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Summary Supply Chain Management
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Short concise summary of the most important aspects of Operations Management and Supply Chain Management
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Summary Supply Chain ManagementChapter 1
Difference Industry 3.0 and 4.0
In Industry 3.0, we automate processes using logic processors and information technology. These
processes often operate largely without human interference, but there is still a human aspect behind
it. Where Industry 4.0 comes in is with the availability and use of vast quantities of data on the
production floor.
For an example of the old way (Industry 3.0), take a CNC machine: while largely automated, it still
needs input from a human controller. The process is automated based on human input, not by data.
Under Industry 4.0, that same CNC machine would not only be able to follow set programming
parameters but also use data to streamline production processes.
Three strategic functions
Business-level strategy
The Business-level strategy is what most people are familiar with and is about the question
“How do we compete?”, “How do we gain (a sustainable) competitive advantage over
rivals?”. In order to answer these questions it is important to first have a good
understanding of a business and its external environment. At this level, we can use internal
analysis frameworks like the Value Chain Analysis and the VRIO Model and external analysis
frameworks like Porter’s Five Forces and PESTEL Analysis. When good strategic analysis has
been done, top management can move on to strategy formulation by using frameworks as
the Value Disciplines, Blue Ocean Strategy and Porter’s Generic Strategies. In the end, the
business-level strategy is aimed at gaining a competitive advantage by offering true value for
customers while being a unique and hard-to-imitate player within the competitive
landscape.
Functional-level strategy
Functional-level strategy is concerned with the question “How do we support the business-
level strategy within functional departments, such as Marketing, HR, Production and R&D?”.
These strategies are often aimed at improving the effectiveness of a company’s operations
,within departments. Within these department, workers often refer to their ‘Marketing
Strategy’, ‘Human Resource Strategy’ or ‘R&D Strategy’. The goal is to align these strategies
as much as possible with the greater business strategy. If the business strategy is for
example aimed at offering products to students and young adults, the marketing
department should target these people as accurately as possible through their marketing
campaigns by choosing the right (social) media channels. Technically, these decisions are
very operational in nature and are therefore NOT part of strategy. As a consequence, it is
better to call them tactics instead of strategies.
Corporate-level strategy
At the corporate level strategy however, management must not only consider how to gain a
competitive advantage in each of the line of businesses the firm is operating in, but also
which businesses they should be in in the first place. It is about selecting an optimal set of
businesses and determining how they should be integrated into a corporate whole: a
portfolio. Typically, major investment and divestment decisions are made at this level by top
management. Mergers and Acquisitions (M&A) is also an important part of corporate
strategy. This level of strategy is only necessary when the company operates in two or more
business areas through different business units with different business-level strategies that
need to be aligned to form an internally consistent corporate-level strategy. That is why
corporate strategy is often not seen in small-medium enterprises (SME’s), but in
multinational enterprises (MNE’s) or conglomerates.
Definitions OM and SCM
In brief:
• Supply Chain management and Operations management are similar and confusing terms in
any organization
• While SCM pertains to activities outside the factory, OM refers to all that goes inside the
factory
• SCM is a part of OM
Keys to effective SCM
• Find the right people. ...
• Establish alliances with key suppliers. ...
• Match supply chain and business line. ...
• Improve the flow of information. ...
• Make technology work for you. ...
• Get outside help.
, SCM Objectives
SCM seeks to improve the total performance of an enterprise by enhancing its responsiveness to the
market place and by reducing the overall cost of supply. Fundamental to its success are effective
performance measures, relevant to each key link in the chain and also relevant to the overall
objective. Without agreed measures, it is difficult to focus effort on those actions which are likely to
bring the greatest improvements and the most cost benefits.
A possible list of the potential goals of SCM might be as follows:
Reduce waste/non value-added activities:
o reduce amount of handling
o reduce excess inventory, both materials and finished goods
Maximise levels of customer service/responsiveness
Improve supply-chain communication:
o increase speed-timeliness of information flows
o increase accuracy of information flows
o increase level of information sharing
Reduce cycle time:
o new product development
o order lead-time
Improve co-ordination of effort.
Difference Upstream and Downstream
Upstream refers to the material inputs needed for production, while downstream is the opposite
end, where products get produced and distributed.
The Bullwhip effect
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