CPIM Part 2, Module 1 - Strategy Flashcards
What are the six steps of the strategic planning and management process?
- Define strategic vision, mission and values
- Gather internal and external information
- Set strategic objectives
- Develop strategy
- Execute strategy
- Monitor, evaluate and correct
What are the three characteristics of well crafted strategies?
- They fit their internal and external environments
- They create significant and sustainable competitive advantage
- They result in measurable performance improvements
What are the steps of the strategy hierarchy?
High -> Low
1. Corporate strategy
2. Business strategy
3. Function area strategy
4. Operating strategy
What are the four key topis and operations strategy has to make decisions about?
- Capacity
- The supply network
- The process technology used to convert resources into finished goods or services
- Organizational improvements
What is the PESTEL used for and how does it work?
It is a tool to scan an organizations external environment. It identifies current and emerging conditions in six categories: Political, economic, sociocultural, technological, environmental and legal.
What is strategic benchmarking?
A tool for environmental scanning and comparison. It compares the organization against external or internal organizations or functions or against industry standards.
What are the domains of the five forces model?
Substitutes vs new entrants
Suppliers vs buyers
What are three warning signs that indicate dangers from substitute products?
- Stronger increases in sales compared to the sales in the industry
- Signs that capacity is being increased by the producer of the substitute
- Increased profits among makers of these substitutes
What does the VRIN acronym stand for? explain each one.
V-Valuable = A resource or capability that is directly related to the strategy being considered
R-Rare = A resource that a competitors lack
I-Inimitable = A resource difficult to copy for competitor
N-Nonsubstituteable = A resource that cannot be countered by a different type of resource
What is a trading partner?
Any organization external to the firm that plays an important role within the supply chain community and whose business succes depends on the succes of the supply chain community.
What are the four strategies from the Ansoff product-market growth matrix?
- Market penetration = Existing products in existing market
- Market development = Existing product in new market
- Product development = New product in existing market
- Diversification = New product in new market
What is a related diversification strategy?
A related diversification strategy focuses on industries with value chain activities similar to the organizations own, which is called strategic fit.
When is there a strategic fit? (3)
- There is a potential for sharing experiences or assets that will have synergistic effects
- Assets can be shared to lower costs
- Brand identity can be transferred to support customer recognition
What are unrelated diversification strategies?
This involves organizations with different value chain activities and/or different types of resources
A organization should submit a potential diversification strategy to three tests, which are these?
- Industry attractiveness
- Cost of entry
- Better-off, this asses whether diversification creates synergy
Matrix tool visualizes the relative attractiveness of enterprises and the entire portfolio of a multi-industry organization. What are the two variables?
Industry attractiveness VS Business unit competitive position
For which three reasons can a global strategy be interesting?
- It can provide access to new customers
- It can lower costs and improve competitive position
- It can be a response to negative conditions in the home country
What are the three types of international strategies?
- Global strategy - Think global. Act global
- Transnational strategy - Think global. Act local
- Multidomestic / Multicountry strategy - Think local. Act local
What are the two directions of growth in a market? Please explain.
- Horizontal integration - Produces or sells similar products in various geographical locations
- Vertical integration - Functions that were previously performed by suppliers are now done internal
In what three ways can organizations accomplish growth related to their horizontal scope?
- By developing its new capabilities entirely in house
- By acquiring new capabilities
- By outsourcing capabilities
What five objectives can by satisfied by a merger, according to ‘crafting and executing strategy’?
- Creating cost efficiencies
- Expanding geographical coverage
- Extending product offerings
- Gaining access to technology, resources , capabilities
- Supporting the organizations ability to adapt to the evolution of its industry
What are the two major obstacles to a succesful merger or acquisition?
- There may be insufficient due diligence into the transaction
- There may be a mismatch of organizational cultures.
What are the four challenges regarding vertical integration?
- It cannot be assumed that the new competencies will come naturally, easily or quickly
- It increases investment in the industry and, therefore, exposure to changes or negative trends
- If the activity is not significant to the organizations operations, the output may not make its acquisition cost-efficient.
- Capabilities may not match optimally
What are strategic drivers?
Factors that influence business unit and manufacturing strategies
In what two ways is market research into customer need approached?
- Inquiries
- Observations
Customer segmentation focuses on several areas relevant to strategy formation. Which three are these?
- The customer value proposition
- The customer experience, revealed through the voice of the customer
- The value of the segment to the organization
What are the primary purposes of strategic objectives?
