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9/24/24, 11:45 AM Print Preview Chapter 3: Operations Strategy Discussion Questions and Experiential Activities Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Discussion Questions and Experiential Activities 17. 3.1 - Explain how organizations seek to gain competitive advantage. What might the competitive advantage be for each of the following companies? a. eBay b. Southwest Airlines c. Starbucks d. Apple e. Facebook f. Uber g. 3M h. Amazon i. Bentley automobiles j. Nordstrom 18. 3.2 - Explain approaches for understanding customer wants and needs. Select a business with which you are familiar and identify examples of order qualifiers and winners. You might also research the businesses on the Internet or visit the library. 19. 3.3 - Describe how customers evaluate goods and services. Select a business with which you are familiar and identify examples of customers using search, experience, and credence quality to evaluate the good or service. You might also research the businesses on the Internet or visit the library. 20. 3.3 - Describe how customers evaluate goods and services. Provide examples of search, experience, and credence attributes for a ride sharing service such as Uber or Lyft. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/4 9/24/24, 11:45 AM Print Preview 21. 3.4 - Explain the five key competitive priorities. Choose an organization with which you are familiar that falls into one of the following categories: sporting goods store haircut salon college bar or restaurant pizza business a sports team wireless telephone service Define the firm’s strategic mission, strategy, and competitive priorities. What are the order qualifiers and winners? What would operations have to be good at to make this a successful business or organization? 22. 3.4 - Explain the five key competitive priorities. How does a package delivery service such as UPS or FedEx use the competitive priority “time” to its competitive advantage? Research, then explain and provide examples in a short paper (maximum of two typed pages). 23. 3.4 - Explain the five key competitive priorities. How does Walmart use the competitive priority “cost” to its competitive advantage? Research, then explain and provide examples in a short paper (maximum of two typed pages). 24. 3.4 - Explain the five key competitive priorities. How does Procter & Gamble use the competitive priority “quality” to its competitive advantage? Research, then explain and provide examples in a short paper (maximum of two typed pages). 25. 3.4 - Explain the five key competitive priorities. How does your cell phone provider use the competitive priority “flexibility” to its competitive advantage? Research, then explain and provide examples in a short paper (maximum of two typed pages). 26. 3.4 - Explain the five key competitive priorities. Compare Lyft (www.lyft.com) and Uber (www.uber.com) strategies. Explain the similarities and differences in their missions, strategies, and competitive priorities, and how their operations strategies might differ. Use the Internet or business magazines to research the information you need. Report your findings in a short paper (maximum of two typed pages). https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 2/4 9/24/24, 11:45 AM Print Preview 27. 3.4 - Explain the five key competitive priorities. Explain the interlinking model of quality and profitability (Exhibit 3.2). How does it connect to business and operations strategy? Can you provide any examples of goods and services that support and add credibility to this model? 28. 3.4 - Explain the five key competitive priorities. Is it possible for a world-class organization to achieve superiority in all five major competitive priorities— price (cost), quality, time, flexibility, and innovation? Explain your reasoning. 29. 3.5 - Explain the role of OM, sustainability, and operations in strategic planning. Why is sustainability a strategy and not a competitive priority? Explain your reasoning. 30. 3.5 - Explain the role of OM, sustainability, and operations in strategic planning. Identify two firms that endorse sustainability as part of their corporate strategy and discuss how sustainability is integrated into their strategies. 31. 3.5 - Explain the role of OM, sustainability, and operations in strategic planning. Research and write a short paper on a company that has a clear strategy based on social and ethical sustainability. 32. 3.6 - Describe Hill’s framework for operations strategy. Apply Hill’s strategy framework to a goods-producing or service-providing organization of your choice. This will require research to identify corporate objectives and competitive priorities. See the McDonald’s example in the chapter for guidance and make sure that you emphasize OM concepts, capabilities, and execution. Report your findings in a short paper (maximum of two typed pages). 33. 3.6 - Describe Hill’s framework for operations strategy. Identify two competing organizations (e.g., AT&T and Verizon, TaylorMade and Callaway golf club manufacturers, or Starbucks and Panera). Explain the differences in their missions, strategies, and competitive priorities, and how their operations strategies might differ. Use the Internet or business magazines to research the information you need. Report your findings in a short paper (maximum of two typed pages). 34. 3.6 - Describe Hill’s framework for operations strategy. Research Apple and define its strategic mission, vision, corporate strategy, competitive priorities, and operations strategy. What can you say about Apple’s strategy and practices regarding sustainability? You might use the Internet or visit the library. Report your findings in a short paper (maximum of two typed pages). https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 3/4 9/24/24, 11:45 AM Print Preview 35. 3.6 - Describe Hill’s framework for operations strategy. How do the “Veja Company: Sneakers with a Conscience” operations and supply chain decisions and practices support their mission and strategy? Provide examples and explain. Report your findings in a short paper (maximum of two typed pages). Chapter 3: Operations Strategy Discussion Questions and Experiential Activities Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 4/4 9/24/24, 11:45 AM Print Preview Chapter 3: Operations Strategy Adventure Gaming, Inc. Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Adventure Gaming, Inc. Jasmine Minoza, the chief information officer of a Canada-based designer of video games, Adventure Gaming, Inc. (AGI), is considering outsourcing her company’s software development activities to firms in other countries. The cost of gaming research and development has become too expensive. The 2020–22 coronavirus pandemic caused many of their key software designers to leave the company, finding employment with other competitors or in different industries. Competitive salaries for potential software gaming employees exceed AGIs salary range, and Jasmine is having a difficult time finding interested potential hires. Most of the time, their job ads went unanswered. With key people leaving, it was a good time to consider outsourcing AGI’s research and development work. Ms. Minoza had identified the two low-cost providers of gaming software—one in India and a second supplier in China. Both countries offered attractive tax incentives to outsource their business, and a highly educated workforce trained in Science, Technology, Engineering, and Mathematics (STEM). Ms. Minoza thought they could collaborate virtually and keep a close watch on projects and new technologies to protect their intellectual property. Minoza created Exhibit 3.7 with the following risk assessments, weights, and rank ordering. She defined country, strategic, and intellectual property risks: Country risk: political, socioeconomic, government, or other international risks. Strategic