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All companies involved in getting product to end user is a supply chainSupply Chain Management is everywhere:PRODUCTS: Everything you wear, eat, sit on or in, use, read, or knock about on a sports field comes to you courtesy of operations.SERVICES: Every book you borrow from the library, every medical treatment you receive, every lecture you attend at a university, every service you receive comes to you courtesy of operations.Common Challenges:1. Lowering costs2. Improving quality3. Enhancing product desirability4. Aligning operations management with the company’s competitive strategy5. Evolving with the needs of customers, competition, and technologyDefinitions:• Supply Chain (SC): the global network of organizations and activities involved in designing, transforming, consuming and disposing of goods and services.• Supply Chain Management (SCM): is management of the processes and relationships in a supply chain• Operations Management: management of internal process used to design, supply, produce and deliver goods and services to customers (a process-oriented discipline) brings together internal to external Why study SCM? Examples of business impacts:According to a study by Swink et al (2010), companies that excel in supply chain operations outperformed their nearest competitors in the following ways: benefits to SCM:- 50% higher net profit margins- 20% lower sales, general & administration (SG&A) expenses- 12% lower average inventories- 30% less working capital expenses- 2X the return on assets (ROA) example of a supply chain of the wrist watchImportant Decisions in SCM; WHAT?What types of activities and what types of goods or services are to be delivered by the system?What product features do our intended customers care about?What activities and resources are needed, and how should they be developed, allocated, and controlled?Important Decisions in SCM; HOW?How is the good or service to be designed, made, and delivered?How much should our transformation process be able to deliver (and under what conditions)?How should we measure and assess performance?Important Decisions in SCM; WHEN? WHERE? WHO?When should products be made, activities be carried out, services be delivered, or capacities/facilities come on line?Where should certain activities be done, and Who should do them: suppliers, partners, or the firm? Evolution of SC Thinking:Prior to 1980: Optimizing Functional Operations1980’s: Discussion of Internal Integration1990’s-Present: Discussion of External Integration & SCMChapter 2Levels of Strategic Planning:These three levels should be closely linked so that they are mutually consistent and supportive.Strategic questions:Corporate:What business(es) should we be in?Business:How do we compete?Functional:How do we best support the strategy?- structure- infrastructure1. Corporate Strategy: overall mission and target businesses; corporate strategic planning addresses the portfolio of businesses owned by a firm. [BROADEST IN SCOPE AND LEAST CONSTRAINED] decisions made at this level limit the choices that can be made at lower strategic planning levels.a. Long time horizonb. Sets the overall values, direction and goals of the firm as a wholec. Acquisitions and divestments of businesses d. Performance metrics (how business performance will be measured)e. Risk management2. Strategic Business Unit (SBU): semi-independent organization for different product, market or geographic dimensions. How should our business unit compete?—to answer managers make choices thatcollectively form the business model that the unit will pursue.a. Identification of customer or target market segmentsb. Appropriate competitive priorities (how they will create advantages over competitors!)c. Constrained by corporate strategyd. More detailed e. Shorter time horizon3. Functional strategy: determines how functions support business unit strategies and corporatea. Most detailed & most constrainedb. Determines specific focusi. Management of critical resourcesii. Key metrics that should be put in place to measure performanceiii. Identification of capabilitiesiv. Coordination of activities with those of the other functional areas to reduce friction Developing an Operations Strategy:--3 Elements to operational strategy (at the heart of operations strategy are choices made in three areas):• Critical Customer: critical to firm’s current and future success and receives firm’s focus. • Value Proposition: tangible and intangibles “benefits” that customers can expect to obtain by using the products offered by the firm (what you provide to those critical customers)• Capabilities: what a firm does well, defines types of problems a firm can proficiently address for our critical customers 1. Critical Customers: (the start and end point for effective and efficient supply chain operations)• Assessing Customers wants and needs; product-specific trait categories:– Order Winners: cause customer to choose product over competitor’s (performance, lower price)– Order Qualifiers: minimum standards to be met (availability, price, conformance)– Order Losers: why customers avoid your firm (do not meet minimum standards)There are several factors to remember. First, order winners and order qualifiers form the basis for customers' expectations. Order losers, in contrast, result from customers' actual experiences with the firm and its operations management processes. They represent the gap between what the firm delivers and what customers expect. Second, order winners, order qualifiers, and order losers vary by customer. An order winner to one customer may be an order qualifier to another. Third, these traits vary over time. An order winner at one time may become an order qualifier at another point in time.Example: Dell Computers – Order Winner: Flexibility (Personalization/Customization - A million combinations!)– Order Qualifier: Affordable price, reasonable quality and reasonable delivery average is 7-10 days (doesn't’t necessarily make you choose dell but minimum requirement to make them even qualify)– How does Dell differ from Apple?• Cant customize with Apple! • Order winner for Apple is much more user friendly 2. Value Proposition: • Value Proposition: firm’s offerings that are valued/attractive by/to customers and different from competitorsWell-designed proposition has four characteristics:1. Features that customers value and will pay for2. A difficult to imitate

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MSU ISP 221 - Notes

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