Transcript value chain

Review class
Process Book
Prepared By: Reham Al-Homayan
Please read the case study and
answer the following questions.
Smith Wholefoods case study
Prepared By: Reham Al-Homayan
Q1 : Think about this organization as an open system, and
Identify the main activities it performs. List the main inputs
and the main outputs of the operations.
Q2: Kats & Khan sets 5 sub-systems at work. Identify them
according to the case.
Q 3: What is the dominant transformed resources-materials,
information or customers? List all the information resources
you find it in the case.
Q4: Identify Porter value chain and choose one area from the
primary activities of Smith Wholefoods and apply it to the
Porter’s value chain.
Q5: “ All parts of the organization are operations” Explain this
statement through examples.
Prepared By: Reham Al-Homayan
Q6: what the advice you might suggests to Mr. smith to shift into
capabilities based competitors, and identify the 4 basic
principles of capabilities based competitors to clarify the idea.
Q7: “For their success, processes should be systems focused”.
Discuss this statement using materials and examples from the
B200 Processes module.
Q8: Discuss why an organisation might choose to recall its
products and how this recall take place. Give examples from
the B200 Processes module.
Q9: Define (OMC) and how can be applied to the case study
Q10: 3- Effective logistics management can provide a major
source of competitive advantage. Explain.
Q11: What are the means to control the manufacturing system?
and What are the five inter-related stages of manufacturing
system design?
Prepared By: Reham Al-Homayan
Q1 : Think about this organization as an open system, and Identify the main
activities it performs. List the main inputs and the main outputs of the
operations.
The company as an open system have direct interact with the environment. Open system
have 3 major characteristics:
Receive input from environment
Convert input to output
Discharge their outputs into their environment.
Input
Materials
Ideas
Staff
Finance (budget)
Location
Environment
Conversion
Manufacturing
packaging
Marketing
Planning
Production
Prepared By: Reham Al-Homayan
Output
Bakery Service
Breads
Crispy potato
Cakes
Kats & Khan sets 5 sub-systems at work. Identify them
according to the case.
Production sub-system: concern with bread and potato production
(manufacture, customer service, products, …)
Supportive sub-system: concern with relationship between the
organization and external environment. ( café, bakery).
Maintenance sub-system: concern with stability of the organization
(Management rules and reward the staff).
Adaptive sub-system: concern with what the organization might
become. How the manufacture is working and deliver services and
product in unique way. ( more branches )
Managerial sub-system: controlling, coordinating, planning, and taking
decision.
Ch 1
p 11
Prepared By: Reham Al-Homayan
What is the dominant transformed resources-materials,
information or customers? List all the information resources
you find it in the case.
The transformation process in operations is closely connected with
the nature of its transformed input resources. Transformation
mean using resources to change the state or condition.
Material Process: Wholefoods using raw materials to develop their
products (breads, cakes, potato crisp)
Information Process: Wholefoods using customer’s ideas and
suggestions to design new products.
Customers Process: more branches in the village, and improve the
product quality.
Ch 2 p 20-21
Prepared By: Reham Al-Homayan
Identify Porter value chain and choose one area
from the primary activities of Smith
Wholefoods and apply it to the Porter’s value
chain.
Value chain definition
Select primary activity (e.g sales & marketing).
Ch 5 p 51 – 56 & Fig 5.3 p 57
Prepared By: Reham Al-Homayan
Answer Q5
- Identify operation in the organization, the
major and support function
- Explain how the organization departments
& management are working effectively to
reach the goal.
- Examples by using table 2.1 p 16
Ch. 2 P. 15 to 17
Prepared By: Reham Al-Homayan
Answer Q 6:
- To be a competitor we need to focus on some effective points ( 5
dimensions) speed, consistency, acuity, agility & innovativeness.
- I identify the 4 steps that transferee the company into capabilitiesbased competitor.
- More clarification by mention the 4 principles.
Ch. 4 p. 42 - 47.
Answer Q 7:
Define process, system, competitive advantage,
transformation process, OMC, logistic management,
…….and any related topic.
Ch 1, 2, 11, 14, ….
Prepared By: Reham Al-Homayan
Answer Q8
Identify reverse logistic
Classes of recall
Steps of recalling
Mention examples
Ch 12 P 171 Fig 12.1
Answer Q9
Identify OMC, explain each order with example.
