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OPERATIONS and SUPPLY

CHAIN STRATEGY

Chapter 2

McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc. 2007, All Rights Reserved


Operations Corporate strategy

Strategy Model
(Figure 2.1) Business strategy

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

Consistent pattern of decisions

Results
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Outline
1. Operations Strategy Model
2. Emphasis on Operations Objectives
3. Linking Strategies
4. Operations Competence
5. Global Scope of Operations

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Distinctive Competence
“Something an organization does

better than any competing

organization that adds value for the

customer.”

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Operations Strategic Objectives
Quality
Flexibility—schedule or product change
Delivery
– Time
– Reliability
Cost efficiency

How does a firm use them to gain a competitive


advantage, and how do they trade-off?

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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 buy
Automation Handmade or machine–made
Process flow Flexible or specialized
Job specialization Project, batch, line, or continuous
Supervision Centralized or empowered workers

Quality Approach Prevention or inspection


Systems Training Technical or managerial training
Suppliers Selected on quality or cost

Capacity Facility size One large or several small facilities


Location Near markets, labor, or materials
Investment Permanent or temporary

Inventory Amount High or low levels of inventory


Distribution Centralized or decentralized
warehouses
Control Systems Control in great detail or less detail
Policy types = decisions in Chapter 1.

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Linking Operations to Business Strategies
Business strategy alternatives
– Product imitator
Operations must focus on keeping costs low.
(generic drugs)
– Product innovator
Operations must maintain flexibility in
processes, labor and suppliers. (Rubbermaid)
Order qualifiers and Winners
– Qualifiers: why you consider the product
– Winners: why you choose the product

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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
Organizational knowledge
Proprietary information or control systems

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Global Scope of Operations
“Traditional” versus “Global” company, i.e.
companies operating in one country vs.
those operating in many.
Characteristics of “Global Corporation”:
facilities, products, suppliers,
transportation…
Operations must have a global distinctive
competence.

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Summary
Operations Strategy Model
Emphasis on Operations Objectives
Linking Strategies
Operations Competence
Global Scope of Operations

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End of Chapter Two

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