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McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved 1-1


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Chapter 2

Operations and Supply Strategy

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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

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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.

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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

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Dealing with Trade-offs

For
For example,
example, ififwe
wereduce
reducecosts
costs by
byreducing
reducingproduct
product
quality
qualityinspections,
inspections,we
wemight
mightreduce
reduceproduct
productquality.
quality.

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

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Operations and Supply Strategy Framework

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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

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Total Measure Productivity

Total Measure Productivity = Outputs


Inputs

or
= Goods and services produced
All resources used

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Partial Measure Productivity

Partial measures of productivity =

Output or Output or Output or Output


Labor Capital Materials Energy

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Multifactor Measure Productivity

Multifactor measures of productivity =

Output .
Labor + Capital + Energy

or

Output .
Labor + Capital + Materials

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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.

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End of Chapter 2

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