Developing Supply Chain Tactical Flexibility

SupplyChainManagement_Session13and14_PlatformLeadershipEco-systemGrowthandStrategicAgilityv1.pptx

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- Supply Chain Management - Assessing supply chain design and management capabilities and developing recommendations for improvements

Sessions 13 and 14 - Platform Leadership, Eco-system Growth, and Strategic Agility

Supply Chain Management is a Business Partnership Model Focus

Core question: How do we maximize throughput and shared value creation?

Spring 2021

Version 1

Agenda

Review course calendar

10:00 - 10:10 am

break

11:15 - 11:30 am

Discuss the Supply Chain Partnership and the core need and challenges of outsourcing and the scope of Quiz 2

Discuss Platform Leadership, Eco-system Growth, and Strategic Agility and final HW Assignment

11:30 - 12:30 pm

10:10 - 10:30 am

Review course calendar

Overview of Sessions and Assignments

This is a supply chain ‘consulting methodology’, to help you better ‘see’, design and manage industry and ecosystem partnerships

Each session builds on the other to lead to a comprehensive executive presentation presenting findings, conclusions and recommendations

We are learning a methodology for understanding, defining, improving, innovating and managing a supply system of partnerships

Open after class for 7 days

Supply Chain Partnership Alignment

Do we know understand the importance of strategic sourcing to supply chain design and management?

Do we understand the range of partnership/ownership relationships?

Do we understand how to assess make/buy and the implications in both cases for supply chain management?

Focus:

Understand the concept of ‘incentive alignment. Be able to articulate why it is critical to supply chain success. Understand the core challenges of incentive alignment and how to address them.

Understand the how make vs buy decisions are made. Understand the role of transaction costs in making these decisions.

Use our understanding of incentive alignment and transaction costs to better understand the role ‘blockchain’ has in fundamentally rethinking the nature of transactions and contracts and the potentially profound impact this will have on supply chain management and design

Readings:

Read: Aligning Incentives in Supply Chains – HBR 2004

Read: Blockchain for Dummies

Read: Operations Management Readings: Strategic Sourcing

HW – discussion only

Assess strategic outsourcing opportunities for your supply chain

For those activities that are ‘outsourced’ assess the contractual arrangement and determine whether there are opportunities to improve incentive alignment

Session 11 – 4/22

Session 12 – 4/29

Supply Chain Growth

Supply Chain Leadership

Supply Chain Technology

Do we know how to drive industry growth?

Do we know how to shape industry direction?

Do we know which technologies are important?

Do we know where to implement technologies to improve performance

HW Assignment 4– Growth and Leadership Assessment

Due 5/6

HW Assignment 4 – Technology Assessment

Due 5/6

Focus:

Understand the industry life cycle and its impact on Supply Chain design and management decisions

Incorporate the Value Disciplines analytical framework to deepen our understanding of life cycle impact on strategy

Understand ‘strategic flexibility’ and how it changes at different stages of the industry life cycle

Understand transaction cost economics and its importance in helping us to understand how to impact the CCR of our customers and suppliers to improve total supply chain Throughput lower total supply chain and Operating Expense and Inventory

Readings:

Read: Value Discipline Models and Competitive Success

Read: What are Transaction Costs

Read: Industry Life Cycle

Read: Your Next Supply Chain – The Sloan Management Review Jan 2010

HW – focus

Identify industry life cycle stage – assess implications for supply chain design and management strategies

Identify opportunities for lowering transaction costs at both supplier and customers.

Identify opportunities to help customers and vendors better assess and manage their respective CCR to improve T, OE and I for the whole supply chain

Focus:

Understand the operations management lifecycle model and the core impact of process and data standardization

Understand the purpose of markets and how market leaders create opportunities for total market growth

Understand the growth of ‘platforms’ and how platform leaders shape conditions for platform participant success

Readings:

Read: Enterprise Architecture as Strategy

Read: Driving Value from IT – HBS 2009

Read: The Supply Chain of the Future - IBM 2009

Read: Pipelines, Platforms, and the New Rules of Strategy – HBS 2016

Read: How to Innovate When Platforms Won't Stop Moving – SMR 2011

HW – focus

Define market/ platform scope

Based on life cycle assessment define key participants

Identify opportunities for market/platform leadership in either process or data standardization or both

Identify opportunities for brand collaboration

Describe the specific opportunities for process/data/brand standardization and articulate the impact on industry T, OE and I

Assess your market/platform position as either laggard/follower or leader. If leader describe benefits and challenges of maintaining leadership. If laggard/follower describe the benefits and challenges of improving your position

Focus:

Understand the core technology trends and their impact on Supply Chain Management and Industry Growth

Special emphasis will be on Big Data, IoT, 3D Mfg., and Social Media and Collaboration Technologies emphases will be on

Understand how to align these technologies against the framework we have studied to understand best how to implement them to improve T and reduce OE and I

Readings:

Read: Seven traits of successful digital businesses – MQ 2014

Read: Digital transformation - Raising supply chain performance to new levels – MQ 2017

Read: McKinsey_3-D printing takes shape – MQ 2014

Read: Creating a Successful Internet of Things Data Marketplace – MQ 2016

HW – focus

Identify which new technologies are having the biggest impact on your supply chain

Use the frameworks developed to date to assess where to apply these technologies (process/data/standardization; transaction cost economics; CCR capability/speed/protection)

Assess the impact in terms which key metric (i.e. T, OE, I) will be most impacted and why

Session 13 – 5/6

Do we know how to drive industry growth?

