Process Thinking in Supply Chain Management

1. Supply Chain Management: From Vision to Implementation Chapter 3: Process Thinking: Supply Chain Management’s Foundation

2. Process Management It’s a shift from competing on what we make to how we make it. • David Robinson, President CSC Index on the need for process thinking • Functional thinking limits cooperation and impedes creative thinking. • Process management promotes collaboration, facilitating customer satisfaction at low cost.

3. Process Management Process Management requires companies to: • Recognize the limiting nature of functional structures • Instill process thinking throughout the company • Process integration remains rare • Michael Hammer estimates less than 10% of companies have made a serious and successful effort • Requires major changes to measurement, job design, management roles, and organizational structure

4. Functional Organization Goals

5. Process Thinking • Process thinking aligns decisions with corporate strategy and coordinates actions across functions. • Each process consists of a set of flows and value-added activities. • Information Flow • Physical Flow • Financial Flow

6. Value-Added Process Materials Acquisition New Product Development

7. Systems Thinking Systems thinkingis the holistic process of considering both the immediate local outcomes and the longer-term system-wide ramifications of decisions. It requires: • A Holistic View • Information Availability and Accuracy • Cross-Functional and Interorganizational Teamwork • Measurement • Systems Analysis

8. Systems Analysis

9. A Process View of a Company Decisions made throughout an organization should focus on using available resources to create customer value. • Customer focus defines the company’s value proposition and drives competency. • Competency guides functional decision making. • Competency development dictates resource allocation. • Information and performance systems align efforts on the system’s goal.

10. Company as Value-Added System

11. Strategic Linkage • The role of strategy is to direct the use of resources to develop the correct competencies to drive the firm’s value proposition. • Value Proposition – the value that the firm promises to deliver to the customer. • Competencies – the skills and processes that collectively deliver the promised value. • Core Competency – what the company is so good at that it drives competitive advantage.

12. Generic Strategies • Cost Leadership – ability to deliver at a cost below competitors • Differentiation – ability to deliver some unique value which reduces price sensitivity • Quality • Delivery • Flexibility • Innovation • Survival often requires low cost and high quality.

13. Cost Leadership Examples

14. Differentiation Examples

15. Differentiation Examples

16. Aligning Strategy with Systems

17. Aligning Strategy with Systems

18. Aligning Strategy with Systems

19. Aligning Strategy with Systems

20. Resource Management Every company must manage five resources: • People – determine the productivity and quality of the system; provide the creativity and passion that determines success; requires education and training • Technology – includes hardware and software; used effectively improves productivity • Materials – all goods and services used in the value-added process for the creation of output • Infrastructure – physical bricks and mortar assets used in the value creating process. • Capital – necessary to finance continuing operations • Coordinated decision making regarding resource allocation across functions is the key to competitive advantage.

21. Function/Resource Matrix

22. Information Sharing Communicates strategic objectives and organizational roles. Typical types and uses of data are: • Customer-related - defines goals, value propositions, and competencies • Firm capabilities and processes - strengths and weaknesses so that an effective strategy can be developed and implemented • Competitors' strategies and capabilities - anticipate competitive threats as well as competitors’ reactions to the company’s own strategic moves • External operating environment - identify potential threats and opportunities such as new markets or the emergence of a new technology • SC operating information - used to make good day-to-day decisions: how many and type of suppliers needed to support the production schedule • "Success stories" - creates momentum for process integration

23. Performance Measurement Performance measurement systems must: • be aligned with strategic objectives; and • clearly communicate expectations and responsibilities. Well designed performance systems: • create understanding of strategic and tactical objectives • promote behaviors consistent with achieving objectives • document actual results, monitoring progress toward goals • benchmark capabilities vis-à-vis competitors’ abilities and customers’ expectations • motivate continuous improvement

24. Information-Measurement Integration