Logistics Work Book 05.pdf

Contents:

Contents:

Logistics and Control

Logistics and Control

Introduction Introduction

What is Logistics?

What is Logistics?

What world-class producers do:

What world-class producers do:

Control Systems.

Control Systems.

The Role of Planning in Logistics:

The Role of Planning in Logistics:

A Systems Perspective.

A Systems Perspective.

Logistics and The Value Chain.

Logistics and The Value Chain.

Logistics Competency

Logistics Competency

Managing Strategic Lead Times Managing Strategic Lead Times Cycle Capability

Cycle Capability JIT Logistics Strategy JIT Logistics Strategy

Supply Chain Relationships

Supply Chain Relationships

Supply Chain Management & Competitive Success

Supply Chain Management & Competitive Success

Material Logistics Management

Logistics in a Global Economy

Logistics in a Global Economy

Logistics and a Global Competitive Strategy Logistics and a Global Competitive Strategy International Supply Chain Management International Supply Chain Management Logistics in a European Context

Logistics in a European Context

Logistics Administration & the Dimensions of Change

Logistics Administration & the Dimensions of Change

Benchmarking the Supply Chain Benchmarking the Supply Chain

Managing the Supply Chain of the Future Managing the Supply Chain of the Future The Role of Information in the Supply Chain The Role of Information in the Supply Chain

Introduction:

Introduction:

Welcome to this course in logistics management. course in logistics management. This workbook is intended to This workbook is intended to assist youassist you develop an appreciation of the subject and will outline all the material required for this develop an appreciation of the subject and will outline all the material required for this module. The workbook will include a number of case studies as well as various exercises to module. The workbook will include a number of case studies as well as various exercises to help develop your understanding of the subject in a practical context.

help develop your understanding of the subject in a practical context.

Aim of the Module

Aim of the Module

This module will give an outline of give an outline of logisitcs in an international logisitcs in an international context. On completing thecontext. On completing the module you will have developed an integrated knowledge of the subject and have an

module you will have developed an integrated knowledge of the subject and have an

understanding of the various theoretical approaches to the subject. In addition you will have understanding of the various theoretical approaches to the subject. In addition you will have had some experience of applying the theory in practical situations through the medium of had some experience of applying the theory in practical situations through the medium of case study analysis.

case study analysis.

Objectives:

Objectives:

To provide students with an appreciation of the role of logistics and supply chain To provide students with an appreciation of the role of logistics and supply chain management in the international commercial world.

management in the international commercial world.

To evaluate and discuss the role of logistics in global competition and the importance of 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. effective supply chain management in developing and sustaining competitive advantage.

On completion of this module students will be able to: On completion of this module students will be able to:

•

• Appreciate the principles of control and complexity and their relationship toAppreciate the principles of control and complexity and their relationship to

effective supply management. effective supply management.

•

• Apply the principles of control and a systems perspective to assist the evaluation ofApply the principles of control and a systems perspective to assist the evaluation of

logistical problems. logistical problems.

•

• Explain the work of logistics in an international context and understand the forcesExplain the work of logistics in an international context and understand the forces

driving an increasingly borderless world as well as barriers to global logistics. driving an increasingly borderless world as well as barriers to global logistics.

Contents:

Contents:

Logistics and Control. Logistics and Control.

Understanding the basic principles of control and the problems associated with the control 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. of human systems. Developing approaches to the design and evaluation of control systems. The law of requisite variety.

The law of requisite variety.

Logistics Competency. Logistics Competency.

The logistical mission; service, total cost. The logistical renaissance; regulatory change, the The logistical mission; service, total cost. The logistical renaissance; regulatory change, the information revolution, quality initiatives.

Supply Chain Relationships. Supply Chain Relationships.

Channel Structure, the Value Chain and channel relationships, supply chain Channel Structure, the Value Chain and channel relationships, supply chain

competitiveness. Logistical service alliances and factors affecting service based alliances. competitiveness. Logistical service alliances and factors affecting service based alliances. Integrated logistics service providers.

Integrated logistics service providers.

Logistics in a Global

Logistics in a Global Economy.Economy.

Forces driving the borderless world, barriers to global logistics, importing and exporting. Forces driving the borderless world, barriers to global logistics, importing and exporting. The interlinked global economy; the stages of regional integration.

The interlinked global economy; the stages of regional integration.

Logistics Administration and the Dimensions of

Logistics Administration and the Dimensions of Change:Change:

Performance measurement; benchmarking; balanced scorecard. A view towards the next Performance measurement; benchmarking; balanced scorecard. A view towards the next decade in international logistics and challenges to effective logistics in a global economy. decade in international logistics and challenges to effective logistics in a global economy. The state of the global logistics infrastructure.

The state of the global logistics infrastructure.

Indicative Reading:

Indicative Reading:

Bowersox, D. J. & Closs, & Closs, D. J., D. J., (1998), (1998), ““ Logistical Management; The Integrated Supply Logistical Management; The Integrated Supply Chain Process

Chain Process”, McGraw-Hill, New York.”, McGraw-Hill, New York. Christopher, M., (1995), “

Christopher, M., (1995), “ Logistics. The Strategic Issues Logistics. The Strategic Issues”, Chapman Hall, London.”, Chapman Hall, London. Christopher, M., (1998), “

Christopher, M., (1998), “ Logistics and Supply Chain Ma Logistics and Supply Chain Management. Strategies fornagement. Strategies for  Reducing Cost and Improving Service

 Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London.”, Financial Times Pitman Publishing, London. Taylor, D. (1997),“

Taylor, D. (1997),“Global Cases in Logistics Global Cases in Logistics and Supply Chain Management and Supply Chain Management ”, Thomson”, Thomson International Business Press, London.

