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- Supply Chain Management -
Assessing supply chain design and management capabilities and
developing recommendations for improvements
Sessions 13 and 14 - Platform Leadership, Eco-system Growth,
and Strategic Agility
Supply Chain Management is a Business Partnership Model
Focus
Core question: How do we maximize throughput and shared
value creation?
Spring 2021
Version 1
Copyright © 2021 Thomas Mazzone
1
Agenda
Review course calendar
10:00 - 10:10 am
break
11:15 - 11:30 am
Discuss the Supply Chain Partnership and the core need and
challenges of outsourcing and the scope of Quiz 2
Discuss Platform Leadership, Eco-system Growth, and Strategic
Agility and final HW Assignment
11:30 - 12:30 pm
10:10 - 10:30 am
2
Copyright © 2021 Thomas Mazzone
Review course calendar
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Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Overview of Sessions and Assignments
This is a supply chain ‘consulting methodology’, to help you
better ‘see’, design and manage industry and ecosystem
partnerships
Each session builds on the other to lead to a comprehensive
executive presentation presenting findings, conclusions and
recommendations
We are learning a methodology for understanding, defining,
improving, innovating and managing a supply system of
partnerships
Open after class for 7 days
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Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Supply Chain Partnership Alignment
Do we know understand the importance of strategic sourcing to
supply chain design and management?
Do we understand the range of partnership/ownership
relationships?
Do we understand how to assess make/buy and the implications
in both cases for supply chain management?
Focus:
Understand the concept of ‘incentive alignment. Be able to
articulate why it is critical to supply chain success. Understand
the core challenges of incentive alignment and how to address
them.
Understand the how make vs buy decisions are made.
Understand the role of transaction costs in making these
decisions.
Use our understanding of incentive alignment and transaction
costs to better understand the role ‘blockchain’ has in
fundamentally rethinking the nature of transactions and
contracts and the potentially profound impact this will have on
supply chain management and design
Readings:
Read: Aligning Incentives in Supply Chains – HBR 2004
Read: Blockchain for Dummies
Read: Operations Management Readings: Strategic Sourcing
HW – discussion only
Assess strategic outsourcing opportunities for your supply chain
For those activities that are ‘outsourced’ assess the contractual
arrangement and determine whether there are opportunities to
improve incentive alignment
Session 11 – 4/22
Session 12 – 4/29
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Copyright © 2021 Thomas Mazzone
Supply Chain Growth
Supply Chain Leadership
Supply Chain Technology
Do we know how to drive industry growth?
Do we know how to shape industry direction?
Do we know which technologies are important?
Do we know where to implement technologies to improve
performance
HW Assignment 4– Growth and Leadership Assessment
Due 5/6
HW Assignment 4 – Technology Assessment
Due 5/6
Focus:
Understand the industry life cycle and its impact on Supply
Chain design and management decisions
Incorporate the Value Disciplines analytical framework to
deepen our understanding of life cycle impact on strategy
Understand ‘strategic flexibility’ and how it changes at
different stages of the industry life cycle
Understand transaction cost economics and its importance in
helping us to understand how to impact the CCR of our
customers and suppliers to improve total supply chain
Throughput lower total supply chain and Operating Expense and
Inventory
Readings:
Read: Value Discipline Models and Competitive Success
Read: What are Transaction Costs
Read: Industry Life Cycle
Read: Your Next Supply Chain – The Sloan Management
Review Jan 2010
HW – focus
Identify industry life cycle stage – assess implications for
supply chain design and management strategies
Identify opportunities for lowering transaction costs at both
supplier and customers.
Identify opportunities to help customers and vendors better
assess and manage their respective CCR to improve T, OE and I
for the whole supply chain
Focus:
Understand the operations management lifecycle model and the
core impact of process and data standardization
Understand the purpose of markets and how market leaders
create opportunities for total market growth
Understand the growth of ‘platforms’ and how platform leaders
shape conditions for platform participant success
Readings:
Read: Enterprise Architecture as Strategy
Read: Driving Value from IT – HBS 2009
Read: The Supply Chain of the Future - IBM 2009
Read: Pipelines, Platforms, and the New Rules of Strategy –
HBS 2016
Read: How to Innovate When Platforms Won't Stop Moving –
SMR 2011
HW – focus
Define market/ platform scope
Based on life cycle assessment define key participants
Identify opportunities for market/platform leadership in either
process or data standardization or both
Identify opportunities for brand collaboration
Describe the specific opportunities for process/data/brand
standardization and articulate the impact on industry T, OE and
I
Assess your market/platform position as either laggard/follower
or leader. If leader describe benefits and challenges of
maintaining leadership. If laggard/follower describe the benefits
and challenges of improving your position
Focus:
Understand the core technology trends and their impact on
Supply Chain Management and Industry Growth
Special emphasis will be on Big Data, IoT, 3D Mfg., and Social
Media and Collaboration Technologies emphases will be on
Understand how to align these technologies against the
framework we have studied to understand best how to
implement them to improve T and reduce OE and I
Readings:
Read: Seven traits of successful digital businesses – MQ 2014
Read: Digital transformation - Raising supply chain
performance to new levels – MQ 2017
Read: McKinsey_3-D printing takes shape – MQ 2014
Read: Creating a Successful Internet of Things Data
Marketplace – MQ 2016
HW – focus
Identify which new technologies are having the biggest impact
on your supply chain
Use the frameworks developed to date to assess where to apply
these technologies (process/data/standardization; transaction
cost economics; CCR capability/speed/protection)
Assess the impact in terms which key metric (i.e. T, OE, I) will
be most impacted and why
Session 13 – 5/6
Do we know how to drive industry growth?
Do we know how to shape industry direction?
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Copyright © 2021 Thomas Mazzone
Supply Chain Viable Vision
Do we have a ‘picture’ that can be ‘shared’ of ‘Viable Vision’?
Can we describe the journey in way that it feels achievable and
exciting?
Focus:
Understand Goldratt’s view of Viable Vision
Relate cumulative set of recommendations and how they
represent a ‘journey map’ to a viable vision
Discuss how we make the journey actionable
Reconnect with SWOT and DICE as frameworks for assessment
and communications
Readings:
View: Goldratt on Viable Vision - Theory of Constraints
HW – focus
Summarize HW assignments into a final paper that takes
cumulative feedback and refines assessment and
recommendations
Link the recommendation into a ‘journey map’ that paints a
compelling picture of a future state and presents a road map that
feels believable, pragmatic and inspiring
Session 14 – 5/13
Supply Chain Recommendation
Final Paper – SWOT Summary, Viable Vision Journey Map and
DICE Assessment
Due 5/13
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supply chain
Core Concept 8
Understanding Outsourcing through Transaction Costs
performance gap assessment
process design assessment
management agility assessment
market growth assessment
improvement road map
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M
CCR
C
To ensure we can make and keep commitments should we do
everything ourselves?
We want to make sure the customer gets what they want?
How much of the supply chain do we have to control to make
sure that happens?
How do we partner with supply chain partners to ensure they
fulfill on their commitments?
we make a contract
We should outsource as much as possible (we shouldn’t make
everything) but that means we are now reliant on others to help
us meet commitments.
Assets
Activities
Assets
Activities
Assets
Activities
Assets
Activities
Assets
Activities
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Mostly everything should be bought
Only do what you are good at
Supply chain leaders, platform leaders,
market leaders excel at organizing producers to align and
deliver a completed good or services that fulfills a need
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Copyright © 2021 Thomas Mazzone
Wikipedia
here
Assess the costs structure of your supply chain and determining
what you should make or buy
What is the boundary of the ‘firm’, your company? Your supply
chain?
What does it mean to make? What does it mean to own the
resources to make?
Shouldn’t we buy everything? Owning is expensive, why?
Why don’t you make your phone or your laptop?
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Copyright © 2021 Thomas Mazzone
A contract is a legally binding document between at least two
parties that defines and governs the rights and duties of the
parties to an agreement.[1] A contract is legally enforceable
because it meets the requirements and approval of the law. A
contract typically involves the exchange of goods, service,
money, or promise of any of those. "Breach of contract", means
that the law will have to award the injured party either the
access to legal remedies such as damages or cancellation.[2]
The Heart of Supply Chains: A Contract
Wikipedia
Why are developing ‘complete’ contracts so hard to make and
enforce?
Contracts ae at the heart of supply chains just as contracts are at
the heart of all relationships, including marriage. And like
marriages, they are the start of something that has to evolve, not
the end of something that is finished
A complete contract is an important concept from contract
theory.
If the parties to an agreement could specify their respective
rights and duties for every possible future state of the world,
their contract would be complete. There would be no gaps in the
terms of the contract.
The Ideal world: ‘A Complete Contract’
Wikipedia
This is an unattainable goal, yet this is the aim of most
outsource agreements
The key point to understand, contracts are not ‘one-time’
events, but the starting point for an ongoing relationship
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Asset specificity mean asset specialization – what does that
mean – how does it apply to machines – how does it apply to
humans - why does that make both buying and making harder?
What does it mean to be ’bounded’? rational? Why does that
making both buying and selling harder? How does that create
the risk of ‘opportunism’?
Transacting is hard – Both buying things and making things,
like employees.
What does it mean to make an employee? How does that relate
to the nature of the good or service and the activity required to
make that good or service?
We should only specialize on the activities that we are good at,
that are a core competency? That differentiate us in the
marketplace?
We should outsource activities that other people are better at?
Do we make the coffee cups for your coffee shop? No. Do you
grow and roast your own beans? Yes.
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Why are ‘complete’ and ‘on-going’ contracts hard to make and
enforce?
