Session 1 New Paradigm for Managing Operatio · Mindset: On the Management ofOn the Management of Operations Equipment ... Reengineering itself being ReengineeredReengineering itself

Prof Hum SinHoonProf Hum SinHoon

New ParadigmNew Paradigmfor Managing Operationsfor Managing Operations

Hum Sin Hoon

NUS Business School


WHAT IS OPERATIONS?WHAT IS OPERATIONS?


WHAT IS OPERATIONSWHAT IS OPERATIONSMANAGEMENT?MANAGEMENT?


Operations Management:Operations Management:The New ParadigmThe New Paradigm

MindsetMindset :: On the Management ofOn the Management of

Operations Equipment (Hardware)Operations Equipment (Hardware)

What do we have? What do we need?What do we have? What do we need?

What is available?What is available?

Operations KnowOperations Know--how (Software)how (Software)

How do we provide the service exactly?How do we provide the service exactly?

Do we know? Do we document?Do we know? Do we document?

Do we follow standards?Do we follow standards?

““One new from each person a day!One new from each person a day!””


Operations Management:Operations Management:The KnowledgeThe Knowledge--Based ProcessBased Process

Creation of KnowledgeCreation of Knowledge

What does the customer want; Market ResearchWhat does the customer want; Market Research

What service to design and deliverWhat service to design and deliver

Communication of KnowledgeCommunication of Knowledge

Documentation of knowledge; ProceduresDocumentation of knowledge; Procedures

Imparting of knowledge; TrainingImparting of knowledge; Training

Implementation of KnowledgeImplementation of Knowledge

Service Creation; Service DeliveryService Creation; Service Delivery

Enhancement of KnowledgeEnhancement of Knowledge

New version of knowledgeNew version of knowledge


THE ISO 9000 SYSTEMTHE ISO 9000 SYSTEM

FoundationFoundation for Quality Excellencefor Quality Excellence

Documentation of ProceduresDocumentation of Procedures

Consistency of Service QualityConsistency of Service Quality

FrameworkFramework for Service Benchmarkingfor Service Benchmarking

BasisBasis for Knowledge Enhancementfor Knowledge Enhancement

Continuous ImprovementContinuous Improvement


The Strategic Importance ofThe Strategic Importance ofKnowledge EnhancementKnowledge Enhancement

The Experience of the Japanese JIT/LeanThe Experience of the Japanese JIT/LeanProduction SystemProduction SystemOngoing Improvements: FineOngoing Improvements: Fine--tuning thetuning theproduction systemproduction systemProblem Identification, Solution, ImplementationProblem Identification, Solution, ImplementationAccumulation of Precise Production KnowledgeAccumulation of Precise Production KnowledgeStability and Standardisation of ProcessesStability and Standardisation of ProcessesSteppingStepping--stone towards Automationstone towards Automation

Yields Strategic Competitive AdvantagesYields Strategic Competitive Advantages


The Strategic Element ofThe Strategic Element ofKnowledge EnhancementKnowledge Enhancement

Management of Intellectual AssetsManagement of Intellectual Assets

Workers to be Empowered: Training; Motivation; RecognitionWorkers to be Empowered: Training; Motivation; Recognition

Evolution of QCCs in JapanEvolution of QCCs in Japan

MultiMulti--skilled Workersskilled Workers

Inventory Reduced; Problems SurfaceInventory Reduced; Problems Surface

Workers help each other; QCCs formedWorkers help each other; QCCs formed

The Service Guarantee (Explicit/Tacit)The Service Guarantee (Explicit/Tacit)

Analysis of Service Recoveries; Associated CostsAnalysis of Service Recoveries; Associated Costs

Allows for Problem Identification/Solution by WorkersAllows for Problem Identification/Solution by Workers


Operations Management: The NewOperations Management: The NewKnowledgeKnowledge--Based ProcessBased Process

Managing Knowledge Pertaining to OpnsManaging Knowledge Pertaining to Opns

Creation; Communication; Implementation;Creation; Communication; Implementation;Enhancement; ISO 9000 as PlatformEnhancement; ISO 9000 as Platform

Strategic Importance of Enhancement/CIStrategic Importance of Enhancement/CI

Strategic Element for Enhancement/CIStrategic Element for Enhancement/CI

Management of Intellectual AssetsManagement of Intellectual Assets


Operations Progress:Operations Progress:The New Wisdom & BlueprintThe New Wisdom & Blueprint