International Business Press, London.

Assessment Requirements:

Assessment Requirements:

Investigative management Report (70 % of total grade) Investigative management Report (70 % of total grade)

Teaching & Learning Modes:

Teaching & Learning Modes:

The delivery philosophy will be to maximise opportunities for interaction and participation, The delivery philosophy will be to maximise opportunities for interaction and participation, through the use of case studies simulations, participation and discussion. These will be used through the use of case studies simulations, participation and discussion. These will be used as a vehicle to give students the opportunity to demonstrate understanding of key issues as a vehicle to give students the opportunity to demonstrate understanding of key issues through mini presentations and informal group discussions.

through mini presentations and informal group discussions.

Students will be given assignments and will be expected to research and report back on 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 findings and understanding of issues raised. This work will be carried out on both an individual and group basis.

What is Logistics?

What is Logistics?

"Having the right thing, at the right place, at the right time." "Having the right thing, at the right place, at the right time."

“Logistics is the

“Logistics is the process of strategically managing the procurement, movement andprocess of strategically managing the procurement, movement and storage of materials, parts and finishing inventory (and the related flows of

storage of materials, parts and finishing inventory (and the related flows of information) through the organisa

information) through the organisation and its tion and its marketing channel in such a way thatmarketing channel in such a way that current & future profitability are maximised

current & future profitability are maximised through the cost-effectthrough the cost-effective fulfilment ofive fulfilment of orders.”

orders.” . (Christopher, M. 1998).. (Christopher, M. 1998).

Logistics and Supply Chain Management are inextricably linked and broadly speaking Logistics and Supply Chain Management are inextricably linked and broadly speaking logistics applies inside the organisation and supply chain management outside the logistics applies inside the organisation and supply chain management outside the organisation

organisation

Supply Chain Management:

Supply Chain Management:

“The management of upstream and downstream relationships with

“The management of upstream and downstream relationships with suppliers &suppliers & customers to deliver superior customer value at less cost to the supply chain customers to deliver superior customer value at less cost to the supply chain as aas a whole.”

whole.” (Christopher, M. 1998). (Christopher, M. 1998).

“A network of

“A network of connected & interdependent organisationconnected & interdependent organisations mutually & s mutually & cooperativecooperativelyly working together to control, manage and improve the flow of materials and

working together to control, manage and improve the flow of materials and information from suppliers to end

information from suppliers to end users.”users.” (Aitken, J., 1998) (Aitken, J., 1998)

Logistics has been recognised throughout history as being of critical importance. Logistics has been recognised throughout history as being of critical importance.

You will not

You will not find it difficult to prove that find it difficult to prove that battles, campaigns, and even wars have beenbattles, campaigns, and even wars have been won or lost primarily

won or lost primarily because of logisticsbecause of logistics. - General Dwight D. Eisenhower.. - General Dwight D. Eisenhower.

“The supreme excellence is not to win

“The supreme excellence is not to win a hundred victories. The supreme excellence isa hundred victories. The supreme excellence is to subdue the armies of your

to subdue the armies of your enemies without even having to fight them.”enemies without even having to fight them.” - Sun Tzu,- Sun Tzu, The Art of War.

The Art of War.

“Logistics comprises the means and arrangements which work out the plans of “Logistics comprises the means and arrangements which work out the plans of strategy and tactics. Strategy decides where to act;

strategy and tactics. Strategy decides where to act; logistics brings the troops to logistics brings the troops to thisthis point.”

-point.” - General Antoine Henri Jomini, Precis de l'Art de la Guerre (The Art of War),General Antoine Henri Jomini, Precis de l'Art de la Guerre (The Art of War), 1838

What world-class producers do:

What world-class producers do:

World-class producelass producers see supply chain manars see supply chain management as a key gement as a key element element in capin capturing turing increasedincreased shares of world markets. They have given the executives in charge expanded and new 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 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 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 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 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 related to materials developed. Whether or not world-class producers centralize materials management,

management, the way that materials are managed has changed.the way that materials are managed has changed. World-class pro

World-class producers are forming partnersducers are forming partnerships with suppliers hips with suppliers to quickly to quickly produceproduce  products of near

 products of near-perf-perfect ect qualquality ity precpreciselisely wy when hen needneeded aed and wnd with ith littlittle le inventory. Providinginventory. Providing suppliers with information about when customer orders are needed and training them in suppliers with information about when customer orders are needed and training them in quality control and manufacturing techniques are becoming more common. Suppliers are quality control and manufacturing techniques are becoming more common. Suppliers are selected and developed with a long-term view toward improving product quality, fast 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 deliveries, and responsiveness to customers' needs. Although price is important, being able to deliver eno

to deliver enough materiugh materials when neededals when needed, producing materials of , producing materials of exceptional exceptional quality, quality, andand  being trustworthy a

 being trustworthy and cond cooperaoperative tive are eare even mven more iore impormportant. tant. Long-Long-termterm, m, multiyeultiyear coar contracntractsts are used to gua

are used to guarantee surantee supplieppliers security and rs security and to provide to provide incentives for incentives for developing trust developing trust andand cooperation.

cooperation.  Near

 Nearby suppby supplierliers are pres are preferrferred. Eed. Even if suven if supplieppliers are located at rs are located at great great distances, distances, they they are oare oftenften clustered together for combined shipments or are able to devise other innovative ways to 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 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 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 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 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 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 dependability, which leads to more certain lead times. Suppliers are even encouraged to extend JIT methods to

extend JIT methods totheirtheirsuppliers.suppliers.