legal risk: different country laws may not protect “trade secrets.” Intellectual property risk: a supplier may learn how to do the business better than the original company. Exhibit 3.7 Adventure Gaming, Inc. Competitive Priority and Risk Assessment https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/3 9/24/24, 11:45 AM Print Preview Adventure Gaming, Inc. (AGI) Case Study Relative AG, Inc. Ahuiu, Inc. Katajii, Inc. Weight Canada China India Cost per Gaming Software 0.45 3 8 10 Engineer Quality of Work 0.05 10 8 8 Timing of Work 0.05 9 8 9 Flexibility of Work 0.05 10 7 7 Innovation 0.10 9 9 10 Country Risk 0.10 10 7 9 Strategic Risk 0.10 10 6 8 Intellectual Property Risk 0.10 10 4 4 Totals 1.00 6.70 7.35 8.80 Scale: 1 (worst, high cost, bad) and 10 (best, low cost, good) The AGI mobile game platform, The Extraterrestrial Federation, generated $104 million in revenue last year with four million registered players. They played the game on a variety of electronic devices, including smartphones, tablets, and computers. Players join one of eleven federations within the Milky Way Galaxy and build their own alien nation within a unique solar system. The goals of the game are to expand your control over your immediate solar system and then over one or more federations. The ultimate goal is to have dominion over the entire galaxy, but no player has accomplished this feat. AGI research and development designs the game’s webpages, software, and outcomes; adds new innovations and surprises, chooses and adopts an exciting sound track and pays royalties, maintains an engaging, powerful story; and offers interesting characters and galactic challenges. The game must challenge the players, yet allow players to form teams as they decide whether to adopt an offensive or defensive strategy. Augmented and mixed reality is the next step in game development. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 2/3 9/24/24, 11:45 AM Print Preview The game is supported with newsletters; global networking and player opportunities; alien nation player chats; and many fun prizes and recognitions as players build their nation, weapons, and armies. Daily operations of the game requires adequate server capacity, backup servers and telecommunication lines, fast and interactive play, no game delays or long player wait times, quick recovery from interruptions, no software errors or continuous loops, and management of player chat rooms and an always open call center for player questions and problem resolution. As Ms. Minoza liked to say, “Our gamers are in our virtual factory. We must keep them happy, entertained, and engaged.” Case Questions for Discussion 1. Do a web search to find a gaming company and report on their mission, strategy, and competitive priorities. 2. Define possible mission and strategy statements for AGI and define each of the five competitive priorities. Assume you would use these statements in AGI next annual report. 3. What are AGI’s core competencies? Should they be outsourced? 4. How can AGI reduce the risk of outsourcing, if they decide to do it? 5. What is your final recommendation? What actions will you recommend to support your final recommendation? Explain. Chapter 3: Operations Strategy Adventure Gaming, Inc. Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 3/3 9/24/24, 11:45 AM Print Preview Chapter 3: Operations Strategy Adventure Gaming, Inc. Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Adventure Gaming, Inc. Jasmine Minoza, the chief information officer of a Canada-based designer of video games, Adventure Gaming, Inc. (AGI), is considering outsourcing her company’s software development activities to firms in other countries. The cost of gaming research and development has become too expensive. The 2020–22 coronavirus pandemic caused many of their key software designers to leave the company, finding employment with other competitors or in different industries. Competitive salaries for potential software gaming employees exceed AGIs salary range, and Jasmine is having a difficult time finding interested potential hires. Most of the time, their job ads went unanswered. With key people leaving, it was a good time to consider outsourcing AGI’s research and development work. Ms. Minoza had identified the two low-cost providers of gaming software—one in India and a second supplier in China. Both countries offered attractive tax incentives to outsource their business, and a highly educated workforce trained in Science, Technology, Engineering, and Mathematics (STEM). Ms. Minoza thought they could collaborate virtually and keep a close watch on projects and new technologies to protect their intellectual property. Minoza created Exhibit 3.7 with the following risk assessments, weights, and rank ordering. She defined country, strategic, and intellectual property risks: Country risk: political, socioeconomic, government, or other international risks. Strategic legal risk: different country laws may not protect “trade secrets.” Intellectual property risk: a supplier may learn how to do the business better than the original company. Exhibit 3.7 Adventure Gaming, Inc. Competitive Priority and Risk Assessment https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/3 9/24/24, 11:45 AM Print Preview Adventure Gaming, Inc. (AGI) Case Study Relative AG, Inc. Ahuiu, Inc. Katajii, Inc. Weight Canada China India Cost per Gaming Software 0.45 3 8 10 Engineer Quality of Work 0.05 10 8 8 Timing of Work 0.05 9 8 9 Flexibility of Work 0.05 10 7 7 Innovation 0.10 9 9 10 Country Risk 0.10 10 7 9 Strategic Risk 0.10 10 6 8 Intellectual Property Risk 0.10 10 4 4 Totals 1.00 6.70 7.35 8.80 Scale: 1 (worst, high cost, bad) and 10 (best, low cost, good) The AGI mobile game platform, The Extraterrestrial Federation, generated $104 million in revenue last year with four million registered players. They played the game on a variety of electronic devices, including smartphones, tablets, and computers. Players join one of eleven federations within the Milky Way Galaxy and build their own alien nation within a unique solar system. The goals of the game are to expand your control over your immediate solar system and then over one or more federations. The ultimate goal is to have dominion over the entire galaxy, but no player has accomplished this feat. AGI research and development designs the game’s webpages, software, and outcomes; adds new innovations and surprises, chooses and adopts an exciting sound track and pays royalties, maintains an engaging, powerful story; and offers interesting characters and galactic challenges. The game must challenge the players, yet allow players to form teams as they decide whether to adopt an offensive or defensive strategy. Augmented and mixed reality is the next step in game development. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 2/3 9/24/24, 11:45 AM Print Preview The game is supported with newsletters; global networking and player opportunities; alien nation player chats; and many fun prizes and recognitions as players build their nation, weapons, and armies. Daily operations of the game requires adequate server capacity, backup servers and telecommunication lines, fast and interactive play, no game delays or long player wait times, quick recovery from interruptions, no software errors or continuous loops, and management of player chat rooms and an always open call center for player questions and problem resolution. As Ms. Minoza liked to say, “Our gamers are in our virtual factory. We must keep them happy, entertained, and engaged.” Case Questions for Discussion 1. Do a web search to find a gaming company and report on their mission, strategy, and competitive priorities. 2. Define possible mission and strategy statements for AGI and define each of the five competitive priorities. Assume you would use these statements in AGI next annual report. 