Do we know how to shape industry direction?

Supply Chain Viable Vision

Do we have a ‘picture’ that can be ‘shared’ of ‘Viable Vision’?

Can we describe the journey in way that it feels achievable and exciting?

Focus:

Understand Goldratt’s view of Viable Vision

Relate cumulative set of recommendations and how they represent a ‘journey map’ to a viable vision

Discuss how we make the journey actionable

Reconnect with SWOT and DICE as frameworks for assessment and communications

Readings:

View: Goldratt on Viable Vision - Theory of Constraints

HW – focus

Summarize HW assignments into a final paper that takes cumulative feedback and refines assessment and recommendations

Link the recommendation into a ‘journey map’ that paints a compelling picture of a future state and presents a road map that feels believable, pragmatic and inspiring

Session 14 – 5/13

Supply Chain Recommendation

Final Paper – SWOT Summary, Viable Vision Journey Map and DICE Assessment

Due 5/13

supply chain

Core Concept 8

Understanding Outsourcing through Transaction Costs

performance gap assessment

process design assessment

management agility assessment

market growth assessment

improvement road map

CCR

To ensure we can make and keep commitments should we do everything ourselves?

We want to make sure the customer gets what they want?

How much of the supply chain do we have to control to make sure that happens?

How do we partner with supply chain partners to ensure they fulfill on their commitments?

we make a contract

We should outsource as much as possible (we shouldn’t make everything) but that means we are now reliant on others to help us meet commitments.

Assets

Activities

Assets

Activities

Assets

Activities

Assets

Activities

Assets

Activities

Mostly everything should be bought

Only do what you are good at

Supply chain leaders, platform leaders,

market leaders excel at organizing producers to align and deliver a completed good or services that fulfills a need

Wikipedia

here

Assess the costs structure of your supply chain and determining what you should make or buy

What is the boundary of the ‘firm’, your company? Your supply chain?

What does it mean to make? What does it mean to own the resources to make?

Shouldn’t we buy everything? Owning is expensive, why?

Why don’t you make your phone or your laptop?

A contract is a legally binding document between at least two parties that defines and governs the rights and duties of the parties to an agreement.[1] A contract is legally enforceable because it meets the requirements and approval of the law. A contract typically involves the exchange of goods, service, money, or promise of any of those. "Breach of contract", means that the law will have to award the injured party either the access to legal remedies such as damages or cancellation.[2]

The Heart of Supply Chains: A Contract

Wikipedia

Why are developing ‘complete’ contracts so hard to make and enforce?

Contracts ae at the heart of supply chains just as contracts are at the heart of all relationships, including marriage. And like marriages, they are the start of something that has to evolve, not the end of something that is finished

A complete contract is an important concept from contract theory.

If the parties to an agreement could specify their respective rights and duties for every possible future state of the world, their contract would be complete. There would be no gaps in the terms of the contract.

The Ideal world: ‘A Complete Contract’

Wikipedia

This is an unattainable goal, yet this is the aim of most outsource agreements

The key point to understand, contracts are not ‘one-time’ events, but the starting point for an ongoing relationship

Asset specificity mean asset specialization – what does that mean – how does it apply to machines – how does it apply to humans - why does that make both buying and making harder?

What does it mean to be ’bounded’? rational? Why does that making both buying and selling harder? How does that create the risk of ‘opportunism’?

Transacting is hard – Both buying things and making things, like employees.

What does it mean to make an employee? How does that relate to the nature of the good or service and the activity required to make that good or service?

We should only specialize on the activities that we are good at, that are a core competency? That differentiate us in the marketplace?

We should outsource activities that other people are better at? Do we make the coffee cups for your coffee shop? No. Do you grow and roast your own beans? Yes.

Why are ‘complete’ and ‘on-going’ contracts hard to make and enforce?

