Beruflich Dokumente
Kultur Dokumente
Logistics Competency
Managing Strategic Lead Times
Cycle Capability
JIT Logistics Strategy
Objectives:
To provide students with an appreciation of the role of logistics and supply chain
management in the international commercial world.
To evaluate and discuss the role of logistics in global competition and the importance of
effective supply chain management in developing and sustaining competitive advantage.
Apply the principles of control and a systems perspective to assist the evaluation of
logistical problems.
Explain the work of logistics in an international context and understand the forces
driving an increasingly borderless world as well as barriers to global logistics.
Contents:
Understanding the basic principles of control and the problems associated with the control
of human systems. Developing approaches to the design and evaluation of control systems.
The law of requisite variety.
Logistics Competency.
The logistical mission; service, total cost. The logistical renaissance; regulatory change, the
information revolution, quality initiatives.
Supply Chain Relationships.
Channel Structure, the Value Chain and channel relationships, supply chain
competitiveness. Logistical service alliances and factors affecting service based alliances.
Integrated logistics service providers.
Forces driving the borderless world, barriers to global logistics, importing and exporting.
The interlinked global economy; the stages of regional integration.
Indicative Reading:
Bowersox, D. J. & Closs, D. J., (1998), Logistical Management; The Integrated Supply
Chain Process, McGraw-Hill, New York.
Christopher, M., (1995), Logistics. The Strategic Issues, Chapman Hall, London.
Christopher, M., (1998), Logistics and Supply Chain Management. Strategies for
Reducing Cost and Improving Service, Financial Times Pitman Publishing, London.
Assessment Requirements:
Class Test (30 % of total grade)
Investigative management Report (70 % of total grade)
Students will be given assignments and will be expected to research and report back on
findings and understanding of issues raised. This work will be carried out on both an
individual and group basis.
What is Logistics?
"Having the right thing, at the right place, at the right time."
Logistics and Supply Chain Management are inextricably linked and broadly speaking
logistics applies inside the organisation and supply chain management outside the
organisation
You will not find it difficult to prove that battles, campaigns, and even wars have been
won or lost primarily because of logistics. - General Dwight D. Eisenhower.
The supreme excellence is not to win a hundred victories. The supreme excellence is
to subdue the armies of your enemies without even having to fight them. - Sun Tzu,
The Art of War.
Logistics comprises the means and arrangements which work out the plans of
strategy and tactics. Strategy decides where to act; logistics brings the troops to this
point. - General Antoine Henri Jomini, Precis de l'Art de la Guerre (The Art of War),
1838
What world-class producers do:
World-class producers see supply chain management as a key element in capturing increased
shares of world markets. They have given the executives in charge expanded and new
responsibilities. These supply chain managers plan and control all the activities related to
materials that move from suppliers, through the production processes, and to customers. The
authority for the materials system residing in a single organizational function provides focus
and avoids the former situation in which everyone blamed everyone else when difficulties
related to materials developed. Whether or not world-class producers centralize materials
management, the way that materials are managed has changed.
World-class producers are forming partnerships with suppliers to quickly produce
products of near-perfect quality precisely when needed and with little inventory. Providing
suppliers with information about when customer orders are needed and training them in
quality control and manufacturing techniques are becoming more common. Suppliers are
selected and developed with a long-term view toward improving product quality, fast
deliveries, and responsiveness to customers' needs. Although price is important, being able
to deliver enough materials when needed, producing materials of exceptional quality, and
being trustworthy and cooperative are even more important. Long-term, multiyear contracts
are used to guarantee suppliers security and to provide incentives for developing trust and
cooperation.
Nearby suppliers are preferred. Even if suppliers are located at great distances, they are often
clustered together for combined shipments or are able to devise other innovative ways to
deliver materials on a just-in-time (JIT) basis. This may take some imagination because of
great geographic distances, but the payoff is found in shorter and more dependable lead times
and in reduced inventories. All the materials in the system are geared to be produced and
arrive just when needed by production so that products can be delivered just when needed by
customers. Company-owned shipping equipment tends to be preferred because of greater
dependability, which leads to more certain lead times. Suppliers are even encouraged to
extend JIT methods to their suppliers.
World-class producers use computers extensively to determine the most efficient routes for
trucks, to find the best way to load and unload trucks, and to provide close communications
between drivers and central offices. This use of computers not only holds down costs, but,
of at least equal importance, it enables management to know where each order in the entire
system is and when it is expected to arrive at its destination. World-class companies use
computer models to develop shipping plans for manufacturing and service operations. Of
particular value is linear programming. With this technique, developing shipping plans that
require the least amount of travel can minimize shipping costs between many sources and
many destinations.