3. What are AGI’s core competencies? Should they be outsourced? 4. How can AGI reduce the risk of outsourcing, if they decide to do it? 5. What is your final recommendation? What actions will you recommend to support your final recommendation? Explain. Chapter 3: Operations Strategy Adventure Gaming, Inc. Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 3/3 9/24/24, 11:45 AM Print Preview Chapter 3: Operations Strategy The Greater Cincinnati Chamber of Commerce Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review The Greater Cincinnati Chamber of Commerce Founded in 1839 to facilitate the growth and ease of commerce, the Greater Cincinnati Chamber of Commerce (www.cincinnatichamber.com) is a membership organization of approximately over 7,000 businesses and organizations in the region that surrounds Cincinnati, Ohio. The Chamber’s stated purpose is to serve its members and region toward economic prosperity, and its vision are simple: Our purpose: To grow the vibrancy and economic prosperity of our region. Our vision: We are the hottest city in America. Our core values: We are visionaries, collaborators, and makers of change. We lead inclusively with passion, integrity, and fun. The Chamber delivers a diverse range of products and services, including New Business Attraction Business Retention Elections and Voting Government Advocacy Education and Training Services Networking Events Awards and Recognitions Networking Opportunities Festivals and Events “Business Connections” membership directory Chamber newsletter(s) While technically a not-for-profit organization, many Chamber services are expected to generate an excess of revenues over expenses, which is required to support a variety of https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/3 9/24/24, 11:45 AM Print Preview non-revenue-producing Chamber programs. The management group defined a vision for the organization as follows: Be the first place that businesses in the region go for solutions to the competitive challenges of growth. Their growth statement is: The Cincinnati Chamber drives growth by providing business resources and accelerators, immersive engagement opportunities and company cost-saving programs. We’re equipped to help grow your talent pool, navigate the regional workforce ecosystem and expand your cultural thinking. The Chamber is organized in a series of product-focused departments. These departments interact directly with customer segments to develop and deliver Chamber products and services. Support groups assist these line departments in product and service delivery functions that include Information Services, Administration, Human Resources, Marketing/Communications, and Finance. In addition, the Chamber’s Membership/Member Relations department serves Chamber staff and members in providing information and access to Chamber products and services, including Chamber membership. The Chamber has ongoing relationships with affiliate organizations that are housed within the Chamber’s downtown Cincinnati office. Those affiliates include the Cincinnati Minority Supplier Development Council, the Cincinnati Minority Enterprise Business Mentoring Program, The Japan-America Society, and many more. The Chamber developed the “Measurement Report Card” emphasizing measurement as the tool to drive effectiveness. This Measurement Report Card links the Strategic Plan, Program of Work, departmental and work group measures into one unified system. This Report Card incorporates a broadened set of measures, coupling financial goals with penetration and satisfaction data through the quarterly operations report. Case Questions for Discussion 1. Characterize the customer benefit package that the Chamber offers. What other peripheral goods might the Chamber provide to complement its services? How might this affect their strategy? 2. What sources of competitive advantage do you feel the Chamber has? Who do they compete with? 3. Critique their mission and strategy. What operational processes must they excel at to accomplish their mission and vision? 4. Rank order their competitive priorities. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 2/3 9/24/24, 11:45 AM Print Preview 5. In many areas, a Chamber of Commerce is primarily in the travel and tourism business. How does the Greater Cincinnati Chamber of Commerce appear to differentiate itself from these types of organizations? Chapter 3: Operations Strategy The Greater Cincinnati Chamber of Commerce Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 3/3 9/24/24, 11:46 AM Print Preview Chapter 3: Operations Strategy Sustainable Lawn Care Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Sustainable Lawn Care “Chris, we make the highest-quality grass seed and fertilizer in the world. Our brands are known everywhere!” stated Caroline Ebelhar, the vice president of manufacturing for The Lawn Care Company. “Yeah! But the customer doesn’t have a Ph.D. in organic chemistry to understand the difference between our grass seed and fertilizer compared to those of our competitors! We need to also be in the lawn-care application service business, and not just the manufacturer of super-perfect products,” responded Chris Kilbourne, the vice president of marketing, as he walked out of Caroline’s office. This ongoing debate among Lawn Care’s senior management team had not been resolved, but the chief executive officer, Mr. Steven Marion, had been listening very closely. Soon they would have to make a major strategic decision. The Lawn Care Company, a fertilizer and grass seed manufacturer with sales of almost $1 billion, sold some of its products directly to parks and golf courses. Customer service in this goods-producing company was historically very narrowly defined as providing “the right product to the right customer at the right time.” Once these goods were delivered to the customer’s premises and the customer signed the shipping documents, Lawn Care’s job was done. For many park and golf course customers, a local subcontractor or the customers themselves applied the fertilizer and seed. These application personnel often did the job incorrectly, using inappropriate equipment and methods. The relationship among these non- lawn care application service personnel, The Lawn Care Company, and the customer also was not always ideal. When claims were made against The Lawn Care Company because of damaged lawns or polluted lakes and streams, the question then became one of who was at fault. Did the quality of the physical product or the way it was applied cause the damage? Either way, the customers’ lawns or waterways were in poor shape, and in some cases the golf courses lost substantial revenue if a green or hole was severely damaged or not playable. One claim filed by a green advocacy group focused on a fish kill in a stream near a golf course. One of Lawn Care’s competitors began an application service for parks and golf courses that routinely applied the fertilizer and grass seed for its primary customers. This competitor bundled the application service to the primary goods, fertilizer and grass seed, and charged a higher price for this service. The competitor delivered and applied the fertilizer on the same day to avoid the liability of storing toxic fertilizer outside on the golf course or park grounds. The competitor learned the application business in the parks and golf course target market segment and was beginning to explore expanding into the residential lawn-care https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/2 9/24/24, 11:46 AM Print Preview application service target market. The Lawn Care Company sold the “highest-quality physical products” in the industry, but it was not currently in either the professional park and golf course or the residential “application service” lawn-care market segments. The Lawn Care Company considered its value chain to end once it delivered its products to the job site or non-lawn care application service. The competitor sold the customer “a beautiful lawn with a promise of no hassles.” To the competitor, this included an application service bundled to grass seed and fertilizer. Le Do/Shutterstock.com Case Questions for Discussion 1. Define Lawn Care’s current strategic mission, strategy, competitive priorities, value chain, and how it wins customers. What are the order qualifiers and winners? Draw the major stages in its value chain without an application service. 