Transactions are the unit of analysis and a ’complete contract’ is the goal

we need to transact with others

that is we need to write a contract that specifies commitments and the consequence failure to meet a commitment

Behavioral characteristics of the contracting parties make obtaining a complete contract difficult to accomplish

Bounded Rationality makes it difficult to get and process information (that we need to transact with others)

Opportunism means that people are self inclined to their own interests and not others, so they ay intentionally or unintentionally hide important information

Transactions characteristics of the service or product being bought/sold obtaining a complete contract difficult to accomplish

Asset specificity makes it difficult to describe the product or service in ways that make the contract enforceable

Uncertainty in the environment make it difficult to describe all possible events that could impact the ability to execute the contract

Contract types

Arms-length - invest in the process - attempts to be complete - get the best price (most mistakenly focus here)

Relationship-based - invest in the outcomes - achieve the right goal (most should, but don’t know how to focus here)

Leverage Best Deal

Non-Critical Efficiency

Critical/Strategic: Cooperation

Bottleneck: Supply Continuity

Supply Risk/market Complexity

Impact to Business

develop strategic partnership

terminate, find new supplier

reduce dependencies and risk, find other solutions

pooling of requirements

high

low

Assess the costs structure of your supply chain and determine what you should make or buy

Which activity should someone else do?

Which activity should we now do?

purchased

What are your choices?

easy/hard to buy/sell

important/not important to an organization comp adv

Will it improve capacity?

Will it improve lead time?

Leverage Best Deal

Non-Critical Efficiency

Critical/Strategic: Cooperation

Bottleneck: Supply Continuity

Supply Risk/market Complexity

Impact to Business

develop strategic partnership

terminate, find new supplier

reduce dependencies and risk, find other solutions

pooling of requirements

high

low

You have made the right decision to ‘buy’, to outsource, now what?

Because of the need for some sort of asset specialization and bounded rationality (our inability to know everything) there is always an opportunity for ‘opportunism’, that is someone trying to take advantage of us

easy/hard to buy/sell

important/not important to an organization comp adv

This is why we need to design supply chain contracts that ensure we have aligned incentives, to make sure no one takes advantage of ‘hidden information’.

Invest in goal alignment and relationship development and not ‘complete’ contracts

More handshakes and dinners, less lawyers!

Contract types

Arms-length - invest in the process - attempts to be complete - get the best price (most mistakenly focus here)

Relationship-based - invest in the outcomes - achieve the right goal (most should, but don’t know how to focus here)

Write a contract…

What type…

Understanding how to make contracts easier ensure I picked the right partner, and that partner can be trusted is the key to understanding how to create and grow eco-systems

Using technology to lower Transactions Costs and make it easier to create, and manage supply chains – easier to create and manage relationship - and ultimately grow them into industry platforms/marketplaces (e.g. Amazon) – Blockchain as a starting point - larger social networks of connected relationships

Blockchain is an enabling technology that facilitates transactions processing

Download the book

here

Transaction Cost Economics helps to explain why transacting is difficult, how markets and technologies like blockchain help and how a focus on transactions unlocks why supply chains are expanding into platforms and ecosystems – this is ‘bridging’ discussion from local supply chains to supply ecosystems and platforms

Go here

Transactions require trust and transparency

Reducing the costs of transactions make supply chain more open (easier to ’buy’ than make) and more scalable (easier to conduct transactions with more customers and suppliers)

Review Chapters 1-3

The focus will be on Ch 3 – ‘Friction-Free Markets’ of Markets with low Transaction Costs

‘Buying is expensive’

so is making

How does Blockchain help?

Focus on the transaction

Address the cost of transacting

Where do we focus our efforts?

- Supply Chain Management - Assessing supply chain design and management capabilities and developing recommendations for improvements

Quiz 2 - Supply Chain Management

Spring 2021

Version 3

1 - How does lengthening or shortening lead time commitments lead to opportunities to improve capacity utilization and throughput?

Developing Supply Chain Tactical Flexibility

(reflection on HW Assignment 3)

10 points

Opens for 7 days on May 6th

2 – What is the difference between ‘out-sourcing’ and ‘off-shoring’? Why do firms ‘out-source’? What are some of the specific issues this raises? Pick one and describe more fully why this is a challenge?

Section 1 – Introduction

Operations Management Readings: Strategic Sourcing

3 - Review the section, ‘An Overview of Strategic Sourcing Decisions’. What are the challenges in determining whether to ‘make’ or ‘buy’? Provide an example to demonstrate pros and cons of each approach.

10 points

Section 2 – Essential Reading

Operations Management Readings: Strategic Sourcing

20 points

4 – Use either the Apple or Crocs case study. Pick one purchased input, that is something that is currently ‘bought’. Assign it to one of the quadrants in the Kraljic Matrix. Justify why it is there. Recommend either keeping it there or moving it to a different quadrant. Justify your recommendation.

5 - Review the section, ‘Competing on Core Competencies’. How do core competencies influence the ‘make-or-buy’ decision?

Section 3 – A Primer on Make-or-Buy Research

Operations Management Readings: Strategic Sourcing

6- Review the section, ‘Transaction Cost Economics’. What are transaction costs? How does ‘asset specificity’ relate to an organization’s core competencies? How do ‘bounded rationality’ and ‘opportunism’ influence the decision of whether to make or buy?