World-class producers use computers extensively to determine the most efficient routes for 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 trucks, to find the best way to load and unload trucks, and to provide close communications  between

 between drivers drivers and and central central offices. offices. This uThis use of se of computers computers not not only only holds holds down down costs, costs, but,but, of at least equal importance, it enables management to know where each order in the entire 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 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 computer models to develop shipping plans for manufacturing and service operations. Of  partic

 particular ular value is value is linear programmlinear programming. With ing. With this this techntechnique, developing ique, developing shipping shipping plans plans thatthat require the least amount of travel can minimize shipping costs between many sources and require the least amount of travel can minimize shipping costs between many sources and many destinations.

many destinations.

Increasingly, some world-class producers are starting to rely on third-party logistics Increasingly, some world-class producers are starting to rely on third-party logistics management firms as they outsource some of their business functions to become more management firms as they outsource some of their business functions to become more focused on their

focused on their core competencies.core competencies.

The main theme of this workbook and the lectures will be to discuss and evaluate the role 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 of logistics in developing and sustaining competitive advantage. Finding and developing competitive advantage is a matter of survival for every competitive organisation.

competitive advantage is a matter of survival for every competitive organisation.

Increasingly, public sector organisations are subject to competitive pressures and have to 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 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 Systems.

In order to develop a solid understanding of Logistics Management in an

In order to develop a solid understanding of Logistics Management in an

organisational context, it is important that we investigate the concept of control,

organisational context, it is important that we investigate the concept of control,

which is one of the important underlying principles on which the subject is based.

which is one of the important underlying principles on which the subject is based.

Definitions: Definitions:

Control:

Control:

There are numerous different definitions, many with emotional connotations; e.g.

There are numerous different definitions, many with emotional connotations; e.g.

dominate, command, exert control over, etc.

dominate, command, exert control over, etc.

Cybernetics:

Cybernetics:

The science of systems of

The science of systems of control and communications in animals and machines.

control and communications in animals and machines.

Law of Requisite Variety:

Law of Requisite Variety:

The complexity and speed of responses from the control system must match the

The complexity and speed of responses from the control system must match the

complexity and speed of the changes to which it must respond.

complexity and speed of the changes to which it must respond.

A simple Control System:

A simple Control System:

Desired

Desired

Temperature

Temperature

Actual

Actual

-desired

desired

Appliance

Appliance

switched on

switched on

Appliance

Appliance

switched off 

switched off 

Actual

Actual

Temperature

Temperature

+

+

Temperature

Temperature

--Temperature

Temperature

Study the above diagram and consider the requirements for effective control. In a 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 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

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

Standard _{CorrectiveCorrective} Action Action P   P  e  _{e  r  r  f}    f   _o o r   r  m  m  _a   a  n  _{n  c  c  e}   e   In balance In balance  perfect control?  perfect control? Figure 2 Figure 2

Organisational control.

Organisational control.

Preoccupation with management control sets organisations apart from other forms of social Preoccupation with management control sets organisations apart from other forms of social arrangements.

arrangements.

Economically

Economically necessary:necessary: Control:

Control: No No control:control:

Efficiency, effectiveness, best Efficiency, effectiveness, best use of resources.

use of resources.

Wasted resources & Wasted resources & inefficiency.

inefficiency.

Psychologically necessary: Psychologically necessary:

•

• Stable & predictable conditions.Stable & predictable conditions. •

• Psychological well being of individuals.Psychological well being of individuals. •

• Maximum work performance.Maximum work performance.

Control can also be a

Control can also be a political process:political process:

•

• Powerful individuals dominate others.Powerful individuals dominate others. •

• Decisions are Decisions are taken by taken by managers, managers, no interference, particularly from no interference, particularly from subordinates.subordinates. •

• A means of perpetuating inequalities of power & other resources within anA means of perpetuating inequalities of power & other resources within an

organisation. organisation.

Techniques for Organisational Control.

Techniques for Organisational Control.

Use of Job

Use of Job Descriptions:Descriptions:

•

• Establish & prescribe communication flows, who reports to whom.Establish & prescribe communication flows, who reports to whom. •

• Location of decision-making responsibility.Location of decision-making responsibility. •

• Position in the organisational hierarchy.Position in the organisational hierarchy.

Control through recruitment & training: Control through recruitment & training:

•

• What criteria are used in selection?What criteria are used in selection? •

• Attitudes & values taken into consideration as well as skills.Attitudes & values taken into consideration as well as skills.

Control through expert power: Control through expert power:

•

• Appeal to people's professional commitment.Appeal to people's professional commitment. •

• People achieve performance level because it is the right thing.People achieve performance level because it is the right thing.

Control through reward & punishment: Control through reward & punishment: Extrinsic rewards:

Extrinsic rewards:

•

• Pay, company car, free meals.Pay, company car, free meals.

Intrinsic rewards: Intrinsic rewards:

•

• Satisfying work, responsibility, and autonomy.Satisfying work, responsibility, and autonomy. •

• Employee’s behaviour controlled by offers to provide or withdraw these rewards.Employee’s behaviour controlled by offers to provide or withdraw these rewards. •

• Psychology suggests punishment or threat of punishment is not an effective meansPsychology suggests punishment or threat of punishment is not an effective means

of controlling behaviour. of controlling behaviour.