- They help align actions across the business’s parts and down its organizational layers
- They provide a basis for measuring the effectiveness of a strategy
- They motivate all members of the organization to achieve and surpass the goals
What are the stages / level of the integrated measurement model?
- Organization = Strategic goals
- Divisional = Balanced scorecard
- Functional = Speed, dependability, flexibility, costs and quality + performance metrics
- Individual = Individual smart performance metrics
What is the integrated measurement model used for?
To help ensure that strategic goals are carried down into the strategies and tactics of the organization
What are the four domains of the balanced scorecard?
- Financial
- Customer
- Business process
- Learning and growth
What are the five generic performance objectives of operations strategy?
- Speed
- Dependability
- Quality
- Flexibility
- Cost
In what two ways can quality be described?
By the specification of the attributes of the products
or
By the compliance of the product with its specifications
What is delivery lead time?
The time from the receipt of the customer order till the delivery of the product
What is time-based competition? And what are the characteristics?
A broad-based strategy that emphasizes time as the vehicle for achieving and maintaining a sustainable competitive edge.
- It deals only with lead times important for customer
- Lead time must decrease in both mean and variance
- Lead time reduction must be achieved through system / process analysis
What are the two dimensions of flexibility?
Volume/mix and agility
What is product mix flexibility?
The ability to change over quickly to other products produced in a facility
What are the two strongest determinants of the manufacturing environment?
Order winners / qualifiers
and
The location of the push / pull frontier
What is product profiling?
A graphical device used to ascertain the level of fit between a manufacturing process and the order-winning criteria of its products
What type of people buy a product during the introduction stage? What are the order qualifiers and order winners?
Type: Innovator
Order qualifiers: Quality and flexibility
Order winners: The degree to which specifications are met
What type of people buy a product during the growth stage? What are the order qualifiers and order winners?
Type: early adopter
Order qualifiers: cost and flexibility
Order winners: dependability / availability
What type of people buy a product during the maturity stage? What are the order qualifiers and order winners?
Type: The majority
Order qualifiers: Quality and flexibility
Order winners: cost and dependability
What type of people buy a product during the decline stage? What are the order qualifiers and order winners?
Type: not really a type but replacements
Order qualifiers: dependability
Order winners: cost
What are the four competitive strategies?
- Cost leadership or low-cost provider
- Differentiation: competing by providing more value by more features
- Focus: focus on a particular segment / niche
- Best-cost provider: providing the exact value the customer wants at lowest possible price
A differentiator strategy is more effective under certain market conditions. What are these four conditions?
- Buyers have diverse needs and preferences
- The product or service can be differentiated in meaningful ways
- Technology in industry frequently changes
- Few competitors are trying this approach
What is a value driven enterprise?
A enterprise that is designed and managed to add utility from the viewpoint of the customer
An organizations structure includes both horizontal and vertical elements. What are these?
- Horizontal: How will the organization structure its internal value chain and the upstream and downstream parts of the supply chain.
- Vertical: How will the organization structure its decision making and control
Strategies and tactics must be measured to make sure that: (3)
- They are producing the intended result
- Conditions still support the chosen strategy or tactic
- Unexpected negative results have not been introduced
What are the principles of a dual operating system? (5)
- Broad internal team base
2.”Get go” rather than “Have to” volunteering
- Heart plus head. Members are recruited and change ideas are being sold by appealing to emotional motives
- Leadership is the key
- Inseparable left and right brains
What are kotters eight accelerators?
A set of principles that relate to a change in behaviour that is called the “Big opportunity”. Basically this is a new idea.
What differentiates a big opportunity from other changes or improvements?
A big opportunity is a idea or solution that will create lasting benefits into the future. Rather than just now.
What are the eight accelerators of kotter?
- Big opportunity and urgency: Determine big opportunity and create sense of urgency
- Guiding coalition as change agents: The first big opportunity helps from the core of the network, as a guiding coalition forms to help win this opportunity
- Vision and inspiration: The network forms a vision for the big opportunity and develops related strategic initiatives
- Legion of volunteers: The network grows by creating an army of volunteers who can devote their time.
- Obstacle and duplication avoidance: Focus on removing obstacles
- Credibility through wins: The network proves its worth by creating quick and bigger wins with strategic relevance
- Self-sustaining network: The network sustains itself
- Institutionalize: Successful initiatives are incorporated into the organization’s hierarchical structure.
What is the organizational strategy?
The total pattern of decisions that shape the long-term capabilities of an operation and their contribution to overall strategy
What is the difference between operational management and strategy from the strategy point of view?
