Operations Management Quiz 2

3 levels of strategy

1. Corporate Strategy 2. Business Strategy 3. Functional Strategy

5 key competitive priorities

1. Cost 2. Quality 3. Time 4. Flexibility 5. Innovation

The United States has experienced three waves of outsourcing:

1. Exodus of goods-producing jobs from the US 2. Simple service work 3. skilled knowledge work

3 attributes for evaluating goods and services:

1. Search 2. Experience, and 3. Credence

Decisions in Supply Chain Design

1. Strategy 2. Control 3. Location 4. Sustainability 5. Technology 6. Digital Content 7. Sourcing 8. Logistics and transportation 9. Outsourcing 10. Managing Risks 11. Measuring performance

Control

A second supply chain design decision is centralization versus decentralization.

A sustainable competitive advantage provides BLANK performance and is essential to survival.

Above-average performance

The 3 goods and service attribute evaluation criteria form what?

An evaluation continuum from easy to difficult

Credence attributes

Attributes of a good or service that the customer must believe in but cannot personally evaluate even after purchase and consumption. Examples: expertise of a surgeon or mechanic, knowledge of a tax advisor, accuracy of a software

Search attributes

Attributes that a customer can determine prior to purchasing the goods and/or services. Examples: color, price, freshness, style, fit, feel, hardness, smell.

Experience attributes

Attributes that can be discerned only after purchase or during consumption or use. Examples: Friendliness, taste, wearability, safety, fun, and customer satisfaction

from the continuum, what are some goods that are easy to evaluate?

Clothing, jewelry, furniture, homes, and cars because they are high in search attributes

Competitive Advantage

Denote a firm's ability to achieve market and financial superiority over its competititors

Efficient supply chains are what?

Designed for efficiency and low cost by minimizing inventory and maximizing efficiencies in process flow.

Cost

Firms gain cost competitive advantage by establishing themselves as the low-cost leader in an industry

Flexibility

Firms gain flexibility competitive advantage because success in globally competitive markets requires both design and demand flexibility.

Quality

Firms gain quality competitive advantage because the value of a good or service in the marketplace is influenced by the quality of its design.

Time

Firms gain time competitive advantage because speeding up processes in supply chains improves customer response.

Order Winners

Goods and service features and performance characteristics that differentiate one customer benefit package from another and win the customer's business

from the continuum, what are some services that are hard to evaluate?

Legal, dentistry, auto repair, medical diagnosis, and estate planning because they are high in credence attributes

Examples of how firms can focus their efforts

Low cost, high quality, quick response, flexibility, customization, etc.

Outsourcing

Many companies outsource activities such as manufacturing, logistics and transportation, information systems, and technical support to suppliers either domestically or abroad.

Vertical Integration

Process of acquiring and consolidating elements of a value chain to achieve more control

vertical integration

Process of acquiring and consolidating elements of a value chain to achieve more control

Offshoring

Process of building, acquiring, or moving of process capabilities from a domestic location to another country location while maintaining ownership and control

Postponement

Process of delaying product customization until the product is closer to the customer at the end of the supply chain

Reshoring

Process of moving operations back to a company's domestic location

Digital Content

Products such as automobiles, appliances, or cell phones are often enhanced with digital content by means of the "Internet of Things."

What is an example of an order qualifier?

Radios and air bags are expected by all customers for a car purchase, and fast delivery is expected of pizza restaurants.

from the continuum, what are some "in the middle" goods and services?

Restaurant meals, vacations, haircuts, and sporting events because they are high in experience attributes.

Sourcing

Selecting suppliers from whom to purchase is a key design decision that also ties closely with the location decision.

Strategy part 2

Supply chains should support an organization's strategy, mission, and competitive priorities.

Technology

Technology often provides a competitive edge, and licensing it to firms in other countries can lead to risks.

Location

The location of facilities in a supply chain has a significant impact on cost and customer service.

Business Strategy

The major decisions involve which markets to pursue and how best to compete in those markets—that is, which competitive priorities the firm should pursue.

The evaluation continuum suggests what?

The model suggests that goods are easier to evaluate than services and that goods are high in search qualities, whereas services are high in experience and credence attributes.

push-pull boundary

The point in the supply chain that separates the push system from the pull system

Logistics and transportation

Transportation is more complex in global supply chains. Global shipments often require multiple modes of transportation, such as water shipping, air, rail, and truck. The transportation infrastructure may vary considerably in foreign countries.

A focus on efficiency works best for goods and services with highly predictable demand, stable product lines with long life cycles that do not change frequently, and low contribution margins.

True

A single supplier often provides economies of scale and the ability to form close partnerships; however, multiple suppliers lower the risk of a supply disruption.

True

Although it may be difficult to change the structure of the value chain, operations managers have considerable freedom in determining what components of the value chain to emphasize

True

Any change in a firm's customer benefit package, targeted markets, or strategic direction typically has significant consequences for the entire value chain and for operations.

True

By understanding differences among such segments, a company can design the most appropriate customer benefit packages, competitive strategies, and processes to create the goods and services to meet the unique needs of each segment.

True

Credence attributes stem from the nature of services, the design of the service system, and the training and expertise of the service providers.

True

Find out what customers expect by having employees talk to customers, having managers talk to customers, and by doing formal market research.

True

Flexibility is manifest in mass-customization strategies that are becoming increasingly prevalent today.

True

Good marketing research includes such techniques as focus groups, salesperson and employee feedback, complaint analysis, on-the-spot interviews with customers, videotaped service encounters, mystery shoppers, telephone hotlines, Internet monitoring, and customer surveys.

