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Management Program
Supply Chain and Operations Management
Dr Steyn Heckroodt
Date: 2014
Inspiring thought leadership across Africa
© Dr . Steyn Heckroodt
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• The material
• Context
• Define Supply Chain Management
• Discussion
• Define Operations Management
• Discussion
• Supply chain management in the services industry
• Apply the principles of risk management to supply chain and
operations management
• Discuss the assignment
INTRODUCTION/AGENDA
© Dr . Steyn Heckroodt
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3 © Dr . Steyn Heckroodt
ORGANISATIONAL CONTEXT
Source: Heckroodt, S. Strategic Thinking – GAME OVER. Epubsa.co.za
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4 © Dr . Steyn Heckroodt
ORGANISATIONAL CONTEXT
Source: Amended from Heckroodt, S. Strategic Thinking – GAME OVER. Epubsa.co.za
Supply chain and operations management
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5
MACRO ENVIRONMENTAL CONTEXT
Dominant attribute
QualityPrice
Variety and Range
Convenience
© Dr . Steyn Heckroodt
Demand
Source: Amended from Heckroodt, S. Strategic Thinking – GAME OVER. Epubsa.co.za
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• The smarter supply chain of the future (Karen Butner, 2010)
• Discussion:
• Each group are to discuss one of the top five supply chain
challenges. Prepare a 10 minute presentation per challenge,
once the entire article has been read. Allocation of
challenge per group are only made post reading.
• Time: 30 minutes reading, 30 minutes preparation.
• Good luck
ARTICLE 1
© Dr . Steyn Heckroodt
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SCM DEFINITION
SCM concerns the efficient integration of all stakeholders in a
distribution network in order to realise
expected service levels, being:
The right quantities, location, time, price
AND
ORGANISATIONAL SPECIFIC ONES
© Dr . Steyn HeckroodtSource: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
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SC STRATEGIES
Shor
t le
ad ti
mes
Long
le
ad ti
mes
Supp
ly c
hara
cter
istics
Demand characteristics
Lean plan and optimize
Hybrid&
Postponement
Continuous replenishment
Agile quick response
Predictable Unpredictable
© Dr . Steyn HeckroodtSource: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
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9
• How do we measure supply chain performance
• Composite service index
• A supply chain composite service index has a number of
factors which are averaged together to form a performance
representative of an overall market or sector.
• Used in measuring of all types of sectors – product and and/or
service related
• Explanation follows
QUESTION
© Dr . Steyn Heckroodt
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MEASURING PERFORMANCE THROUGH A CSI
Composite (Attribute)
Weight ActualMarket
TotalsAdd totals
Quantity 15% x 80% 12% +
Location 20% x 90% 18% +
Time 10% x 90% 9% +
Price 15% x 70% 10.5% +
*Variety and range 30% x 60% 18% +
Convenience 10% x 90% 9% =
*Organisational specific onesCSI 76.5%
© Dr . Steyn Heckroodt
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11 © Dr . Steyn Heckroodt
Composite (Attribute)
Weight ActualMarket
TotalsAdd totals
Quantity x +
Location x +
Time x +
Price x +
x +
x =
*Organisational specific onesCSI
EXERCISE – BUT FIRST...
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• What are the organisational specific ones?
• How do I determine them?
• How do I measure them?
• How do I allocate a weight?
• To answer these questions, we need to understand the
principle of the dominant attribute
QUESTION
© Dr . Steyn Heckroodt
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• Also known as value proposition, promise or USP
• One of many – prioritized to market demand
• Defined from the customer’s viewpoint
• Motivation for initial engagement and continuous support
• Point of differentiation
• Competitive edge
• Behaviour measurement – output
• Outcome of supply chain and operational processes and activities
DEFINITION OF THE DOMINANT ATTRIBUTE
© Dr . Steyn Heckroodt
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MACRO ENVIRONMENTAL CONTEXT
Dominant attribute
QualityPrice
Variety and Range
Convenience
© Dr . Steyn Heckroodt
Demand
Source: Amended from Heckroodt, S. Strategic Thinking – GAME OVER. Epubsa.co.za
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• List all possible attributes in your industry
• Identify your dominant attribute (DA)
• Design questions relating to the DA
• Question both levels of relative performance and relative importance
• Repeat the exercise for all possible attributes
• Group results on CM
• Determine DA performance (Are we achieving our objectives?)
HOW TO MEASURE ACTUAL PERFORMANCE AS PART OF THE CSI
© Dr . Steyn Heckroodt
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Measuring attribute dominance through a CM
Perf
orm
ance
rela
tive
to c
ompe
titor
s
Relative importance to customers
HIGH
LOWLOW MEDIUM HIGH
MEDIUM
© Dr . Steyn Heckroodt
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THAT’S HOW WE MEASURE ACTUAL PERFORMANCE AND DETERMINE WEIGHTINGS
Composite (Attribute)
Weight ActualMarket
TotalsAdd totals
Quantity 15% x 80% 12% +
Location 20% x 90% 18% +
Time 10% x 90% 9% +
Price 15% x 70% 10.5% +
*Variety and range 30% x 60% 18% +
Convenience 10% x 90% 9% =
*Organisational specific onesCSI 76.5%
© Dr . Steyn Heckroodt
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18 © Dr . Steyn Heckroodt
Composite (Attribute)
Weight ActualMarket
TotalsAdd totals
Quantity x +
Location x +
Time x +
Price x +
x +
x =
*Organisational specific onesCSI
NOW – DO THE EXERCISE
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• Conceptualizing and managing service supply chains (Mihalis Giannakis,
2011) – Pg. 1815 from: “Several taxonomies... To bottom of pg. 1820
• Discussion:
• Each group are to discuss the usefulness and application of the conceptual
framework for services SCM, as depicted in Figure 9 (pg. 1820) of the
article, by using a services organisation of one of the group members.