Transactions are the unit of analysis and a ’complete contract’
is the goal
we need to transact with others
that is we need to write a contract that specifies commitments
and the consequence failure to meet a commitment
Behavioral characteristics of the contracting parties make
obtaining a complete contract difficult to accomplish
Bounded Rationality makes it difficult to get and process
information (that we need to transact with others)
Opportunism means that people are self inclined to their own
interests and not others, so they ay intentionally or
unintentionally hide important information
Transactions characteristics of the service or product being
bought/sold obtaining a complete contract difficult to
accomplish
Asset specificity makes it difficult to describe the product or
service in ways that make the contract enforceable
Uncertainty in the environment make it difficult to describe all
possible events that could impact the ability to execute the
contract
Contract types
Arms-length - invest in the process - attempts to be complete -
get the best price (most mistakenly focus here)
Relationship-based - invest in the outcomes - achieve the right
goal (most should, but don’t know how to focus here)
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Copyright © 2021 Thomas Mazzone
Leverage Best Deal
Non-Critical Efficiency
Critical/Strategic: Cooperation
Bottleneck: Supply Continuity
Supply Risk/market Complexity
Impact to Business
develop strategic partnership
terminate, find new supplier
reduce dependencies and risk, find other solutions
pooling of requirements
high
high
low
Assess the costs structure of your supply chain and determine
what you should make or buy
Which activity should someone else do?
Which activity should we now do?
purchased
purchased
purchased
1
2
3
What are your choices?
easy/hard to buy/sell
important/not important to an organization comp adv
Will it improve capacity?
Will it improve lead time?
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Copyright © 2021 Thomas Mazzone
Leverage Best Deal
Non-Critical Efficiency
Critical/Strategic: Cooperation
Bottleneck: Supply Continuity
Supply Risk/market Complexity
Impact to Business
develop strategic partnership
terminate, find new supplier
reduce dependencies and risk, find other solutions
pooling of requirements
high
high
low
You have made the right decision to ‘buy’, to outsource, now
what?
Because of the need for some sort of asset specialization and
bounded rationality (our inability to know everything) there is
always an opportunity for ‘opportunism’, that is someone trying
to take advantage of us
easy/hard to buy/sell
important/not important to an organization comp adv
This is why we need to design supply chain contracts that
ensure we have aligned incentives, to make sure no one takes
advantage of ‘hidden information’.
Invest in goal alignment and relationship development and not
‘complete’ contracts
More handshakes and dinners, less lawyers!
Contract types
Arms-length - invest in the process - attempts to be complete -
get the best price (most mistakenly focus here)
Relationship-based - invest in the outcomes - achieve the right
goal (most should, but don’t know how to focus here)
Write a contract…
What type…
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Copyright © 2021 Thomas Mazzone
Understanding how to make contracts easier ensure I picked the
right partner, and that partner can be trusted is the key to
understanding how to create and grow eco-systems
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Copyright © 2021 Thomas Mazzone
Using technology to lower Transactions Costs and make it
easier to create, and manage supply chains – easier to create and
manage relationship - and ultimately grow them into industry
platforms/marketplaces (e.g. Amazon) – Blockchain as a
starting point - larger social networks of connected
relationships
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Copyright © 2021 Thomas Mazzone
Blockchain is an enabling technology that facilitates
transactions processing
Download the book
here
Transaction Cost Economics helps to explain why transacting is
difficult, how markets and technologies like blockchain help
and how a focus on transactions unlocks why supply chains are
expanding into platforms and ecosystems – this is ‘bridging’
discussion from local supply chains to supply ecosystems and
platforms
Go here
Transactions require trust and transparency
Reducing the costs of transactions make supply chain more open
(easier to ’buy’ than make) and more scalable (easier to conduct
transactions with more customers and suppliers)
Review Chapters 1-3
The focus will be on Ch 3 – ‘Friction-Free Markets’ of Markets
with low Transaction Costs
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‘Buying is expensive’
so is making
How does Blockchain help?
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Focus on the transaction
Address the cost of transacting
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Where do we focus our efforts?
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Where do we focus our efforts?
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Copyright © 2021 Thomas Mazzone
- Supply Chain Management -
Assessing supply chain design and management capabilities and
developing recommendations for improvements
Quiz 2 - Supply Chain Management
Spring 2021
Version 3
Copyright © 2021 Thomas Mazzone
24
1 - How does lengthening or shortening lead time commitments
lead to opportunities to improve capacity utilization and
throughput?
Developing Supply Chain Tactical Flexibility
(reflection on HW Assignment 3)
10 points
Opens for 7 days on May 6th
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Copyright © 2021 Thomas Mazzone
2 – What is the difference between ‘out-sourcing’ and ‘off-
shoring’? Why do firms ‘out-source’? What are some of the
specific issues this raises? Pick one and describe more fully
why this is a challenge?
Section 1 – Introduction
Operations Management Readings: Strategic Sourcing
3 - Review the section, ‘An Overview of Strategic Sourcing
Decisions’. What are the challenges in determining whether to
‘make’ or ‘buy’? Provide an example to demonstrate pros and
cons of each approach.
10 points
10 points
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Section 2 – Essential Reading
Operations Management Readings: Strategic Sourcing
20 points
4 – Use either the Apple or Crocs case study. Pick one
purchased input, that is something that is currently ‘bought’.
Assign it to one of the quadrants in the Kraljic Matrix. Justify
why it is there. Recommend either keeping it there or moving it
to a different quadrant. Justify your recommendation.
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5 - Review the section, ‘Competing on Core Competencies’.
How do core competencies influence the ‘make-or-buy’
decision?
Section 3 – A Primer on Make-or-Buy Research
Operations Management Readings: Strategic Sourcing
6- Review the section, ‘Transaction Cost Economics’. What are
transaction costs? How does ‘asset specificity’ relate to an
organization’s core competencies? How do ‘bounded
rationality’ and ‘opportunism’ influence the decision of whether
to make or buy?
7 - Read the article, ‘Aligning Incentives in Supply Chains’.
What are some of the incentive problems that firms face? How
can they address or prevent incentive problems? Provide a
specific example that illustrates the incentive problem and how
your recommendation would address it.
10 points
20 points
20 points
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Copyright © 2021 Thomas Mazzone
supply chain
Core Concept 9
Assessing Platform Growth and Market Expansion
Opportunities through Transaction Costs
performance gap assessment
process design assessment
management agility assessment
market growth assessment
improvement road map
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Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Do you understand the platforms that you are part of?
Do you understand what drives value?
Are you able to evolve and learn when to standardize and when
to specialize?
Can we trust our partners?
Do we know which processes to focus on?
Do we have a ‘global’ understanding of our supply chain?
How do we reconcile cost containment, revenue growth and
customer intimacy?
Does the value discipline model help us to focus?
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Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Do we know which processes to focus on?
Platform businesses bring together producers and consumers in
high-value exchanges. Their chief assets are information and
interactions, which together are also the source of the value
they create and their competitive advantage.
Where do we choose to focus:
offer centralized services
lead data/process standards
follow data/process standards to gain access to markets and
capabilities
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Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Do we know which processes to focus on?
Understanding how to ‘dis-aggregate’ supply chains and focus
on core capabilities and off load or ’sell’ standard capabilities
is key
How do we create deeper partnerships to drive innovation-based
growth opportunities
32
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Starting with local supply chains then migrating to ecosystems
expands how we see the opportunities for apply new
technologies
How does technology and make data easier to standardize and
access
How does technology and make processes easier to understand
and leverage
How does technology and make it easier to create shared
services so that business partners can focus on their core
competencies
33
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Copyright © 2021 Thomas Mazzone
How can you use what we have learned to make an immediate
impact to your (next) company), even at a junior level
How do you start local to propose big ideas that could transform
your company and your personal opportunities.
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Copyright © 2021 Thomas Mazzone
Firm Strategy, Structure and Rivalry
Factor
Conditions
Demand Condition
Related and Supporting Industries
Determinants of National (eco-system) Competitive Advantage
Read
Supply Chain Partnership
Subordinated Supply Chain Partnership
Customer Partnership
Government Partnership
Training, Infrastructure, Finance
How do we impact the determinants of eco-system advantage?
Eco-systems sink or swim together
35
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Copyright © 2021 Thomas Mazzone
Marketplace
Consumers
Producers
Supply Chains, Markets, Eco-systems, Platforms and Pipelines
Analysis
Market = a regular gathering of people for the purchase and sale
of provisions, livestock, and other commodities.
Eco-systems connect local markets into larger markets
supply chains feed markets
Market lower the transaction costs of selling products and
services to consumers
Platforms and pipelines are the infrastructure that make markets
and eco-systems possible
(can we help to make them more efficient)
Are there opportunities to either better ‘supply’ markets or to
improve the market’s ability to supply
Producers of goods and services have a choice
sell direct to the consumer or
sell through a market place
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Copyright © 2021 Thomas Mazzone
Market Analysis
Producers
Consumers
Market
Exchange
Market
Exchange
Market
Exchange
market and market maker assessment
we need
markets
Markets lower the cost of ‘trusting’ ‘transacting’
understanding
searching
assessing
contracting
policing
these are market participation/ throughput constraints
‘Makers’ lower market constraints and therefore market
throughput by leading standard setting and trust development
infrastructure platforms
data standards
process standards
information transparency and credibility (i.e. partnership on
brand collaboration and trust development)
we need
Market ‘makers’
Data
sharing
Infrastructure sharing
Information Transparency and Credibility
Process sharing
paths
paths
Standards
drive
sharing
opportunities
where are the constraints
how do we increase throughput
market assessment options
own/manage the market
join the market as a product
join the market as a minimarket
To either create the standards or exploit the standards
Where are there other suppliers and customers to leverage and
grow with – keep the focus on a few opportunities
Value focus
paths
Standardization and Centralization Focus
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Copyright © 2021 Thomas Mazzone
37
Leadership and platform (market, industry) growth
Invest in trust
Counter adverse selection
Counter moral hazard
Invest in value/divest in value
Cost responsive
Experience responsive
Market Responsive
Invest in standards
data
process
Ensure we deliver the value people need/want
Ensure we are able together to work together to maximize the
value we deliver
Ensure we are able to focus on what we do best
We have a moral obligation to maximize value and ‘grow the
wealth of the village’ so we all prosper
market growth
38
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Leadership and platform (market, industry) growth
Invest in trust
Counter adverse selection
Counter moral hazard
Invest in value/divest in value
Cost responsive
Experience responsive
Market Responsive
Invest in standards
data
process
Ensure we deliver the value people need/want
Ensure we are able together to work together to maximize the
value we deliver
Ensure we are able to focus on what we do best
We have a moral obligation to maximize value and ‘grow the
wealth of the village’ so we all prosper
market growth
39
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Invest in trust
Counter adverse selection
Counter moral hazard
Invest in value/divest in value
Cost responsive
Experience responsive
Market Responsive
Invest in standards
data
process
Ensure we deliver the value people need/want
Ensure we are able together to work together to maximize the
value we deliver
Ensure we are able to focus on what we do best
market growth
40
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Copyright © 2021 Thomas Mazzone
Value Disciplines
this is a useful framework for helping to understand how to
focus our supply chain – it builds on the market responsive vs
cost effective model
Market Responsive
Cost Responsive
Experience Responsive
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41
focused on market responsiveness
focused on experience responsiveness
focused on cost responsiveness
Customer Value Disciplines define the key supply chain
requirements of each stage of the industry life cycle
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Copyright © 2021 Thomas Mazzone
Industry Life Cycle dictates where to invest (make) and where
to buy (divest), which assets/activities
Economies of Speed
Economies of Scope
Economies of Scale
Customer Intimacy
Product leadership
Operational Excellence
Company?
