Relationship between value chain strategic planning and decision making

Strategic Management Process? - Strategic Management Insight

relationship between value chain strategic planning and decision making

PDF | Developing and implementing a supply chain strategy is essential for process (AHP), a multi-criteria decision-making technique, to guide a firm through its strategic relationships with their partners during the planning process. Oct 15, Strategic supply-chain planning is the Pegasus of strategy: It can soar, a strategic supply-chain planning exercise to assist decision making. Comprehensive Guide to Value Chain Analysis with Examples by Industry Finding these perceived values could mean the difference between getting a Therefore, the first order of any value chain strategy is to identify the When you complete these aspects of analysis, you're ready to put together a plan for changes.

They can do so through early communication between senior managers and supply-chain planners, which shortens strategy-implementation time while letting each group pursue its forte: Acme had been seeing revenue growth for several years, mostly as a result of acquiring other PVC manufacturers.

Some favored consolidating manufacturing into one or two new mega-plants; others suggested closing existing plants or lines. Management chose to do a strategic supply-chain planning exercise to assist decision making.

The Planning Spectrum Strategic supply-chain planning falls in the middle of a decision-making spectrum that has business-strategy formulation at one end and tactical supply-chain planning at the other.

Used in this strategic context, the tools help determine what would be an appropriate supply-chain configuration for sourcing and which plants or distribution centers should be closed or kept open. Strategic Supply-Chain Planning and the Planning Spectrum View Exhibit Strategic Supply-Chain Planning and the Planning Spectrum Strategic supply-chain planning falls in the middle of a decision-making spectrum that has business strategy formulation at one end and tactical supply-chain planning at the other.

In contrast, tactical supply-chain planning is short- or medium-term in scope and impact, with supply-chain planners using past demand to make forecasts for the near term and adjusting these forecasts on the basis of market intelligence or planned promotions.

relationship between value chain strategic planning and decision making

Used in this context, optimization models and APS technology help determine where and when to produce what items and how to distribute them. Planning Processes and Optimization Although business-strategy formulation also uses tools and frameworks, it requires much more creativity than tactical planning. The optimum route to maximizing shareholder value is rarely obvious. It takes creative thinking and freewheeling negotiations to identify, understand and agree upon possible actions.

For tactical supply-chain planning, the decision options and the factors affecting them production capacity, distribution capacity, variable costs, demand forecast are clearly defined. The goal of minimizing total supply-chain costs — for manufacturing, storage and handling, and transportation — is narrower. Because tactical planners can identify beforehand possible decisions and factors that might affect these decisions — and can build those elements into the software — they can use optimization models that rely on mathematical techniques.

The models make recommendations that both minimize costs and help companies meet forecasted demand without exceeding production and distribution capacity. Advanced planning-and-scheduling technologies are available from several companies. But strategic supply-chain planning can benefit from appropriately used optimization models because tactical supply-chain models can be extended to include strategic decisions about closing or opening plants and distribution centers.

APS vendors offer software for that purpose. The factors rarely change — production capacity, distribution capacity and variable costs. The goal of minimizing cost is extended to include the fixed costs of keeping plants and distribution centers open and the one-time costs of opening new ones and closing existing ones.

These more strategic computer models can then guide decision making. Optimization models for tactical supply-chain planning and models for strategic supply-chain planning differ only slightly in their design, but markedly in their use. At General Motors Corp.

relationship between value chain strategic planning and decision making

Creating benchmarks in this way is unique to optimization models using linear programming, a method using advanced mathematics to capture all the constraints, such as capacity, and to find the best possible recommendations that would minimize the total operating cost or some other stated objective.

Such models guarantee the lowest possible supply-chain cost. Spreadsheet calculations or simulation models cannot provide that sort of benchmarking capability.

In another case, a personal-computer manufacturer made successful strategic use of an optimization model for its global manufacturing and distribution network. DEC probably lengthened its life by using supply-chain models to decrease costs. Thus supply-chain management has evolved from a function garnering little attention or prestige to a highly visible and respected one. DEC likely relied too much on supply-chain planners. And after Nike Inc.

Moreover, because management education is focusing less on analytical strategic planning and operations research, M.

They're on the Internet with web sites, e-newsletters, webinars, and spam. They're in all the trade publications. They're speaking; they're writing; they're selling endlessly. What do they do? Do they help—or hinder? Do they really offer a value proposition?

Some perspectives At its best, management consulting can be a noble calling. It's a high-minded endeavor, requiring enormous amounts of both talent and integrity as well as a strong sense of mission and urgency. At its worst, it is an embarrassment and a scandal. To be honest, there have been some spectacular failures in consulting projects. Whatever your view, the emergence of supply chain management as the business focus of the new century has attracted consultants of every imaginable variety.

Some have been at it for years, evolving along with the field. Others are new to the game, and they seem to think that adding supply chain management to their list of service offerings is enough to get onto the playing field. The difference between consultants and advisers There was a time when great care was taken to distinguish management consulting services from management advisory services.

The distinction has faded with time. But the implication is that advisers provide feedback and informed opinion, and that consultants take a more active role. Consultants make decisions, acting on behalf of the client. They design and implement processes, facilities, and systems—in short, they do the hands-on work.

relationship between value chain strategic planning and decision making

Consultancies offer a diverse collection of different business models as well as approaches to problem solving. Let's begin by trying to sort out some of the fundamental types. The mega-firms This category is made up of huge organizations with thousands of people. They may be partnerships; they may be corporations. They are increasingly multinational. Many of the mega-consultants have their origins in the giant public accounting firms.

relationship between value chain strategic planning and decision making

Several years ago, each of the so-called "Big Eight" U. They generally attempted to be all things to all clients, and they would undertake consulting in any channel that held the promise of growth or profit. As they created multinational accounting conglomerates, their consultancies likewise added the appearance of international capability, which tended to be more promise than practice.