- It has a longer time frame
- It has a broader perspective
- It has a higher level of focus
What are the four forces acting on the operational strategy?
- Corporate / business strategy
- Resource capabilities and limitations
- Operations experiences
- Satisfaction of market demand
What does the operations strategy need to be? (4)
- Consistent with the strategic choices made at the business strategy level
- Mindful of the market requirements
- Open to the lessons of experience from those involved in operations
- Aware of the operation’s resources, capabilities and limitations
What six areas does the operations strategy adres?
- Technological analysis
- Capacity requirement analysis
- Capacity strategy
- Marketing strategy
- Supply network
- Manufacturing environment and push/pull boundaries
What is the process technology strategy?
The set of decisions that define the strategic role that direct and indirect process technology can play in the overall operations strategy
What does a selection process for process technology consider? (5)
- The lifecycle of the technology
- Manual labour costs savings
- Overhead costs savings
- When variable costs are lower but fixes are higher
- The costs of doing nothing
Operations strategy differentiates processes by three characteristics. What are these characteristics?
- Scale - Refers to number of technology units required to process the work
- Automation - Refers to the degree in which human intelligence or skill is applied in the process
- Coupling - Refers to the degree to which technology is integrated in the process
What is a cost-volume-profit analysis?
The study of how profits change with various levels of output and selling price.
What is capacity defined by the operations strategy?
The maximum level of value-added activity over a period of time that the operation can achieve under normal conditions
What are diseconomies of scale?
This is the point at which the cost per units stops decreasing and instead begins to increase as volume increases
What are the three capacity strategies ? And what do they entail?
- Lead capacity strategy - Adding capacity in anticipation of increased future demand
- Lag capacity strategy - Not adding capacity until the firm is operating at max capacity
- Tracking capacity strategy (Smoothing strategy) - Adding capacity in small amounts to attempt to respond to changing demand in real time in the market place
What are decoupling points?
The locations in the product structure or distribution network where inventory is placed to create independence between processes or entities
What are the following characteristics like in an Engineer to order environment:
- Product volume
- Product variety
- The key demand management task
- The key operations strategy decision
- Product volume: Low
- Product variety: high
- Key demand management task: communicate customers product needs to engineering
- Key operations strategy decision: Investments in systems for validating production feasibility
What are the following characteristics like in an make to order environment:
- Product volume
- Product variety
- The key demand management task
- The key operations strategy decision
- Product volume:
- Product variety:
- Key demand management task: coordinate information on customer’s product needs with engineering
- Key operations strategy decision: to determine how flexible the manufacturing equipment and control system needs to be
What are the following characteristics like in an assemble to order environment:
- Product volume
- Product variety
- The key demand management task
- The key operations strategy decision
- Product volume: High
- Product variety: adequate
- Key demand management task:
- Key operations strategy decision: To identify the alternative components and options that customers can order and to be able to determine the cost and required lead time of each config
What are the following characteristics like in an assemble to order environment:
- Product volume
- Product variety
- The key demand management task
- The key operations strategy decision
- Product volume:
- Product variety:
- Key demand management task:
- Key operations strategy decision: Mostly to achieve economies of scale
What is a manufacturing strategy?
A collective pattern of decisions that acts upon the formulation and deployment of manufacturing resources
What is a operational plan?
The set of short-range plans and schedules detailing specific actions
What are the two fundamental approaches for control of operational plans and schedules?
- Material requirements planning (MRP)
- Lean
What are the three categories of operations decisions?
- Design decisions
- Delivery decisions
- Development decisions
What factors drive the decision of where to locate activities? (4)
- Production advantages - cheaper labor, cheaper land, low energy cost
- Economies of scale
- Learning curve effects - Focus on one area to gain experience and then disperse
- Better coordination with suppliers and customers -
What are the five basic options for entering a foreign market?
- Export
- Licensing
- Franchising
- Creation of subsidiaries
- Creating a local strategic alliance or joint ventures
When is developing entirely new businesses (greenfield venture) in a foreign country attractive?
- Building a start-up is cheaper than buying
- The new business does not add excess capacity to the market
- The subsidiary will benefit from the parent company’s reputation or capabilities
- The parent company has sufficient resources to be competitive
What are the two factors a manufacturing environment has to respond to or fit to?
- Variety
- Volume
What is repetitive manufacturing?
The repeated production of the same discrete products or families of products
Sometimes a company can create a competitive advantage by creating a mix-mode manufacturing environment. What is this?
A manufacturing environment where some high-volume products and some high-variety products are made within the same organization, but two different environments
What is the biggest difference between a line production process and a continuous production process?