The main theme of this workbook and the lectures will be to discuss and evaluate the role
of logistics in developing and sustaining competitive advantage. Finding and developing
competitive advantage is a matter of survival for every competitive organisation.
Increasingly, public sector organisations are subject to competitive pressures and have to
demonstrate how they add value for their stakeholders and for this reason the study of
logistics is likely to continue to grow in importance.
Control Systems.
Control:
There are numerous different definitions, many with emotional connotations; e.g.
dominate, command, exert control over, etc.
Cybernetics:
The science of systems of control and communications in animals and machines.
+ Actual -
Temperature Temperature Temperature
Desired
Temperature
Figure 1
Study the above diagram and consider the requirements for effective control. In a
temperature control system we might expect to produce a system that will regulate the
temperature in a room with a high degree of success, and reasonably result in a
situation of near perfect control as illustrated in Figure 2.
Standard Corrective
Action
Pe
rfo
rm
an In balance
ce
perfect control?
Figure 2
Organisational control.
Preoccupation with management control sets organisations apart from other forms of social
arrangements.
Economically necessary:
Control: No control:
Psychologically necessary:
Extrinsic rewards:
Pay, company car, free meals.
Intrinsic rewards:
Satisfying work, responsibility, and autonomy.
Employees behaviour controlled by offers to provide or withdraw these rewards.
Psychology suggests punishment or threat of punishment is not an effective means
of controlling behaviour.
Over Control:
Limiting individual autonomy so that it seriously inhibits effective performance.
Under Control:
Too much autonomy to such an extent the organisation loses direction.
Activity 1:
1. Complete the blank control flow chart so that it outlines the basic steps required for the
control of a business's inventory level. (You might like to refer to the earlier diagram for
a simple control system to refresh your memory.)
Feedback: Activity 1:
You might have come up with a variety of actions to do with control of business profit. An
example is shown to the left. You can see that control in a business process uses exactly
the same logic as the control of an engineering process.
Actual -
Corrective - desired + Corrective
action, e.g. action, e.g.
Increase order Reduce order
quantity Inventory quantity
targets
Activity 2:
Think about the steps of the control process you have outlined. What could go wrong?
Feedback: Activity 2:
There are plenty of things that can and do go wrong with control systems. Many businesses
have failed because of over trading, in other words sales exceed the business's ability to
fund them and the firm runs out of cash. This could occur because of problems in the
control system itself, for example because of failure to measure accurately or often enough,
or because the corrective action in terms of increased sales effort is too great. Obviously
the opposite could occur with too little effort put into sales.
In reality the system will often oscillate from one side to the other. So long as the
oscillations are not too great the business can continue to be successful. The trick is to
make sure that the control system is sensitive enough to achieve the desired result for the
least effort. Much of day-to-day management is concerned with getting this balance right.
Having completed the last exercise you should have a good idea of how managers might
use the basic principles of control. When it comes to applying control to human beings
there may be some devastating side effects from misapplication of control. Consider the
case of Henry Ford's attempt to maintain control of decision making during the early years
of the Ford Motor Company.
Activity 3:
Read the information below with regard to Henry Fords approach to management control.
In terms of the basic principles of control outlined in this section what went wrong?
The Ford Motor Company is well known for its early moves towards mass production.
What is less well known is that it went from unparalleled success to virtual collapse. In a
period of 15 years Fords market share had gone from 66% to 20%. The US government
seriously considered nationalising the company to avoid serious damage to the USs
economy and strategic position.
Henry Ford had a secret police (headed by Harry Burnett) whose main function was to
report back to him if any of his executives tried to make a decision. Any executive found
guilty was immediately fired. Harry Burnett rose to a position of almost supreme power,
but was widely recognised to be incapable of making any decisions and to be totally under
the influence of Henry Ford.
Henry Ford's character, even in the early days, showed through. He would, for example,
insist that first line supervisors were demoted every few years to prevent them from
becoming uppity.
Henry Ford wanted technicians and he sought after and paid them well. However he saw
management as the personal prerogative of the owner.
He wanted executives to be his personal assistants and to only do what he directed. Fords
fear of conspiracy was one of his main driving forces.
Just as in his early career he decided not to share ownership with anyone, later he decided
not to share management with any one.
The early Bolsheviks were fervent admirers of Ford, as his ideas seem to make possible
the idea of industrialisation without management.
Feedback:
In order to be able to control any process, measurability is an absolute necessity. Consider
the question of managers making decisions outside the remit of their authority. How easily
might this idea be measured? It is often very difficult to quantify factors such as this,
which tend to be very subjective in nature.
