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

© Prof. D. Kim, 2010, KUBS 2 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, KUBS 3 Firm’s Value Chain and Operations & Supply Chain Processes

© Prof. D. Kim, 2010, KUBS 4 Value Chain and Operations Function (Adapted from Porter 1980, 1985) Procurement & Inbound Logistics (Core) Operations Warehousing & Outbound Logistics Marketing & Sales Customer Service Technology (Information, Engineering), Finance, Accounting, Human Resources/Organization Management Macro Operations

© Prof. D. Kim, 2010, KUBS 5 Managing Transformation: Systems View Process (Transformation, Value creation/adding) Inputs (Material, Labor, Overhead, etc.) Outputs (Goods or Services) 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 DeceptionExcellence StruggleInferiority Effectiveness Low High High Efficiency Low

© Prof. D. Kim, 2010, KUBS 7 Manufacturing Operations Processes (Project) Job Shop Batch Flow Assembly Line Continuous Flow Opportunity Cost Out-of-pocket Cost Process Rigidity/Inflexibility Production Volume/Efficiency Product Mix/Customization Product-Process Matrix (Modified from Hayes & Wheelwright 1975, Chase et al. 2004)

© Prof. D. Kim, 2010, KUBS 8 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 & Customization Low High Low Labor intensity 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, KUBS 11 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 ProcessesCustomer 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, KUBS 12 Supply Chain Push/Pull Boundary Procurement, Operations, and Replenishment Cycles Customer Order Cycle Customer Order Arrives PUSH PROCESSES PULL PROCESSES Make-to-stock, Assemble-to-order, Make-to-order Procurement Cycle Customer Order and Manufacturing Cycle Customer Order Arrives PUSH PROCESSES PULL PROCESSES (Chopra & Meindl 2007)

© Prof. D. Kim, 2010, KUBS 13 Changing Competition and Evolution of OSCM

© Prof. D. Kim, 2010, KUBS 14 Evolution of Economy, History of Competition, & Advances in OSCM Pre-Industrial Industrial Net Post-Industrial Time Competition Transportation Telecommunication TimeCharacteristics – 1865Pre-industrial 1865 – 1900sIndustrial 1910s – 1920sMechanization, Mass production 1930s – 1950sOperations Research (OR), Production Management (PM) 1960s – 1985Post-industrial, Service Economy, (Production &) Operations Management (OM) 1985 – 1995Global, 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, KUBS 15 Changing Management Focus and Paradigm (Modified from Gopal & Cahill 1992)

© Prof. D. Kim, 2010, KUBS 16 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, Faster Velocity: 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, KUBS 17 Key Issues and Challenges of OSCM

© Prof. D. Kim, 2010, KUBS 18 Ten Key Issues and Challenges in OSCM 1.Understand operations and supply chain as a process 2.Align strategies, processes, systems, practices, and measures 3.Build operations and supply chain capabilities 4.Improve demand and supply(/capacity) matching 5.Manage relationships 6.Develop performance measurement and evaluation system 7.Manage change and risks 8.Prepare for challenges and timely issues 9.Think globally and break through current time, space & knowledge 10.Invest in people and execute precisely