TRAYECTORIA DE MATRÍCULA DURANTE EL CICLO LECTIVO 2021

It is clear from this brief introduction that operations and the development of an associ-ated strategy is of vital importance to any organisation. For many enlightened contem-porary organisations effective operations is viewed as a strategically signifi cant issue and a vital means of gaining a competitive advantage. This section explains the shift from price-based operations to relational procurement and operations and emphasises supply chain management as a strategic process. (Price-based operations grew from the mass production methods of the industrial revolution whereby economies of scale allowed unit costs to be driven down.)

3.1.1 Procurement and operations

Recently purchasing has become a strategic issue for fi rms as techniques such as just-in-time (JIT) operations have taken root in a diversity of industries (initially from successes in motor manufacturing). JIT purchasing involves a system whereby ‘material purchases are contracted so that the receipt and usage of material, to the maximum extent possible, coincide’ (CIMA, 2005). Put simply the stock of raw materials is reduced to near-zero lev-els. Financial savings are easily apparent as is the requirement to foster an effective working relationship with suppliers.

The purchasing department has always been responsible for the majority of some com-pany’s expenditure. (Most manufacturing fi rms spend more than 60% of total expenditure on purchasing.) Some of the large buyers, for example in the automobile companies, have become highly sophisticated materials managers and fully integrate design and purchas-ing especially as JIT requires exact specifi cations and materials handlpurchas-ing to achieve low inventory levels. Purchasing experts are also now involved with the design and develop-ment departdevelop-ment with the responsibility of fi nding suppliers for materials that are to the specifi cations required by designers.

Manufacturers are increasingly recognising that buying is as important as selling, and that excellent selling cannot make up for a mediocre buying specifi cation. Savings from economies of scale can be gained by centralising procurement to include not along raw materials but also supplies and capital equipment for offi ces (e.g. computers, cars, tele-phone systems, offi ce furniture, paper and other stationery items, etc.).

Those responsible for purchasing discuss prices, discounts, delivery lead times and speci-fi cations with suppliers, chase late deliveries and sanction payments. They monitor quality,

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seek out competitive sources and maximise quantity discount opportunities where several sources are buying from the same supplier.

Gargan (2004) underlines the crucial signifi cance of an organisation’s procurement operation by reporting that improved purchasing has saved the UK government more than

£1.6 billion on an annual spend of £15 billion, and that in the manufacturing industry, each 5% reduction of purchasing costs increases profi tability by 35% on average.

3.1.2 Strategic issues

Rudzki (2006) makes a case for strategic purchasing and seees it as a lever to world class performance:

During the last 20 years, procurement departments around the world have adopted some new and very pow-erful processes and tools. Done well, advanced procurement and supply management can trigger a com-pounding positive effect on a company’s lifeblood–its return on invested capital.

If you could reduce your product development cycle time by 50 per cent and beat competitors to market, while also reducing costs, would that be meaningful to your business? For most companies, that would be a huge plus. That is why world-class competitors involve their procurement group and other internal func-tions, plus suppliers, in an aligned effort to increase competitive advantage………….

Rudzki (2006) also draws attention to more than 30 critical factors that produce excep-tional supply management performance, categorised under the headings of:

● procurement strategy

● objectives

● leadership

● optimised organisation

● best practices

● innovation and technology.

Purchasing deals with day-to-day buying of goods and services, ensuring they conform to the quality demanded, are priced appropriately and delivered to a suitable time scale.

Supply by comparison involves strategic considerations including planning and implement-ing a strategy and managimplement-ing the overall supply process.

One way of assessing whether supply chain management is being approached strategi-cally is by applying Reck and Long’s (1988) strategic positioning tool. This identifi es the purchasing stage an organisation has reached on a continuum as described in Table 3.2.

Cousins’ (2000) strategic supply wheel depicts the corporate supply strategy at the hub of a wheel and underlines the need for an integrated approach to supply strategy involving a balancing of all fi ve ‘spokes’ in the wheel, namely:

● Organisational structure affects interactions with the rest of the organisation and the way in which control is exercised, the three main options are centralised, decentralised or some combination (a hybrid).