It can be apply through Improve product
Pricing
Café Working hours
Distribution
Management & staff
Ch14 p. 188 – 190
Prepared By: Reham Al-Homayan
Answer Q10
Identify logistics, productivity advantage, value advantage, supply chain
management.
Ch 11 p.150 – 153 Fig 11.3
Answer Q11
Manufacturing systems must be adaptive to survive through the control
system which consider to be a dynamic process to ensure efficiently
meet the system objective.
Manufacturing system at all levels has to see controller function,
information flow system, computers, ….
There are two areas of control which have to integrate in practice:
Process control – Production control
Identify 5 stages
Ch 10 p 141 - 144
Prepared By: Reham Al-Homayan
Chapter 1
Organizations As Systems
The three major characteristics of open
systems are as follows (Fig 1.2):
– They receive inputs or energy from their environment
– They convert these inputs into outputs
– They discharge their outputs into their environment .
Systems are divided into sub-systems. In organizations the sub-systems are
the various departments.
The boundaries between sub-systems are called interfaces
Boundaries are based on relationship
The result of Management decision and choices that really determines where
the organization ends and the environment begins.
Prepared By: Reham Al-Homayan
Kats & Khan
They identified 5 subsystems at work in
an Organization:
Production or technical sub-system
1. Supportive sub-system
2. Maintenance sub-system
3. Adaptive sub-system
4. Managerial Sub-system
Prepared By: Reham Al-Homayan
Chapter 2
Effective Operations Management
IKEA owes its success to the effectiveness of its
operations management, who provide:
1-a smooth customer flow;
2-a clean, well-designed environment;
3-sufficient goods to satisfy demand;
4-sufficient staff to serve customers and stock
warehouse;
5-an appropriate quality of service;
6-a continuous stream of ideas to improve its,
impressive, operations performance.
Prepared By: Reham Al-Homayan
the
already
Operations in the organization
Here we divide the organization major functions:
the marketing function, the accounting and finance function and the
product/service development function. And support functions, which supply
and support the operations, function, including:
The human resources function, the purchasing function and
the engineering/technical function.
The operations function of the organization is the arrangement of resources
which is devoted to the production of its goods and services.
Operations managers are the staff of the organization who have particular
responsibility for managing some, or all, of the resources which comprise
the operations function.
Operations management is the term which is used for the activities, decisions
and responsibilities of operations managers.
Prepared By: Reham Al-Homayan
THE TRANSFORMATION PROCESS MODEL
All operations produce goods or services or a mixture of the two, and they do
this by a process of transformation. By transformation we mean that they
use their resources to change the state or condition of something to
produce outputs.
For example, hospitals have inputs of doctors, nurses and other medical staff,
administrators, cleaning staff, beds, medical equipment, pharmaceuticals,
blood, dressings, and so on. Their purpose is to transform sick patients into
healthy patients. The outputs from the operation are treated patients,
medical test results, medical research and 'best practice' medical
procedures.
Prepared By: Reham Al-Homayan
The inputs to an operation can be conveniently classified as either:
1-transformed resources – the resources (mixture of customers, information
and materials) that are treated, transformed or converted in some way; or
2-transforming resources – there are 2 types of operations blocks : the
resources that act upon the (for example facilities like building and
equipment, the staff who run and manage the operation) transformed
resources.
Prepared By: Reham Al-Homayan
Outputs from the transformation process
The outputs from the transformation process are goods are services, which are
generally seen as being different, for several reasons:
Tangibility- Goods are usually tangible.
Storability- Partly because of tangibility, goods can also be stored
Transportability- the ability to transport goods.
Simultaneity- services are often produced simultaneously with their
consumption, happened at the same time as you 'consumed' the service by
buying it. )follow up through the process)
Customer contact- in services, because they are produced and consumed
simultaneously, they must have high contact between the customer and the
operation.
Quality-
Prepared By: Reham Al-Homayan
Chapter 4
Competing on Capabilities
by Stalk, Evans and Shulman.
A capability is a set of business processes strategically understood.
Capabilities based competitors identify their key business processes, manage
them centrally, and invest in them heavily, looking for a long term payback.
Capabilities based-Competition, is a new concept of corporate strategy that
focus on generate new business, speed, quality
respond to customer, enter new business.
4 Principles of Capabilities Based Competition. Companies suggest 4 basic
principles:
is the way of deliver value to the customer.
begin with identify customer needs & end with satisfying them
all organizations parts need to work together.
building strategic capabilities need special supervision and management.