In line the flow consists of discrete units in a continuous of non-discrete
What are the five manufacturing process types? From high variety / low volume to -> Low variety / high volume.
- Project
- Work center
- Batch
- Line
- Continuous
What are the four manufacturing process layouts? From high variety / low volume to -> Low variety / high volume.
- Fixed position
- Functional
- Cellular
- Product based
What are the three levels of the service design matrix? From High contact to low contact. And how are these systems called?
- Customer interaction and reactive to requirements - Reactive system
- Customer interaction but no customization - Permeable system
- No direct customer interaction - Buffered core
What is the goal of the service gap analysis matrix?
To determine the most important areas for redesign based on what is or needs to be a value-added service and also what is not value added so needs to be removed
What is a process-chain-network diagram?
A tool for service design that is like a swim lane in that the flowchart is divided into zones
What are the four criteria for selecting the best process layout?
- Volume
- Variety
- Process resources
- Products/services required
What is process flexibility?
The design of the manufacturing system that allows for quick changeovers
What are global measurements?
Measurements that judge the performance of the system as a whole. They relate to the long/term goals of the company.
What are local measures?
The set of measurements that relates to a resource, operation, process or part
What is the SCOR model?
The model describes the business activities associated with satisfying a customer’s demand, which include: Plan, source, make, deliver and return
What is the Cash-to-cash cycle time?
It is an indicator of how efficiently a company manages its assets to improve cash flow
What is upside supply chain flexibility?
A discrete measurement of the amount of time it takes a supply chain to respond to an unplanned 20 percent increase in demand without service or cost penalty
What is the balanced scorecard?
A list of financial and operational measurements used to evaluate organizational or supply chain performance
What three things does periodic performance reporting require?
- Linkages to key data
- Determining what to measure and what to report
- Timely reporting on a set schedule
What are the five categories of financial ratios?
- Liquidity
- Activity
- Leverage
- Profitability
- Market value
What is net working capital?
The difference between current assets and current liabilities
What are two key liquidity ratios?
- Current ratio - Current assets divided by current liabilities
- Quick assets ratio - Current assets minus inventory divided by current liabilities
What are activity ratios?
These ratios show the efficiency with which the organization has used its assets to produce value
What is the key activity ratio?
Inventory turnover - This reflects the average amount of time an organization holds inventory before it generates income
What is the cash conversion cycle?
In manufacturing the length of time from the purchase of raw materials to the collection of accounts receivable.
What is the cash to cash cycle time?
An indicator of how efficiency a company manages its assets to improve cash flow
What are operational performance metrics?
Performance metrics related to machine, worker or department efficiency or utilization
What is the total factor productivity?
A measure of productivity that combines the individual productivities off all its resources
What are SCOR metrics? And what are the three levels?
These metrics measure the ability of processes to achieve the strategic objectives associated with performance attributes.
Level 1: Metrics are diagnosed for the overall health of the supply chain
Level 2: Metrics serve as diagnostics for the level 1 metrics
Level 3: Metrics serve as diagnostics for level 2 metrics
What are the steps of the risk management process? (5)
- Identify risk
- Analyze risk
- Develop appropriate response
- Implement and monitor plan
- Asses risk management strategy
On which two activities does the risk management process depend?
- Continuous communication and feedback
- Monitoring and assessment
What is the failure modes and effects analysis (FMEA)? It looks at product and service failures and rates them on three things, what three?
A method used to evaluate a design process to identify and rank potential failures.
- Probability of failure
- Degree of severity
- Likelyhood of escaping detection
Which five approaches will help to prevent failures?
- Design out fail points
- Build in redundant systems
- Use failsafe work methods
- Perform maintenance
- Mitigate risk
What is failure recovery? And what are the four steps?
The set of actions that are taken after the negative effect has occurred, but reduce the impact of the negative effects
1. Discover
2. Act
3. Learn
4. Plan
What are the four risk categories?
- External
- Environmental
- Technical
- Organizational
What are the four categories of managing risks?
- Risk acceptance
- Risk avoidance
- Risk mitigation - reduce exposure to risks
- Risk transfer
What is contingency planning?
A process for creating a document that specifies alternative plans to facilitate success if certain risk events occur
What is residual income? And why is it an improvement over ROI?
The net operating income than an investment center earns above the minimum required return on its operating assets. It is an improvement because it does not just entail an positive return but a return of a certain magnitude
What is economic value added?
Net operating profit earned above the cost of capital for an investment center
What is net present value?