Imposing control or attempting to impose control on factors, which are difficult to measure,
is unlikely to be successful. The process of control requires a logical process of
measurement followed by comparison, which is in turn followed by corrective action. If
you can't measure both the standard and the performance, the control process is futile and
any corrective action taken can only be arbitrary and just as likely to make performance
move further away from the standard as towards it.
Henry Ford's managers must have been very frightened and confused people, never
knowing when Burnett might target them.
The other major factor that Ford failed to consider was human nature. When people are
unfairly treated they tend to seek retribution. This retribution can take many forms from
direct sabotage to simply minimising the effort they put into their job, whilst still attending
work and collecting a wage. When you consider all the ways in which people in an
organisation can take revenge on the organisation there are plenty of opportunities, all
difficult to measure and control. Perhaps this was a significant contributory factor in Ford's
decline during this period.
The Role of Planning in Logistics:
Having developed an understanding of the basic principles of control and some of the
problems associated with controlling things in a management situation we will now turn
our attention to another control process, namely planning. Many of the issues raised by a
study of Logistics and Supply Chain management will require a sound understanding of the
planning process.
Principles of Planning
Involves decisions making.
Four steps:
1. GOALS:
What are you trying to achieve?
What are your priorities?
2. ANALYSIS OF PROGRESS:
How far are you from reaching your goals?
What resources do you have available?
4. THE PLAN:
Alternative series or programmes of action
Business Planning Vs Strategic Planning
Language:
Business Planning Strategic Planning.
Financial Future visions
forecasts & Milestones not
targets. always in figures.
Emphasis on
figures
Accountability:
Business Planning Strategic Planning.
Financial Future visions &
forecasts & milestones
targets. Difficult to
Simple to measure.
measure.
Nature:
Business Planning Strategic Planning.
Short term. Long term.
Environment Speculative.
more
predictable
Conflict of Interest:
Business Planning Strategic Planning.
Managers May require
assessed on sacrifice of short-
short-term term results.
results.
Read
Read the following case study and then answer the questions at the end.
Planning at Canon.
When the Precision Optics Laboratory (the original name for Japan-based Canon) was
founded in 1933, there was little advance planning. The company had a single
production facility that manufactured cameras for local sale on the basis of rough
assessments of likely demand. Today $80 thousand million Canon produces an array of
image, information, and communication products. Production in its numerous world-wide
facilities is based on carefully developed plans that include specific goals. Currently,
about 75 per cent of sales are in business machines, 20 per cent in cameras, and 6 per cent
in optical products.
The Canon planning process began in 1962 with the companys first long-range plan,
covering 5 years. At that point, 95 per cent of Canons sales came from cameras but the
company was concerned that market growth for cameras was levelling off. Therefore, its
initial plan focused on diversification into other products, mainly business machines. The
specific goal was to achieve 20 per cent of its sales from products other than cameras in 5
years. The next two 5-year plans included other critical goals, such as furthering
diversification, boosting production capacity to meet anticipated demand, establishing a
world-wide distribution system for Canon products, and expanding into the image
information industry.
In 1975, the company experienced serious difficulties. It had expanded into producing
hand-held electronic calculators. Unfortunately, more than 10 major competitors emerged
who aggressively marketed new technologies and/or lowered prices. Moreover, a serious
defect in a critical calculator part Canon had bought from an outside supplier led to
massive returns from customers. Excessively optimistic estimations of market demand
also led to an excessive inventory of products that soon became obsolete. An oil crisis,
fluctuations in foreign exchange, and a recession added to the companys woes, causing
major losses. Canon was determined never to get in a situation like that again.
From then on, Canon launched a campaign to become a leading global company that would
be better able to deal effectively with environmental forces. The company reorganised to
provide separate divisions for each major product area, stressed the development of
innovative products, and greatly expanded the planning process.
Today the planning system consists of long-range (strategic), medium-range (tactical), and
short-range (operational) plans. A central planning staff helps with the planning process.
The long-range (strategic) plan (with a horizon of up to 10 years) outlines broad major
directions and goals for the company within the context of the rapidly changing
environment. Goals are normally set for the final year of the plan and may include such
factors as sales volumes, pre-tax income, and capital investment. Other parts of the plan
are revised annually as necessary. These parts focus mainly on the orientation of the
company, changes of structure, and employee motivation and revitalisation.
The medium-range (tactical) plans address shorter-term issues that amplify long-range
plans and goals. They are normally 3-year plans that are revised annually depending on
current business considerations. Tactical plans guide the allocation of resources, such as
personnel facilities, equipment, and funding, to achieve tactical goals. They also centre on
what must be done by the various product divisions to meet overall strategic directives.
