Operations and Supply Strategy

Chapter 1

10 seconds break
Close your eyes
Keep silent

Notice

If you choose English exercise option

Join a study group

Memorize two sentences everyday

Meet once a week One student (in turn) give out quizzes for 14 sentences : 10 sentences with one blank (one or two vocabulary for each blank), produce score 0-10 submit the score of each member and test sheets once a month Any group submitting wrong score gets F grade Share knowledge of studying English.
Every morning print two sentences Memorize sentences while you are walking or you are on a bus

Write down your name in the seat sheet

IKEAs Bang mug

IKEA: Swedish furniture retailer Success factor: Good quality at a low price Redesign of Bang mug
3 times so far Not because of its design But for storage amount

# of mugs on a pallet: 864 -> 2024

60% of shipping cost has been saved

OSM

OSM is

Doing work which has value to customers (e.g.

works relevant to producing goods sellable to customers) about getting work done

quickly, efficiently, without error, at low cost with lower inventory.

Operations: the processes that are used to transform resources into products and services Supply: how materials and services are moved to and from the processes

OM vs. OSM

Topics in OSM

Transformation processes (design, types, capacity, quality) in various production and service industries How the operations are supplied
Input side: parts and raw materials supply Output (or customer) side: finished good

distribution Related topics: Location, Sourcing and outsourcing, Managing the supply inventories

Importance of OSM

Saving $1 results in extra $1 profit! Providing services and products at low cost and at a customers expected quality level is essential for business success. IKEA is a good model of operations and supply efficiency.

Progressive Insurance

An automobile insurance company

11-fold growth in over a decade
3rd largest insurer Combined ratio around 96 percent

Secret of success
Out-operated its competitors with lower

prices and better services

Immediate Response claims handling Compare rates via phone and Web

Efficiency and Effectiveness

Efficiency: doing something at the lowest possible cost Effectiveness: doing the right things to create the most value for the company Trade-off between efficiency and effectiveness

Value

Value: can be defined as quality divided by price Increasing value

Better quality at the same price Lower price at the same quality

Why study OSM?

Systematic Approach to Org. Processes

Complete Business Education

Operations And Supply Management

Career Opportunities

Cross-Functional Applications

America Wests new boarding system

OSM definition

OSM: the design, operation, and improvement of the systems that create and deliver the firms primary products and services. OSM is a field of management

Scope of OSM

OSM is concerned with the management of the entire system. OSM is concerned with managing all of these individual processes as efficiently and effectively as possible

Operations and Supply Strategy

Operations and supply strategy is concerned with

setting broad policies and plans for using the resources of a firm

to best support its long-term competitive

strategy

Strategy and OSS

OSS is comprehensive through its integration with corporate strategy OSS involves decisions about
the design of a process

Selecting technology Sizing the process over time Role of inventory in the process Locating the process

the infrastructure

Planning and control system logics Quality assurance and control Work payment structures Organization of the operations function

OSS in Strategy Process

Strategy Process
Customer Needs

Example
More Product

Corporate Strategy

Increase Org. Size

Operations and Supply Strategy Decisions on Processes and Infrastructure

Increase Production Capacity

Build New Factory

Competitive Dimensions

Cost or Price: Make the Product or Deliver the Service Cheap

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 Other Criteria: Support It

Trade-offs

Operation cannot excel on all dimensions simultaneously.

Delivery speed Flexibility Low-cost Delivery speed, Flexibility, High

quality

A strategic position is not sustainable unless there are compromises with other positions

Straddling

Straddling occurs when a company seeks to match the benefits of a successful position while maintaining its existing position Continental Airlines failure
Launching new service Continental Lite while

maintaining a full-service airline.

Order Winners & Order Qualifiers

The Marketing-Operations Link

Order Winners: the criteria that differentiates

the products and services of one firm from another

Order Qualifiers: the basic criteria that permit

the firms products to be considered as candidates for purchase by customers

Order Winners and Order Qualifiers may change over time

Terry Hill

Fitting Operational Activities To Strategy

Strategic Fit:

A combination of operational activities affects a companys strategy. Need to find connections between operational activities and strategic positions of a company
Activity-system maps Can be useful in understanding how good the fit is

Fitting Operational Activities To Strategy

Strategic Fit:

A Framework For Operations and Supply Strategy

The Strategic Vision

Target market
A target market must be chosen

Core capabilities
Skills that differentiate the service or

manufacturing firm from its competitors

Evaluating Operational Performance

Summary

OSM (Operations and Supply Management)

Definition
Importance (success of the firm)

OSS (Operations and Supply Strategy)

Strategy of the firm and OSS
Operational competitive dimensions Order winners and qualifiers Strategic fit between operations and supply

activities & competitive priorities of the firm

Summary

IKEA
New integrated process

Progressive
Internet and mobile network

Harley-Davidson
Offering many options

Summary

For a firm to remain competitive, all of the operational activities must buttress the firms strategy. Companies that are strong operationally are able to generate more profit for each dollar of sales, thus making them attractive investments.