Operations Management: An Integrated Approach, 5th Edition

THE SUPPLY CHAIN LINK

The operations strategy of a firm directly impacts decisions on its structure and infrastructure, including its supply chain. This includes the design of the supply chain, such as its length, and the relationships the firm has with its supply chain partners. Together, the operations strategy and the firm's supply chain must support the business strategy of the firm. This can be illustrated by the competitive priorities of the firm, which directly impact the type of supply chain a company has in place. For example, a company that competes on cost must have a highly efficient supply chain with high integration of the OM function between supply chain partners. The reason is that the supply chain plays a critical role in keeping both production and delivery costs down. Therefore, a firm competing on cost might structure its supply chain so that the least expensive suppliers are used rather than those with the highest quality supplies.

In contrast, a company that competes on quality will likely have a different supply chain. Competing on quality means that a company's products and services are known for their premium nature, such as product consistency and reliability. Many aspects of the supply chain are altered when companies compete on quality versus another competitive priority, such as cost. The company will likely source its components from suppliers known ...