The present (discounted) value of future earnings
What are the three steps to calculate the NPV?
- Identify the anticipated net cash flows from the project over its lifetime
- Adjust the future values into the value today, or present value
- Compare the PV of all future cash inflows in total with the initial investment in the present. The difference is the NPV
What is the internal rate of return?
The rate of compound interest at which the company’s outstanding investment is repaid by proceeds from the project
What is the hurdle rate?
The minimal acceptable rate of return on a project
What is the profitability index?
The present value of a projected stream of income from a project, divided by the investment in the project. Used to rank investment choices.
What is total productive maintenance (TPM)?
Preventive maintenance plus continuing efforts to adapt, modify and refine equipment to increase flexibility, reduce materials handling and promote continuous flow
TPM uses two tools that ensure that there is no downtime. Which tools are these? And what do they include?
- Overall equipment effectiveness (OEE): Measuring the effectiveness of all the equipment of the company, it has three fundamental components:
- Availability
- Performance
- Quality
Can be calculated as: Availability x performance x quality (%)
- Five s’s
- Sort
- Simplify
- Scrub
- Standardize
- Sustain
What four drivers force organizations towards sustainable operations?
- Regulations
- Community relations
- Economic values
- Organizational ethics and values
What is the triple bottom line?
A approach that measures the economic, social, and environmental impact of an organization’s activities with the intent of creating value for both shareholders and society
What is the purpose of the triple bottom line?
It helps organizations identify and weigh the possible effects of their actions
Approaching sustainability from a strategic perspective offers several advantages to organizations. What are these three?
- Strategy involves the commitment and participation of senior management
- Strategy offers opportunity for integration and coordination of activities across an organization, which uses resources more efficiently and promotes learning
Approaching sustainability from a strategic perspective offers several advantages to organizations. What are these three?
- Strategy involves the commitment and participation of senior management
- Strategy offers opportunity for integration and coordination of activities across an organization, which uses resources more efficiently and promotes learning
- Promotes a more proactive perspective, focus on future problems and opportunities
What are the three categories of organizations sustainable issues?
- General sustainability issues: Are important to society as a whole
- Value chain issues: These are directly effected by an organizations actions
- Issues that have strategic effect: Can effect the way an organization competes or its succes
What are the five stages an organization passes through as they move toward social responsibility?
- Defensive: Organization defends their reputation
- Compliance: Corporate policy should be established and observed
- Managerial: Organization integrates it into daily operations
- Strategic: Organization integrates it into core business strategies
- Civil: Organization promotes corporate social responsibility
What is life-cycle-costing?
In evaluating alternatives, the consideration of all costs - including acquisition, operation, and disposition costs, that will be incurred over the entire lifetime
What are the steps of the corporate sustainability model?
- Gather inputs
- Lead
- Develop programs
- Asses, report on, and audit programs
What does PQCDSM stand for?
P = Productivity
Q = Quality
C = Cost
D = Delivery time
S = Safety
M = Morale
What are ISO 140000 series standards?
A series of generic environment management standard that provide structure and systems for managing environmental compliance with law and regulatory requirements
What is Life cycle assessment (LCA)?
Understanding the human and environmental impacts during the life of a product, process, or service
What is ISO 26000?
An internal standard to assist organizations in contributing to sustainable development beyond legal compliance through common understanding of social responsibility
What is SA8000?
It is a certification regarding labour, human rights and the rights of the child
What is green manufacturing?
A method of producing a good or service that minimizes external cost and pollution.
What does green manufacturing focus on? (3)
- Achieving high performance levels in the long term
- Not doing shit in the short term
- Staying profitable enough to stay in business
What are the steps of design for the environment? (5)
- Get ‘free of’ known culprits
- Follow informed personal preferences
- Create a passive positive list
- Activate positive list
- Reinvent
Rather than using a random combination of endeavors and other efforts a manufacturing strategy for corporate social responsibility requires which three actions?
- Set the goal of shared value
- Identify points of intersection
- Choose which social issues to address
What is the sustainable management system (SMS)?
It is a different approach to sustainable development, starting from a regulatory compliance base and attempting to merge HSE concerns into an existing business model
What are the five components of a sustainable management system?
- Business case
- Organizational component
- Operational component
- Enterprise resource planning (ERP) and ICT
- Monitoring and audits
What is the global reporting initiative (GRI)?
A network based organization that pioneered the worlds most widely used sustainability reporting framework
What is the global reporting initiative reporting framework?
It sets out principles and performance indicators organizations can use to measure and report their human rights, labor, environment and anti corruption practice’s
