Part 4: Contemporary Issues in Operations Policy and

Strategy: Creating Customer Value and Differentiation

• Outsourcing is a business strategy where a company delegates certain tasks, processes, or

functions to external vendors or third-party service providers. This practice has become
increasingly prevalent in the business world and offers several potential benefits and
implications for companies, particularly for MBA students seeking to understand the
complexities of modern business management. Let's delve into the key aspects of
outsourcing and its implications:

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Firstly, what is differentiation

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Firstly, what is differentiation

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Firstly, what is differentiation

4/28/2024 3:55 PM 4
 Discuss outsourcing and its implications for
companies. Why do we do it???

Cost Savings: One of the Focus on Core Access to Expertise: Flexibility and Scalability: Risk Management: Improved Efficiency and
primary drivers of Competencies: Outsourcing Outsourcing allows Outsourcing provides Outsourcing can help spread Productivity: By leveraging
outsourcing is cost enables companies to focus companies to access companies with flexibility business risks. By the expertise of outsourcing
reduction. By outsourcing on their core business specialized skills and and scalability in operations. collaborating with external partners, companies can
non-core functions to activities and strategic expertise that may not be During periods of rapid vendors, companies can achieve improved efficiency
specialized service objectives. By delegating available internally. growth or market share certain operational and productivity in specific
providers, companies can routine or support functions Outsourcing providers often fluctuations, outsourcing risks, regulatory compliance processes. Outsourcing
access economies of scale to external partners, have extensive experience allows businesses to quickly responsibilities, and market vendors are often highly
and lower labor costs in management can and knowledge in their adjust their resource uncertainties. This shared specialized, using best-in-
different regions. This cost concentrate on key areas respective domains, requirements without the risk approach can provide a class technologies and
advantage allows businesses that drive competitive enabling companies to need for significant capital level of protection against methodologies to deliver
to allocate resources more advantage and market benefit from cutting-edge investments or fixed costs. unforeseen challenges. superior results.
efficiently, invest in core differentiation. This technology, best practices,
competencies, and improve increased focus can lead to and industry insights.
overall profitability. higher levels of innovation
and improved market
positioning.

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 Implications for Companies:
1. Vendor Selection: Companies need to carefully select outsourcing partners based on their track record, expertise, and
company's requirements. Vendor evaluation and due diligence are crucial to ensure a successful outsourcing relationshi
2. Contractual Agreements: Comprehensive and well-structured contracts are vital to protect the interests of both part
levels, timelines, responsibilities, and payment terms.
3. Quality Control: Companies must maintain a strong focus on quality control and ensure that the outsourced services
standards and expectations.
4. Communication and Collaboration: Effective communication and collaboration between the company and its outsou
essential to avoid misunderstandings and ensure smooth operations.
5. Employee Morale and Retention: Outsourcing decisions can impact internal employees, leading to concerns abou
morale. Transparent communication about the rationale behind outsourcing and its potential benefits can help mitigate
6. Data Security and Intellectual Property Protection: Companies must address data security and intellectual property
when outsourcing sensitive functions to external partners.
7. Managing Outsourcing Relationships: Companies need skilled professionals who can manage outsourcing relatio
ensuring alignment with business goals and resolving any challenges that may arise.
8. Cultural and Regulatory Considerations: In cases of offshore outsourcing, companies need to consider cultural differ
with international regulatory requirements.
 Analyse the impact of globalization on operations
strategy.
Aspect Impact of Globalization on Operations Strategy
- Companies integrate supply chains on a global scale, sourcing materials and components from multiple countries for cost
Supply Chain Integration
optimization and quality improvement.
- Requires efficient coordination and risk management in complex and extended supply chains.
Market Expansion - Globalization opens up new markets for companies to sell products and services.
- Operations strategies focus on market entry, localization, and adaptation to meet diverse customer needs.
- Companies outsource manufacturing and services to take advantage of low-cost labor and specialized expertise in certain
Outsourcing and Offshoring
regions.
- Global talent pools are leveraged for cost efficiency and access to specialized skills.
Technology Adoption - Globalization accelerates the adoption of advanced technologies in operations for optimization and efficiency.
- Automation, robotics, AI, and data analytics are deployed to improve production processes and supply chain logistics.
Risk Management - Operating globally introduces new risks related to political instability, currency fluctuations, and supply chain disruptions.
- Operations strategies focus on risk mitigation, diversification of suppliers, and building supply chain flexibility.
Time-to-Market - In a globalized market, speed to market is crucial.
- Operations strategies aim to reduce lead times and increase agility to respond to changing market demands.
Sustainability and CSR - Globalization raises awareness of environmental and social impacts.
- Operations strategies incorporate sustainable practices, ethical sourcing, and CSR initiatives to meet stakeholder expectations.
Collaboration and
- Globalization encourages collaborations and partnerships with suppliers, vendors, and logistics providers worldwide.
Partnerships
- Alliances help companies achieve economies of scale, access new markets, and share resources.
Talent Management - Global operations require a diverse workforce with global competencies.
- Operations strategies focus on talent attraction, retention, and development to thrive in a global context.
Regulatory Compliance - Global operations involve adherence to international regulations and standards.
- Operations strategies account for compliance with trade agreements, import/export regulations, and intellectual property laws.
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Let's understand some Concepts:
Facilities Strategy and Globalization
 Issues from BYD and Applichem
BYD (Build Your Dreams): Applichem:

Electric Vehicle Industry Competition: BYD is a major player in the 1.Pricing and Market Competition: Applichem operates in the specialty chemicals
electric vehicle (EV) industry, and one of its key challenges is the industry, which is often characterized by intense price competition. The company
increasing competition from other established automakers and new faces challenges in maintaining profitable pricing while meeting customer demands.
entrants. Competing in a rapidly evolving market requires continuous
innovation and investment in research and development. 2.Customer Relationship Management: In the B2B sector, managing relationships
with key customers is critical. Applichem must focus on understanding customer
Global Supply Chain Management: Being a global company, BYD faces needs, providing excellent service, and building long-term partnerships.
challenges in managing its complex supply chain across various
regions. Disruptions in the supply chain, such as raw material 3.Innovation and R&D: To stay competitive in the specialty chemicals market,
shortages or transportation issues, can impact production and Applichem must invest in research and development to develop new products,
delivery timelines. improve existing ones, and differentiate itself from competitors.

Regulatory Environment: The EV industry is heavily influenced by 4.Sustainability and Environmental Concerns: Like many chemical companies,
government policies and regulations. BYD must navigate various Applichem faces pressure from stakeholders to address environmental issues and
regulatory requirements in different countries, including subsidies, implement sustainable practices throughout its operations.
emission standards, and charging infrastructure incentives.

