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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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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