OPERATIONS and SUPPLY

CHAIN STRATEGY
Chapter 2
 Outline
1. Operations Strategy Model
2. Emphasis on Operations Objectives
3. Linking Strategies
4. Operations Competence
5. Global Scope of Operations
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
 Distinctive Competence
“Something an organization does

better than any competing

organization that adds value for the

customer.”
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?
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.
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
 Operations Competence

To be sustainable, a distinctive competence

must not only be unique, it must be difficult
to imitate or copy.
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
 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.
 Summary
• Operations Strategy Model
• Emphasis on Operations Objectives
• Linking Strategies
• Operations Competence
• Global Scope of Operations