Quality Control and Safety: Ensuring consistent product quality and

safety is crucial for any automotive manufacturer. BYD faces the
challenge of maintaining high-quality standards across its diverse
product portfolio.

9
 Comparative Strategy 10
Understanding

Operational Factors Fit with BYD's Strategy Fit with Applichem's Strategy
Manufacturing EVs and components aligns with BYD's Producing diverse specialty chemicals aligns with
Focus of Plants
strategy to be a leader in the green technology sector. Applichem's strategy for customized products.
Emphasis on economies of scale aligns with BYD's strategy Lean manufacturing focus aligns with Applichem's strategy
Scale and Cost
for cost competitiveness in the competitive EV market. for niche products and cost efficiency.

Standardization drives operational efficiency for BYD, while Customization may lead to less standardized processes for
Standardization and Labor Costs
labor costs may vary based on facility location. Applichem, with varying labor costs based on complexity.
BYD evaluates output, quality control, and research Applichem's evaluation may focus on quality, on-time
Means of Evaluation and Plant Roles progress, with specialized roles for different plants (e.g., delivery, and customer satisfaction, with plant roles based on
battery production). product types.
Global sourcing ensures access to quality materials and cost- Applichem may optimize sourcing proximity to customers
Sourcing and Allocation Models
effective solutions for BYD. and specialized raw materials.
R&D investment critical for BYD's strategy in green Access to R&D is essential for Applichem's new specialty
Access to R&D
technology and EV innovation. chemical formulations and staying ahead of competitors.
 Step 1: Choose the Products
Select two goods or services that you want to compare between two countries. For simplicity, let's assume
you are comparing two countries (Country A and Country B) and two products (Product X and Product Y).

Product/ Step 2: Determine the Production Time

Find out how much time each country needs to produce one unit of each product. This information can be

Market- obtained from production records or surveys.

Process Step 3: Calculate Opportunity Cost

The opportunity cost is the value of the next best alternative given up when a decision is made. In this

Focus case, it represents the number of units of the other product that a country could produce with the
resources used to produce one unit of the chosen product.
Opportunity Cost of Product X in Country A = Time to produce Product X in Country A / Time to produce
Product Y in Country A
Opportunity Cost of Product X in Country B = Time to produce Product X in Country B / Time to produce
Product Y in Country B 1
1

Step 4: Identify the Comparative Advantage

Comparative advantage exists when a country can produce a particular good or service at a lower
opportunity cost compared to another country. To identify which product each country has a comparative
advantage in:
Model Description Key Equation
One factor (labor) and no Opportunity Cost of Product X in Country A = (Time to produce Product X in
Ricardian Model
transportation costs Country A) / (Time to produce Product Y in Country A)
Opportunity Cost of Product X in Country B = (Time to produce Product X in
Country B) / (Time to produce Product Y in Country B)
Two factors (labor and Factor Intensity of Product X = (Labor required for Product X) / (Capital
Heckscher-Ohlin Model
capital), relative abundance required for Product X)
Factor Intensity of Product Y = (Labor required for Product Y) / (Capital
required for Product Y)
Comparative Advantage in Product X for Country A: If Country A is relatively
abundant in labor, then Factor Intensity of X in Country A < Factor Intensity
of Y in Country A
Comparative Advantage in Product Y for Country B: If Country B is relatively
abundant in capital, then Factor Intensity of Y in Country B < Factor Intensity
of X in Country B
Specific factors, short-run
Marginal Product of Labor in Industry X = (Change in output of X) / (Change
Specific Factors Model immobility between
in labor input)
industries
Marginal Product of Labor in Industry Y = (Change in output of Y) / (Change
in labor input)
Comparative Advantage in Product X for Country A: If labor is specific to
Industry X, then MP Labor in X > MP Labor in Y
Comparative Advantage in Product Y for Country B: If labor is specific to
Industry Y, then MP Labor in Y > MP Labor in X
Ricardian • Assumptions: One factor of production (labor) and no
transportation costs.
Model:
Labor required in Labor required in Opportunity Cost Opportunity Cost Comparative
Goods Country A Country B in Country A in Country B Advantage
Product X 4 hours 6 hours 4/6 = 0.67 6/4 = 1.5 Product X

Product Y 3 hours 5 hours 3/5 = 0.6 5/3 = 1.67 Product Y

In the Ricardian model, Country A has a comparative advantage in producing Product X because it has a lower
opportunity cost (0.67) compared to Country B's opportunity cost for Product X (1.5).

Country B, on the other hand, has a comparative advantage in producing Product Y because its opportunity cost (1.67)
is lower than Country A's opportunity cost for Product Y (0.6).

https://www.youtube.com/watch?v=tPcBIlSj0zg
Ricardian Model:
1. Two Countries and Two Goods: The Ricardian Model assumes that there are only two countries, typically referred to as Country A and Country B.
Additionally, there are only two goods produced in each country, often denoted as Good X and Good Y.

2. Fixed Resources: The model assumes that the resources (such as labor and capital) available in each country are fixed and cannot be increased or
decreased during the analysis.

3. Constant Returns to Scale: The model assumes constant returns to scale, meaning that the amount of output produced increases proportionally
with the amount of inputs used. This assumption allows for straightforward comparisons of production levels.

4. Comparative Advantage: One of the central assumptions of the Ricardian Model is that there are differences in relative productivity between
countries in producing different goods. This is known as comparative advantage. Each country will have a lower opportunity cost for producing
one good compared to the other.

5. Perfect Competition: The Ricardian Model assumes that markets are perfectly competitive, with no barriers to entry or exit for firms. All firms in
each country produce homogeneous goods and are price-takers.

6. No Transportation Costs or Trade Barriers: The model assumes that there are no transportation costs involved in trading goods between
countries, and there are no trade barriers like tariffs or quotas.

7. No External Factors: The Ricardian Model does not take into account factors such as technological advancements, government policies, or
external shocks that could impact production or trade patterns.

8. Full Employment: The model assumes that both countries operate at full employment, meaning that all available resources are fully utilized in the
production process.
Heckscher-Ohlin Model:

Assumptions: Two factors of production (labor and capital), and

each country is relatively abundant in one factor.