Contingency plans are also developed to deal with potential serious threats, even when the
probabilities of such circumstances are relatively low.
Canons short-range (operational) goals and plans are oriented to the maximum use of all
resources to obtain planned results during the current fiscal year. Operational reports are
compared with previously established goals to determine the effectiveness of individual
units and the overall company.
Activity
Answer the following questions with respect to the Canon case study.
Activity 9:
Highlight examples of short term planning in the Canon case study and comment on the
way in which they might operate.
Activity 10:
Highlight examples of long term planning in the Canon case study and comment on any
problems that might be associated with this process.
A Systems Perspective.
The strategic challenge framework argues that successful strategy requires that
organisations develop the capability to achieve some balance between competing and ever
changing issues and dilemmas. A study by the Royal Dutch Shell group that looked into
organisational longevity came to the conclusion that the average life expectancy for large
organisations is around 40 years. However there are companies that have lived for a lot
longer than this. The oldest firm in Europe is Stora, a Swedish company that was formed in
the 12th century and is now more than seven hundred years old. During the decade of the
1980s nearly half of the companies listed in the fortune 500 list at the beginning of the
decade had disappeared by the end of it.
This approach highlights the in-built paradox in Logistics and Supply Chain management.
In order to remain successful, organisations need to continuously improve the way they
carry out their day-to-day activities whilst at the same time, in order to survive in the long
run, they need to be able to question the logic of their current recipe for success. This is
inherently difficult for people to do. How can you expect people to be really committed to
improving a current process if at the same time you are expecting them to come up with
radically new ways of doing things?
Interestingly, increasing parallels are being drawn between what happens in nature and the
workings of organisations.
The flapping of a single butterflys wing today produces a tiny change in the state of the
atmosphere. Over a period of time, what the atmosphere actually does diverges from
what it would have done. So in a months time a Tornado that would have devastated the
Indonesian coast doesnt happen. (Lorenz, E.N.,1993)
Obviously parallels can also be drawn between the turbulence and unpredictability of the
general environment and the ability to forecast the weather.
Igor Ansoff, (Ansoff, I. 1987) said that most decisions are made in terms of the practical
limitations of limited resources. Ansoff argued that the firm's resources, (both present &
future) modify a firm's strategy. In practice this means that limited resources will inevitably
result in restricted choice. For this reason it is vital that organisational managers are very
clear about the resources that are available to them both in the present and potentially in the
future.
A common criticism of managers and investors in organisations is that they are overly
concerned with tangible resources. Obviously the great attraction of this is the ease of
quantifying tangible resources. They are easily measurable! This has often meant that
internal analyses of firms have meant little more than a listing and quantification of the firm
from a financial accounting perspective with the objective of giving a financial valuation.
The importance of resources and resource valuation should not be underestimated,
particularly where shareholders are powerful stakeholders in the organisation (see Unit 5).
In this section we will try to develop a more in depth understanding of the concept of value
and value creation using Porter's (Porter, M.E., 1985) concept of the value chain. The value
chain traces a product or service from the raw material right through to the final product.
The argument is that if managers understand the value chain of the firm they may find
opportunities for changing it to the benefit of their firm.
Value:
What is meant by value? The dictionary synonyms for the word value include; "worth,
desirability, utility" and one description puts the meaning as; "worth as estimated by the
buyer".
One way of thinking about the concept of value, in the context of this course, would be to
ask yourself how you would go about setting a price for a new product that you had
developed. This might be relatively easy if your product is a variation of other products
already in the market. However consider the situation where you have developed a
completely new product or service. You might simply work out what the product or service
would cost you and simply mark the price up to give yourself an adequate return. The
danger of this approach is that the resultant price may not be attractive to consumers, either
because it is too expensive or perhaps too cheap. Ultimately, however the consumer will
only purchase your offering if they estimate that they will get value from it. In other words;
the ultimate consumer of the product determines its value.
A consumer who wishes to purchase a product enters a negotiation with the seller. In this
negotiation, both the buyer and the seller strive to maintain as much value as possible for
themselves. Successful businesses are those that can produce a valuable offering to the
market and package it in a way that allows them to retain a significant amount of the value
that they have created. Think back to unit 4 section 2, two of Porter's five forces (Porter,
M.E., 1980) refer to bargaining power.