Today, after mergers, acquisitions, and divestitures, their former consulting entities are barely recognizable. Accenture spun off from Arthur Andersen, which itself disappeared, thanks to Enron. Deloitte Consulting, product of yet another merger and acquisition, retains its corporate identity but is legally a separate LLC entity. The overall business model consists of a hierarchical, pyramidal organization, dependent on sales generation by a relatively small number of rainmakers to provide billable hours for large numbers of analysts and managers.

Thorough methodology and process development is supposed to allow relatively inexperienced consultants to tackle complex problems in consistent ways. This model has been likened to bringing in busloads of bright kids, who have been both indoctrinated into the corporate culture and provided with workbooks full of process descriptions and solutions. They must then hope to come across a client who is asking the right questions.

Few of these firms were willing to bring in more seasoned, more experienced, more independent-minded, and more expensive old pros. It's not so much an age issue as a business model issue, abetted by a cultural conformity. Some independent consultancies have become mega-firms. Some of the early leaders, such as Booz Allen Hamilton, continue to prosper, while some others have fallen on hard times or have been sold off.

Big and important, but not huge A handful of consulting firms concentrated on strategy but took differing directions. Some tried their hands at tactical implementations, and they remain successful in addressing operational issues with strategic implications. Others focused on taking equity positions and managing corporate operations. Several entities focused on performance standards, productivity, and cost reduction. A few pioneers survive, but just barely.

Their business model tended to be based on the engagement of contractors, who are off the payroll as soon as they've completed their assignments.

The permanent cadre comprises successful salespeople along with a handful of top executives.

Value Chains versus Supply Chains

There were dozens of such firms, the majority of which have disap peared. One of the biggest was United Research, which has dropped off the map. But a few have survived.

For example, the engineered standards and method ology-based consultancy H. Maynard remains an active player in the world of work measurement. Some consultancies focused on such operations as manufacturing and logistics in the early days.

One leader in the movement survived an unfortunate acquisition, and has rebounded as a broad-based global consultancy. Others, including some specializing in physical distribution, have disappeared.

Small and mid-sized firms The small and mid-sized consultancies tend to be built upon limited but deep functional experience. They come and go, but some have remarkable staying power.

Relationships for supply chain success

Too numerous to cite here, they can be local, national, or global in coverage. They may be franchises, or they may be real companies. They may affiliate with "stringers" in several locations, handing out business cards to anyone with a suit and a laptop. Or they may grow more organically. Some achieve greater functional breadth through working partnerships with other consultancies and achieve geographic coverage with multinational alliances.

They may follow the hierarchical organization model, or they may be flatter partnerships with more hands-on consulting involvement from senior partners. The supply chain field has spawned many of these operations, and many of them deliver cost-effective and sustainable results.

Some are highly specialized, while others offer a broad range of supply chain strategy, planning, and execution services.

relationship between value chain strategic planning and decision making

Sole practitioners Next come the sole practitioners. The range of services they deliver is staggering; they cover everything from freight-bill audits to supply chain strategies. The solos run the gamut from internationally renowned specialists to prematurely retired managers to out-of-work inebriates. These sub-categories are not mutually exclusive. Unlike in aviation, no lessons are required, and there is no meaningful certification and licensing process.

The only barrier to entry in the consulting marketplace is a failure of nerve. There are many, many really excellent one-man and one-woman shops. For the right kind of problem, they can often offer an on-target solution at the right price.

How To Do Strategic Supply-Chain Planning

The best of them recognize their limitations, and they are brilliant at enlisting other specialists to work on solving the fundamental problems.

The worst of them believe their own press clippings. Because of their egos, they hesitate to bring in people smarter than themselves to help deliver the right answers. The recently unemployed complicate the picture considerably. They typically have no training and little real experience in being a consultant.

They generally have no idea of how to price services or of what's involved in scoping and executing analyses and solution development. They often don't understand the subtleties of communications, client relationships, and selling. The academics Many respected academics practice consulting on either an institutional or a private basis.

This type of strategy is used when strategic business units SBUdivisions or small and medium enterprises select strategies for only one product that is sold in only one market. The example of business level strategy is well illustrated by Royal Enfield firms. They sell their Bullet motorcycle one product in United Kingdom and India different markets but focus on different market segments and sell at very different prices different strategies.

At this level, executives at top parent companies choose which products to sell, which market to enter and whether to acquire a competitor or merge with it. They select between integration, intensive, diversification and defensive strategies. The main questions to answer: Which new markets to develop and how to enter them?

How far to diversify? Thompson and Martin, p. Policies, Motivation, Resistance management, Leadership, Stakeholder Impact Analysis, Changing organizational structure, Performance management Even the best strategic plans must be implemented and only well executed strategies create competitive advantage for a company. At this stage managerial skills are more important than using analysis.

Communication in strategy implementation is essential as new strategies must get support all over organization for effective implementation. It consists of the following 6 steps: Setting annual objectives; Revising policies to meet the objectives; Allocating resources to strategically important areas; Changing organizational structure to meet new strategy; Managing resistance to change; Introducing new reward system for performance results if needed.

These smaller objectives are specifically designed to achieve financial, marketing, operations, human resources and other functional goals. To meet these goals managers revise existing policies and introduce new ones which act as the directions for successful objectives implementation.

The other very important part of strategy implementation is changing an organizational chart.