Control through policies & rules: Control through policies & rules:

•

• Rules for behaviour & levels of performance.Rules for behaviour & levels of performance.

Control through budgets: Control through budgets:

•

Effective control: Effective control:

•

• Controls must be set according to the nature of the job.Controls must be set according to the nature of the job. •

• Deviations should be reported immediately.Deviations should be reported immediately. •

• Controls must conform to the pattern of the organisation.Controls must conform to the pattern of the organisation. •

• If the organisational structure is clear & responsibility well defined it is simpler toIf the organisational structure is clear & responsibility well defined it is simpler to

isolate responsibility. isolate responsibility.

•

• Controls should highlight exceptions.Controls should highlight exceptions. •

• Highlighting exceptions to the standard is often more effective.Highlighting exceptions to the standard is often more effective. •

• Great care must be taken in setting the standard.Great care must be taken in setting the standard. •

• Controls should be flexible & economical in operation.Controls should be flexible & economical in operation. •

• Controls should be simple to understand & where possible indicate correctiveControls should be simple to understand & where possible indicate corrective

action. action.

From an organisational performance perspective it is important to recognise the possibility From an organisational performance perspective it is important to recognise the possibility of both too much and too little control:

of both too much and too little control:

Over Control: Over Control:

•

• Limiting individual autonomy so that it seriously inhibits effective performance.Limiting individual autonomy so that it seriously inhibits effective performance.

Under Control: Under Control:

•

• Too much autonomy to such an extent the organisation loses direction.Too much autonomy to such an extent the organisation loses direction.

Activity 1:

Activity 1:

1. Complete the blank control Complete the blank control flow chart so flow chart so that it outlines the that it outlines the basic steps required for thebasic steps required for the control of a business's inventory level. (You might like to refer to the earlier diagram for 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:

Feedback: Activity 1:

You might have come up with a variety of actions to do with control of business profit. An You might have come up with a variety of actions to do with control of business profit. An example is shown to the left.

example is shown to the left. You can see that control in You can see that control in a business process uses exactlya business process uses exactly the same logic as the control of an engineering process.

the same logic as the control of an engineering process.

Inventory

Inventory

targets

targets

Actual

Actual

-desired

desired

--

₊

₊

Corrective

Corrective

action, e.g.

action, e.g.

Reduce order

Reduce order

quantity

quantity

Actual

Actual

inventory

inventory

Inventory level

Inventory level

increases

increases

Reduced

Reduced

inventory level

inventory level

Corrective

Corrective

action, e.g.

action, e.g.

Increase order

Increase order

quantity

quantity

Activity 2:

Activity 2:

Think about the steps of the control process you have outlined. What could go wrong? Think about the steps of the control process you have outlined. What could go wrong?

Feedback: Activity 2:

Feedback: Activity 2:

There are plenty of things that can and things that can and do go wrong do go wrong with control systems. with control systems. Many businessesMany businesses have failed because of over trading, in other words sales exceed the business's ability to have failed because of over trading, in other words sales exceed the business's ability to fund them and the firm runs

fund them and the firm runs out of cash. out of cash. This could occur because of problems in theThis could occur because of problems in the control system itself, for example because of failure to measure accurately or often enough, control system itself, for example because of failure to measure accurately or often enough, or because the corrective action in

or because the corrective action in terms of increased sales terms of increased sales effort is too great. effort is too great. ObviouslyObviously the opposite could occur with too little effort put into sales.

the opposite could occur with too little effort put into sales. In reality the system will often oscillate from

In reality the system will often oscillate from one side to the other. one side to the other. So long as theSo long as the oscillations are not too great

oscillations are not too great the business can continue to the business can continue to be successful. be successful. The trick is The trick is toto make sure that the control system is sensitive enough to achieve the desired result for the make sure that the control system is sensitive enough to achieve the desired result for the least effort.

least effort. Much of day-to-day management is Much of day-to-day management is concerned with getting this balance right.concerned with getting this balance right. Having completed the last exercise you should have a good idea of how managers might 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 use the basic principles of control. When it comes to applying control to human beings there may be

there may be some devastating side effects from some devastating side effects from misapplication of control. misapplication of control. Consider theConsider the case of Henry Ford's attempt to maintain control of decision making during the early years case of Henry Ford's attempt to maintain control of decision making during the early years of the Ford Motor Company.

Activity 3:

Activity 3:

Read the information below with regard to Henry Ford’s approach to management control. Read the information below with regard to Henry Ford’s approach to management control. In terms of the basic principles of control outlined in this section what went wrong?

In terms of the basic principles of control outlined in this section what went wrong?

Henry Ford’s Attempt To Do

Henry Ford’s Attempt To Do Without ManagersWithout Managers::

The Ford Motor Company is well known for its early moves towards mass production. 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 What is less well known is that it went from unparalleled success to virtual collapse. In a  period of 15 yea

 period of 15 years Ford’s market share had grs Ford’s market share had gone from 66% to 20%. one from 66% to 20%. The US governmentThe US government seriously considered nationalising the company to avoid serious damage to the US’s seriously considered nationalising the company to avoid serious damage to the US’s economy and strategic position.

economy and strategic position.

Henry Ford had a “secret police” (headed by Harry Burnett) whose main function was to Henry Ford had a “secret police” (headed by Harry Burnett) whose main function was to report back to him if any

report back to him if any of his executives tried to make a of his executives tried to make a decision. decision. Any executive foundAny executive found guilty was immediately fired.

guilty was immediately fired. Harry Burnett rose to Harry Burnett rose to a position of almost a position of almost supreme power,supreme power,  but was widely recogn

 but was widely recognised to be incapable oised to be incapable of making any decisionf making any decisions and to be totally unds and to be totally underer the influence of Henry Ford.

the influence of Henry Ford.