7 - Read the article, ‘Aligning Incentives in Supply Chains’. What are some of the incentive problems that firms face? How can they address or prevent incentive problems? Provide a specific example that illustrates the incentive problem and how your recommendation would address it.

10 points

20 points

supply chain

Core Concept 9

Assessing Platform Growth and Market Expansion Opportunities through Transaction Costs

performance gap assessment

process design assessment

management agility assessment

market growth assessment

improvement road map

Do you understand the platforms that you are part of?

Do you understand what drives value?

Are you able to evolve and learn when to standardize and when to specialize?

Can we trust our partners?

Do we know which processes to focus on?

Do we have a ‘global’ understanding of our supply chain?

How do we reconcile cost containment, revenue growth and customer intimacy?

Does the value discipline model help us to focus?

Do we know which processes to focus on?

Platform businesses bring together producers and consumers in high-value exchanges. Their chief assets are information and interactions, which together are also the source of the value they create and their competitive advantage.

Where do we choose to focus:

offer centralized services

lead data/process standards

follow data/process standards to gain access to markets and capabilities

Do we know which processes to focus on?

Understanding how to ‘dis-aggregate’ supply chains and focus on core capabilities and off load or ’sell’ standard capabilities is key

How do we create deeper partnerships to drive innovation-based growth opportunities

Starting with local supply chains then migrating to ecosystems expands how we see the opportunities for apply new technologies

How does technology and make data easier to standardize and access

How does technology and make processes easier to understand and leverage

How does technology and make it easier to create shared services so that business partners can focus on their core competencies

How can you use what we have learned to make an immediate impact to your (next) company), even at a junior level

How do you start local to propose big ideas that could transform your company and your personal opportunities.

Firm Strategy, Structure and Rivalry

Factor

Conditions

Demand Condition

Related and Supporting Industries

Determinants of National (eco-system) Competitive Advantage

Read

Supply Chain Partnership

Subordinated Supply Chain Partnership

Customer Partnership

Government Partnership

Training, Infrastructure, Finance

How do we impact the determinants of eco-system advantage?

Eco-systems sink or swim together

Marketplace

Consumers

Producers

Supply Chains, Markets, Eco-systems, Platforms and Pipelines Analysis

Market = a regular gathering of people for the purchase and sale of provisions, livestock, and other commodities.

Eco-systems connect local markets into larger markets

supply chains feed markets

Market lower the transaction costs of selling products and services to consumers

Platforms and pipelines are the infrastructure that make markets and eco-systems possible

(can we help to make them more efficient)

Are there opportunities to either better ‘supply’ markets or to improve the market’s ability to supply

Producers of goods and services have a choice

sell direct to the consumer or

sell through a market place

Market Analysis

Producers

Consumers

Market

Exchange

Market

Exchange

Market

Exchange

market and market maker assessment

we need

markets

Markets lower the cost of ‘trusting’ ‘transacting’

understanding

searching

assessing

contracting

policing

these are market participation/ throughput constraints

‘Makers’ lower market constraints and therefore market throughput by leading standard setting and trust development

infrastructure platforms

data standards

process standards

information transparency and credibility (i.e. partnership on brand collaboration and trust development)

we need

Market ‘makers’

Data

sharing

Infrastructure sharing

Information Transparency and Credibility

Process sharing

paths

Standards

drive

sharing

opportunities

where are the constraints

how do we increase throughput

market assessment options

own/manage the market

join the market as a product

join the market as a minimarket

To either create the standards or exploit the standards

Where are there other suppliers and customers to leverage and grow with – keep the focus on a few opportunities

Value focus

paths

Standardization and Centralization Focus

Leadership and platform (market, industry) growth

Invest in trust

Counter adverse selection

Counter moral hazard

Invest in value/divest in value

Cost responsive

Experience responsive

Market Responsive

Invest in standards

data

process

Ensure we deliver the value people need/want

Ensure we are able together to work together to maximize the value we deliver

Ensure we are able to focus on what we do best

We have a moral obligation to maximize value and ‘grow the wealth of the village’ so we all prosper

market growth

Leadership and platform (market, industry) growth

Invest in trust

Counter adverse selection

Counter moral hazard

Invest in value/divest in value

Cost responsive

Experience responsive

Market Responsive

Invest in standards

data

process

Ensure we deliver the value people need/want

Ensure we are able together to work together to maximize the value we deliver

Ensure we are able to focus on what we do best

We have a moral obligation to maximize value and ‘grow the wealth of the village’ so we all prosper

market growth

Invest in trust

Counter adverse selection

Counter moral hazard

Invest in value/divest in value

Cost responsive

Experience responsive

Market Responsive

Invest in standards

data

process

Ensure we deliver the value people need/want

Ensure we are able together to work together to maximize the value we deliver

Ensure we are able to focus on what we do best

market growth

Value Disciplines

this is a useful framework for helping to understand how to focus our supply chain – it builds on the market responsive vs cost effective model

Market Responsive

Cost Responsive

Experience Responsive

focused on market responsiveness

focused on experience responsiveness

focused on cost responsiveness

Customer Value Disciplines define the key supply chain requirements of each stage of the industry life cycle

Industry Life Cycle dictates where to invest (make) and where to buy (divest), which assets/activities

Economies of Speed

Economies of Scope

Economies of Scale

Customer Intimacy

Product leadership

Operational Excellence

Company?

