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© Prof. D. Kim , 2010, KUBS1
Operations & Supply Chain Management (OSCM)and Changing Competition
Operations & Supply Chain Management (OSCM)and Changing Competition
Operations Management
© Prof. D. Kim , 2010, KUBS2
Discussion and Learning Points
• Firm’s Value Chain and Operations & Supply Chain Processes– Value Chain and Operations Management (OM)
• Manufacturing Operations and Processes• Service Operations and Processes
– (E-)Supply Chain Management (SCM) and Process-Based View
• Changing Competition and Evolution of OSCM– History of Competition and Advances in OSCM– Competition Dynamics in the E-Economy
• Key Issues and Challenges of OSCM– Key OSCM Issues & Challenges
© Prof. D. Kim , 2010, KUBS3
Firm’s Value Chain andOperations & Supply Chain Processes
Firm’s Value Chain andOperations & Supply Chain Processes
© Prof. D. Kim , 2010, KUBS4
Value Chain and Operations Function
(Adapted from Porter 1980, 1985)
Procurement& InboundLogistics
(Core) Operations
Warehousing & Outbound
Logistics
Marketing & Sales
Customer Service
Technology (Information, Engineering), Finance, Accounting,Human Resources/Organization Management
Macro Operations
© Prof. D. Kim , 2010, KUBS5
Managing Transformation: Systems View
Process(Transformation,
Value creation/adding)
Inputs(Material, Labor,Overhead, etc.)
Outputs(Goods orServices)
Feedback
Planning, Execution, Control
Transformation?Service Uniqueness?System Characteristics?- Effectiveness =- Efficiency =- Capacity- Time
Operations Management (OM)?
© Prof. D. Kim , 2010, KUBS
Performance Effectiveness-Efficiency Matrix
Deception Excellence
Struggle Inferiority
EffectivenessLow High
High
Efficiency
Low
© Prof. D. Kim , 2010, KUBS7
Manufacturing Operations Processes
(Project)
Job Shop
Batch Flow
Assembly Line
Continuous Flow
OpportunityCost
Out-of-pocketCost
Process Rigidity/InflexibilityProduction Volume/Efficiency
Product Mix/Customization
Product-Process Matrix
(Modified from Hayes & Wheelwright 1975, Chase et al. 2004)
© Prof. D. Kim , 2010, KUBS8
Production and Inventory Systems
Finished Goods
Subassemblies/Modules
Raw Materials/Parts
Make-To-Stock(MTS)
Assemble/Configure/Build-To-Order (ATO/CTO/BTO)
Make/Engineer-To-Order (MTO/ETO)
Locus Point of Inventory Control
Movement from MTS toward MTO
© Prof. D. Kim , 2010, KUBS
Service Operations Processes
Service Factory- Transportation- Hotel- Recreation
Service Shop- Hospital- Auto shop- Other repair shop
Professional Service- Physician- Law firm- Accounting firm
Mass Service- Wholesaling- Retailing- School
Customer interaction & CustomizationLow High
Low
Laborintensity
High
(Schmenner 1986)
Service Product-Process Matrix
© Prof. D. Kim , 2010, KUBS
Service Operations: Changing Focus
(Schmenner 1986)
Managing Focus:
Structure → Process
Performance Measures:
Internal measure (scale economy, productivity)
→ External measure (customer satisfaction, profit)
Utility & Quality:
Core/technical service → Total perceived service & relations
© Prof. D. Kim , 2010, KUBS11
Supply Chain Processes
(Modified from Kaprelian 2000)
Demand Creation & Fulfillment:Information, Material/Product, Transaction/Capital Flow
Enterprise
Product Realization Process
Product Realization Process
Order Fulfillment Process
Order Fulfillment Process
Order Capture Process
Order Capture Process
Support Processes
Supplier Relationship Processes Customer Relationship Processes
Suppliers
Product Realization Process
Product Realization Process
Order Fulfillment Process
Order Fulfillment Process
Order Capture Process
Order Capture Process
Support Processes
Customers
Product Realization Process
Product Realization Process
Order Fulfillment Process
Order Fulfillment Process
Order Capture Process
Order Capture Process
Support Processes
Delivered Orders
Returns and Repairs
Settlements
Selling/Buying
Voice of Customer
Customer Care
Delivered Orders
Returns and Repairs
Settlements
Selling/Buying
Voice of Customer
Customer Care
Inbound/Upstream Outbound/Downstream Procurement Chain Demand/Supply Chain Distribution/Selling Chain
Supply Chain Management (SCM)?