The International Quality Study (IQS)The International Quality Study (IQS)

American Quality Foundation & Ernst & YoungAmerican Quality Foundation & Ernst & Young

Definitive Study of Quality Management PracticesDefinitive Study of Quality Management PracticesExamined 945 Practices in 580 OrganisationsExamined 945 Practices in 580 Organisations

Two Key ResultsTwo Key Results

Prevailing Wisdom: Same Practices for AllPrevailing Wisdom: Same Practices for All

New Wisdom: Different Practices for Different PerformersNew Wisdom: Different Practices for Different PerformersOnly Few Universally Beneficial PracticesOnly Few Universally Beneficial Practices

Serves as Blueprint for OperationsServes as Blueprint for OperationsProgressProgress


Blueprint: The Low PerformerBlueprint: The Low Performer

GuidelinesGuidelines

Focus on Building the BasicsFocus on Building the Basics

Operations ProcessesOperations Processes

Customer Service ProcessesCustomer Service Processes

Infrastructure ElementsInfrastructure Elements

ExamplesExamples

Training Systems for Interfaces with CustomersTraining Systems for Interfaces with Customers

Problem Solving Capabilities DevelopmentProblem Solving Capabilities Development

Design Lean ProcessesDesign Lean Processes

Marketing Message: Value at Attractive PricesMarketing Message: Value at Attractive Prices


Blueprint: The Mid PerformerBlueprint: The Mid Performer GuidelinesGuidelines

Make Improvements; Measure ResultsMake Improvements; Measure ResultsKeep Up Cycle of Improvements & MeasurementsKeep Up Cycle of Improvements & Measurements

ExamplesExamplesSimplification of ProcessesSimplification of ProcessesCycle Time AnalysisCycle Time AnalysisDesign of MidDesign of Mid--ManagementManagement

Assessment/Reward SystemsAssessment/Reward SystemsFocus on Supplier Linkage ProcessesFocus on Supplier Linkage ProcessesFocus on Strategic PlansFocus on Strategic Plans


Blueprint: The High PerformerBlueprint: The High Performer

GuidelinesGuidelines

Focus on Marketplace and FutureFocus on Marketplace and Future

Competitors and CustomersCompetitors and Customers

ExamplesExamplesBenchmarking Processes; Market Research ProcessesBenchmarking Processes; Market Research Processes

Supplier Linkage Processes; Customer Input ProcessesSupplier Linkage Processes; Customer Input Processes

Technology Decision and UtilisationTechnology Decision and Utilisation

Employee EmpowermentEmployee Empowerment

Marketing Message: Mass CustomisationMarketing Message: Mass Customisation


Blueprint for Operations ProgressBlueprint for Operations Progress

Universally Beneficial PracticesUniversally Beneficial Practices

Process Improvement MethodsProcess Improvement Methods

Cycle Analysis; Process Simplification;Cycle Analysis; Process Simplification;

Value AnalysisValue Analysis

Strategic PlanStrategic Plan Development and UnderstandingDevelopment and Understanding

Senior/Mid/NonSenior/Mid/Non-- Management;Management;

Suppliers & CustomersSuppliers & Customers

Supplier Certification ProgramsSupplier Certification Programs

Formal and Informal Supplier LinkagesFormal and Informal Supplier Linkages


Reengineering Operations:Reengineering Operations:Managing Innovative andManaging Innovative and

Deep ChangesDeep Changes

Hum Sin HoonHum Sin Hoon

NUS Business SchoolNUS Business School


Process Reengineering:Process Reengineering:Strategic Operations CapabilityStrategic Operations Capability

The JapaneseThe Japanese

Process ImprovementProcess Improvement

Continuous Improvement (Kaizen)Continuous Improvement (Kaizen)

Total Quality Management (TQM)Total Quality Management (TQM)

The AmericanThe American

Process InnovationProcess Innovation

Quantum Improvement (Breakthrough)Quantum Improvement (Breakthrough)

Business Process Reengineering (BRP)Business Process Reengineering (BRP)


Reengineering: Classic DefinitionReengineering: Classic Definition

““Reengineering is theReengineering is the fundamentalfundamentalrethinkingrethinking andand radical redesignradical redesign ofofbusiness processes to achievebusiness processes to achievedramaticdramatic improvements in critical,improvements in critical,contemporary measures ofcontemporary measures ofperformance, such as cost, quality,performance, such as cost, quality,service, and speed.service, and speed.””