Where are we?

Where are we going?

How do we need to adapt?

Market Responsive

Customer Responsive

Cost Responsive

Invest in different specialized assets/activities

Divest of others which are no longer desired by your customer

Industry Life Cycle – the key to understanding Supply Chain Investment/Divestment Assessments

Economies of Speed

Economies of Scope

Economies of Scale

Customer Intimacy

Product leadership

Operational Excellence

Company?

Invest in Centralized Services

Invest in Standardized Data

Invest in Standardized Processes

Growth through centralization and standardization

Invest in - Cost responsiveness

invest in less variation

CCR

so you can reduce non-CCR cost without increasing risk on missing commitments

training

activity redesign

Case studies

Lean Transformation and cost-effectiveness across and enterprise

‘Village’ cost effective delivery

across an ‘eco-system’

Invest in - Customer responsiveness

Case studies

CCR

invest in capacity at the CCR to enable time to interact and ‘customize’ the output, ensure protection built at non-CCR

Assess process activity configurations

assess potential for different customer segments (segment not just by features but also by price/lead time elasticities)

Life Insurance Redesign

Customer Relationship Management

customized processes focused on differentiated services

Invest in - Market responsiveness

Case studies

CCR

Invest in strategic and tactical flexibility (range, performance and mobility)

Global Supply Chain Responsiveness

CCR

invest in capacity at the CCR to enable time to innovate and ‘experiment’, ensure protection built at non-CCR

Product Design and Consistency, Responsiveness

Invest in trust

Counter adverse selection

Counter moral hazard

Invest in value/divest in value

Cost responsive

Experience responsive

Market Responsive

Invest in standards

data

process

Ensure we deliver the value people need/want

Ensure we are able together to work together to maximize the value we deliver

Ensure we are able to focus on what we do best

market growth

Investing in ‘relationships’

Adverse selection

Adverse selection refers to a situation where sellers have more information than buyers have, or vice versa, about some aspect of product quality, although typically the more knowledgeable party is the seller. Adverse selection occurs when asymmetric information is exploited.

Moral hazard

Moral hazard is the risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities, or credit capacity.

Invest in information availability

Invest in information credibility

Don’t invest in the contract invest in the information required to assure people they made the right decision, and you can be relied on to be true to your commitment

Did I make the right commitment? - adverse selection

Can the person I am working with be trusted to keep the commitment? - moral hazard

Invest in information availability and credibility

Case studies

CCR

Company

Customer

Suppliers

share information on CCR’s ( a commitment to sharing private information) and volunteer penalties for non-compliance with delivery agreements (a commitment to trust building), invest in partner capability development programs

Customer Development

Design Partner Development

Supply Chain Development

Invest in trust

Counter adverse selection

Counter moral hazard

Invest in value/divest in value

Cost responsive

Experience responsive

Market Responsive

Invest in standards

data

process

Ensure we deliver the value people need/want

Ensure we are able together to work together to maximize the value we deliver

Ensure we are able to focus on what we do best

market growth

How do we grow our opportunities to partner – the essence of supply chain analysis – the ability to integrate supply with demand

Stage I – Understand our CCR and ensure we don’t limit its growth

Stage II – Develop a shared Understanding of us and our partners (suppliers and customers) CCR and ensure we don’t limit each others growth – manage variation together

Stage III – Understand how to expand supply and demand for our products and our capabilities – for us and our partners

the biggest constraint on future growth is the cost of transacting

if all tasks, processes and data is unique to the individual transaction then it becomes impossible to scale beyond the individual ‘local’ supply chain

the key to supply chain growth is ‘standardization’

to create more ‘flow’ – more customers, more producers for more products/services to more markets

Stabilize Capacity

Extend Opportunities to Utilize Capacity - It is easy to find us and use us – can that create new opportunities to access new customers or sell new products/services

The Importance of Standards and their relationship to market growth

The European Committee for Standards

United Nations Industrial Development Organization

To focus management attention on higher-order processes, such as serving customers, responding to new business opportunities, and developing new products, managers need to limit the time they spend on what should be routine activities. They need to automate routine tasks, so those tasks are performed reliably and predictably without requiring any thought.

The foundation for execution results from carefully selecting which processes and IT systems to standardize and integrate.

Ross, Jeanne W.. Enterprise Architecture As Strategy: Creating a Foundation for Business Execution . Harvard Business Review Press. Kindle Edition.