● Relationships with suppliers and their nature impact on the strategic success of the organ-isation. These relationships may be based on driving deals on price and can be quite adversarial. Alternatively, they may be more collaborative where there is a joint quest to reduce costs and a sharing of technology and innovations (known as ‘partnership sourcing’).

● Cost/benefi t analysis is at the heart of rational decisions over the most appropriate strate-gic approach to follow.

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● Appropriate skills and competencies are vital in order to implement a chosen strategy.

Long-term relationships with suppliers might (for instance) lead to a need to re-orientate and train key personnel.

● Performance measures, both internal and external aligned with the strategy are necessary for monitoring and control.

From a strategic point of view cohesion between these fi ve elements needs to be achieved, and each factor should be supportive of the other.

Exercise 3.2

What potential performance measures can be used to assess suppliers?

Solution

● Capability

● Delivery performance

● Price competitiveness

● Quality (defect rates)

● Timeliness (which will vary dependent upon the value and volume of the item pur-chased, e.g. a piece of computer hardware versus nuts and bolts).

Sourcing strategies refer to the way an organisation organises its supply process and clearly these have strategic implications. There are four main sourcing options:

1. Single. The buyer chooses one source of supply. This may be because of a scarcity of suppliers and under these circumstances the supplier is potentially powerful. One advantage of this option is that it is easier to develop a relationship with a single supplier.

2. Multiple. The buyer chooses several source of supply. Suppliers are rendered less power-ful and prices can be driven down as a result. This is a traditional price-based strategy but it may not be conducive to good working relationships, or developing meaningful supplier relationships.

3. Delegated. The buyer chooses one (fi rst tier) supplier who is responsible for the delivery of for example a complete sub assembly. Using the example of car manufacture, rather than deal with several suppliers to complete a dashboard one fi rst tier supplier would assume this responsibility and deliver a completed dashboard through dealing with a range of other suppliers. This approach allows for a collaborative partnership approach

Table 3.2 Reck and Long’s strategic positioning

Passive Purchasing acts on requests from other departments, some departments may get involved in the detail.

Independent A more professional approach to purchasing including enhanced IT and communication.

Supportive Purchasing is corporately recognised as essential. The function provides timely information about price and availability.

Integrative Purchasing is integral to competitive strategies and management gets involved in strategy development.

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to develop including in some cases ‘open book’ accounting where savings are shared between both parties. One downside is of course that the fi rst tier supplier becomes powerful so the supplier partners must be chosen with great care.

4. Parallel. A complicated approach that involves mixing all three approaches in order to maximise the benefi ts of each.

Operations is no different from other functional areas in that it can be approached from a strategic viewpoint. Brown et al. (2001: 39) stress the signifi cance of this thinking as follows:

Operations capabilities are at the heart of the success of companies such as Dell, Nokia and Sony . . . Although other areas such as marketing and human resource (HR) management are also important, even with the best marketing or HR plans in the world, without operations capabilities an organisation will fl ounder because it cannot deliver on its promises to customers. Organisations can no longer compete on a single dimension such as low cost, high quality, or delivery, but must provide all of these (and more!) simultaneously.

The process of strategy formulation including external and internal scanning and the gen-eration and choice of strategies applies equally to this area. Opgen-erations must be central to the development of an overall corporate strategy.

Brown et al. (2001) include six items that as a minimum should be addressed as part of the operations strategy:

1 the capability required by the organisation, 2 the range and location of operations,

3 investment in technology, both product and process, 4 strategic buyer–supplier relationships,

5 new products or services, and

6 the organisational structure of operations.

Another term often used to describe the fundamental changes required in operations management is ‘worldclass manufacturing’ which is generally concerned with achieving signifi -cant improvements in quality, lead times, fl exibility and customer satisfaction. By making these improvements, an organisation might realistically become globally competitive. The concept and practice of world-class manufacturing is wide ranging and the term is not always used consistently. However, the core features of most approaches to world-class manufac-turing include a strong customer focus which ensures that customer requirements are fully understood and can be satisfi ed with short lead time and fl exibility to respond to changing customer requirements. This represents a signifi cant shift from price-based operations.

3.2 Operations and organisational