Prepared By: Reham Al-Homayan
To win the competition we need to focus on five dimensions:
Speed, the ability to respond quickly to customer or market demand by
creating new ideas and use technology.
Consistency, the ability to produce product that satisfies customers’
expectations.
Acuity, the ability to see competitive environment and understand customers.
Agility, the ability to adapt to different business environments in the same time.
Innovativeness, the ability to generate new ideas by combining existing
elements and create new source of value.
4 steps to transform to a capabilities based competitor:
Shift the strategic framework to achieve aggressive goals
choose the qualified staff, training, roles
Staff evaluation and customer feedback
Do not delegate the leadership of the transformation (CEO)
Prepared By: Reham Al-Homayan
Chapter 5
The Value Chain and
Competitive Advantage
by Michael Porter
Each organization is a collection of several activities (products, market, deliver,
& support) these activities represented by value chain.
The value chain is to analyze the specific activities through which firms or
organizations can create a competitive advantages.
Primary or support value chain.
Primary value chain activities: the goal is to create the value that exceeds the
cost of providing the product or service. The activities are:
Inbound logistic: Receiving input
Operation
Outbound logistic - Material handling
Marketing & sales - advertising and getting buyers
Service - Customer services.
Prepared By: Reham Al-Homayan
Support value chain activities
which support the primary value, and the goal is to viewed as overhead to
develop a competitive advantages through 4 categories:
Procurement, purchasing inputs such as materials, supplies and equipments.
Technology development, research and technology development to support
the value chain.
Human Resources management, recruiting, development, training, …
Firm infrastructure, organizational structure, control system, culture, finance,
quality, management.
There are 4 dimensions of scope that affect the value chain:
Segment scope …product they sell or customers they deal with
Geographic scope … region, countries (canon factory in Japan but sell them
through an offices around the world)
Vertical scope … division activities between firm, suppliers and buyers ,
decide either to perform the activities or using external
Industry scope … the range of related industries in which the firm competes
with a coordinated strategy.
Prepared By: Reham Al-Homayan
Chapter 6
Marketing in a Changing World by Kotler, Armstrong, Saunders, and
Wong
Marketing touches all of us every day of our lives. How?
In other words marketing is a process by which organizations acquire
customers. To be attractive to customers, the products and services
offered must provide value.
Selling and promotion are part of a larger marketing mix: the set of
marketing tools that work together to affect the marketplace.
•
We have to examine the needs, wants, and demands; products; value
and satisfaction; exchange, transactions and relationships; and
markets.
Prepared By: Reham Al-Homayan
Marketing Management
Marketing management is demand management.
“the analysis, planning, implementation and control of programmes designed to
create, build and maintain beneficial exchanges with target buyers for the
purpose of achieving organisational objectives.”
Marketing managers might face any of the following states of demand:
Irregular Demand ( various seasonal demand )
Full Demand
No Demand
Latent Demand ) Not satisfied products )
Negative Demand ) Dislike products )
Overfull Demand ) Very high )
Falling Demand ) Chicken and diseases )
Prepared By: Reham Al-Homayan
Marketing Management Philosophy,
the way to approach the buyers by understanding the interest for customer and
society.
There are five alternative concepts under which organizations can conduct their
marketing activities:
The production concept
When demand exceeds supply, the management need to increase production
The product concept
organizations should make continuous product improvement.
The selling concept
Some products need more promotions.
The marketing concept
Under the marketing concept, organizations produce what consumers want, thereby
satisfying consumers and making profit
The societal marketing concept
Need to know the environmental problem, resources shortage, economic problem, social
service.
Prepared By: Reham Al-Homayan
The 4 goals of the marketing system
Marketing system affects both buyers & sellers. Buyers want best quality at
reasonable price in convenient locations. Sellers face challenging when
preparing the offer for the market. product, consumer, environment,
promotion, new ideas. The marketing system goals are:
Maximize consumption: which will create maximum production, employment,
and wealth. As the more people spend, buy, and consume the happier they
are.
Maximize consumer satisfaction: the consumer satisfaction is difficult to
measure, therefore, some companies develop ways to measure customer
satisfaction..
Maximize choice: this would increase the cost to produce verities
Maximize life quality, this include quality, quantity, availability, cost, and
environment.
Marketing challenge , changing world economy, ethics and procedures, competition, ….