2. What problems, if any, do you see with Lawn Care’s current strategy, vision, customer benefit package and value chain design, and pre- and postservices? 3. Redo Questions (1) and (2) and provide a new or revised strategy and associated customer benefit package and value chain that is more appropriate for today’s marketplace. 4. What does operations have to be good at to successfully execute your revised strategy? 5. What are your final recommendations? Chapter 3: Operations Strategy Sustainable Lawn Care Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 2/2 9/24/24, 11:46 AM Print Preview Chapter 3: Operations Strategy Integrative Case: Diamond Global Supply Chain—Hudson Jewelers Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Integrative Case: Diamond Global Supply Chain—Hudson Jewelers The Hudson Jewelers case study can be found in Appendix C. Chapter 3 Case Questions for Discussion 1. Define and draw the customer benefit package and state Hudson Jewelers’s strategy; rank order its competitive priorities, order qualifiers, and order winners; and state the ways they gain competitive advantage. 2. Evaluate a customer’s retail store experience in terms of search, experience, and credence attributes. Provide some examples and explain why they can be classified as search, experience, and credence attributes. 3. Define in detail the attributes of “value” when buying and codesigning a $50,000 wedding ring. What creates a buying experience that would delight the customer? Chapter 3: Operations Strategy Integrative Case: Diamond Global Supply Chain—Hudson Jewelers Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/1 9/24/24, 11:40 AM Print Preview Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Excel-Based Problems Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Excel-Based Problems For these problems, you may use Excel or the appropriate Excel templates to assist in your analysis. Excel icons signify that you should use the Excel template, data file, or model file as noted in the problem. 46. 2.2 - Explain the use of analytics in OM and how internal and external measures are related.A key hospital outcome measure of clinical performance is length of stay (LOS), that is, the number of days a patient is hospitalized. For patients at one hospital with acute myocardial infarction (heart attack), the length of stay over the past four years has consistently decreased. The hospital also has data for various treatment options such as the percentage of patients who received aspirin upon arrival and cardiac medication for left ventricular systolic dysfunction (LVSD). The data are shown below: Year Average LOS Aspirin on Arrival LVSD Medication 2007 4.35 days 95% 89% 2008 4.33 days 98% 93% 2009 4.12 days 99% 96% 2010 4.15 days 100% 98% Illustrate the interlinking relationships by constructing scatter charts using Excel showing the LOS as a function of the other variables. What do these models tell you? 47. 2.2 - Explain the use of analytics in OM and how internal and external measures are related.Customers call a call center to make room reservations https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 1/5 9/24/24, 11:40 AM Print Preview for a small chain of 42 motels located throughout the southwestern part of the United States. Business analytics is used to determine how and if the following performance metrics are related: time by quarter, average time on hold (seconds) before a customer reaches a company customer service representative, percent of time the customer inquiry is solved the first time (called first pass quality) and customer satisfaction with the overall call center experience. Overall Customer Average Hold Percent Solved Satisfaction Quarter Time First Time Percent Q1 22 seconds 89% 96% Q2 34 seconds 80% 92% Q3 44 seconds 78% 82% Q5 67 seconds 85% 84% Q6 38 seconds 87% 90% Q7 70 seconds 76% 80% Q8 86 seconds 67% 74% Develop graphical interlinking models by constructing scatter charts using Excel showing the relationships between each pair of variables. What do results tell you? 48. 2.2 - Explain the use of analytics in OM and how internal and external measures are related. Use the Excel template VLC to find the average value of a loyal customer in a target market segment if the average purchase price is $75 per visit, the frequency of repurchase is six times per year, the contribution margin is 10 percent, and the average customer defection rate is 25 percent? https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 2/5 9/24/24, 11:40 AM Print Preview 49. 2.2 - Explain the use of analytics in OM and how internal and external measures are related. Using the base case data in question 48, use the Excel template VLC to analyze how the value of a loyal customer will change if the average customer defection rate varies between 15 and 40 percent (in increments of 5 percent) and the frequency of repurchase varies between 3 and 9 times per year (in increments of one year). Sketch graphs (or use Excel charts) to illustrate the impact of these assumptions on the VLC. 50. 2.2 - Explain the use of analytics in OM and how internal and external measures are related. What is the average defection rate for grocery store shoppers in a local area of a large city if they spend $45 per visit, shop 52 weeks per year, the grocery store has a 4 percent gross margin, and the value of a loyal customer is estimated at $3,500 per year? Use a trial-and- error approach with the Excel template VLC to find your answer. 51. 2.2 - Explain the use of analytics in OM and how internal and external measures are related. What is a grocery store’s contribution margin (CM) if the average purchase price is $86.55 per visit, the customer defection rate is 0.10, the VLC is $1,800, and 52 purchases are made per year? Use a trial- and-error approach with the Excel template VLC to find your answer. 52. 2.2 - Explain the use of analytics in OM and how internal and external measures are related. Use the Excel template VLC to estimate the value of a loyal customer for a loyal Craftsman tool buyer. Assume the contribution margin is 0.25, the purchase price is $300 for a certain set of tools, and the repurchase frequency is every five years, and the customer defection rate is 10 percent. If the target market segment for this tool set is one million customers and this firm has a 27 percent market share, what is the VLC for this firm’s target market? 53. 2.2 - Explain the use of analytics in OM and how internal and external measures are related. A retail store sells a popular cosmetic called Devine and the store manager was given $100,000 by the corporate office to improve store performance any way she thinks best. The “base case” information is a price of $30 per bottle, a contribution margin of 0.50, a customer defection rate of 17 percent, and a repurchase frequency of three times a year. If these improvement funds could be used to (a) increase the contribution margin to 0.58 or (b) reduce the customer defection rate to 15 percent or (c) increase the repurchase frequency to four times per year, what is the best way to spend these improvement funds by answering the next two https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 3/5 9/24/24, 11:40 AM Print Preview multiple choice questions? (Assume all other variables remain at the base case level for each of the three improvement options.) Use the Excel template VLC to answer these questions and summarize your answers using the table below: Price Contribution Repurchase Defection VLC in $ Margin Frequency Rate $30 0.50 3 17% $30 0.58 3 17% $30 0.50 3 15% $30 0.50 4 17% a. The value of a loyal customer for improvement option (a) is ? b. The best way to use the $100,000 in improvement funds is Option ? 