Operations
management contemporary concepts and cases 5th e by Schroeder solutions
manual and test bank
Operations
and Supply Chain Strategy
Teaching Notes
This chapter reflects the increasing importance of Operations
and Supply Chain Strategy in today's business environment. The model of Operations Strategy developed by
Schroeder, Anderson, and Cleveland is discussed. Other materials by Porter, Skinner, Hayes and
Wheelwright, and Hill, add definition to the concept of Operations and Supply
Chain Strategy and fortify the argument for its relevance.
The chapter is exciting to students who may think of
operations as nitty gritty or low level material while the important strategic
issues are left to marketing and finance.
The chapter shows how operations can become a "competitive
weapon" of the firm by strategic support of the firm's distinctive
competence. The concepts of multiple
objectives and response to external factors are presented. Linkage of functional strategies and global
operations concerns are also addressed along with supply chain strategies.
Chapter 2 serves an integrating purpose for the book. It can
be taught either at the beginning or at the end of the course depending on
whether one wishes to start or end with a strategic theme. I have personally
used the chapter both ways.
This chapter is also well received by executives and
experienced managers. For many of them,
it represents a new way to view operations and supply chains. The articles by Skinner (1969); Clark (1996);
Ahmad and Schroeder (2002) provide good background reading for the
chapter. The books by Hill (2000) and
Hayes, et al. (2005) contain details of operations strategy.
Answers to Questions
1. The reasons for formulating and
implementing an operations and supply chain strategy include:
To renew
emphasis on operations and the supply chain:
the fundamental creation of value for the customer,
To assure
consistency between the operations and supply chain strategy and the business
strategy,
To enable
the use of operations and supply chain capabilities as a competitive force in
the business.
2. a. Ambulance Service:
Mission --
To provide immediate, quick, and safe transportation for ill or injured people
and a high level of medical care from the ambulance crews. Availability must be very high and costs must
not be excessive.
Associated
Strategies -- A central location near a main freeway to insure fast service, a
knowledgeable and well-trained staff, excellent vehicle maintenance, high
capacity relative to use.
b. Production of hybrid automobile
batteries:
Mission --
To provide environmental friendly automobile batteries for the sustainability
of the environment and reduce energy consumption to meet market demand.
Associated
Strategies – Forming cross-functional teams with suppliers and environmental
interests to measure and reduce the environmental impact in all phases of
design, manufacturing, and distribution of the hybrid batteries.
c. Production of electronics products
that have a short product life cycle:
Mission --
To be first or one of the first to provide an electronics product to the market
at reasonable cost and quality levels.
Associated
Strategies -- Use of new product introduction teams, flexible manufacturing
processes, high R & D budgets, hire people who are willing to take
reasonable risks (innovators).
Note: Many different missions and associated
strategies could be used.
3. a. No, the business does not have an
operations strategy since it can be inferred from the operations manager
complaint that the operations function was not included in the planning
process.
b. The operations manager should write a
memo to the chief executive and other officers of the corporation informing
them of the concerns of the operations function and solicit their appropriate
actions to address the concerns. He/she
should also work with the managers of the other functional areas and take an
active role in strategy formulation and decision making.
4.
Mission of
operations: The mission of operations
defines the role of operations within the total business strategy: how operations fit into the overall business
plan. The mission should state the
relative priority among the operations objectives: cost, quality, delivery, and
flexibility.
Order Winner/Order Qualifier: A high level of performance (C, Q, D, F) on
the order winner is required to get the order.
An order qualifier is a minimum level of performance required to be
considered for the order. A high level
on an order qualifier will not win the order, only high performance on the
order winner itself can win the order.
Distinctive competence: The distinctive competence of operation is
what operations must excel at relative to the competition to provide competitive
advantage. It is generally not possible
to excel on several different dimensions:
thus the distinctive competence of a firm requires focus.
5. To determine if a company has an
operations and supply chain strategy, study the decisions that have been
made. If a consistent pattern of
decision-making exists, then there is an operations strategy present, stated or
unstated, in the firm.