A key aspect of the value chain concept is that successful organisations are those that can
deploy their resources in such a way as to be able to produce offerings that are valued by
consumers. In addition to this, the firm must be able to create value for its consumers whilst
at the same time
Firms Infrastructure being able to
Human Resource Management retain some of
M
Secondary
ar
gi
Activities Technology Development this value for
n
Procurement itself in the form
Outbound
of margin. The
Inbound Operations Marketing Service Value Chain is a
M
ar
Logistics
gi
Logistics & Sales useful way of
n
conceptualising
the various
Primary Activities
activities that any
Adapted from Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining
Superior Performance, Free Press.
firm performs in
order to create
value for its customers and margin or profit for itself. In particular it should be borne in
mind that a firm is only likely to be able to produce a valuable product and retain a
significant proportion of this value for itself if it can link all the value activities together
more effectively than its competitors.
Value System:
In today's world there are very few if any firms that produce all the value in a product for
the ultimate consumer by themselves. Different aspects of the value creation process may
take place within different firms. If this is the case the firm needs to be able to link its value
chain effectively with other firms in the value creation system. In fact there are many
examples of firms that have competed very successfully by specialising in one small part of
the value creation process.
Firms Value
chain
Question 1
Define value chain analysis and explain the awareness, which should arise from it.
Question 2
Question 3
Define value chain analysis and explain the awareness which should arise from it.
Answer 1
Value chain analysis is a systematic way of studying the direct and support activities
undertaken by a firm. Such analysis should create greater awareness of costs, the potential
for lower costs and the potential for differentiation.
Question 2
Answer 2
Primary Activities
1. Inbound Logistics are activities relating to the receiving, storing and internal
distribution of the inputs to the products or service.
2. Operations are activities relating to the transformation of inputs into finished products
and services.
3. Outbound Logistics are activities relating to the distribution of finished goods and
services to customers.
4. Marketing and Sales Activities relate to the advertising, promotion, pricing and
salesforce activity.
5. Service relates to the provision of any necessary service relating to the product.
Support Activities
Question 3
Explain why linkages within the value chain are important?
Answer 3
Linkages in the value chain are important as they clearly indicate that the value chain
activities are a series of related interdependent activities. The linkages/relationship between
different value chain activities are a source of competitive advantage. Linkages are also to
do with the management and people in the organisation, Porter (1985) suggests that
competitive advantage is most likely to come from linkages between value activities.
Linkages, because they are to do with management and people, are inherently difficult to
measure. Anything that is difficult to measure, as we know (See unit 1) is difficult to
control. In the competitive battle between players in an industry having competitive
abilities that are difficult to measure is a distinct advantage because this means it is also
likely to be difficult to copy.
Supply Chain Relationships
Today's practitioners have to pay particular attention to the operational aspects of supply chain
management is because we are currently in the midst of a major technological revolution associated
with information processing and the Internet. This information processing revolution, in the form of
e-commerce and e-business, is offering opportunities to fundamentally transform existing supply
chains through the erosion of dis-intermediation and the speeding up of the information linkage
between ultimate customers and all stages of the supply chain. This will provide companies that
embrace the new technology with opportunities to eliminate many aspects of waste, by delivering
more value to customers through speeding up the process of supply chain communication.
Benchmarking:
What is benchmarking?
Benchmarking is a practice that rigorously examines and compares business practices with
the 'best in the class', aimed at creating and sustaining excellence.
As quality improvement programmes have taken root, managers have started using tools such as
total quality management (TQM), quality function deployment (QFD), statistical process control
(SPC) and continuous improvement (CI). These tools help in the process of discovering the
systemic flaws in the product or service delivery process. The next step in enhancing the conversion
process and improving the value-added component involves the determination of how to fix these
inadequacies. The answers are often being found by way of another quality improvement process
known as benchmarking. Benchmarking is a systematic management process, which helps
managers to search and monitor the best practices and/or processes. The search for the best
practices may not be limited to direct competitors. The goal is to emulate and exceed the "best in
class". Therefore, the search goes beyond the practices of direct competitors, and encompasses all
leading organizations regardless of industry affiliation.
Companies have always benchmarked themselves with competitors and other companies in an
informal way. However, as a formal and rigorous process, benchmarking only started to be applied
by companies in the last decade. It requires an open attitude and a high willingness to learn from
others. This benchmarking methodology consists of the following steps: The project begins by
selecting a business process to improve. Typically, companies start the benchmarking initiative with
a pilot project to learn about the methodology and to overcome possible lack of credibility within
the organisation. As with re-engineering, the bigger opportunities for improvement are in processes
that cross function and departments. A team is selected. Ideally, the leader of the benchmarking
team should be the 'process owner'. That is, the person responsible for the process in the
organisation. Additionally, to ensure the success of this team, top management should actively and
visibly support the initiative. The project team studies and documents in detail the company
process. Often, on understanding the current process, the team improves it substantially by applying
process analysis techniques.
