output or Output Labor Capital Materials Energy

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Multifactor measures of productivity =

Output . Labor + Capital + Energy

or

Output . Labor + Capital + Materials

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You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms.

Which productivity measure should be used?

Answer: Could be classified as a Total Measure or Partial Measure.

Is productivity increasing or decreasing?

Answer: Last week’s productivity = 480/2000 = 0.24, and this week’s productivity is = 560/2400 = 0.23. So, productivity is decreasing slightly.

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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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