Henry Ford's character, even in the early days, showed through. He would, for example, 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 insist that first line supervisors were demoted every few years to prevent them from “becoming uppity”.

“becoming uppity”.

Henry Ford wanted technicians and he sought after and paid them

Henry Ford wanted technicians and he sought after and paid them well. well. However he sawHowever he saw management as the personal prerogative of the owner.

management as the personal prerogative of the owner.

He wanted executives to be his personal assistants and to only do what he directed. Ford’s He wanted executives to be his personal assistants and to only do what he directed. Ford’s fear of conspiracy was one of his main driving forces.

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 Just as in his early career he decided not to share ownership with anyone, later he decided not to share management with any one.

not to share management with any one.

The early Bolshevik’s were fervent admirers of Ford, as his ideas seem to make possible The early Bolshevik’s were fervent admirers of Ford, as his ideas seem to make possible the idea of industrialisation without management.

Feedback:

Feedback:

In order to be able to control any process, measurability is an absolute necessity. Consider In order to be able to control any process, measurability is an absolute necessity. Consider the question of managers making

the question of managers making decisions outside the remit of decisions outside the remit of their authority. their authority. How easilyHow easily might this idea be

might this idea be measured? measured? It is It is often very difficult to quantify factors often very difficult to quantify factors such as this,such as this, which tend to be very subjective in nature.

which tend to be very subjective in nature.

Imposing control or attempting to impose control on factors, which are difficult to measure, Imposing control or attempting to impose control on factors, which are difficult to measure, is unlikely to be

is unlikely to be successful. successful. The process of The process of control requires a logical process ofcontrol requires a logical process of

measurement followed by comparison, which is in turn followed by corrective action. If 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 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 any corrective action taken can only be arbitrary and just as likely to make performance move further away from the standard as towards it.

move further away from the standard as towards it.

Henry Ford's managers must have been very frightened and confused people, never Henry Ford's managers must have been very frightened and confused people, never knowing when Burnett might target them.

knowing when Burnett might target them. The other major

The other major factor that Ford failed factor that Ford failed to consider was human to consider was human nature. nature. When people areWhen people are unfairly treated they tend to

unfairly treated they tend to seek retribution. seek retribution. This retribution can take This retribution can take many forms frommany forms from direct sabotage to simply minimising the effort they put into their job, whilst still attending direct sabotage to simply minimising the effort they put into their job, whilst still attending work and collecting a wage.

work and collecting a wage. When you consider all the ways When you consider all the ways in which people in anin which people in an organisation can take revenge on the organisation there are plenty of opportunities, all 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 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:

The Role of Planning in Logistics:

Having developed an understanding of the basic principles of control and some of the Having developed an understanding of the basic principles of control and some of the  problems associat

 problems associated with controlling thed with controlling things in a management situatiings in a management situation we will now turnon we will now turn our attention to another control process,

our attention to another control process, namely planning. namely planning. Many of the Many of the issues raised by aissues raised by a study of Logistics and Supply Chain management will require a sound understanding of the study of Logistics and Supply Chain management will require a sound understanding of the  planning proce

 planning process.ss.

Principles of Planning

Principles of Planning

Four steps: Four steps:

1. GOALS:

1. GOALS:

What are you trying to achieve? What are you trying to achieve? What are your priorities?

What are your priorities?

2.

2. ANALYSIS ANALYSIS OF OF PROGRESS:PROGRESS:

How far are you from reaching your goals? How far are you from reaching your goals? What resources do you have available? What resources do you have available?

3.

3. ANALYSIS ANALYSIS OF OF AIDS AIDS & & HINDRANCES:HINDRANCES: What factors can help to achieve the goals? What factors can help to achieve the goals? What factors may cause problems?

What factors may cause problems?

4.

4. THE THE PLAN:PLAN:

Alternative series or programmes of action Alternative series or programmes of action

Business Planning Vs Strategic Planning Business Planning Vs Strategic Planning

 Language:  Language:

Business

Business Planning Planning Strategic Strategic Planning.Planning.

• • FinancialFinancial forecasts & forecasts & targets. targets. • • Emphasis onEmphasis on figures figures •

• Future visionsFuture visions •

• Milestones notMilestones not

always in figures. always in figures.

 Accountability:  Accountability:

Business

Business Planning Planning Strategic Strategic Planning.Planning.

• • FinancialFinancial forecasts & forecasts & targets. targets. • • Simple toSimple to measure. measure. •

• Future visions &Future visions &

milestones milestones • • Difficult toDifficult to measure. measure.  Nature:  Nature: Business

Business Planning Planning Strategic Strategic Planning.Planning.

•

• Short term.Short term. • • EnvironmentEnvironment more more  predictable  predictable •

• Long term.Long term. •

• Speculative.Speculative.

Conflict of Interest: Conflict of Interest:

Business

Business Planning Planning Strategic Strategic Planning.Planning.

• • ManagersManagers assessed on assessed on short-term short-term results. results. •

• May requireMay require

sacrifice of sacrifice of short-term results. term results.

Why should planning help? Why should planning help? 1.

1. If If the the organisation’organisation’s s environment environment and and future future is is better better understood, it understood, it is is less less likely likely to to bebe caught off guard.

caught off guard. 2.

