UMMDNX-15-2

Operations & Supply

Management

Lecture 2
Operations and Supply Chain
Strategies
 Weekly lecture topics:
1. Introduction to Operations and Supply Chain Management
(SCM)
2. Operations and Supply Chain Strategies
3. Developing Products and Services
4. Process Design & Technology
5. Process Choice and Layout Decisions in Manufacturing and
Services
6. Capacity & Demand Management
7. Inventory Management
8. Operation improvement (1): Quality Management
9. Operation improvement (2): JIT / Lean Production
10.SCM & Supply chain relationships
11.Contemporary issues in Operations & SCM
12.Exam Revision
13.Exam Q&A/Drop-in sessions
Lecture 2: objectives
 Explain the relationship between business strategies and
functional strategies
 Differentiate between order winners and qualifiers and
explain why this difference is important to developing
the operations and supply chain strategy for a firm.
 Discuss the 5 performance objectives & the concept of
trade-offs
 Explain the importance of strategic alignment and
describe the four states of alignment between the
operations and supply chain strategy and the business
strategy.
 Explain the concept of customer value and calculate a
value index score.
 To examine the need for performance measurement
 To evaluate its use, benefits & drawbacks
 What is Strategy?
‘..the determination of the long-run goals and objectives of an enterprise and the
adoption of courses of action and the allocation of resource necessary for carrying
out these goals’
Alfred Chandler (1963, p. 13)

‘Competitive strategy is about being different. It means deliberately

choosing a different set of activities to deliver a unique mix of value’
Michael Porter (1996, p. 60)

‘..a pattern in a stream of decisions’

Henry Mintzberg (2007, p.3)

The long term direction of a company

Strategy: levels
• Corporate
• Business
• Functional

Copyright © 2013 Pearson Education, Inc.

publishing as Prentice Hall (Source: Coulter, 2013, p.7)
 Functional strategies
• A strategy that translates a business strategy into specific
actions for functional areas such as marketing, human
resources, and finance. (Bozarth & Handfield, 2019, p.43)

• Functional strategies are goal-oriented plans and actions

of the functional areas of an organization, they include:

– Production-Operations
– Marketing
– Research & Development
– Human Resources
– Financial-Accounting
– Information Technology & Support
Copyright © 2013 Pearson Education, Inc. (Coulter, 2013, p.7)
publishing as Prentice Hall
 Overview
• Product development strategy specifies the portfolio of
new products that the company will try to develop

• Marketing and sales strategy specifies how the market

will be segmented and product positioned, priced, and
promoted

• Supply chain strategy determines the nature of material

procurement, transportation of materials, manufacture of
product or creation of service, distribution of product

• All functional strategies must support one another and

the competitive strategy
Strategic fit – competitive and supply chain
strategies have aligned goals

Marketing
strategy

Production/
Operations
strategy A match between
strategies is
Human
needed…
Resources
strategy But also a match
Financial- of these strategies
Accounting
with consumer
strategy
needs!
Operations & SC strategy decisions
choose the right mix (based on: Bozarth & Handfield, 2019, p.45)
Structural Decision Categories Infrastructural Decision Categories

• Capacity • Organization
– Amount, Type, Timing of – Structure, Control/reward systems,
capacity changes Workforce decisions
• Facilities • Sourcing decisions and purchasing process
– Services/Manufacturing, – Sourcing strategies, Supplier selection,
Warehouses, Distribution hubs Supplier performance measurement
– Size, location, degree of • Planning and control
specialization – Forecasting, Tactical planning, Inventory
• Technology management, Production planning and
– Services/Manufacturing control
processes, Material handling • Business processes and quality management
equipment, Transportation – Six Sigma, Continuous improvement,
equipment, Information Statistical quality control
systems
• Product and service development
– The developmental process,
Organizational and supplier roles

Copyright © 2020 Pearson Education, Ltd. All Rights Reserved.