Company?
Company?
Where are we?
Where are we going?
How do we need to adapt?
Market Responsive
Customer Responsive
Cost Responsive
Invest in different specialized assets/activities
Divest of others which are no longer desired by your customer
Copyright © 2021 Thomas Mazzone
Copyright © 2008 Thomas Mazzone
Industry Life Cycle – the key to understanding Supply Chain
Investment/Divestment Assessments
Economies of Speed
Economies of Scope
Economies of Scale
Customer Intimacy
Product leadership
Operational Excellence
Company?
Company?
Company?
Invest in Centralized Services
Invest in Standardized Data
Invest in Standardized Processes
Growth through centralization and standardization
Copyright © 2021 Thomas Mazzone
Invest in - Cost responsiveness
invest in less variation
CCR
so you can reduce non-CCR cost without increasing risk on
missing commitments
training
activity redesign
Case studies
Lean Transformation and cost-effectiveness across and
enterprise
‘Village’ cost effective delivery
across an ‘eco-system’
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Copyright © 2021 Thomas Mazzone
Invest in - Customer responsiveness
Case studies
CCR
invest in capacity at the CCR to enable time to interact and
‘customize’ the output, ensure protection built at non-CCR
A
B
C
Assess process activity configurations
assess potential for different customer segments (segment not
just by features but also by price/lead time elasticities)
Life Insurance Redesign
Customer Relationship Management
customized processes focused on differentiated services
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Copyright © 2021 Thomas Mazzone
Invest in - Market responsiveness
Case studies
CCR
Invest in strategic and tactical flexibility (range, performance
and mobility)
Global Supply Chain Responsiveness
CCR
CCR
CCR
invest in capacity at the CCR to enable time to innovate and
‘experiment’, ensure protection built at non-CCR
Product Design and Consistency, Responsiveness
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Copyright © 2021 Thomas Mazzone
Invest in trust
Counter adverse selection
Counter moral hazard
Invest in value/divest in value
Cost responsive
Experience responsive
Market Responsive
Invest in standards
data
process
Ensure we deliver the value people need/want
Ensure we are able together to work together to maximize the
value we deliver
Ensure we are able to focus on what we do best
market growth
48
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Copyright © 2021 Thomas Mazzone
Investing in ‘relationships’
Adverse selection
Adverse selection refers to a situation where sellers have more
information than buyers have, or vice versa, about some aspect
of product quality, although typically the more knowledgeable
party is the seller. Adverse selection occurs when asymmetric
information is exploited.
Moral hazard
Moral hazard is the risk that a party has not entered into a
contract in good faith or has provided misleading information
about its assets, liabilities, or credit capacity.
Invest in information availability
Invest in information credibility
Don’t invest in the contract invest in the information required to
assure people they made the right decision, and you can be
relied on to be true to your commitment
Did I make the right commitment? - adverse selection
Can the person I am working with be trusted to keep the
commitment? - moral hazard
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Copyright © 2021 Thomas Mazzone
Invest in information availability and credibility
Case studies
CCR
CCR
CCR
Company
Customer
Suppliers
share information on CCR’s ( a commitment to sharing private
information) and volunteer penalties for non-compliance with
delivery agreements (a commitment to trust building), invest in
partner capability development programs
Customer Development
Design Partner Development
Supply Chain Development
50
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Copyright © 2021 Thomas Mazzone
Invest in trust
Counter adverse selection
Counter moral hazard
Invest in value/divest in value
Cost responsive
Experience responsive
Market Responsive
Invest in standards
data
process
Ensure we deliver the value people need/want
Ensure we are able together to work together to maximize the
value we deliver
Ensure we are able to focus on what we do best
market growth
51
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Copyright © 2021 Thomas Mazzone
How do we grow our opportunities to partner – the essence of
supply chain analysis – the ability to integrate supply with
demand
Stage I – Understand our CCR and ensure we don’t limit its
growth
Stage II – Develop a shared Understanding of us and our
partners (suppliers and customers) CCR and ensure we don’t
limit each others growth – manage variation together
Stage III – Understand how to expand supply and demand for
our products and our capabilities – for us and our partners
the biggest constraint on future growth is the cost of transacting
if all tasks, processes and data is unique to the individual
transaction then it becomes impossible to scale beyond the
individual ‘local’ supply chain
the key to supply chain growth is ‘standardization’
to create more ‘flow’ – more customers, more producers for
more products/services to more markets
Stabilize Capacity
Extend Opportunities to Utilize Capacity - It is easy to find us
and use us – can that create new opportunities to access new
customers or sell new products/services
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Copyright © 2021 Thomas Mazzone
The Importance of Standards and their relationship to market
growth
The European Committee for Standards
United Nations Industrial Development Organization
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Copyright © 2021 Thomas Mazzone
To focus management attention on higher-order processes, such
as serving customers, responding to new business opportunities,
and developing new products, managers need to limit the time
they spend on what should be routine activities. They need to
automate routine tasks, so those tasks are performed reliably
and predictably without requiring any thought.
The foundation for execution results from carefully selecting
which processes and IT systems to standardize and integrate.
Ross, Jeanne W.. Enterprise Architecture As Strategy: Creating
a Foundation for Business Execution . Harvard Business Review
Press. Kindle Edition.
This is equally true when it comes to companies and by
extension supply chains
Transaction costs resulting from non-standard, non scalable
tasks, processes and data limit access to capabilities and
markets
understanding what we need
finding suppliers and customers
pricing the supply of the need fairly
enforcing the terms of the contract
the more we standardize these aspects of transactions the easier
it ease for people to participate in the market, in our market
we need to determine what to standardize and what to make
unique (our core competency, so we have a differentiating place
in the market)
54
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Enterprise architecture as strategy – a model for understating
how to focus standardization investments
Process Architecture Assessment is based on research conducted
at MIT which was published in this book
This presentation and article summarize the core concepts that
are presented in the book
The book was well received by students, but i thought it was
overly complex, and confusing in the presentation of its ideas
This presentation is an attempt to simplify those concepts and
therefore make it easier to apply
55
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
55
All businesses start as a single business units/processes
Product/Service
Customer
Process
Process
Process
Supplier
Our Company
Single ‘Local’ Supply Chain
56
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Market growth come through the facilitation of access
Product/Service
Customer
Product/ Process
Process
Process
Supplier
Our Company
Single ‘Local’ Supply Chain
Customer
Customer
Customer
Product/ Process
Product/ Process
Product/ Process
Growth through access to more customers
Growth through access to more capabilities/products
Standardizing processes and data, makes it easier to access
partners and easier to focus on what we are good at
how can we use the pipeline we built to transition to a platform
57
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Gaining access to customers – Data standards
This is an ‘economies of scope’ advantage
Expand market share for current products, information about
what to look for how to use, whether it’s a good price
Expand scope of current products into comparable markets
Leverage strong operations model to bring efficiencies to other
products and/or markets
What are the challenges of gaining ‘economies of scope’
Integrating processes so that information can be shared
Information about customers, about suppliers, about process
efficiencies
What is the challenges of data sharing that prevents getting the
advantages of ‘economies of scope’ – these are opportunities
Data definition, formatting, normalization
Data Storage and access
Maintaining data Integrity, access…
can we facilitate data standardization, or should we adopt
existing standards
58
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Gaining access to capabilities – Process standards
This is an ‘economies of scale’ advantage
Expand scale or processes
Expand capabilities of processes
What are the challenges of gaining ‘economies of scale’
Process standardization, make things similar so we can scale
them, it becomes obvious how to interact with us
Process centralization, take things away, so that processes can
specialize
What is the challenge of process standardization that prevents
getting the advantages of ‘economies of scale’ – these are
opportunities
Overcome, local differences not easily reconciled with global
needs…
Standardize, long-lived, deeply embedded cultural/process
norms…
Overcome, fear of change, inability to adjust, by providing
support and emphasizing the opportunity to specialize on core
competencies…
can we facilitate process standardization, or should we adopt
existing standards
59
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Greater centralization, process standardization and data access
improved the ability for participation in the marketplace
Supply Chain/Industry Platform Design Choices:
Should we standardize business process
Should we integrate business processes
Should we centralize business processes
Value delivery to Customers drives the decision:
Are there economies of scope to be gained that will either
broaden our product suite, improve our service capability or
both?
Are there economies of scale to be gained that will lower the
cost of our product, reduce lead time, improve throughput or all
three?
Are there economies of speed to be gained that will improve
time-to-market?