54. 2.2 - Explain the use of analytics in OM and how internal and external measures are related. The manager at Raphael’s Four-Star Italian Restaurant wants to set the price of their premiere entrée. He estimates a loyal customer is worth $1,000. Based on survey data, the customer defection rate is 0.22, the repurchase frequency is once a month, and the restaurant’s contribution margin is 18.5 percent. What is the price he should charge for the premiere entrée? Use the Excel template VLC to search for the solution. 55. 2.2 - Explain the use of analytics in OM and how internal and external measures are related. A computer manufacturer currently has a 20 percent customer defection rate. Their accounting department estimates the incremental contribution to profit and overhead as 35 percent. Customers purchase computers every four years at an average cost of $1,200.00. In an effort to reduce the defection rate, the company is improving both the quality of its computers and its post-sale service. Use the Excel template VLC to determine the increase in the average value of a loyal customer if the defection rate drops to 5 percent. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 4/5 9/24/24, 11:40 AM Print Preview Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Excel-Based Problems Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 5/5 9/24/24, 11:40 AM Print Preview Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Rapido Burrito Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Rapido Burrito Rapido Burrito is a small, regional chain of quick service restaurants. Rather than wait in a cafeteria-style line, customers check boxes for their choice of ingredients, sauce, and so on paper menus at their table. The food is prepared quickly and then delivered to the tables. Lately, one of the store managers has been hearing customer complaints, such as: “The tortillas are too thin”; “The food is not hot”; “Every time I get a burrito, it seems to be a different size”; and “I got the wrong ingredients on my burrito.” Many complaints were submitted through the corporate website. The district manager was most concerned with the comments about the consistency of size. One of the staff designed a customer survey using the questions in Exhibit 2.10, based on a 5-point Likert scale for the first 10 questions. The last two questions were coded as a 1, 2, 3, or 4. Exhibit 2.10 Customer Survey Questions 1. Was the menu easy to read? 2. Was the order prepared correctly? 3. Was the food tasty? 4. Was the food served hot? 5. Were employees courteous and polite? 6. Was the restaurant clean? 7. In your opinion, did you receive a good value for the price you paid? https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 1/3 9/24/24, 11:40 AM Print Preview 8. What was your level of satisfaction? 9. How likely are you to dine with us again? 10. How likely are you to recommend us to your friends/family? 11. How often do you eat at Rapido Burrito? First time, less than once/month, one to three times a month, weekly? 12. What was the main ingredient in your burrito: chicken, beef, pork, or beans? They administered the questionnaire to 25 random customers. The restaurant also gathered data on the weights of 50 samples of 3 burritos (a total of 150). Both the survey data and weight data are available in the Excel data set Rapido Burrito Case Data.xlsx. Case Questions for Discussion 1. What conclusions do you reach when you calculate descriptive statistics for the answers to each of the survey questions in the database? 2. If you average the responses to the first seven questions by customer, how closely are those averages correlated to the satisfaction score? Include a scatter chart in your analysis. 3. Use Excel to analyze the data on burrito weights using descriptive statistical measures such as the mean and standard deviation, and a frequency distribution and histogram. What do your results tell you about the consistency of the food servings? 4. What recommendations for decision making and improvement can you make to the store manager? Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Rapido Burrito Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 2/3 9/24/24, 11:40 AM Print Preview © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 3/3 9/24/24, 11:40 AM Print Preview Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Haven Malware Call Center Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Haven Malware Call Center “We are losing customers? Why?” Beth Weltman, the Chief Operating Officer and coowner of Haven Malware, said. Viruses, worms, trojans, and malicious bots create constant calls to Haven’s call center. Beth turned toward Jake Marta, the call center manager, and asked, “Do we have a problem with answering customer questions? Is it a training problem? Can we forecast customer demand? A problem of call center capacity? Do our customers wait too long?” “We don’t know,” Jake replied in a hotly debated company meeting. No one else spoke. “Then analyze the data and find out! I want answers at next week’s meeting,” Beth shouted, leaving the conference room. Jake lowered his head and realized that he didn’t know how to analyze the data. He was an excellent manager of people, recruiting, training, and promotion. He was a people person, not a statistician. Employees liked him; he was funny, friendly, and did what he promised. But he had a weakness he kept to himself. He didn’t understand basic statistics, probability, or more advanced methods like regression analysis. Jake went back to his office and looked through his office window at the one-hundred plus cubicles in the call center. His employees were constantly trained in the latest Haven malware revisions and issues. Once he arrived home that evening, he hugged his spouse and two young kids. He was a family man, but tonight after dinner, he went to his basement office, closed the door, and pulled out two old college textbooks—one on statistics and a second book on Excel modeling. Jake liked one of the quotes in his statistics book. It said, “In God we trust; all others bring data analysis!” Jake wanted to answer his boss’s query, “Do our customers wait too long?” For the next five days, averaging five hours of sleep a day, he studied these books night and day. He collected a sample of data on customer wait times in seconds for the call center operation. The data set Haven Malware Case Data shows these data for 500 customer calls. He also planned to examine more detailed data on call volumes and patterns by hour of the day and service processing times at a later time. Jake planned to show up for the meeting tomorrow with basic statistics and histograms, insights into customer waiting times, and options to help solve the problems of long waiting times and lost sales. Case Questions for Discussion https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 1/2 9/24/24, 11:40 AM Print Preview 1. Using the data for customer wait times and the Statistical Analysis Excel template, what can Jake tell his boss, Beth Weltman, about customer wait times? 2. What options should Jake investigate and propose to Beth? Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Haven Malware Call Center Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 2/2 9/24/24, 11:41 AM Print Preview Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Greyhound Bank: Credit Card Division Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Greyhound Bank: Credit Card Division Greyhound Bank operates in the United States and provides a full range of financial services for individuals and business. The credit card division is a profit center that has experienced a 10 percent annual growth rate over the last five years. These credit card services include producing and mailing the plastic credit cards to customers, preparing online and mailing monthly statements to customers, handling all customer requests such as stop payments and customer complaints, and preparation and distribution of summary online reports to all individual and corporate customers. “Our internal operational measures seem to be good,” Ms. Juanita Sutherland, the president of Greyhound’s credit card division stated, “but the customer perceives our performance as poor based on marketing’s recent customer survey. So, what’s going on here? Can anyone at this meeting explain to me this mismatch between these two different sources of information? Is it an important problem or not?” Mr. Luke C. Morris, the vice president of operations quickly responded, “Juanita, one reason there’s a mismatch is that operations doesn’t have a say in the customer survey’s design or performance criteria. We don’t ask the same questions or use the same criteria!” “Wait a minute Luke. We often ask you operations folks for input into our customer survey design but the job usually gets shuttled to your newest MBA who doesn’t have enough company knowledge to truly help us out,” stated Mr. Bill Barlow, the corporate vice president of marketing, as he leaned forward on the conference room table. “O.K.,” Ms. Sutherland interjected, “I want you two to work on this issue and tell me in one week what to do.” I’ve got another appointment so I must leave now but you two have got to work together and figure this thing out. I’m worried that we are losing customers!” At a subsequent meeting between Mr. Morris and Mr. Barlow and their respective operations and marketing staffs, the following comments were made: “The trends in the marketing customer survey are helpful to everyone but the performance criteria simply do not match up well between marketing and operations.” “Plastic card turnaround performance is very good based on the marketing survey data, but the wording of the customer survey questions on plastic card turnaround time is vague.” https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 1/4 9/24/24, 11:41 AM Print Preview “Operations people think they know what constitutes excellent service but how can they be sure?” “You’ll never get marketing to let us help them design ‘their’ customer survey,” said an angry operations supervisor. “Their marketing questions and what really happens are two different things.” “We need a consistent numerical basis for knowing how well process performance matches up with external performance. My sample of data (see Exhibit 2.11) is a place to start.” “If your backroom operational performance measures really do the job, who cares about matching marketing and operations performance information. The backroom is a cost center, not a profit center!” Exhibit 2.11 Sample Internal and External Greyhound Credit Card Performance Data Customer New Applicant Plastic Production Satisfaction Percent Processing Time Turnaround Time Month (%) (Days) (Days) 1 86.4 1.7 1.005 2 81.8 1.0 1.007 3 81.6 1.4 1.208 4 83.7 1.8 0.906 5 83.3 1.6 1.057 6 81.7 1.5 1.099 7 84.0 1.2 0.755 https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 2/4 9/24/24, 11:41 AM Print Preview Customer New Applicant Plastic Production Satisfaction Percent Processing Time Turnaround Time Month (%) (Days) (Days) 8 84.5 1.3 1.208 9 83.3 1.7 0.906 10 82.6 1.1 1.087 11 84.2 1.3 0.884 12 85.0 1.1 0.987 13 85.6 0.9 0.755 14 85.8 1.0 1.102 15 84.1 0.9 0.782 The meeting ended with a lot of arguing but not much progress. Both functional areas were protecting their “turf.” How would you address Ms. Sutherland’s questions? Case Questions for Discussion 1. What are the major problems facing the credit card division? 2. What steps are required to develop a good internal and external performance and information system? 3. How should internal and external performance data be related? Are these data related? What do charts and/or statistical data analysis tell you, if anything? (Use the data in Exhibit 2.11 to help answer these questions.) 4. Is the real service level what is measured internally or externally? Explain your reasoning. 5. What are your final recommendations? Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Greyhound Bank: Credit Card Division Book Title: Operations and Supply Chain Management https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 3/4 9/24/24, 11:41 AM Print Preview Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 4/4 9/24/24, 11:41 AM Print Preview Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Integrative Case: Diamond Global Supply Chain —Hudson Jewelers Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Review Integrative Case: Diamond Global Supply Chain—Hudson Jewelers The Hudson Jewelers case study can be found in Appendix C. Chapter 2 Case Questions for Discussion 1. What is the value of a loyal customer to Hudson Jewelers for a wealthy individual who visits Naples every February and buys jewelry for her extended family every other year? Assume the following: Customer retentionrate = 80 percent Contribution margin = 0.55 Priceper purchase = $200,000 2. Design an individual service plan for a high priority customer. Chapter 2: Analytics and Performance Measurement in Operations and Value Chains Integrative Case: Diamond Global Supply Chain —Hudson Jewelers Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306560&nbId… 1/1 9/24/24, 11:41 AM Print Preview Chapter 3: Operations Strategy Chapter Contents Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter 3 Operations Strategy Chapter Introduction 3-1 Gaining Competitive Advantage 3-2 Understanding Customer Wants and Needs 3-3 Evaluating Goods and Services 3-4 Competitive Priorities 3-4a Cost 3-4b Quality 3-4c Time 3-4d Flexibility 3-4e Innovation 3-5 OM and Strategic Planning 3-5a Operations Strategy 3-5b Sustainability and Operations Strategy 3-5c Global Supply Chains and Operations Strategy 3-6 A Framework for Operations Strategy 3-6a Operations Strategy at McDonald’s Chapter Review Chapter 3 Learning Objective Summaries Key Terms Review Questions Discussion Questions and Experiential Activities Adventure Gaming, Inc. The Greater Cincinnati Chamber of Commerce Sustainable Lawn Care https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&sna… 1/2 9/24/24, 11:41 AM Print Preview Integrative Case: Diamond Global Supply Chain—Hudson Jewelers Chapter 3: Operations Strategy Chapter Contents Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&sna… 2/2 9/24/24, 11:42 AM Print Preview Chapter 3: Operations Strategy Chapter Introduction Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning Chapter Introduction Any change in strategic direction typically has significant consequences for the entire value chain and for operations. robbin lee/Shutterstock.com Learning Objectives After studying this chapter, you should be able to: 3-1 Explain how organizations seek to gain competitive advantage. 3-2 Explain approaches for understanding customer wants and needs. 3-3 Describe how customers evaluate goods and services. 3-4 Explain the five key competitive priorities. 3-5 Explain the role of OM, sustainability, and operations in strategic planning. 3-6 Describe Hill’s framework for operations strategy. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/3 9/24/24, 11:42 AM Print Preview Technological innovation and changing customer wants and needs have caused industries to develop new strategic directions. During the COVID-19 pandemic, Uber found its Uber Eats business growing rapidly as more customers wanted restaurant deliveries. Consequently, the company redefined its mission from just ride hailing to include home delivery service. To support this new mission, Uber acquired Postmates, which delivers groceries, alcoholic drinks, party supplies, and pharmacy items to customers’ homes. Uber’s new strategy focuses on convenience, prompt delivery, and service quality. Uber’s CEO Dara Khrosrowshahi said, “Anyplace you want to go, anything you want delivered to your home, Uber is going to be there with you, and we think these every day frequent interactions create a habit, create a connection with customers.” To remain competitive, some companies have had to completely reinvent themselves. For example, as paper copies gave way to digital files, Xerox branched out into new business services, including commercial information technology, document outsourcing, finance, human resources (HR), transportation, and health care. The direction an organization takes and the competitive priorities it chooses are driven by its strategy. The concept of strategy has different meanings to different people. Strategy (a pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole.) is a pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole. Without an up-to-date and effective strategy, a manufacturing or service organization will struggle, and may even lead to bankruptcy. What Do You Think? How do you see the digital society affecting education? for example, what implications are emerging technologies, such as e-books and distance learning, having? Can you think of others? Changing a business strategy has many implications for operations and the entire value chain. Facilities may have to be reconfigured or new ones built; new technology may have to be acquired; new processes and jobs must be designed; and so on. As home delivery companies battle for market share, Uber needs to focus on operational excellence in order to gain competitive advantage in the growing home delivery marketplace. Looking back at Exhibit 1.8, we also see that all aspects of preproduction services, production processes, and postproduction services will be affected. Industry 4.0/Service 4.0 allows companies to better integrate their processes, as well as suppliers, across the value chain, leading to more flexible production, greater productivity, and new opportunities for fulfilling customers’ individual requirements. Chapter 3: Operations Strategy Chapter Introduction Book Title: Operations and Supply Chain Management https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 2/3 9/24/24, 11:42 AM Print Preview Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 3/3 9/24/24, 11:42 AM Print Preview Chapter 3: Operations Strategy: 3-1 Gaining Competitive Advantage Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning 3-1 Gaining Competitive Advantage Competitive advantage (denotes a firm’s ability to achieve market and financial superiority over its competitors.) denotes a firm’s ability to achieve market and financial superiority over its competitors. In the long run, a sustainable competitive advantage provides above- average performance and is essential to the survival of the business. Creating a competitive advantage requires a fundamental understanding of two things. First, management must understand customer needs and expectations—and how the value chain can best meet these through the design and delivery of attractive customer benefit packages. Second, management must build and leverage operational capabilities to support desired competitive priorities. Every organization has a myriad of choices in deciding where to focus its efforts—for example, on low cost, high quality, quick response, or flexibility and customization—and in designing its operations to support its chosen strategy. The opening scenario suggests that organizations have many strategic choices in designing and operating their domestic and global value chains. These choices should be driven by current and emerging customer needs and expectations. In particular, what happens in operations—on the front lines and on the factory floor—must support the strategic direction the firm has chosen. 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. 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, in selecting technology and processes, in making human resource policy choices, and in making other relevant decisions to support the firm’s strategic emphasis. Chapter 3: Operations Strategy: 3-1 Gaining Competitive Advantage Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/1 9/24/24, 11:42 AM Print Preview Chapter 3: Operations Strategy: 3-2 Understanding Customer Wants and Needs Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning 3-2 Understanding Customer Wants and Needs Because the fundamental purpose of an organization is to provide goods and services of value to customers, it is important to first understand customer desires and also to understand how customers evaluate goods and services. However, a company usually cannot satisfy all customers with the same goods and services. Often, customers must be segmented into several natural groups, each with unique wants and needs. These segments might be based on buying behavior, geography, demographics, sales volume, profitability, or expected levels of service. 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. To correctly identify what customers expect requires being “close to the customer.” There are many ways to do this, such as having employees visit and talk to customers, having managers talk to customers, and doing formal marketing research. Marriott Corporation, for example, requires top managers to annually work a full day or more in the hotels as bellhops, waiters, bartenders, front-desk service providers, and so on, to gain a true understanding of customer wants and needs, and the types of issues that their hotel service providers must face in serving the customer. 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. Basic customer expectations are generally considered the minimum performance level required to stay in business and are often called order qualifiers (basic customer expectations are generally considered the minimum performance level required to stay in business.). For example, a radio and driver-side air bag are generally expected by all customers for an automobile. In the highly competitive pizza business, efficient delivery would be considered an order qualifier. However, the unexpected features that surprise, entertain, and delight customers by going beyond the expected often make the difference in closing a sale; these are called order winners. Order winners (goods and service features and performance characteristics that differentiate one customer benefit package from another and win the customer’s business.) are goods and service features and performance characteristics that differentiate one customer benefit package from another and win the customer’s business. Collision avoidance systems or a voice-activated music system in an automobile, for example, Papa John’s Pizza focused on “better ingredients, better pizza” as the order winner to differentiate the business from the competitors. Over time, however, order winners eventually become order qualifiers as customers begin to expect them. Thus, https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/2 9/24/24, 11:42 AM Print Preview to stay competitive, companies must continually innovate and improve their customer benefit packages. Chapter 3: Operations Strategy: 3-2 Understanding Customer Wants and Needs Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 2/2 9/24/24, 11:42 AM Print Preview Chapter 3: Operations Strategy: 3-3 Evaluating Goods and Services Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning 3-3 Evaluating Goods and Services Research suggests that customers use three types of attributes in evaluating the quality of goods and services: search, experience, and credence. Search attributes (those that a customer can determine prior to purchasing the goods and/or services.) are those that a customer can