Supply Chain Management and OM in business model cc tan (2015)

Use of Business Model
Concept in Designing
SCM, Logistics, and
Operations Management
RESEARCH BY DR. C.C. TAN
SCHOOL OF MANAGEMENT
MAE FAH LUANG UNIVERSITY

2
Illustrate and explain supply chain management in business model structure and concept in the
dimensions of characteristics for sustainable competitive advantage, extended supply chain
architecture, operations strategy, inventory, operations structure, benefits structure that match
with operations strategy, outsourcing strategy, options to reduce risks, basis of competition, and
performance objectives. Demonstrate an example of alignment in supply chain management.
Extended SCM
Vision
Business
Strategy External analysisInternal analysis
CVP/VCProduction/Operations
Resources
Partnership
CRM
Market Distribution
Target Segment
Adapt
Alignment: coordination and collaboration, aligned with business strategy, customers’
needs, and power position (CVP/VC; brand-led, channel-led, supply-led)
Asset NetworksAgile: Flexible and Responsive
Cost Revenue Streams
Benefits to the organization
COPYRIGHTED. PLEASE QUOTE C.C. TAN (2015) AND THE TITLE INFORMATION
ACCORDINGLY.

3
Vision
Business
Resources
Partnership
CRM
Market Distribution
Target Segment
Adapt
Asset NetworksLean and Agile: Flexible and Responsive
Change:
 Change
 Frequency of
change
Profitable GrowthCost efficiency
Organizational learning
Organizational learning
characteristics to SCM:
 Control and improvement
(stability and systems behavior
comprehension orientation)
 Collaboration (teams orientation)
 Focus, target (goals orientation)
 Systems (systems orientation)
 Knowledge repertoire
(SCM Performance)COPYRIGHTED. PLEASE QUOTE C.C. TAN (2015) AND THE TITLE INFORMATION
ACCORDINGLY.

4
Resources
Partnership
CRM
Market Distribution
Logistics systems
Target Segment
SCM Vision and Mission, and Strategies
SCM Performance Objectives:
 Delivery: on-time delivery, fill
rate, lead time, I = TXR
(Little’s Law)
 Quality
 Flexibility
 Time (Speed):Time to market,
time to volume, on time, time
to cash
 Cost
Extended
supply chain
partners and
customers
Fill Rate
On-time
Lead time
Flexibility
Cash-to-cash cycle time = days
in inventory + days in accounts
receivable – days in accounts
payable.
ACCORDINGLY.

5
SCM
Configuration:
Continuous Re-
adaptation, Re-
alignment, Re-
agility
Decisions made by
Competitors:
 A change in your basis of
competition:
 A new competitor has
emerged with a stronger
value proposition
Decisions made by you:
 Decide to make a change in your scope of your
business:
 Offer new products or services
 Target new markets or expand geographically
 Thus, you need to expand your manufacturing capacity
 Add new distribution capabilities
 Develop new channels
 Find new suppliers
 Rethink your supply chain strategy
 You need to change the type of service you offer to
increase market share
 You want to compete in a new market that requires
faster delivery, greater flexibility, or higher quality.
Internal Rivalry
Any major change to your company’s basis of
competition should drive re-examination of your
supply chain strategy and business model
configurations
ACCORDINGLY.

6
Vision
Business
Resources
Partnership
CRM
Market Distribution
Target Segment
Adapt
Asset Networks
Agile: Lean, Flexible and Responsive
Change:
 Change
 Frequency of
change
Bargaining power
of suppliers Bargaining power
of Customers
Internal Rivalry
New entries threat
Substitutes threat
Operations
strategy
Marketing and
channels-mix
strategies
Mergers and acquisitions
DMAIC
Stay vigilant, keep continuous improvement
Asset networks (supply chain capabilities): System of activities make it difficult
to duplicate and thus improve competitive advantage.
ACCORDINGLY.

7
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
Distribution Target Segment
An
example of
alignment:
Freshness
Quality
Premium products
Express mail
Arrive faster and
fresher (quality)
Press to order
Organic product
supply
Ethical product
supply
Traceability
Consistency, reliability
Corporate social responsibility
ACCORDINGLY.

8
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
Inventory:
Raw
materials
WIP FG
Producer’s lead time
in refiling inventory
Customer’s variance
in demand
Logistics lead time in
shipping the products
to the customers
Supplier’s lead
time
Safety stock
needed to
handle variance
in lead time and
demand 𝜎 𝑑∙𝐿𝑇
Variation in
demand
WIP inventory is the most
controllable component of
inventory and is a function of the
company’s throughput time to
convert raw materials into
finished goods: I = TXR
ACCORDINGLY.