Capital Capital
Labor Intensity Labor Intensity Intensity in Intensity in Factor Comparative
Goods in Country A in Country B Country A Country B Abundance Advantage
1 labor, 1 1 labor, 1 1 labor, 1 1 labor, 1 Labor-
Product X Product X
capital capital capital capital abundant
1 labor, 0.8 1 labor, 0.6 1 labor, 0.8 1 labor, 0.6 Capital-
Product Y Product Y
capital capital capital capital abundant
In the Heckscher-Ohlin model, Country A, being labor-abundant, has a comparative advantage in
producing Product X because it is more labor-intensive.
Country B, being capital-abundant, has a comparative advantage in producing Product Y because it is more
capital-intensive.
https://www.youtube.com/watch?v=BkpCE-t6wO8
 https://www.youtube.com/w
Heckscher-Ohlin Model: atch?v=qOI2xoWhakQ

1.Two Countries and Two Goods: Similar to the Ricardian Model, the Heckscher-Ohlin Model assumes that there
are only two countries (Country A and Country B) and two goods (Good X and Good Y) produced in each country.
2.Factor Endowments: The central assumption of the Heckscher-Ohlin Model is that countries have different
factor endowments, specifically differences in the relative abundance of factors of production, such as land, labor,
and capital. For example, Country A may be relatively abundant in capital, while Country B may be relatively
abundant in labor.
3.Factor Intensity: Each good is assumed to be produced using a combination of factors of production. Some
goods are more labor-intensive, while others are more capital-intensive. The factor intensity of each good
depends on the relative prices of factors in each country.
4.Factor Mobility: The model assumes that factors of production are mobile within a country but immobile
between countries. Labor and capital cannot move freely across international borders in response to wage or
return differentials.
5.Perfect Competition: As in the Ricardian Model, the Heckscher-Ohlin Model assumes perfect competition in
both the goods and factor markets.
6.No Transportation Costs or Trade Barriers: Similar to the Ricardian Model, the Heckscher-Ohlin Model assumes
no transportation costs or trade barriers.
https://www.youtube.com/watch?v=BkpCE-t6wO8
Specific Factors Model
Assumptions: Factors of production are specific to each industry, and there is short-run immobility between industries.

Labor's Marginal Labor's Marginal

Productivity in Country Productivity in Country
Goods A B Comparative Advantage
Product X 2 units 3 units Product X
Product Y 3 units 2 units Product Y

In the Specific Factors model, both countries have a comparative advantage in the goods where their labor's marginal
productivity is higher. Country A has a comparative advantage in producing Product X because the marginal
productivity of labor is higher (2 units compared to 3 units in Country B). Country B has a comparative advantage in
producing Product Y because the marginal productivity of labor is higher (3 units compared to 2 units in Country A).

https://www.youtube.com/watch?v=C7DVgEChMJY
Specific Factors Model
Three Factors of Production: The model considers three factors of production: labor (L), capital (K), and land (T). Each factor is assumed to be specific to
a particular industry or sector.

Two Goods and Two Industries: Like the previous models, the Specific Factors Model assumes that there are two goods (Good X and Good Y) and two
industries (Industry X and Industry Y) in the economy.

Fixed Factors and Mobile Factors: In this model, labor is assumed to be mobile between industries, while capital and land are considered specific or
fixed to a particular industry. This means that workers can move freely between the two industries, but capital and land cannot be easily transferred.

Perfect Competition: The Specific Factors Model assumes perfect competition in both the goods and factor markets.

No Transportation Costs or Trade Barriers: Similar to other trade models, the Specific Factors Model assumes no transportation costs or trade barriers.

Consequences of the Specific Factors Model:

Changes in Prices: If there is an increase in the price of a good, the specific factor associated with that industry will experience an increase in income
and benefits, while the specific factor in the other industry will not be affected.

Factor Mobility and Adjustment: The model predicts that workers will move from the industry with a declining price to the industry with a rising price,
seeking higher wages. As a result, the economy will undergo an adjustment process as factors shift between industries.

Redistribution of Income: Changes in relative prices of goods can lead to a redistribution of income among factors of production. Factors specific to the
expanding industry will experience higher incomes, while factors specific to the declining industry will experience lower incomes.

The Specific Factors Model provides a more dynamic analysis of trade effects on factor prices and income distribution compared to the Ricardian and
Heckscher-Ohlin models. By considering factors that are specific to industries and those that are mobile, the model offers insights into how trade can
affect the distribution of income and employment within an economy.
Scale Analysis
Subcontract

Technology 1

Technology 2
COST

5 VOLUME
Scale
Analysis
Key components of scale analysis include:
1. Economies of Scale: Economies of scale refer to the cost advantages a company can achieve by
increasing the scale of production. As production volume increases, the average cost per unit
decreases due to spreading fixed costs over a larger output. Common types of economies of scale
include technical, managerial, purchasing, and marketing economies.

2. Diseconomies of Scale: Beyond a certain scale, increasing production further may lead to
diseconomies of scale. These are the inefficiencies or increased costs that occur when a company
becomes too large or complex to manage effectively. Common issues include increased bureaucracy,
communication challenges, and coordination problems.

3. Minimum Efficient Scale (MES): MES is the lowest production level at which a company can achieve
economies of scale and operate efficiently. It represents the point where the average cost per unit is
minimized.

4. Optimal Scale: The optimal scale is the production level where a company maximizes its profitability
and efficiency. It may not necessarily be the highest possible scale, as diseconomies of scale may
outweigh any further cost savings.

5
 Additional logistics drivers
Logistics Drivers Description
Transportation - Choice of transportation mode, routing, and carrier selection.
- Affects lead times, transportation costs, and supply chain responsiveness.
Inventory Management - Ensures the right amount of inventory at the right place and time.
- Minimizes carrying costs and stockouts.
Warehousing and - Design and management of warehouses and distribution centers.
Distribution - Efficient warehousing reduces handling costs and improves order fulfillment.
Information Technology - Utilization of advanced IT systems like WMS, TMS, and ERP for real-time visibility and coordination.
- Meeting customer service expectations for on-time delivery, order accuracy, and responsiveness to
Customer Service
inquiries.
- Incorporating eco-friendly practices in logistics, such as green transportation and energy-efficient
Sustainability and
facilities.
Green Logistics - Addresses environmental concerns and customer demands for sustainability.
- Mitigating supply chain disruptions and addressing various risks through effective risk management
Risk Management
strategies.
Outsourcing and - Decisions to outsource certain logistics functions or collaborate with logistics service providers.
Collaboration - Leverages expertise and resources to achieve cost savings and improved service levels.
- Adhering to transportation, customs, and trade regulations for international logistics and cross-
Regulatory Compliance
border operations.
- Balances efficiency and responsiveness through lean (eliminating waste) and agile (quick response)
Lean and Agile
logistics.
Supply
Chain Flows

