CPIM - SMR

Lead capacity strategy

-) Adding capacity in anticipation of an increase in demand -) An aggressive strategy with the goal of luring customers away from the company's competitors by improving the service level and reducing lead time

Lag capacity strategy

-) Adding capacity only after the organization is running at full capacity or beyond due to increase in demand -) Decreases the risk of waste, but it may result in the loss of possible customers either by stockout or low service levels

Flexibility objective in design process

1. Ability to anticipate and respond to competitors moves 2. Responsiveness to changes in customer requirements, consumer preferences, and technology 3. Ability to bring internally developed technical solution to the markets quickly 4. Support of speed-to-market competitive advantage 5. Ability to adapt the design process to meet local requirement and sustainability goals 6. Impact of excess capacity on design process flexibility 7. External competitive advantage: design flexibility into products

Ratio analysis

1. Ability to pay current liabilities: liquidity ratio: current ratio, quick ratio 2. Ability to sell inventory and collect receivables: activity ratio: inventory turn, A/R turnover, day's sale in account receivable 3. Ability to pay long-term debt: debt ratio: 4. Ability to make profit: profitability: rate of return on asset

Costing management implication

1. Absorption costing provides an incentive to build inventory 2. Absorption costing conflicts with lean and theory of constraint's methodology 3. Performance measures tied to operating income results can create perverse incentives 4. Organization should consider: a) adopting performance incentives based on variable costing b) using a balanced set of performance measures c) placing strictly controls on inventory buildup

Principles of sustainability

1. Achieving high performance level in the long term 2. Avoiding detrimental behaviors in the short term

Objectives of operations strategy

1. Align operations with business strategy and market requirements 2. Provide vision of an operations strategy 3. Define performance objectives 4. Reconcile strategic decisions to performance objectives

Focused differentiation strategy

1. Apply differentiation strategy to a target market niche 2. The strategy meets unique buyer needs for special products and service attributes or seller capabilities 3. Companies often target customers willing to pay a premium for a product/service

Focused low-cost strategy

1. Apply low-cost strategy to a target maker niche 2. The strategy meets well-defined buyers needs 3. Focus is on lowest overall cost 4. Reconfigure the value chain to reduce costs

Supply Chain Strategy

1. Arm's length and long-term partnership 2. Disintermediation 3. Outsourcing 4. Vertical integration 5. Supplier reduction 6. Bullwhip effect

Profit sanctuaries and cross-market subsidization for gaining competitive advantages

1. Attack a rival's home market: sacrifice profit to weaken rival in home market 2. Selectively attack rivals in different country market to improve market share

3 types of implementation approaches

1. Big Bang Approach: Quickest time to benefit Least amount of human resources Can be traumatic Risks are significant 2. Step Approach: Ideal for large complex projects Allows high degree of focus Lengthens time to benefit Cutover strategy can be complex 3. Parallel: Ideal for small or high risk ventures Safest Requires a large amount of support

Strategic changes in workforce management

1. Build an organization with the resource strengths to execute strategy successfully 2. Marshal money and people to drive strategy execution 3. Institute policies and procedures that facilitate strategy execution 4. Adopt best practices and continually improve value chain activities 5. Install information and operating systems to facilitate strategy execution 6. Tie rewards directly to good strategy execution 7. Instill a corporate culture that promotes strategy execution 8. Exercise strong leadership to drive execution forward

Sustainable Management System Model

1. Business case: perform a cost and benefit analysis 2. Organizational component: get management buy-in 3. Operational component: link to strategic plan, engage stakeholders, train personnel 4. Enterprise resource planning and information technology 5. Monitoring and audits

Basic location factors

1. Capital requirement 2. Cost factors 3. Community factors 4. Flexibility 5. Risk factors

Arm's length (transaction) relationship strategy

1. Competition among suppliers 2. Independent decision 3. Short-term relationship 4. Advantage: competition leads to low cost and possibly high value 5. Disadvantage: little supplier royalty, high transaction costs

Strategy in rapidly growing phase

1. Competitive strategy and focus: Further differentiation 2. Product strategy: innovation to expand product lines and lower prices 3. Marketing strategy: new geographical markets, brand building 4. Distribution channel: access to new channels 5. Supply Chain: further cost reduction

