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Operations and Materials Management. What We Will Discuss:. Competitive Advantage Value Chain . Overview. Competitive Advantage Requires a Focus on: Productivity Quality Innovation Customer Responsiveness. Productivity. More effective use of resources Lower inventory holding costs

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Presentation Transcript

What we will discuss
What We Will Discuss:

  • Competitive Advantage

  • Value Chain


  • Competitive Advantage Requires a Focus on:

    • Productivity

    • Quality

    • Innovation

    • Customer Responsiveness


  • More effective use of resources

  • Lower inventory holding costs

  • Reduced time to process customer orders


  • Find ways to improve product quality

  • Find ways to reduce production costs

  • Find ways to sell products at a lower cost

Responsiveness to customers
Responsiveness to Customers

  • High quality customer service

  • Satisfying shopping experience

  • Good after-sales service

Increase quality
Increase Quality

  • Number of customer orders correctly processed

  • Consistent, reliable products

  • Ensure supply of high quality inputs

  • Two types of quality and their relationship to costs

    • Quality of performance

    • Quality of conformance

Approaches to gain competitive advantage
Approaches to Gain Competitive Advantage

  • Increasing emphasis on balancing financial side and human/creative/socially responsible side of organizational strategy

  • Different metrics to evaluate success than in the past

  • Examples:

    • Six Sigma

    • Balanced Scorecard

    • Blue Ocean Strategy

Six sigma
Six Sigma

  • What is Six Sigma?

  • According to iSixSigma (www.isixsigma.com), Six Sigma is:

    • a measure of quality that strives for near perfection

    • a data-driven, quantitative approach and methodology for eliminating defects in any process: manufacturing, transactions, products, & services

Six sigma cont d
Six Sigma (cont’d.)

  • A successful Six Sigma process produces no more than 3.4 defects per million opportunities

  • A defect is defined as anything outside of customer specifications

  • Six Sigma processes are executed by Six Sigma “Green Belts” (team leaders who implement process improvement projects) & “Black Belts” (successful project leaders who are credentialed through an exam and are skilled in the use of Six Sigma methodology & tools)

The balanced scorecard kaplan norton
The Balanced Scorecard (Kaplan & Norton)

  • A strategic management system that drives performance and accountability throughout the organization

  • Balances traditional performance measures with forward-looking indicators in four “perspectives”.

The balanced scorecard s four perspectives
The Balanced Scorecard’s Four Perspectives

1. Financial perspective

  • Among the four perspectives, organizations generally place the greatest emphasis on financials

  • Financial results ultimately are the primary driver of a firm’s decisions

    2. Customer perspective

  • Customer focus, customer satisfaction

  • Customers need to be happy. If customers aren’t happy, they’ll go to other suppliers

3. Business perspective

  • How well the business is running

  • Do products, services conform to customer requirements?

    • Ex: downloading music - major record labels resisted change by arresting casual music downloaders vs. partnering with Napster, Amazon, etc. to create new distribution models

      4. Learning and growth perspective

  • Employee training

  • Corporate cultural attitudes toward self-improvement

  • Knowledge environment: people are a firm’s most important resource

  • Metrics: You can’t improve what you can’t measure

  • Environment of uncertainty, ambiguity and change: workers must continually learn

    • Mentors

    • Tutors

    • Communication & sharing info: break out of functional silos

Blue ocean strategy kim mauborgne
Blue Ocean Strategy (Kim & Mauborgne)

  • Demand is created through innovation, not fought over

  • Concept of developing new, uncontested market space, rather than competing in existing markets

  • Ample growth that is rapid & profitable

  • Not based on stealing customers in existing market

  • Makes competition irrelevant. Ex:

    • Curves Fitness Centers vs. Bally’s

      • A Curves customer will never consider joining Bally’s

      • Represents a different demographic - women, older, not “skinny”.

      • How does Curves meet the needs of its demographic? Fitness equipment faces inward to encourage conversation & encouragement, rather than individuals facing mirrors & using iPods

    • Cirque de Soleil (circus for adults, not kids; expensive, Las Vegas environment, etc.)

    • Southwest Airlines, Virgin Airways (fun, low cost, customer gets involved)

Blue ocean vs red ocean strategy
Blue Ocean vs. Red Ocean Strategy

  • The Red Ocean Strategy:

    • Competes in an existing market

    • Focuses on “beating the competition”

    • Exploits existing demand

    • Aligns the firm’s activities with a strategic choice of either differentiation or low cost.

  • Vs…

  • The Blue Ocean Strategy:

    • Creates uncontested market space by making competition irrelevant

    • Creates and captures new demand

    • Aligns the firm’s activities with strategic choice of both differentiation and low cost

    • Requires constant innovation; big picture thinking; new type of strategic leaders across organization