© Prof. D. Kim, 2010, KUBS 1 Operations & Supply Chain Management (OSCM) and Changing Competition Operations Management

© Prof. D. Kim , 2010, KUBS1

Operations & Supply Chain Management (OSCM)and Changing Competition

Operations & Supply Chain Management (OSCM)and Changing Competition

Operations Management


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


Firm’s Value Chain andOperations & Supply Chain Processes

Firm’s Value Chain andOperations & Supply Chain Processes


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


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


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)


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


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


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


Supply Chain Processes

(Modified from Kaprelian 2000)

Demand Creation & Fulfillment:Information, Material/Product, Transaction/Capital Flow

Enterprise

Product Realization Process


Order Fulfillment Process


Order Capture Process


Support Processes

Supplier Relationship Processes Customer Relationship Processes

Suppliers







Support Processes

Customers







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)?


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)


Changing Competition and Evolution of OSCMChanging Competition and Evolution of OSCM


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)


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)


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↑


Key Issues and Challenges of OSCMKey Issues and Challenges of OSCM


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

Documents

© Prof. D. Kim, 2010, KUBS 1 Operations & Supply Chain Management (OSCM) and Changing Competition Operations Management