9
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
Benefits
matching
operations
strategy:
Low
manufacturing
costs
Meeting
customer
demands
quickly
Customization Improved service
levels
Reduced
inventory
MTS:
Standardized
products,
High volume
CTO: Variety
of products
MTO:
Customized
products,
infrequent
demand
Low
inventory
Wide range of
product options
Simplified
planning
(transforming
resources)
ETO: Complex
products to
meet unique
customer
needs
Responsive to
specific
customer
requirements
ACCORDINGLY.

10
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
Channel
Mix
Operations
Structure:
Accounts volume
Profitability
Lower account turnover
 Retention
Build loyalty
Repeat sales
Three network
models:
 Global
 Regional
 Country
Customer service
strategy – Value-
added service
Tailor offerings to
customers’ specific
needs
CRM
Product
Life Cycle
RBV
Better
understand
customers
 Better
able to
segment
customers.
IT Systems – Order
capture, Order
fulfilment, and
invoicing must be
fast, consistent,
and trouble-free.
Real-time
monitoring
ABC / cost to serve
ACCORDINGLY.

11
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
Operations
Structure:
Short fulfilment
time
Volatile market
demand
Long fulfilment
time
More complex
engineering market
Process standardization
Efficiency-based KPIs
Low-Price to attract Cost-sensitive buyers
Maintain share in a
community market.
New-revenue
generating services
Strong focus on
customers
Time to market
Time to volume
Customer-segment-
specific capabilities
ACCORDINGLY.

12
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
Benefits
matching
operations
strategy:
Manufacturing
segment:
Key customer
requirements:
Reliability
Timeliness
Delivery directly
to assembly line
of the
customers
Reliability
Timeliness
Different market segments,
different supply chain design
Aligning with customer needs also means
identifying the particular requirements of
different market segments.
Optimize Front end
of the supply chain
Optimize Back
end supply chain
Order management and
distribution
ACCORDINGLY.

13
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
Category
Killers
Price
premium
Operations
Structure:
Innovation
NPD
 Time for NPD
Design chain
partnership
Co-participation
Unparalleled
Marketing
New Services
Gain First-move
advantage:
 Speed
 Volume
(Meet the
demand
created by
NPD) time
Innovation + Cost Performance is possible:
 Shorter time to market
 Higher revenue
 Fewer markdowns
 Logistics cost reduction
ACCORDINGLY.

14
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
Ramp up
or down
production
or service
quickly
Manage
inventory
levels
Outsourcing
Strategy:
Build new products Reposition
themselves
in the
marketplace
Market
expansion
Ensure the supply chain configuration supports
competitive lead times (time)
Outsourced partners already
master product or process
technological expertise
Scale: Provide services more
cheaply
Scope: outsourcing allows
geographic expansion
Outsourcedpartnership
strength:
ACCORDINGLY.

15
CVP/VC
Production
Operations
Resources
Partnership
Target Segment
To outsource
or not:
Evaluation
dimensions
Your source of
differentiation
CRM
Market
Distribution
Your operating
scale
Your power
position:
Supply-led
Bargaining
power of
suppliers
Brand-led
Channel-led
Logistics efficiency:
packaging
innovation and
flexibility
Shelf’s space
Clout with retailers
Bargaining power
of customers
Uniqueness of your operations
Supports competitive
customer lead time
CVP/VC
Scale matters
Scale is relative:
 Segment
 Focus
 Consolidate
 Partner to
leverage
ACCORDINGLY.

16
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
 Manufacturing flexibility
Options to
reduce risks:
Low-cost
manufacturing
base closer to
target segment
Min. Distance
In-market
postponement:
CTO &
Packaging
ACCORDINGLY.

17
CVP/VC
Production
Operations
Resources
Partnership
CRM
Market
Basis of
Competition:
Innovation: Brand and unique technology
Cost: Cost-efficient operations leads to
lowest prices in the product category
Service: Superb service
Quality: safest, most reliable product
Time to market
Time to volume
Designed from
customer in
Tailored to
meet
customer-
specific needs
Supply chain excellence
and quality control
Traceability: Example:
Organic products, ethical
products principles
(deontology)
Bases of Competition
Intensity of Competition
Value-Curve (CVP)
ACCORDINGLY.

Supply Chain Management and OM in business model cc tan (2015)

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