Strategy in declining phase

1. Competitive strategy and focus: harvest cash flow or sell and invest elsewhere 2. Product strategy: selective innovation and differentiation 3. Marketing strategy: Selective promotions 4. Distribution channel: Further consolidation 5. Supply Chain: intense focus on efficiency, low cost leadership

Strategy in maturing phase

1. Competitive strategy and focus: low-cost leader 2. Product strategy: emphasis on cost and service, product pruning 3. Marketing strategy: expand sales to current customers, international markets, brand promotion 4. Distribution channel: closure of low-volume, high-cost channels 5. Supply Chain: technology and flexibility to lower cost, mergers

Strategy in emerging phase

1. Competitive strategy and focus: low-cost or differentiation 2. Product strategy: perfection of product and technology 3. Marketing strategy: Awareness then brand loyalty 4. Distribution channel: first-mover advantages 5. Supply Chain: partnership to gain resources and expertise

Evaluate competitors

1. Competitor strengths and weaknesses 2. Predict next moves: determine which ones: a) Badly need to increase market share b) Have the need and resources to move to a different position in a cluster c) Are candidates for acquisition d) Are likely to enter new geographic markets e) Are likely to expand product offerings and enter new product segments

Long-term partnership strategy

1. Compromise between vertical integration and transaction relationship 2. Continuing relationship based on mutual advantage and trust 3. Multiple points of contact between organization 4. Advantages: dependability of delivery, quality of materials, joint development

Locations of value chain activities for gaining competitive advantages

1. Concentration in few location a) lower manufacturing costs b) economies of scale c) learning curve effect d) proximity to research and development and supplier infrastructure 2. Dispersing of activities a) fulfill customer expectation: distribution centers, sales and service activities b) to manage business risks: exchange rates, supply, politics, etc...

Quality objective in design process

1. Conformance quality means being free of design errors 2. Specification quality is high when a product competes successfully in the market 3. Techniques such as quality function deployments (QFD) support excellence in specification quality 4. Quality of design output is critical to low-cost provider and differentiation strategy

Deployment issues relating to facilites

1. Consistency with operations performance objectives 2. Number and size of facilities 3. Changes of location 4. timing and scale of capacity changes

Cost objective in design process

1. Costs incurred by the design activities 2. Causes of late completion of design output 3. Financial impacts of late completion

Formative strategy issues

1. Customized vs standardized products 2. Location advantages 3. Economic policies and political climate

Disintermediation strategy

1. Cut out the middle man 2. Bypasses downstream supply chain operations 3. Shorten the supplier chain 4. reduces costs and increase net profits 5. Better visibility of customer demand and preferences

Four primary customer needs

1. Delivery: The customer gets the product when they need it. 2. Price: The customer needs to feel that they are receiving value for the money. 3. Reliability: The product performs as specified on a consistent reliable basis. 4. Options: Customers have enough choices to satisfy their needs.

Speed objective of design process

1. Early product and service launch 2. Ability to delay the start of design 3. More opportunities for new product and service introduction and innovation 4. Benefits from the support of flexibility in responding to the marketplace 5. Requires high quality of specifications 6. Ties to competitive advantage in the market

Strategic options for market entry

1. Exporting from home base 2. Licensing 3. Franchising 4. Alliances and joint ventures with foreign partners

Four categories of cost drivers in ABC costing

1. Factory sustaining activities: represent fixed and variable expenses that are unidentifiable by product. Examples would be plant management, facilities and grounds, etc. 2. Product sustaining activities are those that develop and update product and manufacturing information. Examples include engineering, bills of material, routings and standards. 3. Batch level activities are those that match the supply of materials, labor and capacity with demand. Examples include purchasing, receiving, material planning, etc. 4. Unit level activities are costs traditionally associated with individual production units. Examples include materials, direct labor, tooling, etc.