Reengineering: The Classic ExampleReengineering: The Classic Example–– IBM CreditIBM Credit

The Old ProcessThe Old Process

Salesperson called in with request; logged on paper; credit checSalesperson called in with request; logged on paper; credit check byk bycredit dept; special terms attached by business practices dept;credit dept; special terms attached by business practices dept; interestinterestrate set by pricer; administration prep quote letter; deliveredrate set by pricer; administration prep quote letter; delivered totosalesperson by FedEx. Required days; Status tracking notsalesperson by FedEx. Required days; Status tracking not possible.possible.

Improved ProcessImproved ProcessInstalled control desk; track status after each step; incurred mInstalled control desk; track status after each step; incurred more delayore delay(Actual work took only minutes; delays because of ;(Actual work took only minutes; delays because of ; problem isproblem iswith structure and specialists)with structure and specialists)

Reengineered ProcessReengineered ProcessA Deal Structurer processes the entire application; support fromA Deal Structurer processes the entire application; support from newnewcomputer software; specialists for exception. Turnaround in 4 hocomputer software; specialists for exception. Turnaround in 4 hours;urs;Processed deals increased 100Processed deals increased 100--fold.fold.


Reengineering: The Classic ExampleReengineering: The Classic Example–– IBM CreditIBM Credit

Net ResultNet Result

““IBM Credit achieved aIBM Credit achieved a dramaticdramatic performance breakthrough byperformance breakthrough bymaking amaking a radicalradical change to thechange to the processprocess as a whole.as a whole.””

Not:Not:

How do we improve the calculation of a financing quote?How do we improve the calculation of a financing quote?

How do we enhance credit checking?How do we enhance credit checking?

But:But:

How do we improve the credit issuance process?How do we improve the credit issuance process?

Not FineNot Fine--Tuning But ReengineeringTuning But Reengineering By CoordinationBy CoordinationThrough Integrating Processes And Use of InformationThrough Integrating Processes And Use of InformationTechnologyTechnology


Problems with ReengineeringProblems with Reengineering

Classic Reengineering Breaks DepartmentalClassic Reengineering Breaks DepartmentalStructureStructure

Early Implementation Associated withEarly Implementation Associated withRestructuring and DownsizingRestructuring and Downsizing

Led to Low MoraleLed to Low Morale

Classic Reengineering: ProcessClassic Reengineering: Process--FocusedFocusedEnterprises (Hammer & Stanton DecEnterprises (Hammer & Stanton Dec ’’99)99)

Reengineering itself being ReengineeredReengineering itself being Reengineered

Now: Operational Innovation or Deep ChangeNow: Operational Innovation or Deep Change


Operational Innovation (Deep Change)Operational Innovation (Deep Change) Creating New Ways; Not Just Better Ways (of DoingCreating New Ways; Not Just Better Ways (of Doing

Work)Work)

Classic Examples: WalClassic Examples: Wal--MartMart’’s Crosss Cross--Docking; DellDocking; Dell’’ssBuildBuild--ToTo--Order; ToyotaOrder; Toyota’’s Production Systems Production System

Less than 10% of Large Companies Doing OILess than 10% of Large Companies Doing OI

Reasons: Culture Undervalues Operations;Reasons: Culture Undervalues Operations;Operations Out of Sight; Nobody Owns OIOperations Out of Sight; Nobody Owns OI

To Do OI:To Do OI: Benchmark other IndustriesBenchmark other Industries

Focus and Break Constraints/AssumptionsFocus and Break Constraints/Assumptions

Turn Exception into NormTurn Exception into Norm

Rethink Critical Choices: What, Who, Where, When, Whether,Rethink Critical Choices: What, Who, Where, When, Whether,What Information, How ThoroughlyWhat Information, How Thoroughly


Reengineering Or OI:Reengineering Or OI:

Other ExamplesOther ExamplesReengineering The UniversityReengineering The University

Curriculum:Curriculum: Fixed Courses Vs Flexible Electives; Year Vs SemesterFixed Courses Vs Flexible Electives; Year Vs Semester

Registration:Registration: Yearly Vs Semester; Decentralised And Online; Add/DropYearly Vs Semester; Decentralised And Online; Add/Drop

Examination:Examination: Manual Centralised Vs Online Decentralised; Repeat FailuresManual Centralised Vs Online Decentralised; Repeat Failures