Does standardization or integration free management attention
away from commodity process to focus on strategic ones
Does standardization or integration increase our ability to react
to change
60
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
Case studies
Investments in standardized data, process standards and
centralized services (e.g., PayPal)
Investments in trust and brand development (e.g., partner
development programs and customer rating systems)
investments in learning and support to help suppliers be better
market participants (especially for smaller companies)
61
Copyright © 2021 Thomas Mazzone
Copyright © 2021 Thomas Mazzone
supply chain
performance gap assessment
process design assessment
management agility assessment
market growth assessment
improvement road map
62
Copyright © 2021 Thomas Mazzone
Growth Path Assessment – Achieving ‘Viable Vision’
Goldratt felt that any company could grow its value contribution
(profitability) to the level of current revenue in 3 years
Primary growth driver is constraint elimination and constraint
management, for your self initially then with
suppliers/customers, then with the eco-system/market
This is a model for presenting a plan to implement
improvement. It is a four-stage process that could take place
over three years
Establish context -> understand the core customer, justify the
focus. be able to define the full supply chain that serves that
customer, specifying the lead time and capacity metrics -
identify current gaps
Year 1 - internal capability -> ensure we can deliver what the
market wants, build internal flexibility, ‘move the constraint
outside the company - transition to ‘dynamic capacity
management’
Year 2 - vendor capability -> ensure our partners don’t limit our
abilities, build external flexibility, help the vendor improve
flow and manage their constraint – transition to ‘order
frequency’
Year 2 - customer capability -> enable our customers to grow,
build external capability, help the customer improve flow and
manage their constraint – transition to ‘demand management’
Year 3 - market capability -> reduce market constraints - build
market capabilities to enable access and participation –
transition to ‘market facilitation and management’
present
profit
revenue
future
profit
growth through focus on P1 and P2, not P3
(Paradigm, Policy and Not Physical)
3 years
HW
3
4
This is Goldratt’s viable vision
1
2
63
Copyright © 2021 Thomas Mazzone
Year 1 – understand the CCR – understand market demand and
lead time requirements - ensure planned capacity is in place –
protect the capacity –> build internal flexibility (centered first
on protecting the CCR through unbalance and cross–training) –
understand lead time/price elasticities to ensure commitments
are met during natural variation – avoid chaos
63
supply chain
performance gap assessment
process design assessment
management agility assessment
market growth assessment
improvement road map
assessment and recommendation
develop tactical and strategic agility to profitably grow your
business
Final Paper
64
Copyright © 2021 Thomas Mazzone
Develop a Supply Chain Assessment and Present Improvement
Recommendations
Objectives:
Bring the analysis together to make a recommendation to
improve your company’s supply chain and grow its business
(market/eco-system)
Approach (essentially unify the HW assignments into a coherent
report):
Establish context and justify focus - Who is the company,
within that company which customer/market segment and why?
Within that customer/market segment which product/supply
chain and why? Who are the other members of the supply chain
that we need to partner with to deliver the product or service?
What is the ‘critical path’ supply chain? What are the
subordinated supply chains? What is our current level of
collaboration? Profitability?
Assess current state performance – Define the supply chain (the
core high-level activities) that is the focus of the analysis.
Describe the customer, product/service, and capacity/lead time
metrics that are used to assess performance. Identify the current
organization and customer expectation and assess the
performance gap or threat to a performance advantage that
exists.
Assess supply chain process design – Describe the core
activities of the supply chain and identify the root causes of
current performance and/or challenges to sustainable advantage.
Identify opportunities for process improvements - with focus on
improved lead time, greater output and lower operating expense
and inventory levels (waiting times) or or all three using the
CCR as the central point of analysis
Assess supply chain management ability - Describe the current
supply chain management strategy and identify opportunities for
improvements in both customer and supplier management.
Assess opportunities for management improvements with focus
on improved delivery consistency and process agility to improve
lead times and capacity utilization
Assess supply chain growth strategy - Describe the market that
your company sells in. Identify opportunities to standardize
processes, data and trust that could reduce market constraints
and present opportunities for mutual gain. Identify the pros and
cons of being a leader or follower and recommend best option
for your company
Summarize opportunities (the agreements) for improvement and
present a path for the implementation (agreed) recommendation
– summarize the opportunities for improvement by focusing on
improvements to lead time, capacity, and delivery consistency.
Present a plan/road map for implementing your
recommendations
HW 1
HW 2
HW 3
HW 4
Where are we going (always remind us)
Where were we
(always remind us)
Develop a shared understanding, tell the story
All HW’s
(always remind us)
This is the foundation of all supply chain presentations where
are we, where have we been, we where are we going and what
do I need your agreement on?
At each step ask for agreement on conclusions and
recommendations for improvements
Final paper
65
Copyright © 2021 Thomas Mazzone
Presentation Requirements
Slide 1
Slide 2
Slide 3
Who is the company, within that company which
customer/market segment and why? Within that
customer/market segment which product/supply chain and why?
Who are the other members of the supply chain that we need to
partner with to deliver the product or service? What is our
current level of collaboration? Profitability?
Define the supply chain (the core high-level activities) that is
the focus of the analysis. Describe the customer,
product/service, and capacity/lead time metrics that are used to
assess performance. Identify the current organization and
customer expectation and assess the performance gap or threat
to a performance advantage that exists.
Slide 4
Slide 5
Summarize context and justify focus
Summarize current state performance assessment
Summarize supply chain process design assessment
Summarize supply chain management ability assessment
Summarize supply chain growth strategy assessment
Describe the core activities of the supply chain and identify the
root causes of current performance and/or challenges to
sustainable advantage. Identify opportunities for process
improvements - with focus on improved lead time, greater
output and lower operating expense and inventory levels
(waiting times) or or all three using the CCR as the central
point of analysis
Describe the current supply chain management strategy and
identify opportunities for improvements in both customer and
supplier management. Assess opportunities for management
improvements with focus on improved delivery consistency and
process agility to improve lead times and capacity utilization
Describe the market that your company is part of. Identify
opportunities to standardize processes, data and increase trust
that could reduce market constraints and present opportunities
for mutual gain. Identify the pros and cons of being a leader or
follower and recommend best option for your company
Assume you are a McKinsey Consulting team presenting to your
client (and not the class and professor)
typical slide format
Header - what is on this slide and why - what is its role in the
story
Trailer - what is the key message on this slide and why - what
do we need to remember
Exhibit - what is the analysis that you did to support your
primary (single conclusion) - where should we be looking
Options for a trailer:
recommendations
key benefits and risks
work you need help on
support you require
etc…
Always be able to speak to the value of your recommendation
vs. the effort to implement your recommendations
This structure is a requirement
(S.W.O.T. & D.I.C.E.)
Slide 6
Summarize opportunities (the agreements) for improvement and
present a path for the implementation (agreed) recommendation
Summarize the opportunities for improvement by focusing on
improvements to lead time, capacity, and delivery consistency.
Present a plan/road map for implementing your
recommendations
66
Copyright © 2021 Thomas Mazzone
20% 10% 10% 30% 20%
Session Focus Session # Session Date Quizzes Forums Case
Writeup Group Assignments Final Paper
1 1/28 - - - - -
2 2/4 - - - - -
3 2/25 - - - - -
4 3/4 Slide 274-282 - - - 3/4 - HW 1 Performance Gap
5 3/11 Slide 312 - 3/11 - 3/11 - Forum 1 Performance Focus
6 3/18 - - - - -
7 3/25 Slides 283-291 - - - 3/25 - HW 2 Design Challenges
8 4/1 Slides 304-305 - - 4/1 - - Case 1 Applying TOC
9 4/8 Slides 280-298 4/8 - - - Quiz 1 Design and Partnership
10 4/15 Slide 312 - 4/15 - - - Forum 2 Design and Management
11 4/22 Slides 304-305 - - 4/22 - - Case 2 Supply Chain
Partnerships
12 4/29 Slides 257-264 - - - 4/29 - HW 3 Mamnagement
Capabilities
Supply Chain
Leadership
Supply Chain
Technology
Supply Chain
Growth
S
u
p
p
ly
C
h
a
in
S
u
cc
e
ss
Jo
u
rn
e
y
Final
Recommendation
(SWOT and DICE)
P
la
tf
o
rm
L
ea
d
er
sh
ip
,
Ec
o
-s
ys
te
m
G
ro
w
th
,
an
d
S
tr
at
eg
ic
A
g
ili
ty
Supply Chain
Viable Vision
C
o
re
P
rin
ci
p
le
s
Supply Chain
Tactical Agility
Supply Chain
Partnership
AlignmentD
el
iv
er
y
C
o
ns
is
te
nc
y,
T
ac
ti
ca
l
A
g
ili
ty
an
d
P
ar
tn
er
sh
ip
A
lig
nm
en
t
Supply Chain
Strategy
Supply Chain
Design
Supply Chain
Delivery
Consistency
Supply Chain
Foundations
P
ro
ce
ss
D
es
ig
n
5/13
-
13
13
13
5/6 5/6 -
14
14 Forum 4
--
Grade Weighting
5/6
-
-
5/6
-
Assignments
Forum 3
Participation in Class - 10%
(un-excused absence from class will reduce your final grade)
- 5/6
-
- -
Quiz 2 Supply Chain Mgmt
Final paper and
Presentation
-
5/13-Slides 271-275
Slide 277
Slides 265-270
Final paper and Presentation-- -
HW 4
- 5/13 - -
Refere slides 360-368
5/6
5/13
Market Leadership
Strategic Flexibility
HW Guide ref
for Assigments
HW Guide ref
for Class Prep
Slides 180-
236
Slides 114 -
185
Slides 89 -
128
Slides 2 - 75
Slides 280-298
Slide 277
Focus of Assignment
Tactical Flexibility
-
Reception Diagnosis Treatment Recovery Discharge
Time
Capacity
units/day
Jennifer (hospital manager)
HarrySally and FredJoe and Lisa Jane and Peter Mary and Ted
50% Productive 50% Productive 100% Productive 50%
Productive 50% Productive
Receptionist
$45k/yr.
Nurse
$90k/yr.
Doctor
$300k/yr.
Nurse
$90k/yr.
