Chapter 2Chapter 2
Learning Objectives
Compare how operations and supply chain strategy relates to
marketing and finance.
Understand the competitive dimensions of operations and supply
chain strategy.
Identify order winners and order qualifiers.
Understand the concept of strategic fit.
Describe how productivity is measured and how it relates to
operations and supply chain processes.
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A Sustainable Strategy
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
LO 1
Triple Bottom Line Continued
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
LO 1
What is Operations and Supply Strategy?
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
LO 2
Closed-Loop Strategy Process Continued
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
LO 2
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
LO 2
Dealing with Trade-offs
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
LO 2
Defined
Order qualifiers: the basic criteria that permit the firms products
to be considered as candidates for purchase by customers
Order winners: the criteria that differentiates the products and
services of one firm from another
LO 3
Strategic Fit: Fitting Operational Activities to Strategy
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
LO 4
LO 4
Productivity Measurement
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
LO 5
Can be compared with similar operations within its industry
Can be compared over time
Productivity may be expressed as:
Partial measures: output to one input
Multifactor measures: output to a group of inputs
Total measures: output to all inputs
LO 5
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
LO 6
LO 6