Evaluation:Evaluation: Manual Forms Vs Online Capture; Quick Data Analysis/ReportsManual Forms Vs Online Capture; Quick Data Analysis/Reports

Calendar:Calendar: Fit With Schools; Special/Summer TermFit With Schools; Special/Summer Term

Reengineering The HotelReengineering The Hotel:: Special Comm For Prototype In SSpecial Comm For Prototype In S’’POREPORE

Check In:Check In: Remote HandRemote Hand--Held Wireless TechnologyHeld Wireless Technology

Room:Room: Network And Internet Based; MultiNetwork And Internet Based; Multi--Media Property Tour;Media Property Tour;

MultiMulti--Media Menu With Automated Room Service DeliveryMedia Menu With Automated Room Service Delivery

F&B Outlet:F&B Outlet: SubSub--contracted Kitchen; Warming Oven; Networked Computercontracted Kitchen; Warming Oven; Networked Computer

With M/M Menu, Video On Demand, Automated DeliveryWith M/M Menu, Video On Demand, Automated Delivery

Reservation:Reservation: Remote Access To Centralised DRemote Access To Centralised D--B; Rooms Options/FutureB; Rooms Options/Future


TQM Versus BRP/OITQM Versus BRP/OI

•• TQM FineTQM Fine --Tunes Business Processes Between Periodic BRP/OITunes Business Processes Between Periodic BRP/OI

•• TQM Ongoing/BottomTQM Ongoing/Bottom--Up; BRP/OI Periodic/TopUp; BRP/OI Periodic/Top--DrivenDriven

Start With One Process? Two Processes? Everything?Start With One Process? Two Processes? Everything?

•• Real Question: Start With Which?Real Question: Start With Which?

•• Processes That Yield The Biggest PayoffsProcesses That Yield The Biggest Payoffs

After Reengineering/OI: Then What?After Reengineering/OI: Then What?

•• Management Of Reengineered ProcessesManagement Of Reengineered Processes

•• New Focus On Work; TQM; Till Next Round Of OINew Focus On Work; TQM; Till Next Round Of OI

A Methodology For BRP/OIA Methodology For BRP/OI

Reengineering or OI:Putting Into Action

Reengineering or OI:Reengineering or OI:Putting Into ActionPutting Into Action


A Structured Methodology For BPR/OIA Structured Methodology For BPR/OI

Reengineering or OI:Putting Into Action

Reengineering or OI:Reengineering or OI:Putting Into ActionPutting Into Action

A Six-Step Guide To Process Reengineering

Step #1

Identify the Process’s Customer-drivenObjectives

Step #2

Map and Measure the Existing Process

Step #3

Analyze & Modify the Existing Process

Step #4

Benchmark for Innovative, Proven Alternatives

Step #5

Reengineer the Process

Step #6

Roll Out the New Process

ExternalInternal

• Reduce cost.• Minimise cycle time.• Eliminate Defects.

• What is the process? (Or the Critical Dimensions)• How much does it cost?• How long does it take?• What type of results are we experiencing?

• Train employees.• Pilot the process.• Implement full scale.• Monitor the results.


MultiMulti--Dimensional EffectsDimensional Effectsof Reengineering (Deep Change)of Reengineering (Deep Change)

Processes orOperational Innovation

Enable

Values andBeliefs

InformationInformation

TechnologyTechnology

InduceManagement and

Measurement Systems

Require

Determine

Jobs, People, andStructure


Operations Management:Operations Management:

KM StrategiesKM Strategies Operational LevelOperational Level

TQMTQM: Incremental Knowledge Change: Incremental Knowledge Change

BPRBPR: Quantum Knowledge Change: Quantum Knowledge Change

Strategic LevelStrategic Level

CodificationCodification (People(People--toto--Documents)Documents)

PersonalisationPersonalisation (People(People--toto--People)People)

What is the KM Strategy in yourWhat is the KM Strategy in yourOrganisation?Organisation?


Strategic Management ofStrategic Management ofOperationsOperations

Hum Sin HoonHum Sin HoonNUS Business SchoolNUS Business School


Managing OperationsManaging OperationsStrategicallyStrategically

Operations Management In PerspectiveOperations Management In Perspective

Strategic Operations EffectivenessStrategic Operations Effectiveness

Strategic Role of OperationsStrategic Role of Operations

HayesHayes--Wheelwright FrameworkWheelwright Framework


What is the Role of the OperationsWhat is the Role of the OperationsFunction visFunction vis--àà--vis Other Functions?vis Other Functions?


