Productivity Measurement

Productivity is a measure of how well resources are used

Productivity =

Productivity is a relative measure

Must be compared to something else to be meaningful

Operations can be compared to each other

Firms can be compared to other firms

Partial productivity measures compare output to a single input

Multifactor productivity measures compare output to a group of inputs

Total productivity measures compare output to all inputs

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Productivity Calculation

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Operations and Supply Chain Strategy

Setting broad policies and plans for using the resources of a firm – must be integrated with corporate strategy

Corporate strategy provides overall direction and coordinates operational goals with those of the larger organization

Operations effectiveness – performing activities in a manner that best implements strategic priorities at a minimum cost

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Sustainable Strategy

The firm’s strategy describes how it will create and sustain value for its current shareholders

Shareholders (stockholders) – individuals or companies that legally own one or more shares of stock in the company

Stakeholders – individuals or organizations who are directly or indirectly influenced by the actions of the firm

Adding a sustainability requirement means meeting value goals without compromising the ability of future generations to meet their own needs

Triple bottom line – evaluating the firm against social, economic, and environmental criteria

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Triple Bottom Line

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Formulating an Operations and Supply Chain Strategy

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Competitive Dimensions

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Cost

Quality

Delivery Speed

Make the product or deliver the service cheap

Make a great product or delivery a great service

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

Trade-Offs

Management must decide which parameters of performance are critical and concentrate resources on those characteristics

For example, a firm that is focused on low-cost production may not be capable of quickly introducing new products

Straddling – seeking to match a successful competitor by adding features, services, or technology to existing activities

Often a risky strategy

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Order Winners and Order Qualifiers

Order qualifiers are those dimensions that are necessary for a firm’s products to be considered for purchase by customers

Features customers will not forego

Order winners are criteria used by customers to differentiate the products and services of one firm from those of other firms

Features that customers use to determine which product to ultimately purchase

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SC Risk, a Picture

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SC Risk Examples

Japanese Tsunami (March 2011).

In 1996 General Motors experienced an 18-day labor strike at a brake supplier factory.

This strike idled workers at 26 assembly plants and led to an estimated $900 million reduction in earnings.

In 1997 a Boeing supplier’s failure to deliver two critical parts led to a loss of $2.6 billion.

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Assessing Risk Associated with OSCM Strategy

All strategies have an inherent level of risk

Uncertainty in the environment causes supply chain planners to evaluate the relative riskiness of their strategies

Supply chain risk is the likelihood of a disruption that would impact the ability of a company to continuously supply products or services

Supply chain coordination risks are associated with the day-to-day management of the supply chain

Disruption risks are caused by natural or manmade disasters

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Risk Mitigation Framework

1. Identify the sources of potential disruptions and assess a type of vulnerability.

Focus on highly unlikely events that would cause a significant disruption to normal operations.

2. Assess the potential impact of the risk. Here the goal is to quantify the probability and the potential impact of the risk.

Could be based on financial impact, environmental impact, ongoing business viability,

Brand image/reputation, potential human lives, and so on.

3. Develop plans to mitigate the risk. A detailed strategy for minimizing the impact of the risk could take many different forms, depending on the nature of the problem.

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