All companies involved in getting product to end user is a supply chain Supply 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 Improving quality Common Challenges 1 Lowering costs 2 3 Enhancing product desirability 4 Aligning operations management with the company s competitive strategy 5 Evolving with the needs of customers competition and technology example of a supply chain of the wrist watch Definitions 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 Important 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 Operations 1980 s Discussion of Internal Integration 1990 s Present Discussion of External Integration SCM Levels of Strategic Planning Chapter 2 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 infrastructure 1 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 horizon b Sets the overall values direction and goals of the firm as a whole c Acquisitions and divestments of businesses d Performance metrics how business performance will be measured e Risk management 2 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 that collectively form the business model that the unit will pursue Identification of customer or target market segments a b Appropriate competitive priorities how they will create advantages over competitors c Constrained by corporate strategy d More detailed e Shorter time horizon 3 Functional strategy determines how functions support business unit strategies and corporate a Most detailed most constrained b Determines specific focus i Management of critical resources ii Key metrics that should be put in place to measure performance iii iv Coordination of activities with those of the other functional areas to reduce friction Identification of capabilities 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 Assessing Customers wants and needs product specific trait categories the start and end point for effective and efficient supply chain operations 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 Order winner for Apple is much more user friendly Cant customize with Apple 2 Value Proposition Value Proposition firm s offerings that are valued attractive by to customers and different from competitors Well designed proposition has four characteristics 1 Features that customers value and will pay for 2 A difficult to imitate source of differentiation competitors cannot copy 3 Satisfies financial and strategic firm objectives 4 Deliverable using the firm s capabilities and supply chain In order for operations managers to reliably deliver a given value proposition they