A Sustainable Competitive Advantage

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13 April 2016

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Operations Management is a key component in the success of any firm. The textbook outlines ten critical areas to focus on for Operational Managers–many firms have developed these one or two of these areas into a competitive advantage. One firm, Anhueser-Busch/InBev has successfully incorporated all ten areas of focus and developed them into a legacy of quality and a sustainable competitive advantage. This focus on Operations Managemnt has lead to Ab/ InBev’s reputation for quality, and their continued dominance as a global brewery.

Design of Goods

The design of goods/services defines a firm, and sets them up for success (or failure) in the market. In order to design a superior product, firms must first understand their customer— what their needs and requirements are. Anheuser-Busch/InBev has focused on developing a diverse portfolio of global brands to satisfy a myriad of customer needs; a few of their more recently-developed beers are actually based on customer suggestions and recipes. The AB/ InBev portfolio ranges from low-cost products such as Busch (which focuses on a costleadership strategy), while domestic brands such as Budweiser and Bud Light are a force to be reckoned with in the North American markets. Other brands such as Hoeegarden and Leffe appeal to craft beer consumers as well as global markets (a differentiation strategy). By customizing products to various consumer tastes, they are able to obtain greater market share worldwide.

AB/InBev’s original beer, Budweiser, was developed in the 1800s by the company’s founder, Adolphus Busch set out to create a beer that balanced flavor and refreshment— something that everyone could enjoy. This understanding of customer needs, combined with a commitment to quality and consistency still exist in the company today, which contributes to the overall sustainability of the company.

Managing Quality
As mentioned above, AB/InBev makes sure to incorporate quality into their individual products—by meticulously managing their supply chain, they are able to control the overall quality of input as well as their products. Their commitment to tradition is the basis for their commitment to quality; many of the ingredients they use while brewing today’s beer come from the same lineage as the ingredients Adolphus Busch used back in the 1800s. Since AB/InBev directly owns the farms where the hops, rice and barley are grown, by ensuring the quality of the ingredients, they ensure quality and consistency in each batch of beer.

AB/InBev offers quality to consumers by offering an extensive line of products—they improved on their Lime-o-Rita line by offering additional flavors. There is manufacturing based quality in their products—each batch of Budweiser is brewed to the same standards as the last, thus ensuring that each individual bottle tastes as good as the last.

Process and Capacity Design

By maintaining a process-focused strategy, AB/InBev has created a sustainable competitive advantage—their unique lineup of products all revolve around the same quality ingredients. Fewer inputs (hops, rice, barley, etc.) all distill down to a variety of quality products that AB/InBev uses to meet their customer demands. This high volume, low variety production method allows for the efficiency needed to produce the mass quantities of product that AB/InBev demands.

A simple visit to the AB/InBev brewery creates a clear picture of their commitment to the product-focused strategy—their facilities are designed specifically to accommodate the variety of products they have created. This specificity and simplicity lead to lower variable costs per unit, higher equipment utilization, and overall easier production planning.

Although switching  production lines between products can be a bit of a hassle, the specialization of labor reduces lead time and setup costs for each production run.

Location Strategy

The main headquarters of AB/InBev are currently located in St. Louis, Missouri, where they were originally established in the early 1800s. Although the merger between AnheuserBusch and InBev in 2008 could have easily meant that headquarters would be relocated, moving production elsewhere would have been incredibly costly. Because of the company’s long-standing residence in the Midwest, many suppliers are also located in the Midwest. Relocating the brewery would have not only increased shipping/handling costs of the various inputs, but also the campus that AB/InBev currently occupies is now owned outright by the company—attempting to build a new production facility would have been a significant outlay of capital.

The brewery in St. Louis is certainly a well-known landmark within the city, but it is not the only brewery that AB/InBev owns and operates. Because the demand for AB/InBev products is so widespread, the brewery operates 12 different brewing and bottling plants throughout the United States. These locations help ensure the freshness and overall quality of the product delivered to various markets nationwide, as well as help reduce the costs of moving product from manufacturer to distributer.

Layout Strategy!

Because AB/InBev offers almost 200 unique products, layout strategy is incredibly important in keeping the company competitive—efficient and effective use of space ensures that things continue to run smoothly.

At the brewery in St. Louis, a couple of different layouts can be seen. Silos at the entrance to the campus store the various ingredients needed to brew the beers, while outlying buildings double as office space and storage of other components (such as bottles, cans, labels, etc.). By using a warehousing/storage layout for certain items, things that are used most commonly during production are close by, thus saving on shipping and handling costs.

The beer that is brewed in St. Louis is bottled on-site. The bottling lines follow a product-oriented layout—for example, glass bottles for Bud Light are run through one set of lines, while cans of Bud Light are run through a separate set of lines.

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