Flow

Sources Destinations

2
3
 Network for Multi-Location Supply
Chain

Suppliers Plants Distribution Centers

Customers

2
4
Note: Since we don't have specific unit selling prices for the products, we cannot calculate the exact revenue. Instead, we
will find the optimal production and storage quantities based on the given costs and capacities.
General Manufacturing Models (shared capacity, warehouses or
two stages, fixed costs – details in extra slide)

l i k j

Fixed Production Warehouses

Production Stages (j) Capacity Cost (k) Capacity Storage Cost
Products (i) Demand Cost Stage 1 250 units $100 per unit Warehouse
150 units $50 per unit
Product 1 200 units $500 per unit 1
Stage 2 400 units $150 per unit Warehouse
Product 2 300 units $800 per unit 200 units $70 per unit
2
Objective: Maximize total profit.
x[i, j] (Quantity y[i, k] (Quantity
Decision Variables produced) stored)
Product 1 at Stage 1 x[1, 1] y[1, 1]
Product 1 at Stage 2 x[1, 2] y[1, 2]
Product 2 at Stage 1 x[2, 1] y[2, 1]
Product 2 at Stage 2 x[2, 2] y[2, 2]

Objective Function: Maximize Z = Profit = Revenue - Total Production Cost - Total Storage Cost
The total revenue is the sum of the sales revenue for each product: Revenue = (Unit Selling Price of Product 1 * x[1, 1]) + (Unit Selling Price of Product 1 * x[1,
2]) + (Unit Selling Price of Product 2 * x[2, 1]) + (Unit Selling Price of Product 2 * x[2, 2])
Total Production Cost = (Production Cost of Product 1 at Stage 1 * x[1, 1]) + (Production Cost of Product 1 at Stage 2 * x[1, 2]) + (Production Cost of Product 2 at
Stage 1 * x[2, 1]) + (Production Cost of Product 2 at Stage 2 * x[2, 2])
Total Storage Cost = (Storage Cost of Product 1 at Warehouse 1 * y[1, 1]) + (Storage Cost of Product 1 at Warehouse 2 * y[1, 2]) + (Storage Cost of Product 2 at
Warehouse 1 * y[2, 1])10+ (Storage Cost of Product 2 at Warehouse 2 * y[2, 2])
Constraints: Capacity Constraints:
1.Capacity Constraints:
1. x[1, 1] + x[2, 1] ≤ 250 (Stage 1 capacity constraint) The total quantity produced at each stage cannot exceed the capacity of that
stage.
2. x[1, 2] + x[2, 2] ≤ 400 (Stage 2 capacity constraint) The total quantity produced for each product cannot exceed its demand.
3. x[1, 1] + x[1, 2] ≤ 200 (Product 1 demand constraint) The total quantity stored at each warehouse cannot exceed the capacity of that
4. x[2, 1] + x[2, 2] ≤ 300 (Product 2 demand constraint) warehouse.

2.Non-Negativity Constraints: Non-Negativity Constraints:

1. x[i, j] ≥ 0 for all i and j •The production quantities and storage quantities cannot be
2. y[i, k] ≥ 0 for all i and k negative.
3.Warehouse Capacity Constraints:
1. y[1, 1] + y[2, 1] ≤ 150 (Warehouse 1 capacity
constraint)
2. y[1, 2] + y[2, 2] ≤ 200 (Warehouse 2 capacity
constraint)

4.Fixed Production Cost Constraints: Fixed Production Cost Constraints:

1. Total Fixed Production Cost = (Fixed Production Cost of •The total fixed production cost is the sum of the fixed production costs
Product 1 * (x[1, 1] + x[1, 2])) + (Fixed Production Cost incurred for each product, which is the product of the fixed production
of Product 2 * (x[2, 1] + x[2, 2])) cost per unit and the total quantity produced for that product.
Objective Function (Profit):
Maximize Z = (120 * x[1, 1]) + (120 * x[1, 2]) + (150 * x[2, 1]) + (150 * x[2, 2])

[(500 * (x[1, 1] + x[1, 2])) + (800 * (x[2, 1] + x[2, 2]))]

[(100 * x[1, 1]) + (150 * x[1, 2]) + (100 * x[2, 1]) + (150 * x[2, 2])]
[(50 * y[1, 1]) + (70 * y[1, 2]) + (50 * y[2, 1]) + (70 * y[2, 2])]
Subject to the following constraints:

Capacity Constraints:
x[1, 1] + x[2, 1] ≤ 250 (Stage 1 capacity constraint)
x[1, 2] + x[2, 2] ≤ 400 (Stage 2 capacity constraint)
x[1, 1] + x[1, 2] ≤ 200 (Product 1 demand constraint)
x[2, 1] + x[2, 2] ≤ 300 (Product 2 demand constraint)

Non-Negativity Constraints:
x[i, j] ≥ 0 for all i and j
y[i, k] ≥ 0 for all i and k

Warehouse Capacity Constraints:

y[1, 1] + y[2, 1] ≤ 150 (Warehouse 1 capacity constraint)
y[1, 2] + y[2, 2] ≤ 200 (Warehouse 2 capacity constraint)

Fixed Production Cost Constraints:

Total Fixed Production Cost = (500 * (x[1, 1] + x[1, 2])) + (800 * (x[2, 1] + x[2, 2]))

Now, let's find the optimal solution using linear programming:

x[1, 1] = 150 (Product 1 at Stage 1)

x[1, 2] = 50 (Product 1 at Stage 2)
x[2, 1] = 100 (Product 2 at Stage 1)
x[2, 2] = 200 (Product 2 at Stage 2)
y[1, 1] = 0 (Product 1 at Warehouse 1)
y[1, 2] = 0 (Product 1 at Warehouse 2)
y[2, 1] = 50 (Product 2 at Warehouse 1)
y[2, 2] = 200 (Product 2 at Warehouse 2)

Profit (Z) = (120 * 150) + (120 * 50) + (150 * 100) + (150 * 200)

[(500 * (150 + 50)) + (800 * (100 + 200))]

[(100 * 150) + (150 * 50) + (100 * 100) + (150 * 200)]
[(50 * 0) + (70 * 0) + (50 * 50) + (70 * 200)]
 Some Examples of
Strategies

• Different process steps and scale,

significant logistics
• Central stage 1, decentralized
stage 2
• Significant central R&D
• Central plant for at least early life
cycle
• Significant product flexibility
• Decentralized satellite plants for
some stages

28
 A General
Approach

• Develop a strategy and appropriate

means of focus
• Using data, benchmarking, and
analysis of technology, develop scale
curves
• Identify major decision choices
and service requirements
covering plant and process
options
• Do the analysis

29
 Globalizatio
n Adds
Some
Additional
Complexitie
s

• Increase in worldwide exports

• Business level trends
• New technologies such lower-scale,
higher-skill level
• manufacturing systems including FMS
systems
• JIT systems that also underscore the need
for sophisticatedvendor infrastructure
• TQM and organizational learning
• Competitive factors that focus on
customization, rapidproduct
• development, and quick response
• The breakdown of intercompany barriers
30
Globalization
Complexities
• Macro level trends
– Large, sophisticated overseas markets with local needs
– Non-tariff barriers
– Regionalized trading economies
• Variable factor costs – Static and Dynamic differences
• Longer lead times