2. The The process process of of planning planning sensitises sensitises managers managers to to a a variety variety of of problems.problems. 3.

3. The The organisation organisation as as a a whole whole is is moved moved towards towards increased increased rationality, rationality, reducingreducing arbitrary actions by individuals.

arbitrary actions by individuals. 4.

4. Planning Planning contributes contributes to to better better performance performance of of other other management management functions.functions.

Pr

Probleoblems wms wiith ith implemplemementatintati on.on.

1.

1. Failure Failure to to understand understand what what planning planning is.is. 2.

2. Failure Failure to to accept accept balance balance between between intuition, intuition, judgement, judgement, and and formal formal planning planning methods.methods. 3.

3. Failure Failure to to use use an an appropriate appropriate method method of of planning.planning. 4.

5.

5. Failure Failure to to keep keep the the planning planning method method simple simple and and to to constantly look constantly look at at cost cost benefitbenefit analysis.

analysis. 6.

6. Failure Failure to to link link the the major major elements elements of of the the plan plan with with the the method method of of implementation.implementation.

Read

Read

Read the following case study and then answer the

Read the following case study and then answer the questions at the end.questions at the end.

Planning at Canon.

Planning at Canon.

When the Precision Optics Laboratory (the original name for Japan-based Canon) was When the Precision Optics Laboratory (the original name for Japan-based Canon) was founded in

founded in 1933, there 1933, there was little was little ‘advance’ planning. ‘advance’ planning. The comThe company had pany had a singlea single  production

 production facility facility that that manufactured manufactured cameras cameras for for local local sale sale on on the the basis basis of of roughrough assessments of likely

assessments of likely demand. demand. Today $80 Today $80 thousand million Canon thousand million Canon produces an array produces an array ofof image, information,

image, information, and communication products. and communication products. Production in Production in its numerous its numerous world-wideworld-wide facilities is based on carefully developed plans that include specific goals. Currently, 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 about 75 per cent of sales are in business machines, 20 per cent in cameras, and 6 per cent in optical products.

in optical products.

The Canon planning process began in 1962 with the company’s first long-range plan, The Canon planning process began in 1962 with the company’s first long-range plan, covering 5 years. At that point, 95 per cent of Canon’s sales came from cameras but the covering 5 years. At that point, 95 per cent of Canon’s sales came from cameras but the company was concerned

company was concerned that market growth that market growth for cameras wfor cameras was levelling off. as levelling off. Therefore, itsTherefore, its initial plan focused

initial plan focused on diversification into on diversification into other products, mother products, mainly business machines. ainly business machines. TheThe specific goal was to achieve 20 per cent of its sales from products other than cameras in 5 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 years. The next two 5-year plans included other critical goals, such as furthering diversification, boosting production capacity to meet anticipated demand, establishing a diversification, boosting production capacity to meet anticipated demand, establishing a world-wide distribution system for Canon products, and expanding into the image world-wide distribution system for Canon products, and expanding into the image information industry.

In 1975,

In 1975, the company the company experienced serious difficulties. experienced serious difficulties. It had It had expanded into expanded into producingproducing hand-held electronic calculators.

hand-held electronic calculators. Unfortunately, more Unfortunately, more than 10 than 10 major competitors major competitors emergedemerged who aggressively marketed

who aggressively marketed new technologies and/or new technologies and/or lowered prices. lowered prices. Moreover, a Moreover, a seriousserious defect in a critical calculator part Canon had bought from an outside supplier led to defect in a critical calculator part Canon had bought from an outside supplier led to massive returns

massive returns from from customers. customers. Excessively optimistic Excessively optimistic estimations of estimations of market demandmarket demand also led to

also led to an excessive inventory of products that an excessive inventory of products that soon became obsolete. soon became obsolete. An oil An oil crisis,crisis, fluctuations in foreign exchange, and a recession added to the company’s woes, causing fluctuations in foreign exchange, and a recession added to the company’s woes, causing major losses.

major losses. Canon was determined never Canon was determined never to get in to get in a situation like that a situation like that again.again.

From then on, Canon launched a campaign to become a leading global company that would From then on, Canon launched a campaign to become a leading global company that would  be

 be better better able able to to deal deal effectively effectively with with environmental environmental forces. forces. The The company company reorganised reorganised toto  provide

 provide separate separate divisions divisions for for each each major major product product area, area, stressed stressed the the development development ofof innovative products, and greatly expanded the planning process.

innovative products, and greatly expanded the planning process.

Today the planning system consists of long-range (strategic), medium-range (tactical), and Today the planning system consists of long-range (strategic), medium-range (tactical), and short-range (operational) plans.

short-range (operational) plans. A central A central planning staff helps planning staff helps with the with the planning process.planning process. The long-range (strategic) plan (with a horizon of up to 10 years) outlines broad major 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 directions and goals for the company within the context of the rapidly changing environment.

environment. Goals are normally set Goals are normally set for the final year for the final year of the plan of the plan and may include suchand may include such factors as sales

factors as sales volumes, pre-tax income, volumes, pre-tax income, and capital investment. and capital investment. Other parts of Other parts of the planthe plan are revised annually as

are revised annually as necessary. necessary. These parts These parts focus mainly on focus mainly on the orientation of the orientation of thethe company, changes of structure, and employee motivation and revitalisation.

company, changes of structure, and employee motivation and revitalisation.