Prepared By: Reham Al-Homayan
Chapter 11
Logistics and Competitive Strategy by Martin
Christopher
Logistic is the process of strategically managing the procurement,
movement and storage of materials, parts and finished inventory
through the organization and its marketing channels in such a way
that current and future profitability are maximized through the costeffective fulfillment or orders.
Effective logistics management can provide a major source of competitive
advantage. How?
Prepared By: Reham Al-Homayan
Simple model is “Competitive Advantage and the Three Cs”.
The advantage of 3Cs First: The ability of the organization to differentiate itself, in the
eyes of the customer, from its competition. Second : By operating at a lower cost and
hence at greater profit.
Customers
Needs seeking benefits
At acceptable prices
VALUE
VALUE
Assets and
Utilisation
Assets and
Utilisation
Company
Updated by: Reham S. AlHomayan
Competitor
Productivity Advantage or Value Advantage
The productivity advantage gives a lower cost profile to have greater
sales value.
Logistic management can provide a multitude of ways to increase
efficiency and productivity and contribute to reduce unit costs.
and the value advantage gives the product a differential "plus" over
competitive offerings.Customers don’t buy products, they buy
benefits
e.g BMW (as value advantage) – Nissan as (Cost advantage).
Prepared By: Reham Al-Homayan
Logistics and competitive advantage matrix
High
Low
Value advantages
In practice, successful companies will often seek to achieve a
position based upon both productivity advantage and value
advantage. Fig 11.3 p 153
Service
Leader
Commodity
Market
You must differentiate
Your self
Low
Cost & service
Leader
Japanese companies
Cost
Leader
New technology help
High
Productivity advantages
Updated by: Reham S. AlHomayan
Gain competitive advantage through Value chain (fig 11.5 p 154)
Competitive advantage grow out of organize and perform discrete
activities within the value chain.
To gain competitive advantage over its rival (competitor), must promote value
to its customers through performing activities more efficiently that its
competitors and in a unique way that create greater buyer value.
Gain competitive advantage through logistics (fig 11.6 p 155)
Organization will be a leader when they focus on both value advantages and
productivity advantages.
Prepared By: Reham Al-Homayan
The Supply Chain and Competitive Performance
“The supply chain is the network of organizations that are involved,
through upstream and downstream linkages, in the different
processes and activities that produce value in the form of products
and services in the hands of the ultimate consumer.”
Supply chain management covers the flows of goods from supplier
through manufacture and distribution chain to the end user.
The difference between logistics management and supply chain
management??
Logistics management is primarily concerned with optimizing flows
within the organization. while ,supply chain management recognizes
that internal integration by itself is not sufficient.
Prepared By: Reham Al-Homayan
perhaps the most challenging are in the area of logistics:
The customer service explosion
Time compression
Globalization of industry
Organizational integration
Prepared By: Reham Al-Homayan
Chapter 12
Reverse Logistics by Richard Lancioni
The urgency of a recall depends upon certain factors – there are three classes:
Class I: Immediate risk, such product lead to death or serious injury
(e.g Johnson & Johnson)
Class II: No immediate hazardous and might still dangerous and cause
injury but have to be cleared quickly.
Class III : recalled for variety reasons , violation of federal regulations.
The scope of the recall process depends on the nature of the product and
the level of penetration in the distribution system.
The challenge exists for a logistician to design a reverse system of
distribution and get it to work at a desired performance level at the lowest
possible total cost.
Prepared By: Reham Al-Homayan
Locating the Product
Three distinct levels of increasing difficulty associated with the penetration of
the product in the system:
Product still under control of he manufacturer in company controlled
warehouses or primary distributor controlled warehouses. A simple
matter to recall.
Product would have to be located and withdrawn from the middlemen involved
in the distribution of the product (wholesalers and retailers). Recall
Slightly more difficult.
Product is in the hand of consumers. the most difficult.
Movement of the product into each successive level not only complicates
the recall for the logistician but adds to the cost of the operation as well.
Prepared By: Reham Al-Homayan
Warranty Cards
Information that can be coded on computerized warranty cards are:
Product description
Manufacturing Plans
Lot (group)
Retrieval of Products
After the product is located, logisticians can coordinate the process of retrieving
the product in the field either through:
the company's field sales force
the retailer or other middlemen
outside collection specialists
Effective retrievals require that:
The customer be motivated to return defective products for repair, replacement
or refund.
Good relationships be established among carriers and other participants in the
distribution process such as channel members.
The biggest obstacle in recalling products is the consumers. .
