BMAL-590 FOUNDATIONS OF OPERATIONS/PRODUCTION
MANAGEMENT EXAM QUESTIONS AND ANSWERS WITH
COMPLETE SOLUTIONS GRADED A++
Operations and Supply Chain Strategies
Organizations will seek a strategy that focuses on either efficiency or responsiveness in their operations
and supply chain
An organization that is focused on efficiency as a strategy is seeking to compete on lower cost, while an
organization focused on a responsiveness strategy is seeking to compete on speed of delivery.
Both strategies will impact the price of the product and the perception of quality. Regardless of the
strategy, the ultimate goal of the organization is to make profits, and preferably more profits than its
competitors.
Thus it is possible that either the more efficient or the more responsive organization could be more
profitable. It is also possible that neither organization is profitable - particularly if they do not manage
their operations well
Operations and Supply Chain Strategies for Three "World Class" Organizations
Kellogg's has an extensive product line and serves international markets with a large network of plants.
Important operations decisions include the product mix at each plant, the network of suppliers,
,inventory policies, and forecasting.
Sony makes and sells a huge variety of electronic goods all around the world and much of the
manufacturing occurs in Japan and China as well as the Americas and Europe. Manufacturing costs vary
but the increased responsiveness of having supply near a major source of demand is a savvy business
decision. Sony's dispersed production and customer base create numerous logistical challenges, and
Sony manages these challenges through third-party logistics.
American Express is a financial services company whose supply chain is not as complex as Kellogg's or
Sony's. Important decisions it must make include locating retail branches, locating other operations (call
centers), and choosing suppliers—such as manufacturers of credit cards and providers of IT and billing
services.
Competitive Priorities Versus Capabilities
Competitive priorities are the relative rankings of what the company would like to achieve.
Competitive capabilities are the relative effectiveness that the company is able to actually achieve. Some
companies start with a competitive priority because there is a niche in the market that is not being filled,
such as the high level of product flexibility in the mobile device arena (Dell, Apple) while others start
with an existing set of competitive priorities and then find products and markets that are a good fit for
the priorities (Starbucks).
When considering an efficient strategy:
an organization is seeking to be efficient in its operations processes in order to offer a lower price in the
market by using cost and quality approaches.
,A low cost leader, seeks lower prices as the easiest reason to communicate to customers why they
should buy a particular product or service.
Unfortunately, simply lowering prices will lead to reduced profits or even losses; therefore, a company
must simultaneously reduce its operating costs. Low-cost operations seek to provide a product or service
that is less expensive than similar products or services offered by competitors.
To reduce operating costs an organization should consider qualitymanagement tools (described in
sections 2 and 3) as a means for cost reduction. Customers will pay a premium for superior quality. Yet, a
quality strategy is beyond offering a product or service that is superior to the alternatives. Consistent
quality involves meeting the product specifications and the promises made to customers with high
reliability. The product does not necessarily have to be superior to another, but customers must have a
high degree of confidence that what they are buying will perform as promised.
Yet, quality as a strategic approach seeks to reduce scrap, eliminate waste, and improve process
efficiencies.
When considering a responsive strategy:
an organization is seeking to compete on speed of delivery in the market by using time/delivery and
flexibility approaches.
With time/delivery, organizations focus on the gap between when a customer orders a product and
when he or she receives it. On-time delivery involves delivering a product when it is promised, but not
, necessarily quickly. Delivery speed means that an organization offers to deliver a product/service faster
than a competitor. Getting something quickly has obvious appeal. Many customers will pay a premium
for speed. Product development speed refers to the time between generations or major changes to a
product. Product development speed is important to just about any business, but it is particularly
important in dynamic industries such as electronics, computers, and fashion.
When considering flexibility, organizations take into account (a) customization—the ability to make a
product to exactly fit customer needs; (b) postponement—keeping products in a standard format and
then adding unique components for individual customers at the last possible moment; (c) mass
customization—products are produced in high volume at standard product costs but are customized to
individual customer tastes; (d) variety—the ability to handle a wide range or assortment of products
without undue costs; or (e) volume flexibility—the ability to adjust production volume up or down to
meet fluctuations in demand. Volume flexibility is important when supporting delivery speed and when
demand is fairly unstable.