Receptionist
$45k/yr.
planned
commitment
something we expect to
meet 100% of the time
Commitment
protection
5 patients/day
ReceptionDiagnosisTreatmentRecoveryDischarge
Time
Capacity
units/day
Jennifer (hospital manager)
HarrySally and FredJoe and Lisa Jane and PeterMary and Ted
50% Productive
50% Productive
100% Productive50% Productive
50% Productive
Receptionist
$45k/yr.
Nurse
$90k/yr.
Doctor
$300k/yr.
Nurse
$90k/yr.
Receptionist
$45k/yr.
planned
commitment
something we expect to
meet 100% of the time
Commitment
protection
5 patients/day
HW 1
HW 2 and 3
HW 4
Core
Processes
Customer
Supplier
Supplier
Supplier
Supplier
Customer
Supply Chain
Market
HW 1
HW 2 and 3
HW 4
WorkProcess/
Activity Name
WorkProcess/
Activity Name
WorkProcess/
Activity Name
CCR
WorkProcess/
ActivityName
WorkProcess/
ActivityName
WorkProcess/
ActivityName
CCR
Product Leadership
Operational Excellence Customer Intimacy/Experience
“Best Product”
“Best Total
Solution
”“Best Total Cost”
“Customer Responsiveness”“Operational Competence”
“Product Differentiation”
Industry Leadership
Industry Laggard
Industry Competitive
Definitions
Assessment Criteria
Self-
Assessment
Trade-offs???
Product Leadership
Operational Excellence Customer Intimacy/Experience
“Best Product”
“Best Total

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- Supply Chain Management - Assessing supply chain design an

  • 1. - Supply Chain Management - Assessing supply chain design and management capabilities and developing recommendations for improvements Sessions 13 and 14 - Platform Leadership, Eco-system Growth, and Strategic Agility Supply Chain Management is a Business Partnership Model Focus Core question: How do we maximize throughput and shared value creation? Spring 2021 Version 1 Copyright © 2021 Thomas Mazzone 1 Agenda Review course calendar 10:00 - 10:10 am break 11:15 - 11:30 am Discuss the Supply Chain Partnership and the core need and challenges of outsourcing and the scope of Quiz 2 Discuss Platform Leadership, Eco-system Growth, and Strategic Agility and final HW Assignment 11:30 - 12:30 pm 10:10 - 10:30 am 2 Copyright © 2021 Thomas Mazzone
  • 2. Review course calendar 3 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Overview of Sessions and Assignments This is a supply chain ‘consulting methodology’, to help you better ‘see’, design and manage industry and ecosystem partnerships Each session builds on the other to lead to a comprehensive executive presentation presenting findings, conclusions and recommendations We are learning a methodology for understanding, defining, improving, innovating and managing a supply system of partnerships Open after class for 7 days 4 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Supply Chain Partnership Alignment Do we know understand the importance of strategic sourcing to supply chain design and management? Do we understand the range of partnership/ownership relationships? Do we understand how to assess make/buy and the implications in both cases for supply chain management?
  • 3. Focus: Understand the concept of ‘incentive alignment. Be able to articulate why it is critical to supply chain success. Understand the core challenges of incentive alignment and how to address them. Understand the how make vs buy decisions are made. Understand the role of transaction costs in making these decisions. Use our understanding of incentive alignment and transaction costs to better understand the role ‘blockchain’ has in fundamentally rethinking the nature of transactions and contracts and the potentially profound impact this will have on supply chain management and design Readings: Read: Aligning Incentives in Supply Chains – HBR 2004 Read: Blockchain for Dummies Read: Operations Management Readings: Strategic Sourcing HW – discussion only Assess strategic outsourcing opportunities for your supply chain For those activities that are ‘outsourced’ assess the contractual arrangement and determine whether there are opportunities to improve incentive alignment Session 11 – 4/22 Session 12 – 4/29 5 Copyright © 2021 Thomas Mazzone Supply Chain Growth Supply Chain Leadership Supply Chain Technology Do we know how to drive industry growth? Do we know how to shape industry direction? Do we know which technologies are important? Do we know where to implement technologies to improve
  • 4. performance HW Assignment 4– Growth and Leadership Assessment Due 5/6 HW Assignment 4 – Technology Assessment Due 5/6 Focus: Understand the industry life cycle and its impact on Supply Chain design and management decisions Incorporate the Value Disciplines analytical framework to deepen our understanding of life cycle impact on strategy Understand ‘strategic flexibility’ and how it changes at different stages of the industry life cycle Understand transaction cost economics and its importance in helping us to understand how to impact the CCR of our customers and suppliers to improve total supply chain Throughput lower total supply chain and Operating Expense and Inventory Readings: Read: Value Discipline Models and Competitive Success Read: What are Transaction Costs Read: Industry Life Cycle Read: Your Next Supply Chain – The Sloan Management Review Jan 2010 HW – focus Identify industry life cycle stage – assess implications for supply chain design and management strategies Identify opportunities for lowering transaction costs at both supplier and customers. Identify opportunities to help customers and vendors better assess and manage their respective CCR to improve T, OE and I for the whole supply chain Focus: Understand the operations management lifecycle model and the core impact of process and data standardization Understand the purpose of markets and how market leaders create opportunities for total market growth
  • 5. Understand the growth of ‘platforms’ and how platform leaders shape conditions for platform participant success Readings: Read: Enterprise Architecture as Strategy Read: Driving Value from IT – HBS 2009 Read: The Supply Chain of the Future - IBM 2009 Read: Pipelines, Platforms, and the New Rules of Strategy – HBS 2016 Read: How to Innovate When Platforms Won't Stop Moving – SMR 2011 HW – focus Define market/ platform scope Based on life cycle assessment define key participants Identify opportunities for market/platform leadership in either process or data standardization or both Identify opportunities for brand collaboration Describe the specific opportunities for process/data/brand standardization and articulate the impact on industry T, OE and I Assess your market/platform position as either laggard/follower or leader. If leader describe benefits and challenges of maintaining leadership. If laggard/follower describe the benefits and challenges of improving your position Focus: Understand the core technology trends and their impact on Supply Chain Management and Industry Growth Special emphasis will be on Big Data, IoT, 3D Mfg., and Social Media and Collaboration Technologies emphases will be on Understand how to align these technologies against the framework we have studied to understand best how to implement them to improve T and reduce OE and I Readings: Read: Seven traits of successful digital businesses – MQ 2014 Read: Digital transformation - Raising supply chain performance to new levels – MQ 2017 Read: McKinsey_3-D printing takes shape – MQ 2014
  • 6. Read: Creating a Successful Internet of Things Data Marketplace – MQ 2016 HW – focus Identify which new technologies are having the biggest impact on your supply chain Use the frameworks developed to date to assess where to apply these technologies (process/data/standardization; transaction cost economics; CCR capability/speed/protection) Assess the impact in terms which key metric (i.e. T, OE, I) will be most impacted and why Session 13 – 5/6 Do we know how to drive industry growth? Do we know how to shape industry direction? 6 Copyright © 2021 Thomas Mazzone Supply Chain Viable Vision Do we have a ‘picture’ that can be ‘shared’ of ‘Viable Vision’? Can we describe the journey in way that it feels achievable and exciting? Focus: Understand Goldratt’s view of Viable Vision Relate cumulative set of recommendations and how they represent a ‘journey map’ to a viable vision Discuss how we make the journey actionable Reconnect with SWOT and DICE as frameworks for assessment and communications Readings: View: Goldratt on Viable Vision - Theory of Constraints HW – focus Summarize HW assignments into a final paper that takes
  • 7. cumulative feedback and refines assessment and recommendations Link the recommendation into a ‘journey map’ that paints a compelling picture of a future state and presents a road map that feels believable, pragmatic and inspiring Session 14 – 5/13 Supply Chain Recommendation Final Paper – SWOT Summary, Viable Vision Journey Map and DICE Assessment Due 5/13 7 Copyright © 2021 Thomas Mazzone supply chain Core Concept 8 Understanding Outsourcing through Transaction Costs performance gap assessment process design assessment management agility assessment market growth assessment improvement road map 8 Copyright © 2021 Thomas Mazzone M CCR C To ensure we can make and keep commitments should we do
  • 8. everything ourselves? We want to make sure the customer gets what they want? How much of the supply chain do we have to control to make sure that happens? How do we partner with supply chain partners to ensure they fulfill on their commitments? we make a contract We should outsource as much as possible (we shouldn’t make everything) but that means we are now reliant on others to help us meet commitments. Assets Activities Assets Activities Assets Activities Assets Activities Assets Activities 9 Copyright © 2021 Thomas Mazzone Mostly everything should be bought Only do what you are good at Supply chain leaders, platform leaders, market leaders excel at organizing producers to align and deliver a completed good or services that fulfills a need 10 Copyright © 2021 Thomas Mazzone
  • 9. Wikipedia here Assess the costs structure of your supply chain and determining what you should make or buy What is the boundary of the ‘firm’, your company? Your supply chain? What does it mean to make? What does it mean to own the resources to make? Shouldn’t we buy everything? Owning is expensive, why? Why don’t you make your phone or your laptop? 11 Copyright © 2021 Thomas Mazzone A contract is a legally binding document between at least two parties that defines and governs the rights and duties of the parties to an agreement.[1] A contract is legally enforceable because it meets the requirements and approval of the law. A contract typically involves the exchange of goods, service, money, or promise of any of those. "Breach of contract", means that the law will have to award the injured party either the access to legal remedies such as damages or cancellation.[2] The Heart of Supply Chains: A Contract Wikipedia Why are developing ‘complete’ contracts so hard to make and enforce? Contracts ae at the heart of supply chains just as contracts are at
  • 10. the heart of all relationships, including marriage. And like marriages, they are the start of something that has to evolve, not the end of something that is finished A complete contract is an important concept from contract theory. If the parties to an agreement could specify their respective rights and duties for every possible future state of the world, their contract would be complete. There would be no gaps in the terms of the contract. The Ideal world: ‘A Complete Contract’ Wikipedia This is an unattainable goal, yet this is the aim of most outsource agreements The key point to understand, contracts are not ‘one-time’ events, but the starting point for an ongoing relationship 12 Copyright © 2021 Thomas Mazzone Asset specificity mean asset specialization – what does that mean – how does it apply to machines – how does it apply to humans - why does that make both buying and making harder? What does it mean to be ’bounded’? rational? Why does that making both buying and selling harder? How does that create the risk of ‘opportunism’? Transacting is hard – Both buying things and making things, like employees. What does it mean to make an employee? How does that relate to the nature of the good or service and the activity required to make that good or service? We should only specialize on the activities that we are good at, that are a core competency? That differentiate us in the marketplace? We should outsource activities that other people are better at?