True

Manager have freedom in determining technology and processes, human resource policy choices, and in other relevant decisions

True

Organizations have many strategic choices in designing and operating their domestic and global value chains

True

Strategic planning is the process of determining long-term goals, policies, and plans for an organization

True

Supply chain optimization is the process of ensuring that a supply chain operates at the highest levels of efficiency and effectiveness.

True

The center-of-gravity method determines the x and y coordinates (location) for a single facility.

True

The location of factories, distribution centers, and service facilities establishes the infrastructure for the supply chain and has a major impact on profitability.

True

The objective of strategic planning is to build a position that is so strong in selected ways that the organization can achieve its goals despite unforeseeable external forces that may arise.

True

The operational structure of a supply chain is the configuration of resources such as suppliers, factories, warehouses, distributors, technical support centers, engineering design and sales offices, and communication links.

True

The principal goal of a supply chain is to provide customers with accurate and quick response to their orders at the lowest possible cost.

True

The transportation problem is a special type of linear optimization model that arises in planning the distribution of goods and services from several supply points to several demand locations.

True

The ultimate objective of operational excellence is satisfied customers. Operational excellence includes the value chain, process, equipment, and job efficiencies, as well as superior people-related performance—all focused to support the service-encounter level.

True

To find the break-even quantity, set the Total Cost of production equal to the total cost of outsourcing and solve for Q

True

the most important search attributes should be evaluated during design, measured during manufacturing, and should drive key operational controls to ensure they're built into the good with high quality

True

Time is the most important source of competitive advantage

True because time reductions often drive simultaneous improvements in quality, cost, and productivity.

the unexpected features that surprise, entertain, and delight customers by going beyond the expected often make the difference in closing a sale

True, this is part of Order Winners

A company usually cannot satisfy all customers with the same goods and services.

True. Often, customers must be segmented into several natural groups, each with unique wants and needs.

Customers seek and rely more on information from personal sources than from nonpersonal sources when evaluating services prior to purchase.

True. Operations must ensure that accurate information is available and that experiences with prior services and service providers result in positive experiences and customer satisfaction.

Customers perceive greater risks when buying services than when buying goods. Because services are intangible, customers cannot look at or touch them prior to the purchase decision.

True. They experience the service only when they actually go through the process. This is why many are hesitant to use online banking or bill paying.

Total Cost of outsourcing is equal to what?

Variable Cost multiplied by quantity

Total Cost of production is equal to what?

Variable Cost multiplied by quantity, plus fixed cost

Forward integration

acquiring distributors

Backward integration

acquiring suppliers

Core Competencies

are the strengths that are unique to an organization.

Order Qualifiers

basic customer expectations are generally considered the minimum performance level required to stay in business

Mass customization

being able to make whatever goods and services the customer wants, at any volume, at any time for anybody, and for a global organization, from any place in the world

Third-party logistics providers

businesses that provide integrated services that might include packaging, warehousing, inventory management, and inbound or outbound transportation.

Examples of customer segments

buying behavior, geography, demographics, sales volume, profitability, etc.

Professor Terry Hill

created strategy development framework that defines the essential elements of an effective operations strategy in OPERATIONS DESIGN CHOICES nd BUILDING THE RIGHT INFRASTRUCTURE

Competitive Priorities

emphasis that a firm places on certain performance measures and operational capabilities within a value chain.

Critical Economic factors in location decisions include

facility costs such as construction, utilities, insurance, taxes, depreciation, and maintenance; operating costs, including fuel, direct labor, and administrative personnel; and transportation costs associated with moving goods and services from their origins to the final destinations, or the opportunity cost of customers coming to the facility.

Strategic business units

families of goods or services having similar characteristics or methods of creation

responsive supply chains focus on what?

flexibility and responsive service and are able to react quickly to changing market demand and requirements.

Responsive Supply Chains...

focus on flexibility and response is best when demand is unpredictable;

Infrastructure

focuses on the nonprocess features and capabilities of the organization and includes the workforce, operating plans and control systems, quality control, organizational structure, compensation systems, learning and innovation systems, and support services.

Infrastructure

focuses on the nonprocess features and capabilities of the organization.

Contract manufacturer

is a firm that specializes in certain types of goods-producing activities, such as customized design, manufacturing, assembly, and packaging, and works under contract for end users.

Strategy

is a pattern or plan that integrates an organization's major goals, policies, and action sequences into a cohesive whole.

multinational enterprise

is an organization that sources, markets, and produces its goods and services in several countries to minimize costs, and to maximize profit, customer satisfaction, and social welfare.

Innovation

is the discovery and practical application or commercialization of a device, method, or idea that differs from existing norms.

Outsourcing part 2

is the process of having suppliers provide goods and services that were previously provided internally.

Multi-site Management

is the process of managing geographically dispersed service-providing facilities.

Operations Strategy

is the set of decisions across the value chain that supports the implementation of higher-level business strategies.

Corporate Strategy

necessary to define the businesses in which the corporation will participate and develop plans for the acquisition and allocation of resources among those businesses.

Push System

produces goods in advance of customer demand using a forecast of sales and moves them through supply chain to points of sale where they are stored as finished goods inventory.

Pull System

produces only what is needed at upstream stages in the supply chain in response to customer demand signals from downstream stages

Sustainability and operations strategy

sustainability is an organizational strategy; it is broader than a competitive priority

Operations design choices

the decisions management must make as to what type of process structure is best suited to produce goods or create services

Functional Strategy

the means by which business strategies are accomplished. A set of decisions that each area, such as marketing or finance, develops to support its particular business strategy.

Over time, order winners eventually become order qualifiers as customers begin to expect them.

true. To stay competitive, companies must continually innovate and improve their customer benefit packages.

Sustainability

ustainability is a key issue in supply chains, and we often hear about this in the media (often quite negatively).