Simultaneously, the team develops a set of key process measures to compare with other companies'
processes. These measures are not the main objective of benchmarking, but a way later on to
identify best practices. Afterwards, the team looks for organisations to benchmark with. This search
should include (if appropriate) other companies within the same corporation, competitors and the
best companies in other industries. Often, managers are hesitant about the value of comparing
themselves with companies outside their industry. For example, it could be argued that selling cars
is different from selling fast-food. However, companies outside the industry are usually the best
source for new processes and ideas. For example, the need for a consistent service quality and 'offer'
from dealers or franchisees has striking similarities in the car and fast-food industries. Obtaining
collaboration from the target companies to benchmark is not as difficult as some managers believe.
Many companies are willing to be benchmarked provided that there is a quid pro quo and
confidentiality issues are clearly spelled out. The benefit for the benchmarked company should be a
discussion about the findings. In short, how the benchmarked company itself can improve.
A visit to the benchmarked company is obviously essential. To make it efficient, the benchmarking
company should send a well-prepared list of questions in advance. This should help identify areas
of excellence for further detailed investigation.
The investigation should result in revealing a set of gaps between the company's process and the
best practices, and lead to a much better process. These differences in measures and processes
should be made public within the organisation to obtain a momentum for change. Subsequently the
team develops an action plan to implement the new process. Having the process owner as the leader
or a member of the project team proves to be a critical factor for implementation. Finally, the
improvements obtained should be communicated to the benchmarking partners. That is, the
benchmarked companies should learn from the benchmarking company's experience.
Benchmarking practices have the advantages of overcoming a natural disbelief in the feasibility of
big improvements, of making sure that improvement targets are high enough, and of helping to
create a learning and outward-looking culture in the company.
There are many success stories about benchmarking. At the beginning of the 1980s Xerox found
that its Japanese competitors were selling photocopy machines for a price lower than Xerox's
product cost. Through benchmarking, Xerox improved sharply its product development process and
was able to beat back the Japanese competition. While the risk involved in benchmarking projects is
not high, the tendency to justify 'why our company is different' and the 'not invented here syndrome
can hamper the success of these projects. Also, a lack of focus and attention to the selection of the
processes to benchmark can prove an obstacle. When years ago, IBM executives tried to benchmark
300 processes they found it overwhelmingly difficult.
Candidates for benchmarking are those processes known to be inefficient or where there is some
evidence that competitors or companies in other industries have better processes. Many companies
have benchmarked critical processes, making important and, sometimes, big improvements.
Purposes of Benchmarking:
* To enhance the effectiveness of the organisation & therefore its value to stakeholders.
* To enhance organisational performance.
* To achieve world-class status.
It is important to understand how these management initiatives can support each other for a
coherent understanding of strategic management
Internal Benchmarking:
External Benchmarking:
Where to begin
Processes.
Benchmarking is best analysed for separate value activities. This facilitates best practice
evaluation.
* Productivity
* Quality
* Delivery/timeliness
* Innovation.
Planning
* Understanding of existing operations and targets for improvement.
Analysis
* Researching the practice of others
* Identifying performance gaps and redesigning the process
Action
* Planning & implementing change
* Analysing the impact of changes and planning how to improve.
Why share?
* Best practice organisations share openly
* Sharing supports culture change
* Benchmarking partners must abide by guidelines of good behaviour
* Obligation as corporate citizen to help improve overall competitiveness
* But don't share secrets.
Finding best practice
* Published information
* Annual reports
* Conferences
* Professional benchmarking organisations
* Customers and suppliers
* Benchmarking databases
* Professional associations
* Trade associations
* Professional journals, magazines and newspapers
* Exchanges
* Face to face interviews
* Direct information exchange
* Groups
* Intermediaries.
Supporting Organisations
* Benchmarking clubs
* Industry-related organisations
* Professional associations
* Networking organisations
* Data providers
* Specialist support.
Who to involve
Employees
* Know the process best and can evaluate potential improvements.
Managers
* Can provide leadership and support, and are responsible for the strategy &
communication process.
External support
* Can provide expert facilitation, transferring skills into the organisation and aiding
organisational learning.
Strategic Control & Measurement.
The traditional measures of performance used by firms are heavily linked to financial
measurement and are based, in the main, on historical information.
This has resulted in a still often out of balance approach to measurement and control.
Financial
Perspective.
Goals Measures
How do we look to
shareholders?
Customer
Perspective Internal Business
Goals Measures
Perspective
Goals Measures
How do customers STRATEGY.
see What must
us? we
excel at?
Innovation &
Learning Perspective
Goals Measures
Can we continue to
improve &
create value?