The medium-range (tactical) plans address shorter-term issues that amplify long-range The medium-range (tactical) plans address shorter-term issues that amplify long-range  plans and goals

 plans and goals. . They are normally 3-yeaThey are normally 3-year plans that are revised annr plans that are revised annually depending oually depending onn current business considerations.

current business considerations. Tactical plans guide Tactical plans guide the allocation of the allocation of resources, such asresources, such as  personnel faci

 personnel facilities, equipment, and funlities, equipment, and funding, to achieve tactiding, to achieve tactical goals. cal goals. They also centre onThey also centre on what must be done by the various product divisions to meet overall strategic directives. 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 Contingency plans are also developed to deal with potential serious threats, even when the  probabilities o

 probabilities of such circumstances arf such circumstances are relatively low.e relatively low.

Canon’s short-range (operational) goals and plans are oriented to the maximum use of all Canon’s 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 resources to obtain planned results during the current fiscal year. Operational reports are compared with previously established goals to determine the effectiveness of individual compared with previously established goals to determine the effectiveness of individual units and the overall company.

Activity

Activity

Answer the following questions with respect to the Canon case study. Answer the following questions with respect to the Canon case study.

Activity 9:

Activity 9:

Highlight examples of short term planning in the Canon case study and comment on the Highlight examples of short term planning in the Canon case study and comment on the way in which they might operate.

way in which they might operate.

Activity 10:

Activity 10:

Highlight examples of long term planning in the Canon case study and comment on any Highlight examples of long term planning in the Canon case study and comment on any  problems that might be a

A Systems Perspective.

A Systems Perspective.

The strategic challenge framework argues that successful strategy requires that The strategic challenge framework argues that successful strategy requires that

organisations develop the capability to achieve some balance between competing and ever 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 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 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 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 longer than this. The oldest firm in Europe is Stora, a Swedish company that was formed in the 12

the 12thth century and is now more than seven hundred years old. During the decade of the century and is now more than seven hundred years old. During the decade of the 1980’s nearly half of the companies listed in the fortune 500 list at the beginning of the 1980’s nearly half of the companies listed in the fortune 500 list at the beginning of the decade had disappeared by the end of it.

decade had disappeared by the end of it.

This approach highlights the in-built paradox in Logistics and Supply Chain management. 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 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 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 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 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 improving a current process if at the same time you are expecting them to come up with radically new ways of doing things?

radically new ways of doing things?

Interestingly, increasing parallels are being drawn between what happens in nature and the Interestingly, increasing parallels are being drawn between what happens in nature and the workings of organisations.

workings of organisations.

“T

“T he flhe fl appappiing of ng of a sa siingle buttengle butterr flfl y’y’ s s winwin g todag today producey produces s a tina tin y change y change in in the sthe state tate of thof th ee atmos

atmosphere. Ovephere. Over r a pea perr iiod of tod of tiimeme, what , what the atmosthe atmosphere actuallphere actuall y doey does ds diiveverr geges frs fr omom what i

what it woult woul d have d have donedone. S. So in o in a montha month s s titi me me a Tora Tor nado that nado that woulwoul d have d have dedevasvastatetated thed the II ndonesndonesiian coasan coast doet doessn’n’ t happet happen.”n.” (Lorenz, E.N.,1993)(Lorenz, E.N.,1993)

Obviously parallels can also be drawn between the turbulence and unpredictability of the Obviously parallels can also be drawn between the turbulence and unpredictability of the general environment and the ability to forecast the weather.

general environment and the ability to forecast the weather.

The Strange attractor for the weather system: The Strange attractor for the weather system:

(Adapted from Stacey, R, 1996 pp 320) (Adapted from Stacey, R, 1996 pp 320) Like the weather,

Like the weather,“organisations appear to be in“organisations appear to be in a state that has characteristics of stability and a state that has characteristics of stability and instability, a state away from equilibrium that instability, a state away from equilibrium that  seems to be in the borders between stability and  seems to be in the borders between stability and

instability”

instability” (Stacey, R, 1996 pp 315 (Stacey, R, 1996 pp 315 (Adapted from Stacey, R, 1996 pp 320) (Adapted from Stacey, R, 1996 pp 320)

Logistics and The Value Chain.

Logistics and The Value Chain.

Igor Ansoff, (Ansoff, I. 1987) said that most ost decisions are made in terms of the decisions are made in terms of the practicalpractical limitations of limited resources. Ansoff argued that the firm's resources, (both present & 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 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 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 clear about the resources that are available to them both in the present and potentially in the future.

future.

A common criticism of managers and investors in organisations is that they are overly 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 concerned with tangible resources. Obviously the great attraction of this is the ease of quantifying tangible resources.

quantifying tangible resources.They are easily measurable!They are easily measurable! This has often meant that This has often meant that internal analyses of firms have meant little more than a listing and quantification of the firm 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. from a financial accounting perspective with the objective of giving a financial valuation. The importance of resources and resource valuation should not be underestimated,

The importance of resources and resource valuation should not be underestimated,  particularly wher

 particularly where shareholders are pe shareholders are powerful stakeholdeowerful stakeholders in the organisation rs in the organisation (see Unit 5).(see Unit 5). In this section we will try to develop a more in depth understanding of the concept of value In this section we will try to develop a more in depth understanding of the concept of value and value creation using

and value creation using Porter's (Porter, M.E., 1985) concept of the value chain. The valuePorter'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. 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 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.

opportunities for changing it to the benefit of their firm.

Value:

Value:

What is meant by value? The dictionary synonyms for the word value include; "

What is meant by value? The dictionary synonyms for the word value include; "worth,worth, desirability, utility

desirability, utility" and one description puts the meaning as; "" and one description puts the meaning as; "worth as estimated by theworth as estimated by the buyer 

buyer ".".