This is equally true when it comes to companies and by extension supply chains

Transaction costs resulting from non-standard, non scalable tasks, processes and data limit access to capabilities and markets

understanding what we need

finding suppliers and customers

pricing the supply of the need fairly

enforcing the terms of the contract

the more we standardize these aspects of transactions the easier it ease for people to participate in the market, in our market

we need to determine what to standardize and what to make unique (our core competency, so we have a differentiating place in the market)

Enterprise architecture as strategy – a model for understating how to focus standardization investments

Process Architecture Assessment is based on research conducted at MIT which was published in this book

This presentation and article summarize the core concepts that are presented in the book

The book was well received by students, but i thought it was overly complex, and confusing in the presentation of its ideas

This presentation is an attempt to simplify those concepts and therefore make it easier to apply

All businesses start as a single business units/processes

Product/Service

Customer

Process

Supplier

Our Company

Single ‘Local’ Supply Chain

Market growth come through the facilitation of access

Product/Service

Customer

Product/ Process

Process

Supplier

Our Company

Single ‘Local’ Supply Chain

Customer

Product/ Process

Growth through access to more customers

Growth through access to more capabilities/products

Standardizing processes and data, makes it easier to access partners and easier to focus on what we are good at

how can we use the pipeline we built to transition to a platform

Gaining access to customers – Data standards

This is an ‘economies of scope’ advantage

Expand market share for current products, information about what to look for how to use, whether it’s a good price

Expand scope of current products into comparable markets

Leverage strong operations model to bring efficiencies to other products and/or markets

What are the challenges of gaining ‘economies of scope’

Integrating processes so that information can be shared

Information about customers, about suppliers, about process efficiencies

What is the challenges of data sharing that prevents getting the advantages of ‘economies of scope’ – these are opportunities

Data definition, formatting, normalization

Data Storage and access

Maintaining data Integrity, access…

can we facilitate data standardization, or should we adopt existing standards

Gaining access to capabilities – Process standards

This is an ‘economies of scale’ advantage

Expand scale or processes

Expand capabilities of processes

What are the challenges of gaining ‘economies of scale’

Process standardization, make things similar so we can scale them, it becomes obvious how to interact with us

Process centralization, take things away, so that processes can specialize

What is the challenge of process standardization that prevents getting the advantages of ‘economies of scale’ – these are opportunities

Overcome, local differences not easily reconciled with global needs…

Standardize, long-lived, deeply embedded cultural/process norms…

Overcome, fear of change, inability to adjust, by providing support and emphasizing the opportunity to specialize on core competencies…

can we facilitate process standardization, or should we adopt existing standards

Greater centralization, process standardization and data access improved the ability for participation in the marketplace

Supply Chain/Industry Platform Design Choices:

Should we standardize business process

Should we integrate business processes

Should we centralize business processes

Value delivery to Customers drives the decision:

Are there economies of scope to be gained that will either broaden our product suite, improve our service capability or both?

Are there economies of scale to be gained that will lower the cost of our product, reduce lead time, improve throughput or all three?

Are there economies of speed to be gained that will improve time-to-market?

Does standardization or integration free management attention away from commodity process to focus on strategic ones

Does standardization or integration increase our ability to react to change

Case studies

Investments in standardized data, process standards and centralized services (e.g., PayPal)

Investments in trust and brand development (e.g., partner development programs and customer rating systems)

investments in learning and support to help suppliers be better market participants (especially for smaller companies)

supply chain

performance gap assessment

process design assessment

management agility assessment

market growth assessment

improvement road map

Growth Path Assessment – Achieving ‘Viable Vision’

Goldratt felt that any company could grow its value contribution (profitability) to the level of current revenue in 3 years

Primary growth driver is constraint elimination and constraint management, for your self initially then with suppliers/customers, then with the eco-system/market

This is a model for presenting a plan to implement improvement. It is a four-stage process that could take place over three years

Establish context -> understand the core customer, justify the focus. be able to define the full supply chain that serves that customer, specifying the lead time and capacity metrics - identify current gaps

Year 1 - internal capability -> ensure we can deliver what the market wants, build internal flexibility, ‘move the constraint outside the company - transition to ‘dynamic capacity management’

Year 2 - vendor capability -> ensure our partners don’t limit our abilities, build external flexibility, help the vendor improve flow and manage their constraint – transition to ‘order frequency’

Year 2 - customer capability -> enable our customers to grow, build external capability, help the customer improve flow and manage their constraint – transition to ‘demand management’

Year 3 - market capability -> reduce market constraints - build market capabilities to enable access and participation – transition to ‘market facilitation and management’

present

profit

revenue

future

profit

growth through focus on P1 and P2, not P3

(Paradigm, Policy and Not Physical)

