Chapter 2 Supply Chain Management


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University of Toledo BUAD 3020

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  • Chapter 2 Supply Chain Management

    1. 1. Chapter 2 Strategy and SustainabilityMcGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
    2. 2. Learning Objectives • Compare how operations and supply chain strategy relates to marketing and finance. • Understand the competitive dimensions of operations and supply chain strategy. • Identify order winners and order qualifiers. • Understand the concept of strategic fit. • Describe how productivity is measured and how it relates to operations and supply chain processes. • Explain how the financial markets evaluate a firm’s operations and supply chain performance. 2-2
    3. 3. A Sustainable Strategy • Shareholders: Those individuals or companies that legally own one or more shares of stock in the company • Stakeholders: Those individuals or organizations who are influenced, either directly or indirectly, by the actions of the firm 2-3
    4. 4. Triple Bottom Line 2-4
    5. 5. Triple Bottom Line Continued • Social: pertains to fair and beneficial business practices toward labor, the community, and the region in which a firm conducts is business • Economic: the firm’s obligation to compensate shareholders who provide capital via competitive returns on investment • Environmental: the firm’s impact on the environment 2-5
    6. 6. What is Operations and Supply Strategy? • Operations and supply strategy: setting broad policies and plans for using the recourses of a firm to best support its long-term competitive strategy – Part of a planning process that coordinates operational goals with those of the larger organization • Operations effectiveness relates to the core business processes needed to run the business 2-6
    7. 7. Closed-Loop Strategy Process 2-7
    8. 8. Closed-Loop Strategy Process Continued • Activity 1 is performed at least yearly and is where the overall strategy is developed • Activity 2 is where the overall strategy is refined and updated as often as four times a year • Activity 3 is where operational plans that relate to functional areas such as marketing, manufacturing, and so on, are coordinated 2-8
    9. 9. Competitive Dimensions • 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 2-9
    10. 10. Other Product-Specific Criteria 1. Technical liaison and support 2. Meeting a launch date 3. Supplier after-sale support 4. Environmental impact 5. Other dimensions 2-10
    11. 11. Dealing with Trade-offs • For example, if we reduce costs by reducing product quality inspections, we might reduce product quality • For example, if we improve customer service problem solving by cross- training personnel to deal with a wider- range of problems, they may become less efficient at dealing with commonly occurring problems 2-11
    12. 12. Order Qualifiers and WinnersDefined • Order qualifiers: the basic criteria that permit the firms products to be considered as candidates for purchase by customers • Order winners: the criteria that differentiates the products and services of one firm from another 2-12
    13. 13. Strategic Fit: Fitting Operational Activitiesto Strategy • All the activities that make up a firm’s operation relate to one another • To be efficient, must minimize total cost without compromising on customer needs • Activity-system maps show how a company’s strategy is delivered through a set of tailored activities 2-13
    14. 14. Mapping Activity Systems at IKEA 2-14
    15. 15. Productivity Measurement • Productivity is a common measure of how well an organization is using its resources – Fundamental to understanding operations- related performance • In its broadest sense productivity is outputs divided by inputs – To increase productivity, we want to make this ratio as large as practical 2-15
    16. 16. Productivity Measurement Continued • Productivity is a relative measure – Can be compared with similar operations within its industry – Can be compared over time • Productivity may be expressed as: 1. Partial measures: output to one input 2. Multifactor measures: output to a group of inputs 3. Total measures: output to all inputs 2-16
    17. 17. Examples of Productivity Measures 2-17
    18. 18. Partial Measures of Productivity 2-18
    19. 19. How Does Wall Street EvaluateOperations Performance? • Comparing firms from an operations view is important to investors – Earnings growth is a function of profitability – Profits can increase through higher sales or lower costs – Highly efficient firms shine during recession periods • When evaluating large productivity, it is important to look for unusual explanations – Want to avoid one-time events 2-19
    20. 20. Efficiency Measures Used by Wall Street 2-20