• (cont’d)

31
 Global Strategies
Emphasize Some
Additional Factors

• Global product volumes and life cycles

• Decentralized network based on
regional presence
• Infrastructure versus cost
• Work force capabilities
• Vendors
• Transportation and communication
• Extra plants and capacity to build
flexibility for exchange rate risks
• Flexibility in short, medium, and long
term
32
 Exchange Rate Model
460

450 # of plants

One
440
Two
Cost

430 Three

420 Four
Five
410

400
0 100 200 300 400
Total Capacity
An exchange rate model is a theoretical framework used by economists and analysts to
understand and predict the behavior of exchange rates between two or more currencies. These
models attempt to explain the factors influencing the value of one currency relative to another
33 over time.
 Exchange Rate Model
• There are various exchange rate models, each based on different economic
theories and assumptions. Some of the most well-known exchange rate models
include:
• Purchasing Power Parity (PPP) Model: PPP suggests that exchange rates
should move in a way that equalizes the purchasing power of different
currencies. It states that the price of a basket of goods and services in one
country should be equivalent to the price of the same basket in another country
when converted into a common currency. Violations of PPP can lead to currency
misalignments.
• Interest Rate Parity (IRP) Model: IRP is based on the idea that the difference
in interest rates between two countries should be equal to the expected change
in the exchange rate over the same period. IRP helps explain the relationship
between interest rates, inflation rates, and exchange rates.
• Asset Market Model: The asset market model assumes that exchange rates
are determined by the demand and supply of financial assets denominated in
different currencies. It considers factors such as interest rates, inflation rates, and
investor sentiment.
• Balance of Payments (BOP) Model: The BOP model focuses on the overall
balance of payments between two countries. It examines the current account
and capital account balances to understand how international trade and financial
flows impact exchange rates.
• Behavioral Models: Behavioral exchange rate models take into account
psychological and market sentiment factors that can influence short-term
fluctuations in exchange rates. These models often rely on technical analysis and34
investor behavior patterns.
 Example
Exchange Rate Model Description Factors Considered Example
Exchange rates should Prices of basket of goods If the price of a laptop is $1000 in the US
Purchasing Power equalize the purchasing and services in different and €800 in Germany, PPP suggests that
Parity power of different countries, converted into a the exchange rate should be 1.25
currencies. common currency. USD/EUR.
Interest rate differential If the interest rate in the US is 2% and in
Interest rates, inflation
between two countries Japan is 0.5%, IRP suggests that the
Interest Rate Parity rates, and their impact on
should equal the expected USD/JPY forward exchange rate should be
exchange rates.
change in exchange rate. 101.5.
Exchange rates are
Interest rates, inflation If investors expect higher returns on US
determined by demand
rates, investor sentiment, stocks, the demand for USD-denominated
Asset Market Model and supply of financial
and financial market assets will increase, leading to an
assets in different
conditions. appreciation of the USD.
currencies.
Current account and capital If a country has a trade surplus and
Focuses on overall
Balance of Payments account balances, attracts foreign investments, the demand
balance of payments
Model international trade and for its currency will increase, causing its
between two countries.
financial flows. exchange rate to appreciate.
Psychological and market
If investors start selling a currency due to
sentiment factors Technical analysis, investor
fear and uncertainty, the exchange rate of
Behavioral Models influencing short-term behavior patterns, and
that currency may depreciate in the short
fluctuations in exchange market sentiment.
term
rates.
 Facilities Strategy Given Uncertainty
(adapted from Huchzermeir and Cohen)

Alternative Supply Chain

Alternative Exchange Rate Network Model
Facilities & Factor Cost Outcome for Each Expected
Configurations Distributions Combination Outcomes

A
A
Best
Configuration
for Current
Exchange Rate
B and Factor Costs
B

N
Switching N
Costs

36
20 Courtesy of Arnd Huchzermeier. Used with permission.
 Five-Stage Approach to Strategy
Development
Stage 1:
Strengths Business and Competitive
Operations Strategy Environment
and Plant Charters
Global
Market
Stage 2:
Cross-Sectional Process
Multiple-Technology
Data Technologies
Scale Curves

Stage 3: Internal
Market Presence Constraints
Major Network
and Capabilities
Options
Supplier
Industries
Stage 4:
Infrastructural Political and
Location and
Requirements Market Issues
Process Options

Logistics Stage 5: Factor

21 Costs Modeling Costs
 Summary
Aspect Methods for Analysis
Focus, Scale, and Flow - Market Analysis
- Scale Analysis
- Flow Analysis
Impact of New Markets and Technologies - Technology Assessment
- Market Entry Strategies
Global Product Design and Flow Patterns - Global Product Standardization vs. Localization
- Supply Chain Redesign
Flexibility - Agile Manufacturing
- Flexible Supply Chain
Factor Costs - Comparative Advantage Analysis
- Labor Cost Analysis
Outsourcing and Offshoring - Risk Management
- Vendor Selection
Longer Lead Times - Inventory Management
- Forecasting and Demand Planning
Other Considerations - Cultural and Language Differences
- Ethical and Social Consideration
Explore the future of operations
and manufacturing.

Class Discussion
4/28/2024 3:58 PM 40
Explore the future of operations and
manufacturing.
The future of operations and manufacturing is characterized by
technological advancements and digital transformation. Industry 4.0,
smart manufacturing, and additive manufacturing (3D printing) are
revolutionizing production processes. Digital twin technology, AR, and
VR are enhancing efficiency and decision-making. Robotics, including
collaborative and autonomous robots, are reshaping the workforce.
Sustainability, supply chain digitization, and mass customization are
gaining importance. Resilience, agility, and human-machine
collaboration are key factors for success in the future of manufacturing.
Embracing innovation and adapting to changing consumer demands
will be crucial for manufacturers to remain competitive.
4/28/2024 3:54 PM 41
Understanding customer-centric supply chain
management
Customer-centric supply chain management (SCM) is an approach that
prioritizes the needs and expectations of customers throughout the entire
supply chain process. It involves aligning supply chain activities and
strategies to enhance customer satisfaction, increase customer value, and
create a positive customer experience. The ultimate goal of customer-
centric SCM is to deliver the right product or service to the right
customer at the right time, efficiently and effectively.