3 years

This is Goldratt’s viable vision

Year 1 – understand the CCR – understand market demand and lead time requirements - ensure planned capacity is in place – protect the capacity –> build internal flexibility (centered first on protecting the CCR through unbalance and cross–training) – understand lead time/price elasticities to ensure commitments are met during natural variation – avoid chaos

supply chain

performance gap assessment

process design assessment

management agility assessment

market growth assessment

improvement road map

assessment and recommendation

develop tactical and strategic agility to profitably grow your business

Final Paper

Develop a Supply Chain Assessment and Present Improvement Recommendations

Objectives:

Bring the analysis together to make a recommendation to improve your company’s supply chain and grow its business (market/eco-system)

Approach (essentially unify the HW assignments into a coherent report):

Establish context and justify focus - Who is the company, within that company which customer/market segment and why? Within that customer/market segment which product/supply chain and why? Who are the other members of the supply chain that we need to partner with to deliver the product or service? What is the ‘critical path’ supply chain? What are the subordinated supply chains? What is our current level of collaboration? Profitability?

Assess current state performance – Define the supply chain (the core high-level activities) that is the focus of the analysis. Describe the customer, product/service, and capacity/lead time metrics that are used to assess performance. Identify the current organization and customer expectation and assess the performance gap or threat to a performance advantage that exists.

Assess supply chain process design – Describe the core activities of the supply chain and identify the root causes of current performance and/or challenges to sustainable advantage. Identify opportunities for process improvements - with focus on improved lead time, greater output and lower operating expense and inventory levels (waiting times) or or all three using the CCR as the central point of analysis

Assess supply chain management ability - Describe the current supply chain management strategy and identify opportunities for improvements in both customer and supplier management. Assess opportunities for management improvements with focus on improved delivery consistency and process agility to improve lead times and capacity utilization

Assess supply chain growth strategy - Describe the market that your company sells in. Identify opportunities to standardize processes, data and trust that could reduce market constraints and present opportunities for mutual gain. Identify the pros and cons of being a leader or follower and recommend best option for your company

Summarize opportunities (the agreements) for improvement and present a path for the implementation (agreed) recommendation – summarize the opportunities for improvement by focusing on improvements to lead time, capacity, and delivery consistency. Present a plan/road map for implementing your recommendations

HW 1

HW 2

HW 3

HW 4

Where are we going (always remind us)

Where were we

(always remind us)

Develop a shared understanding, tell the story

All HW’s

(always remind us)

This is the foundation of all supply chain presentations where are we, where have we been, we where are we going and what do I need your agreement on?

At each step ask for agreement on conclusions and recommendations for improvements

Final paper

Presentation Requirements

Slide 1

Slide 2

Slide 3

Who is the company, within that company which customer/market segment and why? Within that customer/market segment which product/supply chain and why? Who are the other members of the supply chain that we need to partner with to deliver the product or service? What is our current level of collaboration? Profitability?

Define the supply chain (the core high-level activities) that is the focus of the analysis. Describe the customer, product/service, and capacity/lead time metrics that are used to assess performance. Identify the current organization and customer expectation and assess the performance gap or threat to a performance advantage that exists.

Slide 4

Slide 5

Summarize context and justify focus

Summarize current state performance assessment

Summarize supply chain process design assessment

Summarize supply chain management ability assessment

Summarize supply chain growth strategy assessment

Describe the core activities of the supply chain and identify the root causes of current performance and/or challenges to sustainable advantage. Identify opportunities for process improvements - with focus on improved lead time, greater output and lower operating expense and inventory levels (waiting times) or or all three using the CCR as the central point of analysis

Describe the current supply chain management strategy and identify opportunities for improvements in both customer and supplier management. Assess opportunities for management improvements with focus on improved delivery consistency and process agility to improve lead times and capacity utilization

Describe the market that your company is part of. Identify opportunities to standardize processes, data and increase trust that could reduce market constraints and present opportunities for mutual gain. Identify the pros and cons of being a leader or follower and recommend best option for your company

Assume you are a McKinsey Consulting team presenting to your client (and not the class and professor)

typical slide format

Header - what is on this slide and why - what is its role in the story

Trailer - what is the key message on this slide and why - what do we need to remember

Exhibit - what is the analysis that you did to support your primary (single conclusion) - where should we be looking

Options for a trailer:

recommendations

key benefits and risks

work you need help on

support you require

etc…

Always be able to speak to the value of your recommendation vs. the effort to implement your recommendations

This structure is a requirement

(S.W.O.T. & D.I.C.E.)