Examples of Companies with Different Operations Strategies
Low cost
Superior quality
Delivery speed
Customization flexibility
Walmart
Taco Bell
Southwest Airlines
MANAGEMENT EXAM QUESTIONS AND ANSWERS WITH
COMPLETE SOLUTIONS GRADED A++
Operations and Supply Chain Strategies
Organizations will seek a strategy that focuses on either efficiency or responsiveness in their operations
and supply chain
An organization that is focused on efficiency as a strategy is seeking to compete on lower cost, while an
organization focused on a responsiveness strategy is seeking to compete on speed of delivery.
Both strategies will impact the price of the product and the perception of quality. Regardless of the
strategy, the ultimate goal of the organization is to make profits, and preferably more profits than its
competitors.
Thus it is possible that either the more efficient or the more responsive organization could be more
profitable. It is also possible that neither organization is profitable - particularly if they do not manage
their operations well
Operations and Supply Chain Strategies for Three "World Class" Organizations
Kellogg's has an extensive product line and serves international markets with a large network of plants.
Important operations decisions include the product mix at each plant, the network of suppliers,
,inventory policies, and forecasting.
Sony makes and sells a huge variety of electronic goods all around the world and much of the
manufacturing occurs in Japan and China as well as the Americas and Europe. Manufacturing costs vary
but the increased responsiveness of having supply near a major source of demand is a savvy business
decision. Sony's dispersed production and customer base create numerous logistical challenges, and
Sony manages these challenges through third-party logistics.
American Express is a financial services company whose supply chain is not as complex as Kellogg's or
Sony's. Important decisions it must make include locating retail branches, locating other operations (call
centers), and choosing suppliers—such as manufacturers of credit cards and providers of IT and billing
services.
Competitive Priorities Versus Capabilities
Competitive priorities are the relative rankings of what the company would like to achieve.
Competitive capabilities are the relative effectiveness that the company is able to actually achieve. Some
companies start with a competitive priority because there is a niche in the market that is not being filled,
such as the high level of product flexibility in the mobile device arena (Dell, Apple) while others start
with an existing set of competitive priorities and then find products and markets that are a good fit for
the priorities (Starbucks).
When considering an efficient strategy:
an organization is seeking to be efficient in its operations processes in order to offer a lower price in the
market by using cost and quality approaches.
,A low cost leader, seeks lower prices as the easiest reason to communicate to customers why they
should buy a particular product or service.
Unfortunately, simply lowering prices will lead to reduced profits or even losses; therefore, a company
must simultaneously reduce its operating costs. Low-cost operations seek to provide a product or service
that is less expensive than similar products or services offered by competitors.
To reduce operating costs an organization should consider qualitymanagement tools (described in
sections 2 and 3) as a means for cost reduction. Customers will pay a premium for superior quality. Yet, a
quality strategy is beyond offering a product or service that is superior to the alternatives. Consistent
quality involves meeting the product specifications and the promises made to customers with high
reliability. The product does not necessarily have to be superior to another, but customers must have a
high degree of confidence that what they are buying will perform as promised.
Yet, quality as a strategic approach seeks to reduce scrap, eliminate waste, and improve process
efficiencies.
When considering a responsive strategy:
an organization is seeking to compete on speed of delivery in the market by using time/delivery and
flexibility approaches.
With time/delivery, organizations focus on the gap between when a customer orders a product and
when he or she receives it. On-time delivery involves delivering a product when it is promised, but not
, necessarily quickly. Delivery speed means that an organization offers to deliver a product/service faster
than a competitor. Getting something quickly has obvious appeal. Many customers will pay a premium
for speed. Product development speed refers to the time between generations or major changes to a
product. Product development speed is important to just about any business, but it is particularly
important in dynamic industries such as electronics, computers, and fashion.
When considering flexibility, organizations take into account (a) customization—the ability to make a
product to exactly fit customer needs; (b) postponement—keeping products in a standard format and
then adding unique components for individual customers at the last possible moment; (c) mass
customization—products are produced in high volume at standard product costs but are customized to
individual customer tastes; (d) variety—the ability to handle a wide range or assortment of products
without undue costs; or (e) volume flexibility—the ability to adjust production volume up or down to
meet fluctuations in demand. Volume flexibility is important when supporting delivery speed and when
demand is fairly unstable.
Examples of Companies with Different Operations Strategies
Low cost
Superior quality
Delivery speed
Customization flexibility
Walmart
Taco Bell
Southwest Airlines
