1. Strategy and Sustainability
Chapter 2
Strategy and Sustainability

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.

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
LO 1

4. Triple Bottom Line
LO 1

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
LO 1

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
LO 2

7. Closed-Loop Strategy Process

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
LO 2

9. Competitive Dimensions
Price: make the product or deliver the service less expensively
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
LO 2 4

10. Other Product-Specific Criteria
Technical liaison and support
Meeting a launch date
Supplier after-sale support
Environmental impact
Other dimensions
LO 2

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
LO 2 5

12. Order Qualifiers and Winners Defined
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
LO 3 6

13. Service Breakthroughs
A brand name car can be an “order qualifier”
Repair services can be “order winners”
Examples: Warranty, Roadside Assistance, Leases, etc

14. Strategic Fit: Fitting Operational Activities to 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
LO 4

15. Mapping Activity Systems at IKEA
LO 4

16. 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
LO 5

17. 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:
Partial measures: output to one input
Multifactor measures: output to a group of inputs
Total measures: output to all inputs
LO 5

18. Examples of Productivity Measures
LO 5

19. Partial Measures of Productivity
LO 5

20. How Does Wall Street Evaluate Operations 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
LO 6

21. Efficiency Measures Used by Wall Street
LO 6