© Prof. D. Kim , 2010, KUBS12
Supply Chain Push/Pull Boundary
Procurement,Operations, andReplenishment Cycles
Customer Order Cycle
Customer OrderArrives
PUSH PROCESSES PULL PROCESSES
Make-to-stock, Assemble-to-order, Make-to-order
Procurement Cycle Customer Order andManufacturing Cycle
Customer OrderArrives
PUSH PROCESSES PULL PROCESSES
(Chopra & Meindl 2007)
© Prof. D. Kim , 2010, KUBS13
Changing Competition and Evolution of OSCMChanging Competition and Evolution of OSCM
© Prof. D. Kim , 2010, KUBS14
Evolution of Economy, History of Competition, & Advances in OSCM
Pre-IndustrialIndustrial
Net
Post-Industrial
1860 19901960Time
Competition
Transportation
Telecommunication
Time Characteristics
– 1865 Pre-industrial
1865 – 1900s Industrial
1910s – 1920s Mechanization, Mass production
1930s – 1950s Operations Research (OR), Production Management (PM)
1960s – 1985 Post-industrial, Service Economy, (Production &) Operations Management (OM)
1985 – 1995 Global, Customer Economy, Operations Strategy (OS)
1995 – Net/E-Economy, Supply Chain Management (SCM)
(Modified from Fitzsimmons & Fitzsimmons 2001, Chase et al. 2004)
© Prof. D. Kim , 2010, KUBS15
Changing Management Focus and Paradigm
Management Attribute Before 1985 1985 – 1995 After 1995 Management Focus Portfolio-driven strategic
planning Operations excellence Enterprise/supply chain
excellence Management Type Generalist/specialist Cross-functional Multi-functional Employee Focus Resource Involvement Empowerment Customer Focus Product Customer service, quality,
cost, delivery Total customer satisfaction
New Product Introduction Over the wall Voice of customer, design for manufacturing/service
Competitive product response
Product Features & Demand
Discrete Options/features Customer-demanded variety
Product Lifecycle Managing for cash flow New product introduction Time to market, break-even time
Operations Focus Efficiency Effectiveness Speed, Flexibility Cost Focus Direct labor Within plant cost Total cost of ownership Technology Focus Automation Information & interface Integration Technology Change Rate Stable High Very high Supply Management Resources/adversarial Supplier excellence Strategic alliances, virtual
factory Information Focus MRP II (Manufacturing
resource planning) CIM (Computer integrated manufacturing)
Integrated enterprise/supply chain systems, BI, KM
Information Management Centralized/dept-driven/disconnected
Centralized/distributed/user-driven/interface
Centralized/Distributed/user-driven/integrated
(Modified from Gopal & Cahill 1992)
© Prof. D. Kim , 2010, KUBS16
Changing Industry Dynamics & Business Drivers: 3V’s
Source: Hammer (2003), Kim (2006)
Value: Benefit / Cost• Increasing customer expectation• Dynamically changing customer preference• More Value Added – Better, Cheaper, FasterVelocity: Speed, Flexibility, Agility• Shorter product lifecycle• Time compression• Technology advances
Volatility: Uncertainty, Variability• Increasing competition• Industry globalization• Uncertain demand, Wide capacity swings
Customer Economy: Power Shift toward Customers
Business Responses
– Mass Customization– Lean, Quick Response– 6 (Six Sigma)– Collaborative Commerce– Supply Chain Synchronization
Demand-Supply Matching↑
© Prof. D. Kim , 2010, KUBS17
Key Issues and Challenges of OSCMKey Issues and Challenges of OSCM
© Prof. D. Kim , 2010, KUBS18
Ten Key Issues and Challenges in OSCM
1. Understand operations and supply chain as a process2. Align strategies, processes, systems, practices, and measures3. Build operations and supply chain capabilities4. Improve demand and supply(/capacity) matching5. Manage relationships6. Develop performance measurement and evaluation system7. Manage change and risks8. Prepare for challenges and timely issues9. Think globally and break through current time, space & knowledge10. Invest in people and execute precisely
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