4/28/2024 3:54 PM 42
Understanding customer-centric supply chain
management

4/28/2024 3:54 PM 43
 Understanding
customer-
centric supply
chain
management

https://www.linkedin.com/pulse/building-customer-centric-
supply-chain-strategy-lora-cecere/ 4/28/2024 3:54 PM 44
Delivering superior
customer value through
operations
• Delivering superior customer value through
operations involves aligning operational processes
with customer needs and expectations. It
emphasizes customer-centricity, quality, speed,
flexibility, and innovation. By optimizing supply
chains, embracing technology, and empowering
employees, companies can achieve customer
loyalty, competitive advantage, and increased
profitability. The focus on continuous improvement
and transparent communication contributes to a
positive customer experience and word-of-mouth
referrals. Overall, delivering superior customer value
through operations enhances customer satisfaction
and drives business success.
4/28/2024 3:58 PM 45
Well known models
1. Lean Manufacturing: Lean is a widely adopted operational model that emphasizes eliminating waste,
streamlining processes, and delivering value to customers efficiently. It originated in the manufacturing industry but
has since been applied to various sectors globally.
2. Six Sigma: Six Sigma is a data-driven methodology aimed at improving process quality and reducing defects. By
reducing process variation, companies can enhance customer satisfaction and deliver consistent value.
3. Total Quality Management (TQM): TQM is a comprehensive approach that involves all employees in a company
continuously improving processes, products, and services to meet or exceed customer expectations.
4. Agile Operations: Originally developed in software development, the agile methodology has been adopted by
many industries to enable flexible and responsive operations that can quickly adapt to changing customer demands.
5. Supply Chain Management (SCM): SCM focuses on optimizing the end-to-end supply chain to ensure timely and
efficient delivery of products or services to customers.
6. Service Operations Management: This model is specific to service-based industries and focuses on delivering
high-quality services that meet customer needs and preferences.

4/28/2024 3:54 PM 46
Where its applied , Let discuss your model
• Toyota (Lean Manufacturing): Toyota is a global leader in applying lean manufacturing principles.
Its Toyota Production System (TPS) is renowned for reducing waste, improving efficiency, and
delivering high-quality vehicles.
• General Electric (Six Sigma): GE has successfully implemented Six Sigma methodologies to
improve process quality and customer satisfaction. It is known for its commitment to quality and
continuous improvement.
• Apple (Agile Operations): Apple's agile operations enable it to rapidly introduce new products and
updates to meet customer demands and stay ahead of competitors.
• Amazon (Supply Chain Management): Amazon's advanced supply chain management practices
allow it to provide fast and reliable delivery to customers, contributing to its dominance in the e-
commerce industry.
• Marriott International (Service Operations Management): Marriott focuses on delivering
exceptional customer service across its global chain of hotels, earning it a strong reputation for
customer satisfaction.
4/28/2024 3:54 PM 47
Other Models and Strategies

4/28/2024 3:54 PM 48
Operational Model Description Application/Area
Lean Manufacturing Eliminate waste and optimize processes Production, Manufacturing
Six Sigma Data-driven approach to reduce defects Quality Management
Total Quality Management (TQM) Continuous improvement and customer focus Quality Management
Agile Operations Flexible and responsive operations Project Management, Software Development
Supply Chain Management (SCM) Optimize end-to-end supply chain Logistics, Inventory Management
Service Operations Management Delivering high-quality services Service-Based Industries
Business Process Reengineering (BPR) Redesign and improve processes Business Process Optimization
Theory of Constraints (TOC) Identify and manage constraints in processes Production, Project Management
Customer Relationship Management (CRM) Managing customer interactions and relationships Sales, Marketing
Just-In-Time (JIT) Production Minimize inventory and production delays Manufacturing, Production
Continuous Improvement (CI) Ongoing incremental enhancements Process Improvement
Kaizen Continuous small improvements Quality Management, Process Improvement
Value Stream Mapping (VSM) Visualize and improve process flows Process Improvement
Design Thinking Human-centered approach to problem-solving Innovation, Product Design
Business Model Canvas Visualizing and analyzing business models Business Strategy
Customer Journey Mapping Visualize customer experiences and touchpoints Customer Experience Management
Customer-Centric Design Design products/services around customer needs Product Design, Innovation
Voice of Customer (VOC) Analysis Gathering customer feedback and insights Customer Experience Management
Net Promoter Score (NPS) Measure customer loyalty and satisfaction Customer Experience Management
Customer Segmentation Divide customers into distinct groups Marketing, Customer Analysis
Customer Experience Management (CEM) Enhance overall customer experience Customer Service, Marketing
Key Performance Indicators (KPIs) for Customer Value Metrics to measure customer value Business Performance Evaluation
ISO 9000 Quality Management System Quality management standards and principles Quality Management
ISO 14001 Environmental Management System Environmental standards and practices Environmental Management
ISO 45001 Occupational Health and Safety Management
Health and safety standards Occupational Health and Safety
System
ISO 27001 Information Security Management System Information security standards Information Security Management
Hoshin Kanri (Policy Deployment) Strategic planning and goal deployment Strategic Management
Performance Excellence Models (e.g., Baldrige, EFQM) Criteria for organizational excellence Organizational Excellence Assessment
Customer Analytics and Big Data Analyzing customer data for insights Marketing, Customer Insights
Customer-Centric
4/28/2024 Supply
3:54 Chain
PM Aligning supply chain with customer needs Logistics, Supply Chain Management 49
Designing agile
and responsive
supply chains
• Customization and
personalization in
supply chain offerings

4/28/2024 3:54 PM 50
Industry Leaders
1.H&M: One of the main components of supply chain management for this
industry, H&M focuses on cost efficiency for its production unit and
reducing lead times for its inventory. Successful implementation of both
factors has made it a global brand name for years.
2.Nike: Nike is well-known footwear and apparel firm; it has close to 700
factories spread over 42 countries around the world. It focuses on labor
productivity, consolidating materials to reduce wastage, and introducing
modern technologies in their manufacturing process.
3.Walmart: Walmart is the second largest employer in the United States; it
has more than 11,000 stores in 27 countries and an inventory worth 32
billion; this shows how important it is for them to have efficient and agile
supply chain management. Walmart has succeeded by having fewer links
in its supply chain management, partnering with vendors that add
strategic value for innovative and modern technology to cut costs and
cross-docking inventory.

4/28/2024 3:54 PM 51
 Designing Agile and Responsive Supply Chains:
1. Visibility & Collaboration: Real-time data sharing and cooperation among stakeholders for risk identification and informed
decisions.
2. Flexibility & Scalability: Quickly adapt to demand fluctuations with diverse sourcing and scalable facilities.
3. Risk Management: Mitigate risks with contingency plans, supplier diversification, and predictive analytics.
4. Short Lead Times: Optimize production, transportation, and inventory for rapid response to market changes.
5. Collaborative Supplier Relationships: Strong partnerships for better responsiveness and shared risk management.
6. Demand Forecasting & Planning: Data-driven forecasting to align production and inventory accurately.
7. Technology Integration: Leverage IoT, AI, and blockchain for improved visibility and decision-making.
8. Continuous Improvement: Cultivate a culture of ongoing optimization and innovation.
9. Lean Principles: Eliminate waste, reduce costs, and enhance efficiency.
10. Responsive Transportation: Utilize adaptable transportation modes for quick shipments.
11. Customer-Centric Approach: Tailor the supply chain to meet customer preferences and expectations.
12. Cross-Functional Teams: Foster collaboration among different functions for faster decision-making.
13. Scenario Planning: Prepare for disruptions with scenario-based strategies.

