Operations and

Supply Chain
Strategies

Chapter 2, Slide 1
Group task (20 mins working time)
• Identify a supply chain for a chosen company.

• Visually present the end-to-end supply chain in an interesting way (link to file, graphic,
table, chart)

Add your example to the padlet wall

• https://padlet.com/johnwideman/8dc8xip9huuvfmcr

• Be prepared to briefly explain the Supply chain and its partners components (choose a
spokesperson) 

Chapter 2, Slide 2
 Chapter Objectives

Be able to:
Explain the relationship between business and functional strategies and the difference
between structural and infrastructural elements.
Describe some of the main operations and supply chain decision categories.
Explain the customer-value concept and calculate a value-index score.
Differentiate between order winners and qualifiers. Explain why this difference is
important to developing operations and supply chain strategy.
Discuss the concept of trade-offs and give an example.
Define core competencies and give an example of how they can be used in the
operations and supply chain areas for competitive advantage.
Explain the importance of strategic alignment and describe the four stages of alignment
between the operations and supply chain strategy and the business strategy.

Chapter 2, Slide 3
 Business Elements

Structural Infrastructural
Difficult to change: Relatively easy to
• Buildings change:
• Equipment • People
• Computer systems • Policies
• Other capital assets • Decision rules
• Organizational structure

Chapter 2, Slide 4
 Definitions
• Business Strategy

Long-term master plan for the company; establishes

the general direction
• Functional Strategies
Further develop the business strategy in segments
of the business — must be aligned and coordinated
• Core Competencies
Organizational strengths that provide focus and
foundation for the company’s strategies

Chapter 2, Slide 5
A Top-Down Model of Strategy

Figure 2.1
Operations and
Supply Chain Strategies
The operations and supply chain strategy is a functional strategy that indicates how the
structural and infrastructural elements within the operations and supply chain areas will be
acquired and developed to support the overall business strategy.

• What mix of structural and infrastructural elements ?

• Is the mix aligned with the business strategy?

• Does it support the development of core competencies?

Functional Strategy
• Translates the business strategy into functional terms.

• Assures coordination with other areas.

• Provides direction and guidance for operations and supply chain decisions.

Chapter 2, Slide 8
 Decisions Guided by the Structural Strategy

Capacity Size?
Timing?
Type?
Facilities Size?
Location?

Technology Equipment?
Processes?
Information systems?
Vertical Direction?
Extent?
Integration
Chapter 2, Slide 9
 Decisions Guided by the Infrastructural Strategy

Organization Control/reward systems?

Centralization/decentralization?
Workforce – skilled/semi-skilled?
Sourcing and Supplier selection/performance metrics?
Purchasing Procurement systems?
Sourcing strategy?
Planning and Forecasting?
Control Inventory management?
Production planning/control?
Process and Quality Continuous improvement processes?
Business process management
SPC/Six Sigma
Product and Service Development process?
Design Organization/supplier roles?
Chapter 2, Slide 10
A starting point for SC strategy is ………….. (any
guesses??)

Chapter 2, Slide 11
 Customer Value
• Value Analysis - A process for assessing the value of a product or
service.

A measure that uses the performance and

• Value Index -

importance scores for various dimensions of performance

for an item or a service to calculate a score that indicates
the overall value of an item or a service to a customer.
 Value Analysis
• A process for determining the best choice when there are no unambiguous formulas for doing
so.
• Helps maintain focus in gathering and assessing relevant data.

(also called a preference matrix).

E.g:
Choosing which home to buy or apartment to rent
Picking a location for a new factory
Selecting the best person for a new position
Deciding which supplier to use other than for lowest price
Deciding which features to include in a new product

Chapter 2, Slide 13
 Value Index Determination

N
V   I n Pn
n 1
Where:
In = Importance of value dimension (criteria) n
Pn = Performance of candidate with regard to dimension n
N = total number of value dimensions evaluated
(Higher values represent higher importance or performance)
Chapter 2, Slide 14
 Value Analysis – Thoughts

Requires definition of criteria and their importance

beforehand to avoid bias
It is useful if the importance or weighting values add
up to 100%
A threshold score can set by evaluating the current
situation, if it exists, using the selected analysis criteria
Requires careful definition of scoring values for
performance assessment (highest value represents most
desirable result)

Chapter 2, Slide 15
 Why???

• Encourages identification of less important factors.

• A higher score to reflect the more desirable outcome and to avoid
biasing a choice.
• A potential problem that can be solved by eliminating any
alternative that fails to meet the minimum acceptable score for that
criterion.

