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McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 Chapter 2

Operations and Supply Strategy

 2-3

OBJECTIVES
• Operations and Supply Strategy
• Competitive Dimensions
• Order Qualifiers and Winners
• Strategy Design Process
• A Framework for Manufacturing Strategy
• Service Strategy Capacity Capabilities
• Productivity Measures
 2-4

What is Operations and Supply Strategy?

• Operations and supply strategy is

concerned with setting broad
policies and plan for using the
resources of a firm to best support
its long-term competitive strategy.
 2-5

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 Product-Specific Criteria
– Support It
 2-6

Dealing with Trade-offs

For
Forexample,
example,ifif we
wereduce
reducecosts
costsbybyreducing
reducingproduct
product
quality
qualityinspections,
inspections,we
wemight
might reduce
reduce product
product quality.
quality.

For
Forexample,
example,ifif we
we
improve
improvecustomer
customer Cost
service
serviceproblem
problemsolving
solving
by
bycross-training
cross-training Flexibility Delivery
personnel
personneltotodeal
dealwith
withaa
wider-range
wider-rangeofof Quality
problems,
problems,they
theymay
may
become
becomeless
lessefficient
efficient at
at
dealing
dealingwith
withcommonly
commonly
occurring
occurringproblems.
problems.
 2-7

Order Qualifiers and Winners

Defined

•Order qualifiers are the basic

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

•Order winners are the criteria that

differentiates the products and
services of one firm from another
 2-8

Operations and Supply Strategy Framework

 2-9

What is Productivity?
Defined

Productivity is a common
measure on how well resources
are being used. In the broadest
sense, it can be defined as the
following ratio:
Outputs
Inputs
 2-10

Total Measure Productivity

Total Measure Productivity = Outputs

Inputs

or
= Goods and services produced
All resources used
 2-11

Partial Measure Productivity

• Partial measures of productivity =

• Output or Output or Output or Output

Labor Capital Materials Energy
 2-12

Multifactor Measure Productivity

Multifactor measures of productivity =

Output
Labor + Capital + Energy

or

Output
Labor + Capital + Materials
 2-13

Example of Productivity Measurement

• You have just determined that your service

employees have used a total of 2400 hours of
labor this week to process 560 insurance
forms. Last week the same crew used only
2000 hours of labor to process 480 forms.
• Which productivity measure should be used?
• Answer: Could be classified as a Total
Measure or Partial Measure.
• Is productivity increasing or decreasing?
• Answer: Last week’s productivity = 480/2000 =
0.24, and this week’s productivity is =
560/2400 = 0.23. So, productivity is
decreasing slightly.
 2-14

Question Bowl

An operations and supply strategy is

concerned with which of the
following?
a. Setting specific policies and plans
b. Short-term competitive strategies
c. Coordination of operational goals
d. All of the above
e. None of the above
Answer: c. Coordination of operational
goals
 2-15

Question Bowl

Typically a strategy breaks down

into what major components?
a. Operations effectiveness
b. Customer management
c. Production innovation
d. All of the above
e. None of the above

Answer: d. All of the above

 2-16

Question Bowl

A criterion that differentiates the

products and services of one firm
from another can be which of the
following?
a. An order qualifier
b. An order winner
c. PWP
d. KPI
e. None of the above

Answer: b. An order winner

 2-17

Question Bowl

A travel agency processed 240 customers on

Day 1 with a staff of 12, and 360 customers
the on Day 2 with a staff of 15. What can be
said about the productivity shift from Day 1 to
Day 2?
a. An increase in productivity from Day 1 to Day 2
b. A decrease in productivity from Day 1 to Day 2
c. The same productivity from Day 1 to Day 2
d. Can not be computed from data above
e. None of the above

Answer: a. An increase in productivity from Day 1 to Day

2(Day 1 productivity = 240/12=20
Day 2 productivity = 360/15=24)
 2-18

End of Chapter 2