Functional layouts

1. Fixed-position layout 2. Functional layout 3. Cell layout 4. Product layout

Quality characteristics

1. Functionality - how well the product or service does its job 2. Appearance - sensory characteristics such as look, feel, sound and smell 3. Reliability - consistency of performance or length of acceptable performance 4. Durability - useful life 5. Recovery - problem resolution 6. Contact - knowledge and courtesy of staff

Five reasons for expanding globally

1. Gain access to new customers 2. Achieve lower cost, and competitiveness 3. Exploit core competencies 4. Spread business risk 5. Global leadership

Benefits of ERP system

1. Greater visibility of financial and operational performance 2. Adoption of better, integrated business processes 3. Improved control of operations 4. Better communication and information exchange with customers 5. Integration with supply chains of customer and supplier

Business strategy objectives

1. Grow the business 2. Differentiate from rivals 3. Outperform rivals 4. Achieve high levels of financial and market performance 5. Create sustainable competitive advantage

Adding capacity with new large-scale facilities

1. High overcapacity until demand catches up with capacity 2. Initial higher unit costs

Financial statement analysis types

1. Horizontal analysis: by time series comparing year to year 2. Vertical analysis: comparing percent of each item 3. Ratio analysis

Five key issues of the internal environment

1. How well the current strategy is working 2. Strengths and weaknesses, opportunities and threads 3. Competitiveness of prices and costs 4. Strength relative to competitors 5. Highest priority issues for management

Best-cost provider strategy

1. Hybrid, low cost approach to offer a differentiated product and service 2. Upscale attributes are incorporated using strategic advantage of lower-cost production than rivals 3. Product and service is significantly better than low-cost version 4. Price is significantly lower than higher-priced differentiated alternatives

Benefits of cash flow statements

1. Identify activities that cause cash inflows and outflows 2. Shows if operations generating cash 3. Shows if growth can be financed from cash 4. Enables organizations to take advantage of investment opportunities 5. Explains how organizations can pay dividends when net profit shows a loss 6. Identifies need to liquidate assets or borrow to support operations

Industry attractiveness and profitability

1. Industry decision factors: a) the industry's growth potential b) the effect of competition on current and future profitability c) The impact of driving forces on profitability d) The risk and uncertainty in the industry future e) Effects on regulation, environmental issues, customer demand, and industry overcapacity 2. Company-specific decision factors: a) Competitive position b) Relationship between competitive strength to rivals and industry attractiveness c) Ability to capitalize on vulnerabilities of competitors

Job design

1. Influence of volume and variety 2. Allocation of tasks 3. Job commitment through meaningful work: job enlargement, job enrichment, job rotation, empowerment and teams

Manage the bullwhip effect

1. Information sharing 2. Channel alignment 3. Operational efficiency and improved forecasting

Linkages

1. Inside-out: influences of company on society: infrastructure, HR, technology development, logistics, etc... 2. Outside-in: influences of society on company: available resource: HR, transportation, policies, local demand standards, etc...

Types of benchmarking

1. Internal 2. External 3. Non-competitive 4. Competitive 5. Performance 6. Practice

Examples of visual management

1. Kanban work authorization 2. Visual WIP management 3. Local display of production and quality data 4. Key performance measurement report

Assess the current strategy

1. Key competitive factors: a) efforts to build competitive advantages b) plans to outperform rivals c) ability to react to changing conditions d) geographic coverage e) collaborative partnership and strategic alliances 2. Value chain capabilities 3. Quantitative and other measures: a) Sales and market shares growth compared to competitors b) New customer acquisition rate c) Changes in net profit margins d) Net profit and ROI trends e) Innovation and new product, service introduction f) Improvement in financial strength and credit rating g) Strong positive brand association

Adding capacity with small-scale facilities

1. Less overcapacity as demand catches up with capacity 2. Possible lower initial unit costs

Basic competitive options

1. Localized multicountry strategy: a) Product adapted and packaged to accommodate local preferences b) Difficult to develop a single competitive strategy c) Plants located in multiple countries and use of local suppliers d) wide autonomy for country manager --> higher cost structure in multicountry strategy 2. Global strategy a) Sales of same product in all markets and emphasis on strong brand b) Use of the same competitive strategy in all markets c) Plants and best suppliers located where advantageous d) Transfer ideas, technologies and capabilities among markets 3. Hybrid strategy

Techniques for gaining competitive advantages

1. Location of value chain activities to reduce costs 2. Transfer of competitive competencies and capabilities to operations in foreign market 3. Use of profit sanctuaries and cross-market subsidization