determine prior to purchasing the goods and/or services. These attributes include things like color, price, freshness, style, fit, feel, hardness, and smell. Experience attributes (those that can be discerned only after purchase or during consumption or use.) are those that can be discerned only after purchase or during consumption or use. Examples of these attributes are friendliness, taste, wearability, safety, fun, and customer satisfaction. Credence attributes (any aspects of a good or service that the customer must believe in but cannot personally evaluate even after purchase and consumption.) are any aspects of a good or service that the customer must believe in but cannot personally evaluate even after purchase and consumption. Examples include the expertise of a surgeon or mechanic, the knowledge of a tax advisor, or the accuracy of tax preparation software. This classification has several important implications for operations. For example, the most important search and experience attributes should be evaluated during design, measured during manufacturing, and drive key operational controls to ensure that they are built into the good with high quality. Credence attributes stem from the nature of services, the design of the service system, and the training and expertise of the service providers. During the COVID-19 pandemic, cruise lines suspended operations. As the pandemic slowed, management faced the challenge of winning back customers’ trust that the ships’ service delivery system will be safe and protect their health. To insure customer safety, cruise lines hired additional medical staff with expertise in virus diagnosis and treatment, installed medical grade air filters throughout the ship, and implemented many changes to ensure social distancing. Cruise lines spent a lot of effort to inform potential customers of these changes and reinforce safety on the ships. We can see that search, experience, and credence attributes were vital to customers’ deciding to cruise again and feeling safe during their cruise. However, despite all efforts, cruise lines still experience COVID-19 infections and major disruptions. Listen to Your Customers—Creatively! At IDEO, one of the world’s leading design firms (it designed Apple’s first mouse and stand-up toothpaste tubes as just two examples), design doesn’t begin with a far-out concept or a cool drawing. It begins with a deep understanding of the people who might use whatever product or service eventually emerges from its work, drawing https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 1/3 9/24/24, 11:42 AM Print Preview from anthropology, psychology, biomechanics, and other disciplines. When former Disney executive Paul Pressler assumed the CEO position at Gap, he met with each of Gap’s top 50 executives, asking them such standard questions as “What about Gap do you want to preserve and why?,” “What about Gap do you want to change and why?,” and so on. But he also added one of his own: “What is your most important tool for figuring out what the consumer wants?” Some companies use unconventional and innovative approaches to understand customers. Texas Instruments created a simulated classroom to understand how mathematics teachers use calculators; and a manager at Levi Strauss used to talk with teens who were lined up to buy rock concert tickets. The president of Chick-fil-A spends at least one day each year behind the counter, as do all of the company’s employees, and has camped out overnight with customers at store openings. At Whirlpool, when customers rate a competitor’s product higher in satisfaction surveys, engineers take it apart to find out why. The company also has hundreds of consumers fiddle with computer-simulated products while engineers record the users’ reactions on videotape. Rawpixel.com/Shutterstock.com These three evaluation criteria form an evaluation continuum from easy to difficult, as shown in Exhibit 3.1. This 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. Of course, goods and services are usually combined and configured in unique ways, making for an even more complex customer evaluation process. Customers evaluate services in ways that are often different from goods. A few ways are summarized below along with significant issues that affect operations. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 2/3 9/24/24, 11:42 AM Print Preview Customers seek and rely more on information from personal sources than from nonpersonal sources when evaluating services prior to purchase. 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. 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. Exhibit 3.1 How Customers Evaluate Goods and Services Source: Adapted from V. A. Zeithamel, “How Consumer Evaluation Processes Differ Between Goods and Services,” in J. H. Donnelly and W. R. George, eds., Marketing in Services, published by the American Marketing Association, Chicago, 1981, pp. 186–199. Reprinted with permission from the American Marketing Association. Dissatisfaction with services is often the result of customers’ inability to properly perform or coproduce their part of the service. A wrong order placed on the Internet can be the result of customer error despite all efforts on the part of the company to provide clear instructions. The design of services must be sensitive to the need to educate customers on their role in the service process. These insights help explain why it is more difficult to design services and service processes than goods and manufacturing operations. Chapter 3: Operations Strategy: 3-3 Evaluating Goods and Services Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning © 2024 Cengage Learning Inc. All rights reserved. No part of this work may by reproduced or used in any form or by any means - graphic, electronic, or mechanical, or in any other manner - without the written permission of the copyright holder. https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=6109322280022464279529202136&eISBN=9780357901687&id=2191306575&nbId… 3/3 9/24/24, 11:42 AM Print Preview Chapter 3: Operations Strategy: 3-4 Competitive Priorities Book Title: Operations and Supply Chain Management Printed By: Jessa Joy Leoligao ([email protected]) © 2024 Cengage Learning, Cengage Learning 3-4 Competitive Priorities Every organization is concerned with building and sustaining a competitive advantage in its markets. A strong competitive advantage is driven by customer needs and aligns the organization’s resources with its business opportunities. A strong competitive advantage is difficult to copy, often because of a firm’s culture, habits, or sunk costs. Competitive advantage can be achieved in different ways such as outperforming competitors on price or quality, responding quickly to changing customer needs in designing goods and services, or providing rapid design or delivery. Competitive priorities (represent the strategic emphasis that a firm places on certain performance measures and operational capabilities within a value chain.) represent the strategic emphasis that a firm places on certain performance measures and operational capabilities within a value chain. Understanding competitive priorities and their relationships with customer benefit packages provides a basis for designing the value and supply chains that create and deliver goods and services. In general, organizations can compete on the following five key competitive priorities: 1. Cost 2. Quality 3. Time 4. Flexibility 5. Innovation All of these competitive priorities are vital to success. For example, no firm today can sacrifice quality simply to reduce costs, or emphasize flexibility to the extent that it would make its goods and services unaffordable. However, organizations generally make trade- offs among these competitive priorities and focus their efforts along one or two key dimensions. For e

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