= SC optimisation

Chapter 2, Slide 16
Value Analysis:
Introduce new product?
Threshold score = 720

Performance Importance Score Value

Criteria (A) (B) (A x B)
Market potential 30
Unit profit margin 20
Operations compatibility 20
Competitive advantage 15
Investment requirement 10
Project risk 5
100%

Chapter 2, Slide 17
 Value Analysis:
Introduce new product?
Threshold score of current product = 720

Performance Importance Score Value

Criterion (A) (B) (A x B)
Market potential 30 6
Unit profit margin 20 10
Operations compatibility 20 6
Competitive advantage 15 10
Investment requirement 10 3
Project risk 5 4

Chapter 2, Slide 18
Value Analysis:
Introduce new product?
Threshold score = 720

Performance Importance Score Value

Criterion (A) (B) (A x B)
Market potential 30 6 180
Unit profit margin 20 10 200
Operations compatibility 20 6 120
Competitive advantage 15 10 150
Investment requirement 10 3 30
Project risk 5 4 20

Value Index = 700

Not at this time!

Chapter 2, Slide 19
Four Performance Dimensions

Quality
Time
Flexibility
Cost
Four Performance Dimensions

•Quality
• Performance Quality – The basic operating characteristics of the product or service.

• Conformance Quality – Was the product made or the service performed to

specifications?

• Reliability Quality – Will a product work for a long time without failing?
Four Performance Dimensions

•Time
• Delivery Speed - The ability for the operations or supply chain function to quickly
fulfill a need once it has been identified.

• Delivery Reliability – The ability to deliver products or services when promised.

Four Performance Dimensions

•Flexibility
• Mix Flexibility – The ability to produce a wide range of products or services.

• Changeover Flexibility – The ability to produce a new product with minimal delay.

• Volume Flexibility – The ability to produce whatever volume the customer needs.
Four Performance Dimensions

•Cost
• Labor costs

• Material costs

• Engineering costs

• Quality-related costs
 Order Winners and Qualifiers
•Winners:
 Differentiators — performance not yet duplicated by
competitors
 Competitive advantage — performance better than all
or most of the competitors
•Qualifiers
 Minimum acceptable level of performance

Over time, Differentiators   Winners   Qualifiers as

competition intensifies.

Chapter 2, Slide 25
 The Idea Behind Prioritizing:

“Best in
Class”

Minimum
Needs

Cost Design Speed Flexibility

Quality
Chapter 2, Slide 26
 Comparing Two Software Development Firms

“Best in
Class”

Minimum
Needs

Cost Design Speed Flexibility

Quality
Chapter 2, Slide 27
 Measurements
• Performance against:

Customer needs
Business objectives or standards
• Comparisons to competitors

• Comparisons to “best in class.”

Chapter 2, Slide 28
 Priority Trade-Offs
• Generally very difficult to excel at all four performance dimensions.
• Some common conflicts
• Low cost versus high quality
• Low cost versus flexibility
• Delivery reliability versus flexibility
• Conformance quality versus product flexibility

Chapter 2, Slide 29
Stages of Alignment between Supply
Chain and Operations Strategies

Neutral Supportive
Stage 2 Stage 4
External Industry Practice Actively Engaged

Stage 1 Stage 3
Internal Not linked Participation
(Closing the loop)

Chapter 2, Slide 30
Stages of Alignment Between Supply Chain
and Operations Strategies
• Stage 1 – Internally neutral
• Minimize negative potential in the operations and
supply chain areas.
• Stage 2 – Externally neutral
• Follow industry practice.
• Stage 3 – Internally supportive
• Align structural and infrastructural elements with
business strategy.
• Stage 4 – Externally supportive
• Seek to exploit core competencies.
 Closing the Loop Between Business Strategy
and Functional Area Strategies

Figure 2.5
 Individual task / Homework

Go to this link and read the following chapter:

https://www.pearsonhighered.com/content/dam/region-na/us/higher-ed/en/pro
ducts-services/course-products/foster-1e-info/pdf/sample-chapter--ch02.pdf

Navigate to Moodle and find the Forum entitled ” 2. Supply chain strategy
Glossary - (Homework)”

Choose one term/concept/definition contained within the chapter and include

in the forum as a message. Try to paraphrase to ensure you have fully
understood the concept (rather than CTRL C and CTRL V) .

DO NOT repeat concepts already in the forum, find a unique concept!

Chapter 2, Slide 33
Thanks!

Chapter 2, Slide 34