Prepare a 10 minute presentation.
• Time: 30 minutes reading and then 30 minutes preparation. HOWEVER, let’s
first have a larger group discussion post the reading time to ensure
everybody understands what was read.
• Good luck
ARTICLE 2
© Dr . Steyn Heckroodt
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• Operations management is an area of management
concerned with overseeing, designing, and controlling the
process of production and redesigning business operations in
the production of goods or services
• It concerns core business processes, support business
processes and organisational support processes
• It concerns the flow of products/services, funds and
information (visibility)
OPERATIONS MANAGEMENT
© Dr . Steyn HeckroodtSource: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
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OPERATIONAL FLOWS
Raw material
Sub-assembly
Full
Distributors
Retailers
Customers
Product and service flow
Information flow
Funds flow
© Dr . Steyn HeckroodtSource: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
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22
OPERATIONAL PROCESSES
CEO
Outward directed Concerned with product and/or service deliveryMain purpose of business
Source: Amended from Dostal, E. Biomatrix – A Systems Approach to Organisational and Societal Change. Sun Press.
Inward directedLine function and specializationConcerned with resource allocation
Self directedConcerned with maintaining the organisation as a entity
© Dr . Steyn Heckroodt
Core
bus
ines
spr
oces
ses
Organisa
tional
support
processe
s
Business support processes
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• Critical path = the longest route in the shortest time
• Affects products/services, funds and information flows
• Changes
• Mainly used when having to manage risk and prioritise risk
mitigating projects
• Redesign to increase lead time efficiency, visibility and overall
cost reduction
CRITICAL PATH AND OPERATIONAL PROCESSES
© Dr . Steyn Heckroodt
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A
Place order
0 5 5
D
6 5 11
B
6 180 186
C
6 10 16
F
187 9 196
E
187 13 200
G
197 24 221
H
Collect money
222
ES ID EF
SL Description
LS Duration LF
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A
Place order
0 5 5
D
6 5 11
B
6 150
C
6 10 16
F
9
E
13
G
24
H
Collect money
ES ID EF
SL Description
LS Duration LF
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A
Place order
0 5 5
D
6 5 11
B
6 180 186
C
6 10 16
F
5
E
13
G
5
H
Collect money
ES ID EF
SL Description
LS Duration LF
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A
Place order
0 5 5
D
6 5 11
B
6 180 186
C
6 1
F
9
E
5
G
24
H
Collect money
ES ID EF
SL Description
LS Duration LF
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28
• Identify a organisation in your group, one per group, which you
want to use as an example
• Identify which operational process you would want to improve
and brainstorm the ideas pertaining to the possible
improvement
• The process improvement needs to consist of a reduction of
lead time
• Map the current process – as it is currently
• Time: 30 min
• Please wait for further instructions
EXERCISE
© Dr . Steyn Heckroodt
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29
• Map the ideal process – as you would want it to be like
• Once completed – apply the Failure Mode and Effect Analysis
(FMEA) on your proposed improvement area
• Ask and answer the following three questions:
– What could go wrong?
– What could cause it to go wrong?
– What would the impact be if things go wrong?
• Time: 30 min
• Please wait for further instructions
EXERCISE CONTINUE...
© Dr . Steyn Heckroodt
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Risk analysis scoring system
Severity 1. No direct effect on operating service level
2. Minor deterioration
3. Definite reduction
4. Serious deterioration
5. Approaches zero
Likelihood of
occurrence
1. Probability of once in many years
2. In many months
3. In some weeks
4. Weekly
5. Daily
Likelihood of
detection
1. Very high
2. Considerable prior warning
3. Some warning
4. Little warning
5. Effectively zero
• Rate the possibility of things going wrong against the following criteria• Create a combined priority and risk score by multiplying the three scores
A risk mitigating project is now created to reduce the highest risk factor pertaining to things possibly going wrong This completes the exercise
NOW CALCULATE THE RISK AND DETERMINE PRIORITIES
© Dr . Steyn Heckroodt
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31
RISK AND THE RELATION TO FINANCES
© Dr . Steyn Heckroodt
Turnover
Costs
Cash
Accounts receivable/payable
Inventory
Fixed assets
Profit
Capital employment
ROI
Source: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
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32
RISK AND THE RELATION TO FINANCES
© Dr . Steyn Heckroodt
10
8
2
2
2
2
2
8
25%
Source: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
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33
RISK AND THE RELATION TO FINANCES
© Dr . Steyn Heckroodt
10
7
2
2
2
2
3
8
37.5%
Source: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
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34
RISK AND THE RELATION TO FINANCES
© Dr . Steyn Heckroodt
10
7
2
2
2
2
3
8
37.5%
Source: Amended from Christopher, M. Logistics and Supply Chain Management. Pearson Education
12
16
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• Identify an operational process in your workplace that you
want to improve. Follow the exact same steps as that in slides
28, 29 and 30. Calculate the risk factors of things that can go
wrong and determine the priorities in terms of tackling them.
Conclude by highlighting possible risk mitigating projects that
you have in mind.
• Requirements are as per the assignment handout document
ASSIGNMENT
© Dr . Steyn Heckroodt