  • 11. Do we make the coffee cups for your coffee shop? No. Do you grow and roast your own beans? Yes. 13 Copyright © 2021 Thomas Mazzone Why are ‘complete’ and ‘on-going’ contracts hard to make and enforce? Transactions are the unit of analysis and a ’complete contract’ is the goal we need to transact with others that is we need to write a contract that specifies commitments and the consequence failure to meet a commitment Behavioral characteristics of the contracting parties make obtaining a complete contract difficult to accomplish Bounded Rationality makes it difficult to get and process information (that we need to transact with others) Opportunism means that people are self inclined to their own interests and not others, so they ay intentionally or unintentionally hide important information Transactions characteristics of the service or product being bought/sold obtaining a complete contract difficult to accomplish Asset specificity makes it difficult to describe the product or service in ways that make the contract enforceable Uncertainty in the environment make it difficult to describe all possible events that could impact the ability to execute the contract Contract types Arms-length - invest in the process - attempts to be complete - get the best price (most mistakenly focus here)
  • 12. Relationship-based - invest in the outcomes - achieve the right goal (most should, but don’t know how to focus here) 14 Copyright © 2021 Thomas Mazzone Leverage Best Deal Non-Critical Efficiency Critical/Strategic: Cooperation Bottleneck: Supply Continuity Supply Risk/market Complexity Impact to Business develop strategic partnership terminate, find new supplier reduce dependencies and risk, find other solutions pooling of requirements high high low Assess the costs structure of your supply chain and determine what you should make or buy Which activity should someone else do? Which activity should we now do? purchased purchased purchased 1 2 3 What are your choices? easy/hard to buy/sell important/not important to an organization comp adv Will it improve capacity? Will it improve lead time?
  • 13. 15 Copyright © 2021 Thomas Mazzone Leverage Best Deal Non-Critical Efficiency Critical/Strategic: Cooperation Bottleneck: Supply Continuity Supply Risk/market Complexity Impact to Business develop strategic partnership terminate, find new supplier reduce dependencies and risk, find other solutions pooling of requirements high high low You have made the right decision to ‘buy’, to outsource, now what? Because of the need for some sort of asset specialization and bounded rationality (our inability to know everything) there is always an opportunity for ‘opportunism’, that is someone trying to take advantage of us easy/hard to buy/sell important/not important to an organization comp adv This is why we need to design supply chain contracts that ensure we have aligned incentives, to make sure no one takes advantage of ‘hidden information’. Invest in goal alignment and relationship development and not ‘complete’ contracts More handshakes and dinners, less lawyers!
  • 14. Contract types Arms-length - invest in the process - attempts to be complete - get the best price (most mistakenly focus here) Relationship-based - invest in the outcomes - achieve the right goal (most should, but don’t know how to focus here) Write a contract… What type… 16 Copyright © 2021 Thomas Mazzone Understanding how to make contracts easier ensure I picked the right partner, and that partner can be trusted is the key to understanding how to create and grow eco-systems 17 Copyright © 2021 Thomas Mazzone Using technology to lower Transactions Costs and make it easier to create, and manage supply chains – easier to create and manage relationship - and ultimately grow them into industry platforms/marketplaces (e.g. Amazon) – Blockchain as a starting point - larger social networks of connected relationships 18 Copyright © 2021 Thomas Mazzone Blockchain is an enabling technology that facilitates transactions processing Download the book here
  • 15. Transaction Cost Economics helps to explain why transacting is difficult, how markets and technologies like blockchain help and how a focus on transactions unlocks why supply chains are expanding into platforms and ecosystems – this is ‘bridging’ discussion from local supply chains to supply ecosystems and platforms Go here Transactions require trust and transparency Reducing the costs of transactions make supply chain more open (easier to ’buy’ than make) and more scalable (easier to conduct transactions with more customers and suppliers) Review Chapters 1-3 The focus will be on Ch 3 – ‘Friction-Free Markets’ of Markets with low Transaction Costs 19 Copyright © 2021 Thomas Mazzone ‘Buying is expensive’ so is making How does Blockchain help? 20 Copyright © 2021 Thomas Mazzone Focus on the transaction Address the cost of transacting 21
  • 16. Copyright © 2021 Thomas Mazzone Where do we focus our efforts? 22 Copyright © 2021 Thomas Mazzone Where do we focus our efforts? 23 Copyright © 2021 Thomas Mazzone - Supply Chain Management - Assessing supply chain design and management capabilities and developing recommendations for improvements Quiz 2 - Supply Chain Management Spring 2021 Version 3 Copyright © 2021 Thomas Mazzone 24 1 - How does lengthening or shortening lead time commitments lead to opportunities to improve capacity utilization and throughput? Developing Supply Chain Tactical Flexibility (reflection on HW Assignment 3)
  • 17. 10 points Opens for 7 days on May 6th 25 Copyright © 2021 Thomas Mazzone 2 – What is the difference between ‘out-sourcing’ and ‘off- shoring’? Why do firms ‘out-source’? What are some of the specific issues this raises? Pick one and describe more fully why this is a challenge? Section 1 – Introduction Operations Management Readings: Strategic Sourcing 3 - Review the section, ‘An Overview of Strategic Sourcing Decisions’. What are the challenges in determining whether to ‘make’ or ‘buy’? Provide an example to demonstrate pros and cons of each approach. 10 points 10 points 26 Copyright © 2021 Thomas Mazzone Section 2 – Essential Reading Operations Management Readings: Strategic Sourcing 20 points 4 – Use either the Apple or Crocs case study. Pick one purchased input, that is something that is currently ‘bought’. Assign it to one of the quadrants in the Kraljic Matrix. Justify why it is there. Recommend either keeping it there or moving it to a different quadrant. Justify your recommendation. 27 Copyright © 2021 Thomas Mazzone
  • 18. 5 - Review the section, ‘Competing on Core Competencies’. How do core competencies influence the ‘make-or-buy’ decision? Section 3 – A Primer on Make-or-Buy Research Operations Management Readings: Strategic Sourcing 6- Review the section, ‘Transaction Cost Economics’. What are transaction costs? How does ‘asset specificity’ relate to an organization’s core competencies? How do ‘bounded rationality’ and ‘opportunism’ influence the decision of whether to make or buy? 7 - Read the article, ‘Aligning Incentives in Supply Chains’. What are some of the incentive problems that firms face? How can they address or prevent incentive problems? Provide a specific example that illustrates the incentive problem and how your recommendation would address it. 10 points 20 points 20 points 28 Copyright © 2021 Thomas Mazzone supply chain Core Concept 9 Assessing Platform Growth and Market Expansion Opportunities through Transaction Costs performance gap assessment process design assessment management agility assessment market growth assessment improvement road map 29 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone
  • 19. Do you understand the platforms that you are part of? Do you understand what drives value? Are you able to evolve and learn when to standardize and when to specialize? Can we trust our partners? Do we know which processes to focus on? Do we have a ‘global’ understanding of our supply chain? How do we reconcile cost containment, revenue growth and customer intimacy? Does the value discipline model help us to focus? 30 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Do we know which processes to focus on? Platform businesses bring together producers and consumers in high-value exchanges. Their chief assets are information and interactions, which together are also the source of the value they create and their competitive advantage. Where do we choose to focus: offer centralized services lead data/process standards follow data/process standards to gain access to markets and capabilities 31 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Do we know which processes to focus on?
  • 20. Understanding how to ‘dis-aggregate’ supply chains and focus on core capabilities and off load or ’sell’ standard capabilities is key How do we create deeper partnerships to drive innovation-based growth opportunities 32 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Starting with local supply chains then migrating to ecosystems expands how we see the opportunities for apply new technologies How does technology and make data easier to standardize and access How does technology and make processes easier to understand and leverage How does technology and make it easier to create shared services so that business partners can focus on their core competencies 33 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone How can you use what we have learned to make an immediate impact to your (next) company), even at a junior level How do you start local to propose big ideas that could transform your company and your personal opportunities.