4/28/2024 3:54 PM 52
 Supply chain
optimization
through
technology and
digitalization

4/28/2024 3:54 PM 53
Video
• Video 1 & 2

• https://www.youtube.com/watch
?v=TUFJG7BJ-LI

• https://www.youtube.com/watch
?v=ELOW6UdTY4Q

4/28/2024 3:54 PM 54
 Advanced
supply chain
analytics for
decision-
making

4/28/2024 3:54 PM 55
Advanced supply
chain analytics for
decision-making
• Video 3,4 & 5

• https://www.youtube.com/watch
?v=3d7C4pShykI
• https://www.youtube.com/watch
?v=C1vd_y6MSDk
• https://www.youtube.com/watch
?v=0AZfe7DuT_U

4/28/2024 3:54 PM 56
 Balancing
efficiency and
flexibility in
supply chain
design

4/28/2024 3:54 PM 57
• Video 6,7, & 8
• https://www.youtube.com/watch?v=
sWdmGcaTras

• https://www.youtube.com/watch?v=
qeadkAL5YwY

• https://www.youtube.com/watch?v=
IMPbKVb8y8s

4/28/2024 3:54 PM 58
 Performance
measurement
and KPIs for
supply chain
excellence

4/28/2024 3:54 PM 59
KPI
Performance measurement and Key Performance Indicators (KPIs) are
crucial aspects of achieving supply chain excellence. By tracking and
assessing key metrics, organizations can identify areas for
improvement, measure progress towards goals, and make data-driven
decisions to enhance supply chain efficiency and effectiveness. Below
are some essential performance measurement areas and
corresponding KPIs for achieving supply chain excellence

4/28/2024 3:54 PM 60
Performance
Measurement Key Performance Indicators (KPIs) Definition
The time it takes to convert cash
Days Inventory Outstanding + Days Sales
Cash-to-Cash Cycle Time invested in inventory and operations
Outstanding - Days Payable Outstanding
back to cash through sales.
Measures related to environmental,
Supply Chain Sustainability Carbon emissions, waste reduction, fair labor
social, and ethical aspects of the
Metrics practices compliance, etc.
supply chain.
Ability to respond and adapt quickly to
Number of successful supply chain adaptations /
Supply Chain Flexibility changes in demand or supply
Total number of supply chain disruptions
disruptions.
Measure of customer satisfaction and Customer Satisfaction Surveys, Net Promoter Score
Customer Service Level
service quality. (NPS), etc.
Supply Chain Risk Metrics to assess and manage supply Supplier Risk Index, Risk Exposure Index, Risk
Management chain risks and vulnerabilities. Response Time, etc.

4/28/2024 3:54 PM 61
Performance
Measurement Key Performance Indicators (KPIs) Definition
Percentage of orders delivered on (Number of on-time deliveries / Total number of
On-Time Delivery (OTD)
time. orders) * 100
Order Fulfillment Cycle Average time taken to fulfill customer Total time taken to fulfill orders / Total number of
Time orders from placement to delivery. orders
Number of times inventory is sold and Cost of Goods Sold (COGS) / Average Inventory
Inventory Turnover
replaced in a given period. Value
Percentage of orders delivered (Number of perfect orders / Total number of orders)
Perfect Order Rate
without any errors or defects. * 100
Supply Chain Cost-to- Measure of supply chain cost
(Total Supply Chain Costs / Total Income) * 100
Income Ratio efficiency in relation to total income.
Supplier delivery reliability, lead time, Supplier On-Time Delivery Performance, Supplier
Supplier Performance
and quality. Lead Time Variance, Supplier Quality Index, etc.
Transportation Cost per Average cost of transportation per
Total Transportation Costs / Total Units Shipped
Unit unit of product shipped.

4/28/2024 3:54 PM 62
 Balancing cost
and service
levels in supply
chain operations

4/28/2024 3:54 PM 63
 Models and Methods
Methods and
Computations Relevant Models/Formulas Definitions
Various optimization algorithms like Linear Transportation Optimization employs mathematical optimization techniques to
Transportation
Programming, Integer Programming, or Genetic find the most efficient transportation routes, modes, and allocation of goods to
Optimization
Algorithms. minimize transportation costs while meeting service requirements.
Demand Forecasting and Inventory Planning methods like JIT and VMI aim to
Demand Forecasting and JIT (Just-in-Time) and VMI (Vendor Managed balance inventory levels with demand fluctuations. JIT focuses on minimizing
Inventory Planning Inventory) inventory by synchronizing production with actual demand, while VMI transfers
inventory management responsibilities to suppliers.
Collaborative Planning, CPFR is a collaborative approach where supply chain partners share information,
Collaboration and information sharing between
Forecasting, and collaborate on planning and forecasting, and jointly manage replenishment to
supply chain partners.
Replenishment (CPFR) enhance supply chain efficiency, visibility, and responsiveness.
Service-Level Agreements with Customers establish agreed-upon service levels,
Service-Level Agreements Defining acceptable service levels, lead times,
lead times, and response times to meet customer expectations and ensure
with Customers and response times with customers.
consistent and satisfactory customer experiences.
Cost-to-Serve Analysis assesses the costs incurred in serving specific customer
Analyzing costs associated with serving specific
Cost-to-Serve Analysis segments or product lines, enabling organizations to identify profitable
customer segments or product lines.
customers and products and optimize their operations accordingly.
Value Stream Mapping (VSM) is a lean management tool used to visualize,
Mapping and analysis of the entire supply chain
Value Stream Mapping analyze, and improve the flow of materials and information across the entire
to identify non-value-added activities and
(VSM) supply chain. It helps identify and eliminate non-value-added activities to
improve processes.
improve overall efficiency.
Supply Chain Network Design involves optimizing the configuration of the supply
Various optimization models for network
Supply Chain Network chain network, including the location of facilities and distribution centers, to
optimization, such as the Facility Location
Design minimize costs and enhance service levels. It often utilizes optimization models
Model or Transportation Model.
4/28/2024 3:54 PM like the Facility Location Model or Transportation Model. 64
 Models and Methods
ethods and Computations Relevant Models/Formulas Definitions
Total Cost Analysis is a comprehensive evaluation of all costs involved in supply
Cost = Procurement Cost + Production Cost +
chain operations, including procurement, production, transportation, inventory
Total Cost Analysis Transportation Cost + Inventory Holding Cost +
holding, and distribution costs. It helps identify cost drivers and areas for cost
Distribution Cost
optimization.
Economic Order Quantity (EOQ) is a model used to calculate the optimal order
quantity that minimizes total inventory costs by balancing ordering costs and
Economic Order Quantity EOQ = √((2 * Demand * Ordering Cost) /
carrying costs. It aims to find the right balance between ordering large quantities
(EOQ) Carrying Cost)
(reducing ordering costs) and holding excessive inventory (increasing carrying
costs).
Service Level Agreements (SLAs) are contractual agreements between supply
Establishing clear service level commitments
Service Level Agreements chain partners and customers that define the expected service levels, lead times,
with suppliers, logistics partners, and
(SLAs) response times, and performance metrics. They ensure clarity and alignment in
customers.
service expectations and help manage service levels effectively.
Safety Stock Calculation determines the buffer stock required to mitigate
Safety Stock = Z-score * √(Lead Time uncertainties in demand and lead times. The Z-score represents the desired level
Safety Stock Calculation
Variability^2 + Demand Variability^2) of service, and lead time and demand variability account for supply chain
volatility.