Progression of Strategic ThinkingProgression of Strategic Thinking& Practices in Operations& Practices in Operations

Broad Sketch Of Literature On Strategic RoleBroad Sketch Of Literature On Strategic Role

Skinner [1969]Skinner [1969]

Operations: Missing Link In Corporate StrategyOperations: Missing Link In Corporate Strategy

Skinner [1978] [1985]; Wheelwright [1978]; Buffa [1984]Skinner [1978] [1985]; Wheelwright [1978]; Buffa [1984]

Operations: In Support Of Corporate StrategyOperations: In Support Of Corporate Strategy

Wheelwright and Hayes [1984]; Hayes, Wheelwright andWheelwright and Hayes [1984]; Hayes, Wheelwright andClarke [1988]; Stalk, Evans and Shulman [1992]; HayesClarke [1988]; Stalk, Evans and Shulman [1992]; Hayesand Upton [1998]; Hammer [2004]and Upton [1998]; Hammer [2004]

Operations: Basis For Corporate StrategyOperations: Basis For Corporate Strategy


Progression of Strategic ThinkingProgression of Strategic Thinking& Practices in Operations& Practices in Operations

HayesHayes--Wheelwright FrameworkWheelwright FrameworkFourFour--Stage Framework Of Strategic OperationsStage Framework Of Strategic OperationsEffectivenessEffectiveness

As An Audit InstrumentAs An Audit Instrument

Providing Directions For Strategic ImprovementsProviding Directions For Strategic Improvements


STRATEGIC MANAGEMENT OFSTRATEGIC MANAGEMENT OFOPERATIONS CAPABILITIESOPERATIONS CAPABILITIES

Broad Areas Of CapabilitiesBroad Areas Of Capabilities C : Low C or Lowest Possible C Q : High or Excellent Level

Significant cf Competitors; Sufficient to SupportImage

F : Responsive to Customer Reqts Variations of Services (Delivery Flex) New Types of Services (Product Flex/Innovation)

D : Reliability/Consistency In Terms Of Speed; and Availability

Wants to have Capabilities in all Four Areas?Need to Prioritize; How?


Capabilities Tradeoff Theory (Skinner 1969)Capabilities Tradeoff Theory (Skinner 1969)Improvement In One Requires Tradeoff In OthersImprovement In One Requires Tradeoff In OthersExcept When Inefficiencies/Slack ExistExcept When Inefficiencies/Slack Exist

Wheelwright (1981)Wheelwright (1981)Quality Improvement With Cost ReductionQuality Improvement With Cost Reduction

Skinner (1986)Skinner (1986)With Cost Focus, Quality Is Lost;With Cost Focus, Quality Is Lost;With Quality As Priority, Cost Improvement Can FollowWith Quality As Priority, Cost Improvement Can Follow

More Current Developments: Ferdows & De MeyerMore Current Developments: Ferdows & De Meyer(1990s(1990s--))

Cumulative Sand Cone ModelCumulative Sand Cone ModelFor Long Lasting Operations Capabilities ImprovementFor Long Lasting Operations Capabilities Improvement

And Avoidance Of Tradeoffs: Sequence ImportantAnd Avoidance Of Tradeoffs: Sequence ImportantSequence: Quality, Delivery/Dependability, Flexibility, CostSequence: Quality, Delivery/Dependability, Flexibility, CostCorrect Principles Of Operations Built Into SystemCorrect Principles Of Operations Built Into System

STRATEGIC MANAGEMENT OFSTRATEGIC MANAGEMENT OFOPERATIONS CAPABILITIESOPERATIONS CAPABILITIES


HayesHayes--Wheelwright FrameworkWheelwright FrameworkStage 1: Minimize OperationsStage 1: Minimize Operations’’ Negative PotentialNegative Potential

((Internally NeutralInternally Neutral))

Outside experts called in to make decisions about strategic operOutside experts called in to make decisions about strategic operationsationsissuesissuesInternal mgt control systems used for monitoring operationsInternal mgt control systems used for monitoring operationsperformanceperformanceOperations not lockedOperations not locked--in to particular system or technology; keptin to particular system or technology; keptreactivereactive

Stage 2: Achieve Parity With CompetitorsStage 2: Achieve Parity With Competitors((Externally NeutralExternally Neutral))