  • 21. 34 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Firm Strategy, Structure and Rivalry Factor Conditions Demand Condition Related and Supporting Industries Determinants of National (eco-system) Competitive Advantage Read Supply Chain Partnership Subordinated Supply Chain Partnership Customer Partnership Government Partnership Training, Infrastructure, Finance How do we impact the determinants of eco-system advantage? Eco-systems sink or swim together 35 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Marketplace
  • 22. Consumers Producers Supply Chains, Markets, Eco-systems, Platforms and Pipelines Analysis Market = a regular gathering of people for the purchase and sale of provisions, livestock, and other commodities. Eco-systems connect local markets into larger markets supply chains feed markets Market lower the transaction costs of selling products and services to consumers Platforms and pipelines are the infrastructure that make markets and eco-systems possible (can we help to make them more efficient) Are there opportunities to either better ‘supply’ markets or to improve the market’s ability to supply Producers of goods and services have a choice sell direct to the consumer or sell through a market place 36 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Market Analysis
  • 24. Market Exchange market and market maker assessment we need markets Markets lower the cost of ‘trusting’ ‘transacting’ understanding searching assessing contracting policing these are market participation/ throughput constraints ‘Makers’ lower market constraints and therefore market throughput by leading standard setting and trust development infrastructure platforms data standards process standards information transparency and credibility (i.e. partnership on brand collaboration and trust development) we need Market ‘makers’ Data sharing
  • 25. Infrastructure sharing Information Transparency and Credibility Process sharing paths paths Standards drive sharing opportunities where are the constraints how do we increase throughput market assessment options own/manage the market join the market as a product join the market as a minimarket To either create the standards or exploit the standards Where are there other suppliers and customers to leverage and grow with – keep the focus on a few opportunities Value focus paths Standardization and Centralization Focus 37 Copyright © 2021 Thomas Mazzone 37
  • 26. Leadership and platform (market, industry) growth Invest in trust Counter adverse selection Counter moral hazard Invest in value/divest in value Cost responsive Experience responsive Market Responsive Invest in standards data process Ensure we deliver the value people need/want Ensure we are able together to work together to maximize the value we deliver Ensure we are able to focus on what we do best We have a moral obligation to maximize value and ‘grow the wealth of the village’ so we all prosper market growth 38 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Leadership and platform (market, industry) growth Invest in trust Counter adverse selection Counter moral hazard Invest in value/divest in value Cost responsive Experience responsive Market Responsive Invest in standards
  • 27. data process Ensure we deliver the value people need/want Ensure we are able together to work together to maximize the value we deliver Ensure we are able to focus on what we do best We have a moral obligation to maximize value and ‘grow the wealth of the village’ so we all prosper market growth 39 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Invest in trust Counter adverse selection Counter moral hazard Invest in value/divest in value Cost responsive Experience responsive Market Responsive Invest in standards data process Ensure we deliver the value people need/want Ensure we are able together to work together to maximize the value we deliver Ensure we are able to focus on what we do best
  • 28. market growth 40 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Value Disciplines this is a useful framework for helping to understand how to focus our supply chain – it builds on the market responsive vs cost effective model Market Responsive Cost Responsive Experience Responsive 41 Copyright © 2021 Thomas Mazzone 41 focused on market responsiveness focused on experience responsiveness focused on cost responsiveness Customer Value Disciplines define the key supply chain requirements of each stage of the industry life cycle 42 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone
  • 29. Industry Life Cycle dictates where to invest (make) and where to buy (divest), which assets/activities Economies of Speed Economies of Scope Economies of Scale Customer Intimacy Product leadership Operational Excellence Company? Company? Company? Where are we? Where are we going? How do we need to adapt? Market Responsive Customer Responsive Cost Responsive Invest in different specialized assets/activities Divest of others which are no longer desired by your customer Copyright © 2021 Thomas Mazzone Copyright © 2008 Thomas Mazzone Industry Life Cycle – the key to understanding Supply Chain Investment/Divestment Assessments Economies of Speed Economies of Scope Economies of Scale Customer Intimacy Product leadership Operational Excellence
  • 30. Company? Company? Company? Invest in Centralized Services Invest in Standardized Data Invest in Standardized Processes Growth through centralization and standardization Copyright © 2021 Thomas Mazzone Invest in - Cost responsiveness invest in less variation CCR so you can reduce non-CCR cost without increasing risk on missing commitments training activity redesign Case studies Lean Transformation and cost-effectiveness across and enterprise
  • 31. ‘Village’ cost effective delivery across an ‘eco-system’ 45 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Invest in - Customer responsiveness Case studies CCR invest in capacity at the CCR to enable time to interact and ‘customize’ the output, ensure protection built at non-CCR A
  • 32. B C Assess process activity configurations assess potential for different customer segments (segment not just by features but also by price/lead time elasticities) Life Insurance Redesign Customer Relationship Management customized processes focused on differentiated services 46 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Invest in - Market responsiveness Case studies CCR Invest in strategic and tactical flexibility (range, performance and mobility) Global Supply Chain Responsiveness CCR CCR
  • 33. CCR invest in capacity at the CCR to enable time to innovate and ‘experiment’, ensure protection built at non-CCR Product Design and Consistency, Responsiveness 47 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Invest in trust Counter adverse selection Counter moral hazard Invest in value/divest in value Cost responsive Experience responsive Market Responsive Invest in standards data process Ensure we deliver the value people need/want Ensure we are able together to work together to maximize the value we deliver Ensure we are able to focus on what we do best market growth
  • 34. 48 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Investing in ‘relationships’ Adverse selection Adverse selection refers to a situation where sellers have more information than buyers have, or vice versa, about some aspect of product quality, although typically the more knowledgeable party is the seller. Adverse selection occurs when asymmetric information is exploited. Moral hazard Moral hazard is the risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities, or credit capacity. Invest in information availability Invest in information credibility Don’t invest in the contract invest in the information required to assure people they made the right decision, and you can be relied on to be true to your commitment Did I make the right commitment? - adverse selection Can the person I am working with be trusted to keep the commitment? - moral hazard 49 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone
  • 35. Invest in information availability and credibility Case studies CCR CCR CCR Company Customer Suppliers share information on CCR’s ( a commitment to sharing private information) and volunteer penalties for non-compliance with delivery agreements (a commitment to trust building), invest in partner capability development programs Customer Development Design Partner Development Supply Chain Development 50 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Invest in trust Counter adverse selection Counter moral hazard
  • 36. Invest in value/divest in value Cost responsive Experience responsive Market Responsive Invest in standards data process Ensure we deliver the value people need/want Ensure we are able together to work together to maximize the value we deliver Ensure we are able to focus on what we do best market growth 51 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone How do we grow our opportunities to partner – the essence of supply chain analysis – the ability to integrate supply with demand Stage I – Understand our CCR and ensure we don’t limit its growth Stage II – Develop a shared Understanding of us and our partners (suppliers and customers) CCR and ensure we don’t limit each others growth – manage variation together Stage III – Understand how to expand supply and demand for our products and our capabilities – for us and our partners the biggest constraint on future growth is the cost of transacting if all tasks, processes and data is unique to the individual transaction then it becomes impossible to scale beyond the individual ‘local’ supply chain the key to supply chain growth is ‘standardization’
  • 37. to create more ‘flow’ – more customers, more producers for more products/services to more markets Stabilize Capacity Extend Opportunities to Utilize Capacity - It is easy to find us and use us – can that create new opportunities to access new customers or sell new products/services 52 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone The Importance of Standards and their relationship to market growth The European Committee for Standards United Nations Industrial Development Organization 53 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone To focus management attention on higher-order processes, such as serving customers, responding to new business opportunities, and developing new products, managers need to limit the time they spend on what should be routine activities. They need to automate routine tasks, so those tasks are performed reliably and predictably without requiring any thought. The foundation for execution results from carefully selecting which processes and IT systems to standardize and integrate. Ross, Jeanne W.. Enterprise Architecture As Strategy: Creating a Foundation for Business Execution . Harvard Business Review
  • 38. Press. Kindle Edition. This is equally true when it comes to companies and by extension supply chains Transaction costs resulting from non-standard, non scalable tasks, processes and data limit access to capabilities and markets understanding what we need finding suppliers and customers pricing the supply of the need fairly enforcing the terms of the contract the more we standardize these aspects of transactions the easier it ease for people to participate in the market, in our market we need to determine what to standardize and what to make unique (our core competency, so we have a differentiating place in the market) 54 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Enterprise architecture as strategy – a model for understating how to focus standardization investments Process Architecture Assessment is based on research conducted at MIT which was published in this book This presentation and article summarize the core concepts that are presented in the book The book was well received by students, but i thought it was overly complex, and confusing in the presentation of its ideas This presentation is an attempt to simplify those concepts and therefore make it easier to apply
  • 39. 55 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone 55 All businesses start as a single business units/processes Product/Service Customer Process Process Process Supplier Our Company Single ‘Local’ Supply Chain 56 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Market growth come through the facilitation of access Product/Service Customer Product/ Process Process Process Supplier Our Company Single ‘Local’ Supply Chain Customer Customer Customer Product/ Process Product/ Process
  • 40. Product/ Process Growth through access to more customers Growth through access to more capabilities/products Standardizing processes and data, makes it easier to access partners and easier to focus on what we are good at how can we use the pipeline we built to transition to a platform 57 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Gaining access to customers – Data standards This is an ‘economies of scope’ advantage Expand market share for current products, information about what to look for how to use, whether it’s a good price Expand scope of current products into comparable markets Leverage strong operations model to bring efficiencies to other products and/or markets What are the challenges of gaining ‘economies of scope’ Integrating processes so that information can be shared Information about customers, about suppliers, about process efficiencies What is the challenges of data sharing that prevents getting the advantages of ‘economies of scope’ – these are opportunities Data definition, formatting, normalization Data Storage and access Maintaining data Integrity, access… can we facilitate data standardization, or should we adopt existing standards 58 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Gaining access to capabilities – Process standards This is an ‘economies of scale’ advantage
  • 41. Expand scale or processes Expand capabilities of processes What are the challenges of gaining ‘economies of scale’ Process standardization, make things similar so we can scale them, it becomes obvious how to interact with us Process centralization, take things away, so that processes can specialize What is the challenge of process standardization that prevents getting the advantages of ‘economies of scale’ – these are opportunities Overcome, local differences not easily reconciled with global needs… Standardize, long-lived, deeply embedded cultural/process norms… Overcome, fear of change, inability to adjust, by providing support and emphasizing the opportunity to specialize on core competencies… can we facilitate process standardization, or should we adopt existing standards 59 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Greater centralization, process standardization and data access improved the ability for participation in the marketplace Supply Chain/Industry Platform Design Choices: Should we standardize business process Should we integrate business processes Should we centralize business processes Value delivery to Customers drives the decision: Are there economies of scope to be gained that will either broaden our product suite, improve our service capability or both? Are there economies of scale to be gained that will lower the cost of our product, reduce lead time, improve throughput or all
  • 42. three? Are there economies of speed to be gained that will improve time-to-market? Does standardization or integration free management attention away from commodity process to focus on strategic ones Does standardization or integration increase our ability to react to change 60 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone Case studies Investments in standardized data, process standards and centralized services (e.g., PayPal) Investments in trust and brand development (e.g., partner development programs and customer rating systems) investments in learning and support to help suppliers be better market participants (especially for smaller companies) 61 Copyright © 2021 Thomas Mazzone Copyright © 2021 Thomas Mazzone supply chain
  • 43. performance gap assessment process design assessment management agility assessment market growth assessment improvement road map 62 Copyright © 2021 Thomas Mazzone Growth Path Assessment – Achieving ‘Viable Vision’ Goldratt felt that any company could grow its value contribution (profitability) to the level of current revenue in 3 years Primary growth driver is constraint elimination and constraint management, for your self initially then with suppliers/customers, then with the eco-system/market This is a model for presenting a plan to implement improvement. It is a four-stage process that could take place over three years Establish context -> understand the core customer, justify the focus. be able to define the full supply chain that serves that customer, specifying the lead time and capacity metrics - identify current gaps Year 1 - internal capability -> ensure we can deliver what the market wants, build internal flexibility, ‘move the constraint outside the company - transition to ‘dynamic capacity management’ Year 2 - vendor capability -> ensure our partners don’t limit our abilities, build external flexibility, help the vendor improve flow and manage their constraint – transition to ‘order frequency’ Year 2 - customer capability -> enable our customers to grow, build external capability, help the customer improve flow and manage their constraint – transition to ‘demand management’ Year 3 - market capability -> reduce market constraints - build market capabilities to enable access and participation – transition to ‘market facilitation and management’
  • 44. present profit revenue future profit growth through focus on P1 and P2, not P3 (Paradigm, Policy and Not Physical) 3 years HW 3 4 This is Goldratt’s viable vision 1 2 63 Copyright © 2021 Thomas Mazzone Year 1 – understand the CCR – understand market demand and lead time requirements - ensure planned capacity is in place – protect the capacity –> build internal flexibility (centered first on protecting the CCR through unbalance and cross–training) – understand lead time/price elasticities to ensure commitments are met during natural variation – avoid chaos 63 supply chain performance gap assessment process design assessment management agility assessment
  • 45. market growth assessment improvement road map assessment and recommendation develop tactical and strategic agility to profitably grow your business Final Paper 64 Copyright © 2021 Thomas Mazzone Develop a Supply Chain Assessment and Present Improvement Recommendations Objectives: Bring the analysis together to make a recommendation to improve your company’s supply chain and grow its business (market/eco-system) Approach (essentially unify the HW assignments into a coherent report): Establish context and justify focus - Who is the company, within that company which customer/market segment and why? Within that customer/market segment which product/supply chain and why? Who are the other members of the supply chain that we need to partner with to deliver the product or service? What is the ‘critical path’ supply chain? What are the subordinated supply chains? What is our current level of collaboration? Profitability? Assess current state performance – Define the supply chain (the core high-level activities) that is the focus of the analysis. Describe the customer, product/service, and capacity/lead time metrics that are used to assess performance. Identify the current organization and customer expectation and assess the performance gap or threat to a performance advantage that exists. Assess supply chain process design – Describe the core activities of the supply chain and identify the root causes of current performance and/or challenges to sustainable advantage.
