Chapter

2 - Opera/ons and
Supply Chain Strategy
Opera,ons Management in the Supply Chain
by

Roger G. Shroeder
6th Edi/on McGraw-Hill 2013

Wiley 2010 1
 Opera/on Strategy

Is a consistent paEern of
decisions for opera/ons and the
associated supply chain that are
linked to the business strategy
and other func/onal strategies,
leading to a compe//ve
advantage for rm
 What Is a Supply Chain?
Flow of products and services from:
Raw materials manufacturers
Intermediate products manufacturers
End product manufacturers
Wholesalers and distributors and
Retailers
Connected by transporta/on and storage
ac/vi/es
Integrated through informa/on, planning, and
integra/on ac/vi/es
Cost and service levels
 supply chain
The network of manufacturing and service opera/on
that supply one another from raw material through
produc/on to the ul/mate customer.
The supply chain consists of the physical ow of
materials, money, and informa/on along the en/re
chain of purchasing, produc/on and distribu/on.
Ac/ve management of supply chain ac/vi/es and
rela/onships to maximize customer value and
achieve a sustainable compe//ve advantage

 The Value Chain and Its Support Func/ons

Exhibit 1.10
The McGraw-Hill Companies, Inc., 2003
Fundamentals of Opera/ons
15
Management 4e
 Strategies for Compe//ve Advantage
Dieren/a/on a unique and frequently
innova/ve new product or service
Cost leadership low cost in commodity
markets
Focus focus refers to the geographical or
product por^olio being narrow or broad in
nature
Michael Porter (1980)

Response rapid response
 Strategy
Ac/on plan to achieve
mission
Func/onal areas have
strategies
Strategies exploit
opportuni/es and
strengths, neutralize
threats, and avoid
weaknesses
Opera,on Strategy
Process
 Corporate and Business Strategy

Corporate strategy views the organiza/on as a

system of interconnected parts, each working
with the others to achieve desired goals.

Business Strategy follows from the corporate
strategy and denes how each par/cular
business will compete.

 Opera,ons Strategy
Opera/ons strategy consists of mission,
objec/ves, strategic decisions and dis/n/ve
competence, which are integrated with one
another and with other func/ons.
Supports the corporate strategy and business
strategy requires con/nuous cross-func/onal
interac/on.
The opera/ons strategy should be customer
driven.
 Opera,ons Mission
The opera/on mission should be aligned with the
business strategy.
The opera/ons mission include :
- low cost,
- fast new product introduc/on,
- exibility to adapt product to changing
market need.
- fast delivery,
- best quality,
 Opera,ons Objec,ves
The four common objec/ves of opra/on :
1. Cost is a measure of the resourcher used by opera/on
(unit cost of produc/on, Cost of goods sold)
2. Quality is the conformance of the product or service to
the customers requirements.
3. Delivery is providing the product or service quickly and
on /me.
4. Flexibility is the ability to rapidly change opera/on.
Typical Opera/on Objec/ves
 Strategic Decisions
Opera/on strategic decision indicate how
opera/on objec/ves will be achieved.
Strategic decision of major decision area :
1. Process
2. Quality system
3. Capacity
4. Inventory
In designing new opera/ons, trade-o choices in
opera/ons are required.
Examples of Important Strategic decision in opera/on
 Dis,nc,ve Competence
The dis/nc/ve competence of opera/ons should
support the mission and dieren/ate opera/ons
from its compe/tors.
Possible dis/nc/ve competencies include :
- proprietary technology,
- embedded organiza/on culture,
- available capacity inventory,
- any innova/on in opera/ons that cannot be
copied easily.
Strategic Alterna/ves
 Supply Chain Strategy
The scope of opera/ons and supply chain startegy
has expanded to a global basis, par/cularly for
business pursuing a global business strategy.
Supply chain strategy is an extension of opera/ons
strategy that considera/on not only the rm but
also the strategies and capabili/es of its supply
chain partners.
Supply Chain Strategy