Slide 6

Summarize opportunities (the agreements) for improvement and present a path for the implementation (agreed) recommendation

Summarize the opportunities for improvement by focusing on improvements to lead time, capacity, and delivery consistency. Present a plan/road map for implementing your recommendations

20% 10% 10% 30% 20%

Session Focus Session # Session Date Quizzes Forums Case Writeup Group Assignments Final Paper

1 1/28 - - - - -

2 2/4 - - - - -

3 2/25 - - - - - 4 3/4 Slide 274-282 - - - 3/4 - HW 1 Performance Gap

5 3/11 Slide 312 - 3/11 - 3/11 - Forum 1 Performance Focus 6 3/18 - - - - -

7 3/25 Slides 283-291 - - - 3/25 - HW 2 Design Challenges 8 4/1 Slides 304-305 - - 4/1 - - Case 1 Applying TOC

9 4/8 Slides 280-298 4/8 - - - Quiz 1 Design and Partnership 10 4/15 Slide 312 - 4/15 - - - Forum 2 Design and Management

11 4/22 Slides 304-305 - - 4/22 - - Case 2 Supply Chain Partnerships

12 4/29 Slides 257-264 - - - 4/29 - HW 3 Mamnagement Capabilities

Supply Chain Leadership

Supply Chain Technology

Supply Chain Growth

S u p p ly

C h a in

S u cc

e ss

u rn

e y

Final Recommendation (SWOT and DICE)

P la

tf o rm

L ea

d er

sh ip

, Ec

o -s

ys te

G ro

w th

, an

d S

tr at

eg ic

A g ili

Supply Chain Viable Vision

C o re

P rin

ci p le

Supply Chain Tactical Agility

Supply Chain Partnership AlignmentD

el iv

er y

C o ns

is te

nc y,

T ac

ti ca

l A

g ili

an d P

ar tn

er sh

ip A

lig nm

en t

Supply Chain Strategy

Supply Chain Design

Supply Chain Delivery

Consistency

Supply Chain Foundations

P ro

ce ss

D es

ig n

5/13

5/6 5/6 -

14 Forum 4

Grade Weighting

5/6

Assignments

Forum 3

Participation in Class - 10% (un-excused absence from class will reduce your final grade)

- 5/6

- -

Quiz 2 Supply Chain Mgmt

Final paper and Presentation

5/13-Slides 271-275

Slide 277

Slides 265-270

Final paper and Presentation-- -

HW 4

- 5/13 - -

Refere slides 360-368

5/6

5/13

Market Leadership

Strategic Flexibility

HW Guide ref for Assigments

HW Guide ref for Class Prep

Slides 180- 236

Slides 114 - 185

Slides 89 - 128

Slides 2 - 75

Slides 280-298

Slide 277

Focus of Assignment

Tactical Flexibility

Reception Diagnosis Treatment Recovery Discharge Time

Capacity units/day

Jennifer (hospital manager)

HarrySally and FredJoe and Lisa Jane and Peter Mary and Ted

50% Productive 50% Productive 100% Productive 50% Productive 50% Productive

Receptionist $45k/yr.

Nurse $90k/yr.

Doctor $300k/yr.

Nurse $90k/yr.

Receptionist $45k/yr.

planned commitment something we expect to meet 100% of the time

Commitment protection

5 patients/day

ReceptionDiagnosisTreatmentRecoveryDischarge

Time

Capacity

units/day

Jennifer (hospital manager)

HarrySally and FredJoe and Lisa Jane and PeterMary and Ted

50% Productive

100% Productive50% Productive

50% Productive

Receptionist

$45k/yr.

Nurse

$90k/yr.

Doctor

$300k/yr.

Nurse

$90k/yr.

Receptionist

$45k/yr.

planned

commitment

something we expect to

meet 100% of the time

Commitment

protection

5 patients/day

HW 1

HW 2 and 3

HW 4

Core Processes

Customer

Supplier

Customer

Supply Chain

Market

HW 1

HW 2 and 3

HW 4

Work Process/ Activity Name

CCR

Work Process/

ActivityName

Work Process/

ActivityName

Work Process/

ActivityName

CCR

Product Leadership

Operational Excellence Customer Intimacy/Experience

“Best Product”

“Best Total Solution”“Best Total Cost” “Customer Responsiveness”“Operational Competence”

“Product Differentiation” Industry Leadership

Industry Laggard

Industry Competitive

Definitions Assessment Criteria

Self- Assessment

Trade-offs???

Product Leadership

Operational Excellence Customer Intimacy/Experience

“Best Product”

“Best Total Solution”

“Best Total Cost”

“Customer Responsiveness”

“Operational Competence”

“Product Differentiation”

Industry Leadership

Industry Laggard

Industry Competitive

Definitions

Assessment Criteria

Self-

Assessment

Trade-offs???

product leadership

customer intimacy

operational excellence

your company

-speed to market with new features -volume of new features

-speed of response -amount of customization

-volume of output -speed of delivery (factors in availability)

leader

laggard parity

leader

laggard parity

leader

laggard parity

product leadership

customer intimacy

operational excellence

your company

-speed to market with new features -volume of new features

-speed of response -amount of customization

-volume of output -speed of delivery (factors in availability)

leader

laggard parity

leader

laggard parity

leader

laggard parity

product leadership

customer intimacy

operational excellence

your company

-speed to market with new features -volume of new features

-speed of response -amount of customization

-volume of output -speed of delivery (factors in availability)

leader

laggard parity

leader

laggard parity

leader

laggard parity