Specifically, information about the
four decision categories, process, quality, capacity, and inventory would be
required. Questions such as the
following could be used to obtain information:
What are
the most important characteristics of a new process? Quality produced by the process? Capacity of the process? Flexibility of the process? Amount of training required for the work
force to operate the process?
Is
capacity acquired after demand materializes?
Ahead of demand?
Is
inventory built up to prevent layoffs?
To delay the addition of additional capacity?
What is
the company policy on hiring and layoffs?
On training of employees at various levels? On the level of compensation relative to the
competition?
The answers to these and other
questions should be analyzed for internal consistency. If an operations and supply chain strategy
exists, it can be deduced from the consistent pattern of decision-making it
produces.
Another test for an operations and
supply chain strategy is the presence of a written plan that has been
implemented in operations. Not only
should the plan be examined, but managers should also be interviewed to insure
they understand the plan and are implementing the strategy through their
everyday decision making.
6. Quality. This would be the primary goal of most
hospitals. Much of the staff is licensed
in their professions, and in-service training is used regularly. Staff-patient ratios are considered
important, and techniques such as peer review, quality committees, and the use
of many kinds of high-tech equipment are used to insure quality of care.
Delivery. This refers to the speed with which a patient
receives care and providing care as promised on time. Delivery also occurs with each service the
patient receives from check-in to checkout.
It is important in hospitals that handle many emergency cases. As consumers take a more active role in
choosing hospitals, delivery is becoming more of a concern.
Flexibility. This is the ability to respond to different
and changing patient needs. Flexibility
implies offering a wide variety of services and the ability to change at a
moment's notice. A current problem with
hospitals is that they stress this objective too much and duplication of
services occurs between hospitals. As a
result there are equipment and services that are sometimes under-utilized. This situation is improving, though, with
regional health planning.
Cost. Until recently, this objective has received
low priority. But with rising costs,
inflation, government pressure and payment of standard fees by public health
programs
and
HMO's, hospitals are under extreme pressure to hold costs down while
maintaining or improving quality. The
cost effectiveness of each objective, including quality, will have to be
demonstrated as it becomes increasingly costly to provide health care.
All departments are not typically
focused on the same objectives. One
department may stress cost control while another stresses quality or
flexibility.
The order winner in a hospital is
typically quality from the patient’s point of view. Delivery, cost and flexibility may be order
qualifiers. An insurance company, on the
other hand may consider cost the order winner and quality, delivery and
flexibility the order qualifiers.
7. Mission emphasizing imitation and
low cost. Strategic decisions
include the level of automation, service levels and inventory policies, store
layout and general appearance, store location, product selection, wage level,
service level at check-out, availability of carry-outs, and service in
aisles.
Mission emphasizing innovation
and quality. Strategic decisions
include service levels, general store appearance, locations of stores, product
selection, freshness, top brand quality, convenience, training of staff,
availability of staff in aisles, carry-out, delivery, check-out service, and
addition of special features such as lobster tanks, a delicatessen, or a
restaurant.
8. a. An airline is affected by many external
factors such as:
. fees
charged by other comparable passenger carriers
. public
perception of safety and service
. general
economic conditions
.
variability of fuel prices
. changes
in government regulations
b. The principal external factors
affecting a bank are:
. the
level of interest rates and the money supply
.
competition from other financial institutions
.
government regulations
. general
economic conditions
c. Semiconductor manufacturing is affected
by external factors such as:
. changes
in patent regulations
. the
demand for computers and other electronic products
. prices
paid to suppliers of plant and equipment
. changes
in micro-chip technology
9. Answers will vary depending on the
students' sources.
10. Students' examples will vary. But, how firms have been able to achieve
these seemingly conflicting results will be more consistent. Their answers will include reasons such as: cutting waste, improving consistency of
quality, using lean principles, automation, etc.
11. Examples of where higher quality costs
more occur in all products including automobiles, clothing, furniture,
etc. The definition of quality in this
case refers to product design
features,
not consistency in producing a given product.