Adapted from R. Kaplan & D. Norton, The Balanced Score Card, Harvard Business Review no 92105 Jan-Feb 1992.
Drawn by Rulzion Rattray
Philosophy:
Focus on the measures and controls that are the most important to the
strategy of the firm.
Helps managers to look at the whole picture and reduces the chance of bias.
Managers must articulate goals and then develop measurement and control
systems.
Customer Perspective:
How do customers see us?
Forces managers to seek to control the things that really matter to the customer:
Customers may be happy to pay a premium price for JIT Zero Defect Products, etc.
Allows production managers to focus on critical internal measures that help the firm
satisfy customer needs.
Use of information systems can be of critical importance in success using real time
information on production and quality.
The importance of developing new levels of service is often a key to continued corporate
success and logistics and supply chain management are increasingly important targets for
this type of improvement.
Financial Perspective:
How do we look to our shareholders?
Important measures:
Profitability
Growth
Shareholder Value.
Critics have argued that over emphasis on short term goals are counter-
productive.
As part of the balanced approach it is important to ensure that improvements in
performance in other areas are reflected in financial terms.
Failure to do so should lead to fundamental questions about the logic of the
strategy being pursued.
Improvements in methods might make certain activities redundant. Financial
measures can help highlight these and result in significant cost savings.
Market Share.
Operating Margins
Asset turnover.
Operating Expenses.
The challenge should be to make explicit linkages between operations and finance.
Overview:
This approach is a dynamic one and is therefore iterative in that failure to achieve
strategic objectives must raise questions about the nature of the strategic objectives
themselves.
Financial
Perspective.
Goals Measures
z ROCE
z Cash Flow
z Profitability
Customer
Perspective
Goals Measures
z Value for money
Mission z Reliable Service
z Service z JIT
z Innovation
Strategic Objectives.
z Employee Quality
Internal Business
z Shareholder Perspective
Expectations Goals Measures
z Quality Service
z Project Management
z Safety
Innovation &
Learning Perspective
Goals Measures
z Step Improvement
z Service Innovation
z Empowered.
Adapted from R. Kaplan & D. Norton, The Balanced Score Card, Harvard Business Review no 92105 Jan-Feb 1992.
Drawn by Rulzion Rattray.
In the same way measures are assessed and if ineffective they should be questioned.
Measured improvements in other areas should ultimately affect the "bottom line" in
financial terms and if not should be questioned.
Conclusions:
Simulation Rules:
Minimum of two people are assigned to each position, one of whom is responsible for
keeping the score.
Keep account of the inventory level, the cumulative back order-position and the number of
cases ordered at each stage of the game, as well as keeping a view of the costs.
Player Instructions:
2. The team at each position must decide how many cases to order and are free to
order any number of cases.
3. The players at each position should collaborate on decisions and act as a team.
4. Players at one position must not communicate with players at other positions except
by means of the ordering process.
Costs incurred:
1. Orders are always fulfilled i.e. no sales are ever lost. This means that all back orders
are filled when stocks allow.
2. Customer orders are predetermined but are only revealed period by period. This
information is only revealed to the retailer.
3. Each position places an order with the next position up the supply chain. It takes two
time periods before the order reaches the supplier and is fulfilled, during this time the
supplier is not aware of the extent of the order.
4. Orders must be written onto a piece of paper and folded then placed into the system.
The supplier may only read the order when it arrives with them after two time periods
(i.e. orders placed in time period 1 are delivered in time period 5.).
Starting Position:
Order
O1 O2 O1 O2 O1 O2 O1 O2 O
Decision
M D W R C
Manufacturer Distributer Wholesaler Retailer Customer
Inventory
S2 S1 S2 S1 S2 S1 S2 S1 S
Supply
Developing Critical Evaluation.
Rulzion Rattray
Dundee Graduate School of Management
Stephen Toulmin (1958) developed a model that set out the structure of an argument
along the lines shown in the diagram below:
Data Claim
(Evidence) (So)
Data used to support the claim An arguable statement
Warrant
(Since)
An expectation that links evidence & the claim
Backing
(because)
Context & assumptions used to support the
validity of the warrant and the evidence
Make sure that your arguments are firmly focussed on the question. Most questions
have more than one element and therefore require some thought. In many instances it is
useful to break the question down so that you can examine each part of the question
separately. Having broken the question down you will need to consider how to evaluate
each aspect in turn.