Prepared By: Reham Al-Homayan
Chapter 13
The Triumph of Process by Michael Hammer
BPR is the term applied to a range of techniques that aim to redesign organisations,
based on their business processes.
BPR – Business Process Reengineering: the fundamental rethinking and radical
redesign of business processes to achieve dramatic improvement in critical current
measure of performance , such as cost, quality, service, and
speed.
The problems that affect modern organizations are not task problems, they
are process problems. Some of the problems:
We are slow to deliver results not because our people are performing their individual
tasks slowly and inefficiently, but because some of our people are performing
tasks that need not to be done at all to achieve the result and because we
encounter agonizing delays in getting the work from the person who does one task
to the person who does the next one.
So, the staff will misunderstand their supervisor instruction and do wrong things.
We are inflexible not because individuals are locked into fixed way of operating, but
because no one has an understanding of how individual tasks combine to create
result. Understanding important to solve this problem.
Prepared By: Reham Al-Homayan
Implementation
Organizations found themselves in a situation where they have to implement
the new process where processes play a central role in the operation and
management of the business: the process centered organization.
To start taking a process centered approach, a company must do four things:
-The company must recognize and name its processes. Often companies
divide primary processes into a small number of sub processes which are
then describable in terms of basic tasks or activities.
-Ensure that everyone in the company is aware of these processes and their
importance to the organization as a whole.
-Pprocess measurement.
-Process management, looking for opportunities.
Prepared By: Reham Al-Homayan
Chapter 14
Staple Yourself to an Order by Shapiro, Rangan and Sviokla.
a process perspective on its activity forces the organisation to become
customer focused.
Every customer’s experience is determined by a company’s order
management cycle (OMC).
The order management cycle offers managers the opportunity to look at
their company through the eyes of the customer, to see and
experience transactions the way as a customer.
.
Prepared By: Reham Al-Homayan
There are 10 stages to walk through the OMC:
Order planning, show how and why bad customer service and fragmented operations
can cripple a company. Sales people, marketing and operation need to cooperate.
Order generation, this stage usually produces a gap between order generation, order
planning, and later steps.
Cost estimation and pricing, the battles between engineers who estimating, accountant
who calculate the cost, a headquarters group that oversees pricing, and sales that
actually develop the price.
Order receipt and entry, takes place in customer services department when the
customer reps in contact with the customers, sometimes no connection with the top
management.
Order selection and prioritisation, the process of choosing which order to accept and
which to decline. Smart company like the order with business strategy. The decision
are taking by top management, customer service reps.
Prepared By: Reham Al-Homayan
Scheduling, when the order slotted into an actual production or operation sequence,
there will be a fight between sale people, marketing, and operation. Focus on the
service or the production way?
Fulfilment, the actual provision of the product or service. This is complex step and vary
from company to another , it depend on the industry. Location, product, ….
Billing, is designed to serve the need and interests of the company not the customer. Is
handled by finance people.
Returns and claims, this step affect admin cost, transportation, and customer relations.
Some companies set a rules to protect them self and dissatisfied customers.
Post sales service, this step can affect customer satisfaction and company profitability.
it can include such elements as product , repair, maintenance, customer training, ….
The quality assurance team responsible to follow this step.
Prepared By: Reham Al-Homayan
FOUR KEY PROBLEMS
After tracing some individual orders four problems emerged:
1- Most companies never view the OMC as a whole system.
Each department think separately, and they count on each other.
2- Overlapping responsibilities. The department can not differentiate between
the primary and the sole responsibilities.
3- The people in the bottom of the organization know more than top
management but can not communicate with them.
4 -The customer remains as remote from the OMC as top management do.
The top management out of the picture completely regarding customers
activities (complain, order, pay, … )
Prepared By: Reham Al-Homayan
How to fix an OMC
Analysis – understand the flow of activities and to have a clear picture about
order flow, difficulties and discuss a solutions in visible way.
Companies need to look at the OMC from the customer’s point of view.
maybe the organization reach the goal but the customer not satisfied.
System Focus – Put the pieces together, move across boundaries
Political Strategy – Staple yourself to an order
Political Strategy - The best way to improve the situation in any company is to
‘close the loop’ between service provider and strategy setter. the customer
may like to have their things in a drum rather than plastic rapping !
Benefits
improved customer satisfaction, interdepartmental problems will recede, and
companies will improve their financial performance.
Prepared By: Reham Al-Homayan