Types of competitive strategies

1. Low cost provider: lower overal costs to broad customer 2. Broad differentiation: differentiate in products attribute, service, and image 3. Best-cost provider: excellent product attributes at a lower cost 4. a focused low-cost provider: appeals to a narrow market with low cost 5. focused differentiation: offer a differentiated product to a narrow market

Low-cost provider strategy

1. Maintain high value chain efficiency, low value chain costs 2. Maintain low price, not neccesary frills-free 3. Underprice competitors to increase total profits 4. Achieve lasting strategic competancy that rivals find hard match

Benchmarking guidelines

1. Make benchmarking a continuous process 2. Use benchmarking for ideas not solutions 3. Understand your own processes 4. Use benchmarking to understand further not imitate 5. Allocate resources: staff and monetary resources

Outsourcing strategy

1. Make or buy decision 2. Cost, quality, speed, dependability, and flexibility 3. Operations ownership is not a strategic advantage 4. Tradeoff with vertical integration 5. Business process or product outsourcing

Corporate Social Responsibility (CSP)

1. Moral obiligation 2. sustainability 3. liscense to operate 4. reputation

6 simple rules for choosing the right measurements

1. Multiple measures are better than single measures. 2. Measurements should provide an agreed upon basis for decision making. 3. Measurements should be immediately understandable. 4. Measurements should be easily and correctly interpreted. 5. Measurements should be economical to obtain and apply. 6. Measurements must cause the correct response from a strategic perspective.

Project characteristics

1. One time focus 2. Specific purpose and desired results 3. Start and finish 4. Time frame for completion 5. Involvement of a cross functional group of people 6. Limited set of resources 7. Logical sequence of interdependent activities 8. Clear user of the results

Vertical integration strategy

1. Ownership of an organization's supply network 2. Strategic positioning 3. Financial and marketing strategy drivers

Cost of quality

1. Prevention costs 2. Appraisal costs 3. Internal failure costs 4. External failure costs

Three major process dimensions

1. Process entities 2. Process objects 3. Process activities

Broad differentiation strategy

1. Product and service attributes lower buyer's costs of using 2. Buyers are attracted to intangible features of the product and service 3. Price premium is greater than cost to differentiate 4. Strategic capabilities are hard to match

Service process types

1. Professional services: relatively low volume, and delivered by highly trained people. Ex: IT, level, architectural, design, medical 2. Service shops: are somewhat standardized, but still be customized to meet customers' need. Ex: banks, school, restaurant, high-end stores, etc... 3. Mass services: high numbers of transactions, low customized service. Ex: airlines, rail networks, supermarket

Dependability objective of design process

1. Project management minimizes internal delays 2. Close relationship with suppliers and customers reduces process uncertainty 3. Flexible design process increases responsiveness 4. Dependable design process creates certainty of new product introduction and innovation schedules 5. Process dependability (internal) directly supports external competitive advantages in speed and quality

Manufacturing process types

1. Project process 2. Job shop process 3. Batch process 4. Mass process 5. Continuous process

Performance appraisal and rewards

1. Provide attractive perks and fringe benefits 2. Rely on promotion from within whenever possible 3. Make sure employee's ideas and suggestions are valued 4. Create a work atmosphere with sincerity, caring, and mutual respect 5. State the strategic vision in inspirational terms 6. Share information with employees about financial performance, strategy, operations measures, market condition, and competitors' action 7. Have a workplace with appealing furniture and amenities 8. Be flexible in the approach to people management in multicultural environments

Competitive strength assessment - rating criteria

1. Quality and product performance 2. Reputation and image 3. Technological skills 4. Dealer network 5. Product and service innovation 6. Financial resources 7. Relative cost position 8. Customer service

Supplier reduction strategy

1. Reduce the complexity of managing and coordinating suppliers 2. Reduce transaction cost 3. Focus on strategic issues

Performance objectives

1. Speed 2. Dependability 3. Flexibility 4. Quality 5. Cost

Learning organization

1. Systematic problem solving 2. Experimentation with new approaches 3. Learning from their own experiences and past history 4. Learning from the experiences and best practices of others 5. Transferring knowledge quickly and efficiently throughout the organization

Seven key issues of External Environment

1. The industry's dominant economics features 2. Strength of competition forces facing industry members 3. Forces driving industry change 4. Market positions occupied by industry members 5. Likely strategic moves by rivals 6. Key factors for future success in the industry 7. Industry attractiveness and profitability

3 phases of performance measurement change

1. Tinkering with Cost Systems - Companies will often tinker with the existing cost system to better reflect reality. They usually do this by changing the overhead allocation. 2. Cut the Gordian Knot - Companies will recognize that there is no way a cost accounting system can provide the appropriate measures for the business. They will "cut the cord" to the system and begin the process of adapting new measures for the business. 3. Embracing Change - Companies will finally change the manufacturing measures to become an integral part of the manufacturing strategy. If strategic objectives are to be met, then the measures must be supportive of these objectives.