The five operations
performance objectives
Quality Being RIGHT

Speed Being FAST

Competitiveness
Dependability Being ON TIME

Flexibility Being ABLE TO CHANGE

Cost Being PRODUCTIVE

(Slack, Brandon-Jones and Johnston, 2013)

The benefits of excelling at
the five objectives
Minimum price, highest value

Cost
Dependable
Quick
delivery
delivery Minimum cost,
Speed maximum value Dependability
Fast Reliable
Internal
throughput operation
benefits
Error-free Ability to
processes change
Quality Flexibility
Error-free Frequent new
products and products, maximum
services choice
External
benefits
(Slack, Brandon-Jones and Johnston, 2013)
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
Order Winners and
Order Qualifiers
 Order Winners
A performance dimension that
differentiates a company’s products
and services from its competitors.
This Photo by Unknown Author is licensed under
CC BY-SA-NC

 Order Qualifiers
A performance dimension on which
customers expect a minimum level
of performance to be considered.

This Photo by Unknown Author is licensed This Photo by Unknown Author is licensed
under CC BY-SA-NC under CC BY
3. Balance the 5 Performance Objectives

• Contribution of Operations is vital for competitive

advantage (Operations-based advantage)

ADVANTAGES
Things operations should do...

Provide error free goods & services Quality

Minimise lead time Speed

Keep delivery promises Dependability

Adapt to change in circumstances Flexibility

Minimise cost Cost

 14

Cost Organisational cost structure

Speed 'Speed of response'
Dependability 'being on time'
Flexibility 'being able to change the operation in some way‘
(product/service flexibility, mix flexibility, volume
flexibility, and delivery flexibility)
Quality conforms to its specifications
 (Slack, Brandon-Jones and Johnston, 2013)

Getting it Right reduced by quality

reduced by flexibility
reduced by reliability
reduced by speed
reduces costs
increases flexibility Cost
increases reduces costs
dependability increases quality
Speed Depend- increases speed
ability

Quality Flexibility

increases speed
reduces costs
reduces costs
Increases speed
improves
increases
dependability
dependability

Copyright © 2013 Pearson Education, Inc.

publishing as Prentice Hall
 Quality could mean …
Hospital Car factory
• Patients receive the most appropriate
• All parts are made to specification
treatment
• Treatment is carried out in the correct • All assembly is to specification
• The product is reliable
manner
• Patients are consulted & kept informed • The product is blemish-free
• Staff are courteous, friendly and helpful • The product is attractive

Bus company Supermarket

• The buses are clean and tidy • Goods are in good condition
•The buses are quiet and fume-free • The store is clean and tidy
• The timetable is accurate and • Arrangement of goods is user-friendly
user-friendly • Decor is appropriate and attractive
• Staff are courteous, friendly and helpful • Staff are courteous, friendly and helpful

Copyright © 2013 Pearson Education, Inc.

publishing as Prentice Hall
 Speed could mean …
Hospital Car factory

• The time between requiring and • The time between dealers requesting a
receiving treatment kept to a minimum vehicle of a particular specification and
• The time for test results, X-rays, etc. to receiving it kept to a minimum
• The time to deliver spares to service
be returned to a minimum
centres kept to a minimum

Bus company Supermarket

• The time taken for the total transaction

• The time between a customer setting out of going to the supermarket, making
on the journey and reaching his/ her the purchases and returning kept to a
destination kept to a minimum minimum
•The immediate availability of goods
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
 Dependability could mean …
Hospital Car factory

• Proportion of appointments which are

cancelled kept to a minimum • On-time delivery of vehicles to dealers
• Keeping to appointment times • On-time delivery of spares to service
• Test results, X-rays, etc. returned as centres
promised

Bus company Supermarket

• Predictability of opening hours

• Keeping to the published timetables at • Proportion of goods out of stock kept to
all points on the route a minimum
•Constant availability of seats for • Keeping to reasonable queuing times
passengers • Constant availability of parking
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
 Flexibility could mean …
Hospital Car factory