““Industry PracticeIndustry Practice”” is followedis followed

Planning horizon for operations investment decision extended: siPlanning horizon for operations investment decision extended: singlenglebusiness cyclebusiness cycleCapital investment primary means for catching up/achievingCapital investment primary means for catching up/achievingcompetitive edgecompetitive edge


HayesHayes--Wheelwright FrameworkWheelwright FrameworkStage 3: Provide Support To Business StrategyStage 3: Provide Support To Business Strategy

((Internally SupportiveInternally Supportive))Operations investments screened for consistency with businessOperations investments screened for consistency with businessstrategystrategyAn operations strategy is formulated and pursuedAn operations strategy is formulated and pursuedLongerLonger--term operations developments and trends are addressedterm operations developments and trends are addressedsystematicallysystematically

Stage 4: Pursue OpnsStage 4: Pursue Opns--Based Competitive AdvBased Competitive Adv((Externally SupportiveExternally Supportive))Efforts made to anticipate potential of new operations practicesEfforts made to anticipate potential of new operations practicesand technologiesand technologiesOperations involved up front in major marketing/strategyOperations involved up front in major marketing/strategydecisions and vice versadecisions and vice versaLongLong--term programsterm programs pursued to acquire capabilities in advancepursued to acquire capabilities in advanceof needsof needs


Litmus Tests for AssessingLitmus Tests for AssessingStage 4 Operations EffectivenessStage 4 Operations Effectiveness

The Attention Paid To Operations InfrastructureThe Attention Paid To Operations InfrastructureStage 4 operations integrates measurement systems,Stage 4 operations integrates measurement systems,planning and control procedures, and workforceplanning and control procedures, and workforcepolicies with its structural decisions on capacity,policies with its structural decisions on capacity,location, vertical integration etc; it considers bothlocation, vertical integration etc; it considers bothstructural and infrastructural elements as important andstructural and infrastructural elements as important andcomplementary sources of competitive strengthcomplementary sources of competitive strength

The Link Between Product And Process DesignThe Link Between Product And Process DesignStage 4 operations emphasizes parallel and interactiveStage 4 operations emphasizes parallel and interactivedevelopment of both products and processesdevelopment of both products and processes


Litmus Tests for AssessingLitmus Tests for AssessingStage 4 Operations EffectivenessStage 4 Operations Effectiveness

The Amount Of Ongoing InThe Amount Of Ongoing In--House Innovation AndHouse Innovation AndImprovementImprovement

Stage 4 organisations continually invest in product and processStage 4 organisations continually invest in product and processimprovements; they acknowledge the cumulative value ofimprovements; they acknowledge the cumulative value ofcontinual enhancements in process procedures and technologiescontinual enhancements in process procedures and technologies

The Extent It Develops Its Own Operations SystemThe Extent It Develops Its Own Operations SystemAnd TechnologyAnd TechnologyThe typical stage 3 operations relies on outside vendors forThe typical stage 3 operations relies on outside vendors forprocess equipment and IT systems development. Stage 4process equipment and IT systems development. Stage 4organization wants to know more than its vendors aboutorganization wants to know more than its vendors abouteverything that is critical to its business. It will continue toeverything that is critical to its business. It will continue toconsult and buy from external vendors, but it will seek toconsult and buy from external vendors, but it will seek tounderstand and adapt internally in order to master these systemsunderstand and adapt internally in order to master these systemsand technologiesand technologies


Strategic Importance:Strategic Importance:Management of Intellectual AssetsManagement of Intellectual Assets

Managing Knowledge: Key To Innovation AndManaging Knowledge: Key To Innovation AndContinual ImprovementContinual ImprovementIntellectual Assets Developed And Kept InhouseIntellectual Assets Developed And Kept Inhouse

Yields Sustainable Competitive AdvantageYields Sustainable Competitive Advantage

ManagerManager’’s Tasks TaskProviding Environment That Empowers WorkersProviding Environment That Empowers Workers

Training (Impart Knowledge)Training (Impart Knowledge)Correcting (Implement/Perfect Knowledge)Correcting (Implement/Perfect Knowledge)Improving (Creating Knowledge)Improving (Creating Knowledge)Documenting (Keeping Knowledge)Documenting (Keeping Knowledge)

WorkerWorker’’s Tasks TaskRespond To ManagerRespond To Manager’’s Effortss Efforts

Implement Knowledge; Improve/Create KnowledgeImplement Knowledge; Improve/Create KnowledgeHelp Build Capabilities; Experiment and InnovateHelp Build Capabilities; Experiment and Innovate


A Secret is SharedA Secret is Shared

We will win and you will lose. You cannot do anything about itWe will win and you will lose. You cannot do anything about itbecause your failure is an internal disease. Your companies arebecause your failure is an internal disease. Your companies arebased on Taylorbased on Taylor’’s principles. Worse, your heads are too. Yous principles. Worse, your heads are too. Youfirmly believe that sound management means executives onfirmly believe that sound management means executives onone side and workers on the other; on one side men who thinkone side and workers on the other; on one side men who thinkand on the other, men who can only carry out the work.and on the other, men who can only carry out the work.