4/28/2024 3:54 PM 65
Video reviews
• https://www.youtube.com/watch
?v=Lqg4Gh5I4fc

• https://www.youtube.com/watch
?v=uqSWx9c90GE

4/28/2024 3:54 PM 66
Value chain dynamics:
Lessons from the auto
industry

4/28/2024 3:54 PM 67
Video reviews
• Video 8 & 9

• https://www.youtube.com/watch?v=-
eiyj7Hgt-s
• https://www.youtube.com/watch?v=0
wVAPXswE6E&list=RDLV-eiyj7Hgt-
s&index=3
• https://www.youtube.com/watch?v=b
oGTx01nVJI&list=RDLV-eiyj7Hgt-
s&index=6

4/28/2024 3:54 PM 68
Enterprise architecture
and operations strategy

Discover the brilliance behind

Southwest Airlines' operations model
compared to traditional airlines. 🛫
We'll also explore the auto and
airframe industries, uncovering
insights into enterprise/value chain
architecture and operations strategy.

4/28/2024 3:54 PM 69
Video reviews
• Video 11, 12, &13
• https://www.youtube.com/watch
?v=OQYO6cqYIdA
• https://www.youtube.com/watch
?v=SjTOVR339Ck
• https://www.youtube.com/watch
?v=8_CeFiUkV7s

4/28/2024 3:54 PM 70
Vertical integration and
outsourcing

Hold tight as we use captivating cases

to discuss the critical decisions
surrounding vertical integration and
outsourcing.

4/28/2024 3:54 PM 71
Capacity strategy: How
to make decisions on
capacity and capacity
expansion.

4/28/2024 3:54 PM 72
 Competing on quality: Sources of
quality and different measures of
quality.
• Quality is the name of the game! 🏆 Uncover
how different companies prioritize and measure
quality as a strategic output.

4/28/2024 3:54 PM 73
Sources and Measures of Quality:
• Product Quality: Refers to the inherent characteristics and features of a product that meet
customer requirements and expectations. Measures include defect rates, product specifications,
and customer feedback.

• Process Quality: Relates to the efficiency and effectiveness of production processes. Measures
may include cycle time, process yield, and adherence to quality standards.

• Service Quality: Pertains to the level of service provided to customers. Measures include response
time, customer satisfaction scores, and service reliability.

• Employee Skills and Training: Well-trained and skilled employees contribute to the overall quality
of products and services. Measures include employee training hours and skill assessments.

• Supplier Quality: The quality of inputs and raw materials provided by suppliers impacts the final
product quality. Measures include supplier performance evaluations and defect rates.

4/28/2024 3:54 PM 74
Industries and Situations:
Industry Competitors Methods of Competition on Quality
Automotive Industry - Toyota - Continuous improvement in manufacturing processes
- Honda - Stringent quality control and testing
- Incorporating customer feedback for product
- Ford
enhancements
Healthcare Industry - Mayo Clinic - Advanced medical technologies and equipment
- Cleveland Clinic - High standard of medical expertise and patient care
- Patient-centered approach and personalized treatment
- Johns Hopkins Medicine
plans
Technology Industry - Apple - Strict quality assurance during product development
- Samsung - Innovation in design and features
- Dell - Focus on product reliability and durability
- Extensive staff training for exceptional customer
Service Sector - Marriott International
interactions
- Hilton Worldwide - Consistent service standards across all locations
4/28/2024 3:54 PM - Ritz-Carlton - Personalized services and attention to guest preferences
75
 Industries and Situations:
Industry Competitors Methods of Competition on Quality
- Ensuring vehicles meet international safety and quality
Automotive Industry - Toyota South Africa
standards
- Incorporating advanced technologies in vehicle
- Volkswagen South Africa
manufacturing
- Nissan South Africa - Continuous improvement in manufacturing processes
Healthcare Industry - Netcare - State-of-the-art medical equipment and facilities
- Life Healthcare - Highly qualified and experienced medical professionals
- Accreditation and quality certifications for healthcare
- Mediclinic
services
Technology Industry - Safaricom (Kenya) - Offering reliable and fast telecommunication services
- MTN Group (Multiple African Countries) - Extensive network coverage and superior call quality
- Vodacom (South Africa) - Innovation in mobile data services and digital offerings
Service Sector - Serena Hotels (Various African Countries) - Exceptional hospitality and personalized guest experiences
- Ethiopian Airlines - On-time performance and high safety standards
- Shoprite (South Africa) - Quality products and customer service at affordable prices
4/28/2024 3:54 PM 76
Industries and Situations:
Consequences on Customer Loyalty and
Industry Companies Quality-related Issues Retention
Battery explosions in Loss of trust, declining customer loyalty,
Technology Samsung
smartphones and a decrease in smartphone sales
Emissions cheating Reduced customer trust, lawsuits, and a
Automotive Volkswagen
scandal decline in sales and customer retention
Chipotle Mexican Food contamination Loss of customer confidence, drop in sales,
Food and Beverage
Grill outbreaks and a decline in repeat business

Quality and sizing issues Negative customer reviews, decreased

Retail Forever 21
with clothing customer loyalty, and loss of market share

Passenger mistreatment Public backlash, damaged reputation, and a

Airlines United Airlines
and overbooking decline in customer loyalty
Counterfeit products sold Decreased trust from customers, potential
E-commerce Amazon
on the platform legal issues, and a loss of repeat customers

4/28/2024 3:54 PM 77