If we use the definition of quality as consistently meeting a given
customer need, then higher quality costs less.
12. a. Starbucks Coffee distinctive
competence is the location of their stores and the unique product line that
they have.
b. Hewlett Packard has a distinctive
competence in the HP Way and in product innovation. The HP Way is how they treat their people
with respect and trust. Product
innovation is pursued to stay ahead of the competition.
c. Burger King has a distinctive
competence that is unique to the industry that focuses on unique service and
required transformation of the traditional supply chain system. They provide
fast and efficient food service.
13. A distinctive competence in operations
provides a basis for providing to customers what is important to them. It gives the company a way to make a
difference from competitors and to attract customers. It provides a means to keep focused on what
is important to the company.
14. One example of a distinctive competence
that can be sustained and not easily duplicated is a particular type of
internal culture that is very customer oriented, as evidenced by companies such
as Nordstroms and IBM. Another example
is the ability to continually introduce new products in companies such as 3M
and Sony. These product innovators
develop internal systems that support continuous new product ideas.
The above
distinctive competencies are hard to duplicate because they rely on internal
values, cultures and systems that are difficult to describe and very path
dependent in their development. These
distinctive competencies cannot be purchased on the open market.
15. Students
examples will vary. Operations and
supply chains must be conceived of as global in nature. A global distinctive
competence should be developed for operations, along with a global mission,
objectives, and strategic decisions. For example, Ford is a company that is
considered to have one of the best world-wide sources of supply. The supply is found regardless of its
national origin. The supply chain is
global in nature. Global design and process technology are used. A basic
product is designed, and whenever possible, it fits global tastes.
16. The
link between the business and operations is through the operations mission. The
operations mission is derived from the business strategy and also should be in
agreement with other functional strategies. If there is misalignment between
the business and operations strategies the company might not be able to give an
adequate response to the market needs.
For example, if a company’s business strategy is operational excellence
(or low-cost producer) and if the operations mission is flexibility, then the
company would not be able to make the right decision on what type of technology
to purchase: for flexible manufacturing, or for large scale manufacturing. Obviously, there is always a trade-off in the
decision-making process. A company
cannot have everything, because of limited recourses. The link between business
and the operations strategy guarantees that the right trade-offs will be
considered.
17. Three examples of supply chains that
compete:
a. An interesting example of competing supply chains is
Apple’s supply chain of suppliers that build components and assemblies of its iPod versus Microsoft’s supply chain
that builds and markets Zune. These portable devices for storing and playing
audio and video files are relatively new, innovative products which currently
compete more on product features and innovations than item cost. In the future,
as this type of device becomes commonplace and innovations are less frequent,
competition will focus more on item price and the supply chains will need to
become cost sensitive.
b. A second
interesting example of competing supply chains would be two grocery firms that
compete within a region of the country such as Kroger and Safeway. Typically,
the basis of competition is low cost as grocers market standardized, mature
items. Take for example a can of green beans. There is little that
differentiates the offering of these two grocers’ own label of green beans
other than price. In this instance, the efficiency of the supply chain in being
able to achieve a low cost per unit offers a distinctive competitive advantage
to consumers.
c. Another
example of competing supply chains for innovative products is Microsoft’s X-Box
versus Sony’s Play Station 3. Currently, these two products are employing the
latest graphic, storage, and web connectivity technology in order to gain a
competitive advantage. Cost is not the primary competitive emphasis, but rather
the product features are what attracts customers. The supply chain for these
two companies needs to be able to embed the state-of-the-art computer
technology within these competing products.
18. The distinctive competence of Wal-Mart
rests on its ability to coordinate a vast network of suppliers and to
efficiently resupply and operate its stores.
This is difficult to duplicate because of its large purchasing power,
its fleet of trucks and warehouses, store locations, and its unique store
culture that involves employees.
The distinctive competence of 3M
rests on its ability to continually develop new products with mass customer
appeal. It is hard to duplicate because
the competence is built on the type of employees hired, the way employees are
rewarded, the pride that 3M takes in new product innovations and the culture of
the company.
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