Manufacturing and service facilities

1. manufacturing: factories, service centers, R&D lab, distribution 2. Service: Retail stores, warehouse, hospitals, office buildings, fire station

Transfer of competence and capability for gaining competitive advantages

1. to be first into new markets to gain market leadership and increase revenue 2. sustainable competitive advantages

Licensing strategy for market entry

Advantages: 1. Applicable to proprietary technical know-how or unique patented product 2. Income generated by royalties 3. Low resource requirement 4. Low investment risk Drawback: 1. Sharing valuable intellectual property with 3rd party 2. Difficult in enforcing gray areas of license agreement 3. High risk of patent infringement

Strategic alliances and joint ventures strategy for market entry

Advantages: 1. Better access to attractive markets through well positioned local companies 2. Economies of scales in production and marketing 3. Fills in technical expertise gaps of local company 4. Fill in market knowledge gap of company seeking access Drawback: 1. More business risk than other strategy 2. Impact of cultural differences on decision making 3. Disagreement on what are remain propriety to one party 4. Differences in corporate values and ethical standards

Large-scale operations

Advantages: 1. Economies of scale 2. Average cost per unit decrease as utilization increase 3. Good fit for high-volume, low-variety products 4. Flexibility to adjust volume Disadvantages: 1. Less flexibility of equipment, workers 2. Worker skills not as high as in small-scale operations 3. Diseconomies of scale

Small-scale operations

Advantages: 1. Locate near local knowledge networks 2. Respond faster to regional needs and trends 3. Agile and more entrepreneurial management Disadvantages: 1. Average production cost per unit is higher than for large-scale operations

Export strategy for market entry

Advantages: 1. Low-risk initial move 2. Modest investment needed 3. Economies of scales of home-country production 4. Reliance on the expertise of foreign wholesalers in handling marketing, import and distribution of products 5. Establish its own distribution, sales promotion, brand awareness function Drawback 1. High cost of shipping 2. Possible loss of home-country production cost in long run 3. Possible loss of cost advantage to rival's plants 4. Currency exchange rate

ERP and push system

Allows to: 1. Plan the schedules and routings of product through work centers 2. Plan schedule releases for make-to-stock products made on high-volume line 3. Recommend the release of work orders 4. Facilitate reporting at each stage of production

Visual management and pull system

Products which are: 1. demand variances are low, high-volume and continous 2. Product complexity is low 3. Linear, or plant layout 4. Very little WIP

Supply Chain Management's objectives

Satisfy customers by providing goods and services when needed at a competitive cost, that are consistent with competitive strategies

Market positioning

Use strategic group mapping technique: 1. Price and quality of goods and services sold 2. Distribution channels 3. Product and service features that appeal to different market segments

Franchising strategy for market entry

advantages: 1. Low cost and risk of setting up and operating 2. Franchisor selects, trains, support and monitor franchisee Drawback: 1. Cultural differences leads to different quality concerns 2. Modify product to satisfy local taste may be detrimental to the brand

Target cost

are costs which need to be achieved to reach certain market share levels

Five forces analysis

is a tool to analyze the principal competing pressures in a market

Contribution margin

is calculated by subtracting variable costs from revenue. It is an improved way of managing the business from an internal operations viewpoint. It cannot be a substitute for full absorption accounting for reporting to the "outside" world.

Economic Value Added (EVA)

measures the net profit over the cost of all the capital used to create that profit. There are three ways that EVA can be raised. 1. Earn more profit without using more capital 2. Use less capital - most companies find ways to do this 3. Invest capital in higher return projects

Project crashing

the assignment of additional resources to one or more critical activities in order to shorten the project time lines.