We have passed that stage. We are aware that business hasWe have passed that stage. We are aware that business hasbecome terribly complex. Therefore a company must have thebecome terribly complex. Therefore a company must have theconstant commitment of its employees to survive. For us,constant commitment of its employees to survive. For us,management is the entire workforcemanagement is the entire workforce’’s intellectual commitments intellectual commitmentat the service of the companyat the service of the company -- without selfwithout self--imposed functionalimposed functionalor class barriers.or class barriers.

(Source: Konosuke Matsushita)(Source: Konosuke Matsushita)


MANAGEMENT OF INTELLECTUAL ASSETSMANAGEMENT OF INTELLECTUAL ASSETS

Knowledge: A Renewable ResourceKnowledge: A Renewable Resource

The More We Use It, The More We HaveThe More We Use It, The More We Have

The More We Focus On It, The More We CreateThe More We Focus On It, The More We Create

The sources of competitive advantageThe sources of competitive advantage

True strategic focus means that a company can concentrate more pTrue strategic focus means that a company can concentrate more power inower inits chosen markets than anyone else can. Once, this meant owningits chosen markets than anyone else can. Once, this meant owning thethelargest resource base, manufacturing plants, research labs, or dlargest resource base, manufacturing plants, research labs, or distributionistributionchannels to support product lines. Now, physical facilitieschannels to support product lines. Now, physical facilities –– including aincluding aseemingly superior productseemingly superior product –– seldom provide a sustainable competitiveseldom provide a sustainable competitiveedge. They are too easily byedge. They are too easily by--passed, reverse engineered, cloned, orpassed, reverse engineered, cloned, orslightly surpassed.slightly surpassed.

Instead, aInstead, a maintainable advantagemaintainable advantage usually derives from outstanding depthusually derives from outstanding depthinin selected human skills, logistics capabilities, knowledge bases,selected human skills, logistics capabilities, knowledge bases, or otheror otherservice strengthsservice strengths that competitors cannot reproduce and that lead tothat competitors cannot reproduce and that lead togreater demonstrable value for the customergreater demonstrable value for the customer

Source: Quinn, Dorley and Paquette (HBR 1990)


Building Capabilities inBuilding Capabilities inOperationsOperations

Hum Sin HoonHum Sin HoonNUS Business SchoolNUS Business School


Building Capabilities In OperationsBuilding Capabilities In Operations

Consider Two Models/ExamplesConsider Two Models/Examples

The WalThe Wal--Mart ExampleMart Example

The Li & Fung ModelThe Li & Fung Model


The WalThe Wal--Mart ExampleMart Example Building Operations Capability to Support StrategicBuilding Operations Capability to Support Strategic

IntentIntent

See Description of the WalSee Description of the Wal--Mart Supply ChainMart Supply ChainOperations in Next Two SlidesOperations in Next Two Slides

Consider these Questions:Consider these Questions:

Describe the Key Elements of the WalDescribe the Key Elements of the Wal--Mart SC;Mart SC;How Effective Is This SC?How Effective Is This SC?

Who Built this SC? Could Someone Else Build It?Who Built this SC? Could Someone Else Build It?

To What Extent Have You Built Such A SC for YourTo What Extent Have You Built Such A SC for YourOrganisationOrganisation??



(Source: Stalk et al, HBR)(Source: Stalk et al, HBR)



(Source: Stalk et al, HBR)(Source: Stalk et al, HBR)



KmartKmart vsvs WalWal--MartMartSpecial Item SaleSpecial Item Sale vsvs EDLPPEDLPPKey Strategy: Replenishment Process CapabilityKey Strategy: Replenishment Process Capability

Cross DockingCross Docking85% of Goods through Own Warehouse85% of Goods through Own WarehouseOwn Fleet of TrucksOwn Fleet of TrucksEPOS Direct to Vendors through OwnEPOS Direct to Vendors through OwnSatellite CommunicationSatellite CommunicationReplenishment: Twice per Week;Replenishment: Twice per Week;

Once per Fortnight (Industry)Once per Fortnight (Industry)



WalWal--MartMart’’s Strategic Intents Strategic Intent

The Replenishment Process is Key!The Replenishment Process is Key!