A logical first step in this process is to go through the data that you have available in
the case study (or from practical situation), highlighting issues that are relevant to each
component of the question in turn. Each time you highlight an issue make a note as to
why it is relevant. Academic theory can be extremely useful in helping you to
formulate an argument and can be used as part of your thought process when you
consider why issues highlighted in the case are important. So having highlighted
evidence from the case relevant to each aspect of the question, make a note of which
academic theories or approaches might be relevant to your analysis of each of these
issues.
The process outlined above highlights a number of important stages, which are an
expansion of the key elements of an argument.
Analyse the question and break it down into its component parts. This process
might be thought of as a process of differentiation. There is always a danger
when you do this that you might lose sight of the overall requirements of the
question, so dont forget that you will need to think about how you can
reintegrate the components of the question to address the overall issues required
by the question. By doing this you help to demonstrate that your arguments are
focussed on relevant issues.
This process is important because you can refer to this data in the defence of
your argument. This is the first part of your supporting evidence.
1
Theory:
1. a. Systematically organized knowledge applicable in a relatively wide variety of circumstances, especially
a system of assumptions, accepted principles, and rules of procedure devised to analyze, predict, or
otherwise explain the nature or behavior of a specified set of phenomena. b. Such knowledge or such a
system.
2. Abstract reasoning; speculation.
3. A belief that guides action or assists comprehension or judgment: rose early, on the theory that
morning efforts are best; the modern architectural theory that less is more.
4. An assumption based on limited information or knowledge; a conjecture.
[Late Latin theria, from Greek, from theros, spectator : probably thea, a viewing + -oros, seeing.]1
to debate; consequently someone seeking to argue against you could use another
academic theory as the basis for his or her counter argument. In order to
strengthen your argument and to pre-empt criticism, it can be useful to use more
than one theory to support your argument. Use of more than one approach,
sometimes referred to as triangulation2, can also be a useful spur to the
development of critical comment.
In order to be able to establish the relevance of the academic theory you need to
highlight which aspect of the theory is pertinent to the point under
consideration. Remember it is not necessary to spend a great deal of effort
explaining the theory. It is important, however, to reference the theory correctly
using the university standard referencing system. Once you have referenced the
theory you can assume that any reader can familiarise themselves with it and
therefore do not include long detailed explanations of the logic of the theory.
The next stage is to highlight which aspect of the theory you consider to be
relevant and why this is important. This should form the foundation of any
claims or critical comment you might wish to make.
The process should combine and link all the previous points discussed in point
1.1 to 1.3. It is by combining and linking these stages that opportunities for
critical comment and the development of an argument occur. Typically this can
occur where the evidence from the case suggests that practice has followed a
particular theory successfully or where it has failed to. In both cases this can be
commented on and further opportunities for discussion can come from a process
of triangulation. By looking at the problem from a different perspective (theory
or model) new issues can be highlighted. In addition, the questioning discussion
can be expanded to include comment as to the usefulness or otherwise of the
academic theories cited.
2
Triangulation:
1 The process by which the location of an unknown point, as in navigation, is ascertained, by the
formation of a triangle having the unknown point and two known points as the vertices.
2. In this context the notion is that you can get a better idea of a situation if you look at it from more than
one point of view.
Visualising and Building Analysis and Critical Comment.
The problem of dealing with a wide range of often complicated and interwoven issues can be very confusing. It is particularly important
therefore to make sure that your written explanation and discussion of these issues follows a very sound and clear structure. One way of
achieving this is to represent your ideas graphically as a way of clarifying your thoughts before writing more formally. This can be achieved
in a number of ways but perhaps the most straightforward is to divide the process up into the four stages discussed above and represent each
of these stages by a separate column as illustrated below.
Question Evidence from practice Evidence from Critical comment or analytical points
Breakdown or from the case study. Academic Theory
First part of Evidence of good or bad Reference for a relevant 1. To what extent does the evidence from practice fit in
question. practice or of things going well academic theory. (Use the with the theory?
or badly, that is relevant to the university standard
question. referencing system) 2. Could practice have been improved by the application or
comment on the particular use of the theory you mentioned?
aspect of the theory and its
particular relevance. Think 3. Would an alternative theory provide a better insight? If
about how it explains or so reference it and enter it into the next column.
can be used to discuss the
practice. 4. Is there further evidence in the case that on reflection of
the above might help you develop a better insight into
the issues you have developed? If so refer to it and enter
it into the next available column space.
Use words such as thus, therefore, etc i.e. words that can be
used to structure an argument and are useful linking words
between the different factors being considered.
Additional relevant theory. Additional critical thought and comment. Does the logic of
this argument fit in with your initial thoughts? If not is it
relevant to the secondary thoughts?
Additional practical evidence. Relevant to which theory? Further critical comment and discussion
Is this evidence consistent with
previous evidence?
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