• Introduction of new types of treatment • Introduction of new models

• A wide range of available treatment • A wide range of options available
• Ability to adjust the number of patients • Ability to adjust the number of vehicles
treated (volume) manufactured (volume)
• Ability to reschedule appointments • Ability to reschedule manufacturing
priorities

Bus company Supermarket

• Introduction of new goods or promotions

• Introduction of new routes or excursions • A wide range of goods stocked
• A large number of locations served • Ability to adjust the number of
• Ability to adjust the frequency of services
customers served (volume)
• Ability to reschedule trips • Ability to obtain out-of-stock items
(very occasionally)
Copyright © 2013 Pearson Education, Inc.
publishing as Prentice Hall
Cost could mean …
Hospital
Car factory
Technology and facilities
costs

Bought-in materials and Technology and facili-

services ties costs
Staff costs Bought-in materials
and services
Staff costs

Supermarket
Bus company
Technology and facili-
ties costs Technology and facili-
ties costs
Bought-in materials
and services Bought-in materials
and services
Staff costs
Staff costs

Copyright © 2013 Pearson Education, Inc.

publishing as Prentice Hall
 The Triple Bottom Line
•Developed by John Elkington, 1994
• Addressing sustainability in business context
• Measure Financial, Environmental
& Social Performance
• Applicable to supply chains Environmental Social

Performance Performance

Sustainability

Sustainability = balance of all 3

Economic
Performance
 Performance effects?
Triple Bottom-line performance
Planet – The environmental account,
measured by environmental impact of the
operation.

People – The social Sustainability Profit – The economic

account, measured by account, measured by
the impact of the profitability, return on
operation on the quality assets, etc. of the
of people’s lives. operation.

(Source: Slack, Brandon-Jones and Johnston, 2013, p.40)

How can operations impact on TBL performance?
• Recyclability of materials, energy consumption and waste material generation
• Reducing transport-related energy
• Noise pollution, fume and emission pollution
• Obsolescence and wastage
• Environmental impact of process failures
• Recovery to minimize impact of failures

Planet – The environmental account,

measured by environmental impact of the
operation.

People – The social Sustainability Profit – The economic

account, measured by account, measured by
the impact of the profitability, return on
operation on the quality assets, etc. of the
of people’s lives. operation.
How can operations impact on TBL performance?
Planet – The environmental account, measured
by environmental impact of the operation.

People – The social Sustainability Profit – The economic

account, measured by the account, measured by
impact of the operation on profitability, return on
the quality of people’s assets, etc. of the
lives. operation.

• Customer safety from products and services

• Employment impact of an operation’s location
• Employment implications of outsourcing
• Repetitive or alienating work
• Staff safety and workplace stress
• Non-exploitation of developing country suppliers
How can operations impact on TBL performance?
Planet – The environmental account,
measured by environmental impact of the
operation.

People – The social Sustainability Profit – The economic

account, measured by the account, measured by
impact of the operation on profitability, return on
the quality of people’s assets, etc. of the
lives. operation.

• Cost of producing products and services

• Revenue from the effects of quality, speed, dependability and
flexibility
• Effectiveness of investment in operations resources
• Risk and resilience of supply
• Building capabilities for the future
 Operations: Transformation Model
Inputs Process Outputs

Raw materials Design Customer

Energy Operating Systems Goods
People Control Services
Machines Quality
Fixed Assets Timely delivery
Information
Firm
Profits
Objectives
Information
Feedback to modify inputs, change
Employee
the input mix, change the process,
Wages
make improvements.
Satisfaction
Security
“Concerned with all the activities involved in making a
product or providing a service. It is responsible for the Undesired Outputs
transformation of various kinds of inputs into useful (and Financial losses
sometimes waste) outputs.” (Slack et al, 2016, p6) Pollution
 Summary
• Outcome measures are not enough
• Process measures help
• Make it balanced!
• Use measurement to drive the business towards
its strategic objectives