One way of thinking about the concept of value, in the context of this course, would be to 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

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 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 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 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

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 danger of this approach is that the resultant price may not be attractive to consumers, either  because it is too ex

 because it is too expensive or perhaps topensive or perhaps too cheap. Ultimately, howeveo cheap. Ultimately, however the consumer willr the consumer will only purchase your offering if they estimate that they will get value from it. In other words; 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.

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 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 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 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 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, 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.

M.E., 1980) refer to bargaining power.

The Value Chain:

The Value Chain:

Before looking in more detail at Porter's value chain concept it is worth remembering that Before looking in more detail at Porter's value chain concept it is worth remembering that in terms of Whittington's framework (Whittington, R. 1993) [see unit 2 section 4] Porter is in terms of Whittington's framework (Whittington, R. 1993) [see unit 2 section 4] Porter is  placed in the Classi

 placed in the Classical quadrant of the grical quadrant of the grid. This implies that the prd. This implies that the profit maximisation is theofit maximisation is the  primary outcome of a suc

 primary outcome of a successful strategycessful strategy. It should be no surprise. It should be no surprise, therefore, to see that, therefore, to see that margin is given an important place in the diagrammatic representation of the value chain. margin is given an important place in the diagrammatic representation of the value chain. (See diagram).

(See diagram).

A key aspect of the value chain concept is that successful organisations are those that can 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 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 consumers. In addition to this, the firm must be able to create value for its consumers whilst

at the same time at the same time  being able to  being able to

retain some of retain some of this value for this value for itself in the form itself in the form of margin. The of margin. The Value Chain is a Value Chain is a useful way of useful way of conceptualising conceptualising the various the various

activities that any activities that any firm performs in firm performs in order to create order to create value for its customers and margin or profit for itself. In particular it should be borne in 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 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 significant proportion of this value for itself if it can link all the value activities together more effectively than its competitors.

more effectively than its competitors.

M    M    a   a  r  r   _{g   g  i}    i   _n  n      M    M   a   a  r  r   g   g  i   i    n   n Firm’s Infrastructure Firm’s Infrastructure Human Resource Management Human Resource Management

Technology Development Technology Development Procurement Procurement Inbound Inbound Logistics Logistics Operations

Operations MarketingMarketing  & Sales  & Sales Outbound Outbound Logistics Logistics Service Service Primary Activities Primary Activities Secondary Secondary Activities Activities

Adapted from Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Adapted from Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press.

Superior Performance, Free Press.

Value System:

Value System:

In today's world there are very few if any firms that produce all the value in a product for 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 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 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

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 examples of firms that have competed very successfully by specialising in one small part of the value creation process.

the value creation process.

Firm’s Value

Firm’s Value

chain

chain

Adapted from Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Adapted from Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press.

Activity 1:

Activity 1:

Question 1 Question 1

Define value chain analysis and explain the awareness, which should arise from it. Define value chain analysis and explain the awareness, which should arise from it.

Question 2 Question 2

Summarise each activity in the value chain. Summarise each activity in the value chain.

Question 3 Question 3

Explain why linkages within the value chain are important. Explain why linkages within the value chain are important.

Feedback: Activity 1:

Feedback: Activity 1:

Question 1 Question 1

Define value chain analysis and explain the awareness which should arise from it. Define value chain analysis and explain the awareness which should arise from it.

Answer 1 Answer 1

Value chain analysis is a systematic way of studying the direct and support activities 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 undertaken by a firm. Such analysis should create greater awareness of costs, the potential for lower costs and the potential for differentiation.

for lower costs and the potential for differentiation.

Question 2 Question 2

Summarise each activity in the value Summarise each activity in the value chain.chain.

Answer 2 Answer 2

Primary Activities Primary Activities 1.

1. Inbound LogisticsInbound Logistics are activities relating to the receiving, storing and internal are activities relating to the receiving, storing and internal distribution of the inputs to the products or service.

distribution of the inputs to the products or service. 2.

2. OperationsOperations are activities relating to the transformation of inputs into finished products are activities relating to the transformation of inputs into finished products and services.

and services. 3.

3. Outbound LogisticsOutbound Logistics are activities relating to the distribution of finished goods and are activities relating to the distribution of finished goods and services to customers.

services to customers. 4.

4. Marketing and Sales ActivitiesMarketing and Sales Activities relate to the advertising, promotion, pricing and relate to the advertising, promotion, pricing and salesforce activity.

salesforce activity. 5.

5. ServiceService relates to the provision of any necessary service relating to the product. relates to the provision of any necessary service relating to the product. Support Activities

Support Activities 1.

1. ProcurementProcurement refers to the activity or function of purchasing inputs to the system. refers to the activity or function of purchasing inputs to the system. 2.

2. Technology DevelopmentTechnology Development covers technology in a very broad sense, covering covers technology in a very broad sense, covering knowhow, research and development, product design and process improvement. knowhow, research and development, product design and process improvement. 3.

3. Human Resource ManagementHuman Resource Management involves all activities relating to recruiting, training, involves all activities relating to recruiting, training, developing and rewarding people throughout the organization.

developing and rewarding people throughout the organization. 4.

4. The Firm's The Firm's InfrastrucInfrastructureture includes the structure of the organization, planning, includes the structure of the organization, planning,

financial controls and quality management, designed to support the whole value chain. financial controls and quality management, designed to support the whole value chain.

Question 3 Question 3