Built Capability into this ProcessBuilt Capability into this Process

3PLs3PLs

No Such Capability ThenNo Such Capability Then

Serve asServe as Logistics Service TransactionsLogistics Service TransactionsProvidersProviders Rather than asRather than as Strategic LogisticsStrategic LogisticsService Providers (Internal Logistics Arms ofService Providers (Internal Logistics Arms ofCustomers)Customers)


The WalThe Wal--Mart ExampleMart Example Understanding the CustomerUnderstanding the Customer’’s Strategic Intent:s Strategic Intent:

Appreciating the Paradigms of CompetitionAppreciating the Paradigms of Competition

Progression of Competitive ParadigmsProgression of Competitive Paradigms

CostCost--Based ParadigmBased Paradigm

QualityQuality--Based ParadigmBased Paradigm

VarietyVariety--Based ParadigmBased Paradigm

TimeTime--Based ParadigmBased Paradigm

CapabilitiesCapabilities--Based ParadigmBased Paradigm

WalWal--Mart: Engaged in CBC with CompetenciesMart: Engaged in CBC with CompetenciesWorking Together to Deliver a Strategic LogisticsWorking Together to Deliver a Strategic LogisticsCapabilityCapability

Could WalCould Wal--Mart Outsource This?Mart Outsource This?


Building Operations Capabilities:Building Operations Capabilities:The Li & Fung ModelThe Li & Fung Model

Consider Li & Fung CaseConsider Li & Fung Case

Consider these Questions:Consider these Questions:

Describe the Li & Fung Model in itsDescribe the Li & Fung Model in itsWorking with their Clients; What is theWorking with their Clients; What is theRole that Li & Fung Performs on BehalfRole that Li & Fung Performs on Behalfof their Clients?of their Clients?

What Capabilities Does Li & FungWhat Capabilities Does Li & FungPossess?Possess?



Three Elements in Logistics OperationsThree Elements in Logistics OperationsInbound Logistics; Production Logistics;Inbound Logistics; Production Logistics;

Outbound LogisticsOutbound Logistics

In Which of these Elements Do You See theIn Which of these Elements Do You See theMost 3PLs Operating In? Why?Most 3PLs Operating In? Why?

Where is Li & Fung Operating?Where is Li & Fung Operating?

What Capabilities are Needed for thisWhat Capabilities are Needed for thisModel?Model?


The Li & Fung ModelThe Li & Fung Model ““Li & Fung works with an ever expanding networkLi & Fung works with an ever expanding network

of thousands of suppliers around the globe,of thousands of suppliers around the globe,sourcing clothing and other consumer goodssourcing clothing and other consumer goodsranging from toys to fashion accessories toranging from toys to fashion accessories toluggageluggage””

““Managing dispersed production forced us to getManaging dispersed production forced us to getsmart not only about logistics and transportationsmart not only about logistics and transportationbut also about dissecting the value chainbut also about dissecting the value chain””

““What we do is close to creating a customisedWhat we do is close to creating a customisedvalue chain for every customer ordervalue chain for every customer order””



(Source: Magretta, HBR)(Source: Magretta, HBR)


Building Capabilities In Operations:Building Capabilities In Operations:The Li & Fung ModelThe Li & Fung Model

AsAs ArchitectsArchitects of Entire Supply Chainsof Entire Supply Chains

TheThe Ultimate TaskUltimate Task in Buildingin Building

Operations Capabilities?Operations Capabilities?

((Doing itDoing it yourself, oryourself, or Doing itDoing it forforothers)others)


Building Capabilities in Operations:Building Capabilities in Operations:3PLs as Architects of Supply Chains3PLs as Architects of Supply Chains


Understanding CustomersUnderstanding Customers’’ StrategicStrategicRequirements; A Target Supply Chain ForRequirements; A Target Supply Chain For3PLs to Build for their Customers3PLs to Build for their Customers


3PLs as Architects of Entire Global Supply3PLs as Architects of Entire Global SupplyChains; the Ultimate Task for 3PLs?Chains; the Ultimate Task for 3PLs?