  • 46. Identify opportunities for process improvements - with focus on improved lead time, greater output and lower operating expense and inventory levels (waiting times) or or all three using the CCR as the central point of analysis Assess supply chain management ability - Describe the current supply chain management strategy and identify opportunities for improvements in both customer and supplier management. Assess opportunities for management improvements with focus on improved delivery consistency and process agility to improve lead times and capacity utilization Assess supply chain growth strategy - Describe the market that your company sells in. Identify opportunities to standardize processes, data and trust that could reduce market constraints and present opportunities for mutual gain. Identify the pros and cons of being a leader or follower and recommend best option for your company Summarize opportunities (the agreements) for improvement and present a path for the implementation (agreed) recommendation – summarize the opportunities for improvement by focusing on improvements to lead time, capacity, and delivery consistency. Present a plan/road map for implementing your recommendations HW 1 HW 2 HW 3 HW 4 Where are we going (always remind us) Where were we (always remind us) Develop a shared understanding, tell the story All HW’s (always remind us) This is the foundation of all supply chain presentations where are we, where have we been, we where are we going and what do I need your agreement on?
  • 47. At each step ask for agreement on conclusions and recommendations for improvements Final paper 65 Copyright © 2021 Thomas Mazzone Presentation Requirements Slide 1 Slide 2 Slide 3 Who is the company, within that company which customer/market segment and why? Within that customer/market segment which product/supply chain and why? Who are the other members of the supply chain that we need to partner with to deliver the product or service? What is our current level of collaboration? Profitability? Define the supply chain (the core high-level activities) that is the focus of the analysis. Describe the customer, product/service, and capacity/lead time metrics that are used to assess performance. Identify the current organization and customer expectation and assess the performance gap or threat to a performance advantage that exists. Slide 4 Slide 5 Summarize context and justify focus Summarize current state performance assessment Summarize supply chain process design assessment Summarize supply chain management ability assessment Summarize supply chain growth strategy assessment Describe the core activities of the supply chain and identify the
  • 48. root causes of current performance and/or challenges to sustainable advantage. Identify opportunities for process improvements - with focus on improved lead time, greater output and lower operating expense and inventory levels (waiting times) or or all three using the CCR as the central point of analysis Describe the current supply chain management strategy and identify opportunities for improvements in both customer and supplier management. Assess opportunities for management improvements with focus on improved delivery consistency and process agility to improve lead times and capacity utilization Describe the market that your company is part of. Identify opportunities to standardize processes, data and increase trust that could reduce market constraints and present opportunities for mutual gain. Identify the pros and cons of being a leader or follower and recommend best option for your company Assume you are a McKinsey Consulting team presenting to your client (and not the class and professor) typical slide format Header - what is on this slide and why - what is its role in the story Trailer - what is the key message on this slide and why - what do we need to remember Exhibit - what is the analysis that you did to support your primary (single conclusion) - where should we be looking Options for a trailer: recommendations key benefits and risks work you need help on support you require etc… Always be able to speak to the value of your recommendation vs. the effort to implement your recommendations
  • 49. This structure is a requirement (S.W.O.T. & D.I.C.E.) Slide 6 Summarize opportunities (the agreements) for improvement and present a path for the implementation (agreed) recommendation Summarize the opportunities for improvement by focusing on improvements to lead time, capacity, and delivery consistency. Present a plan/road map for implementing your recommendations 66 Copyright © 2021 Thomas Mazzone 20% 10% 10% 30% 20% Session Focus Session # Session Date Quizzes Forums Case Writeup Group Assignments Final Paper 1 1/28 - - - - - 2 2/4 - - - - - 3 2/25 - - - - - 4 3/4 Slide 274-282 - - - 3/4 - HW 1 Performance Gap 5 3/11 Slide 312 - 3/11 - 3/11 - Forum 1 Performance Focus 6 3/18 - - - - - 7 3/25 Slides 283-291 - - - 3/25 - HW 2 Design Challenges 8 4/1 Slides 304-305 - - 4/1 - - Case 1 Applying TOC 9 4/8 Slides 280-298 4/8 - - - Quiz 1 Design and Partnership 10 4/15 Slide 312 - 4/15 - - - Forum 2 Design and Management
  • 50. 11 4/22 Slides 304-305 - - 4/22 - - Case 2 Supply Chain Partnerships 12 4/29 Slides 257-264 - - - 4/29 - HW 3 Mamnagement Capabilities Supply Chain Leadership Supply Chain Technology Supply Chain Growth S u p p ly C h a in S u cc e ss Jo
  • 53. ci p le s Supply Chain Tactical Agility Supply Chain Partnership AlignmentD el iv er y C o ns is te nc y, T ac ti ca
  • 56. Grade Weighting 5/6 - - 5/6 - Assignments Forum 3 Participation in Class - 10% (un-excused absence from class will reduce your final grade) - 5/6 - - - Quiz 2 Supply Chain Mgmt Final paper and Presentation - 5/13-Slides 271-275 Slide 277
  • 57. Slides 265-270 Final paper and Presentation-- - HW 4 - 5/13 - - Refere slides 360-368 5/6 5/13 Market Leadership Strategic Flexibility HW Guide ref for Assigments HW Guide ref for Class Prep Slides 180- 236 Slides 114 - 185 Slides 89 - 128 Slides 2 - 75 Slides 280-298
  • 58. Slide 277 Focus of Assignment Tactical Flexibility - Reception Diagnosis Treatment Recovery Discharge Time Capacity units/day Jennifer (hospital manager) HarrySally and FredJoe and Lisa Jane and Peter Mary and Ted 50% Productive 50% Productive 100% Productive 50% Productive 50% Productive Receptionist $45k/yr. Nurse $90k/yr. Doctor $300k/yr. Nurse $90k/yr.
  • 59. Receptionist $45k/yr. planned commitment something we expect to meet 100% of the time Commitment protection 5 patients/day ReceptionDiagnosisTreatmentRecoveryDischarge Time Capacity units/day Jennifer (hospital manager) HarrySally and FredJoe and Lisa Jane and PeterMary and Ted 50% Productive 50% Productive 100% Productive50% Productive 50% Productive Receptionist $45k/yr. Nurse $90k/yr. Doctor $300k/yr. Nurse $90k/yr. Receptionist $45k/yr. planned commitment something we expect to
  • 60. meet 100% of the time Commitment protection 5 patients/day HW 1 HW 2 and 3 HW 4 Core Processes Customer Supplier Supplier Supplier Supplier Customer Supply Chain Market HW 1 HW 2 and 3 HW 4
  • 61. WorkProcess/ Activity Name WorkProcess/ Activity Name WorkProcess/ Activity Name CCR WorkProcess/ ActivityName WorkProcess/ ActivityName WorkProcess/ ActivityName CCR Product Leadership
  • 62. Operational Excellence Customer Intimacy/Experience “Best Product” “Best Total Solution ”“Best Total Cost” “Customer Responsiveness”“Operational Competence” “Product Differentiation” Industry Leadership Industry Laggard Industry Competitive Definitions Assessment Criteria Self- Assessment Trade-offs???
  • 63. Product Leadership Operational Excellence Customer Intimacy/Experience “Best Product” “Best Total