VALUE CHAIN MANAGEMENT

MANAGEMENT 201 Trina Ched T. Escalante Bryan M. Yarra Gerald Eduard B. Dela Cruz

Overview1. Define operations management and explain its importance to all types of organizations2.

3. Define value chain and value chain management4.

5. Discuss the goals of value chain management6.

7. Explain the organizational and managerial requirements for value chain management8.

9. Describe the benefits of and obstacles to value chain management10.

11.Case: Seaoil Phils., Inc.

Operations ManagementThe design, operation, and control of the

transformation process that converts such resources as labor and raw materials into goods and services that are sold to customers

Importance of Operations ManagementEncompasses both services and manufacturing

Manufacturing organization - produces physical goods Service organization - produces non-physical outputs in the form of services

Important in effectively and efficiently managing productivity

Productivity - overall output of goods or services divided

by the inputs needed to generate that output

Plays a strategic role in an organizations competitive success More organizations move toward managing their

organizations from a value chain perspective.

It s 11 PM , and you re listening to a voicemail from your parents saying they want to buy you a computer for your birthday this year . They want you to order so you have it to help you in your studies this semester . You log on to Dell Computer s Website and configure your dream machine that will serve even your most demanding needs for the remainder of your college years . You hit the order button and within three days , your dream computer is delivered to your front door , built to your exact specifications , ready to set up and use immediately to type that assignment due tomorrow . source: management by Stephen Robbins

How can organizations deliver to customers in such a timely manner the products to meet their unique needs?

VALUE CHAIN MANAGEMENT MANAGEMEN

What is Value Chain? The entire series of organizational work

activities that add value at each step from raw materials to finished product

is the amount buyers are willing to pay for what a firm provides them .

How value is provided to customers..Transformati on

However, simple act of transformation from variety of resources into something valuable to customers involves a vast array of interrelated work activities performed by different participants (suppliers, manufacturers, an even customers), that is ..

Concept of Value Chain

Transforming operations management strategies and training organizations around the world into finely tuned models of efficiency and effectiveness strategically positioned to exploit the competitive opportunities as they arise.

Value Chain Management

e sequence of integrated activities and information about prod

- Externally oriented; effectiveness oriented - Focuses on both incoming of raw materials an outgoing of output - Aims to create the highest value to customers

-

VALUE ACTIVITIESThose activities that are distinct both

physically and technologically Some activities are more vital than others depending on industryFor instance, marketing activities would

be more vital in a very competitive consumer goods industry than in a telephone monopoly

Some activities are direct in the sense that

they are directly involved in creating value for the buyer

Some activities are indirect and are

VALUE ACTIVITIES

involved only in making it possible to perform the direct activities on a continuing basi(e.g. MAINTENANCE, SCHEDULING,

OPERATION OF FACILITIES, RECORD KEEPING).

Some activities are primarily involved in

quality assurance and are involved mainly in ensuring quality of other activitiesETC.)

(e.g. MONITORING, INSPECTING, TESTING,

An activity can be separated from other

VALUE ACTIVITIES

activities if it has any of the following characteristics;

A.has different economics compared to the others B.has a high potential impact of differentiation and, C.represents a significant or growing portion of the cost of production or operation

Who has the POWER?

MANUFACTURERS

IT IS ARE

CUSTOMERS

Value chain managementTo create a value chain strategy that meets and exceeds customers needs and desires and allows for full and seamless integration among all members of the chain

The better the collaboration among the various

claim participants, the better the customers solutions WHEN VALUE IS CREATED

EVERYBODY BENEFITS

Porters Generic Value ChainSUPPORT ACTIVITIESFirm Infrastructure Human Resource Management Technology Development Procurement

N IN GI G AR AR M M

PRIMARY ACTIVITIES

MA RG IN

Inbound Logistics

Operations

Outbound Logistics

Marketing & Sales

Service

Porters Generic Value ChainSUPPORT ACTIVITIESFirm Infrastructure Processes of transforming inputs into finished products & services Human Resource Management Identification of customer needs & generation of sales Technology Development Procurement

N IN GI G AR AR M M

Receiving, warehousing & distribution of raw mat upport of customers after the products & services are sold to them Warehousing & distribution of finished goods

PRIMARY ACTIVITIES

MA RG IN

Inbound Logistics

Operations

Outbound Logistics

Marketing & Sales

Service

ational structure, control systems, company culture, etc. Employee recruiting, hiring, training, development & compe

Porters Generic Value ChainFirm Infrastructure Human Resource Management Technology Development Procurement

SUPPORT ACTIVITIES

N IN GI G AR AR M M

PRIMARY ACTIVITIES

MA RG INo le o n h c e T o t s e ic g t r o p p u s r c e u l a v a g n i t a s e i t i v i t

Inbound Logistics

Operations

Outbound Logistics

Marketing & Sales

Service

Purchasing of inputs such as materials, supplies & equipment

Requirements for Successful Value Chain Management

Requirements for Successful Value Chain Management Coordination

comprehensive and seamless integration among all members of the chain

and Collaboration -

Technology

technology can be used to restructure the value chain to serve end-users

Investment - information

Technology is used in every value-creating activity:Primary Activities Inbound Logistics Technologies Transportation, material handling, material storage, communications, testing, information systems Operations Technologies Process, materials, machine tools, material handling, packaging, maintenance, testing, building design & operation, information systems Outbound Logistics Technologies Transportation, material handling, packaging, communications, information systems Marketing & Sales Technologies Media, audio/video, communications, information systems Service Technologies Testing, communications, information systems Support Activities Technologies related to training, computer-aided design, software development

Requirements for Successful Value Chain Management Organizational

organizational work is done

Processes - the way that

must examine core competencies to determine

where value is being added non-value-adding activities should be eliminated

Leadership - outlines expectations for

organizations pursuit of value chain management

Requirements for Successful Value Chain Management Employees/Humanflexibility in the design of jobs hiring of workers who have the ability to learn

Resources

and adapt significant investments in continual and ongoing employee training

Organizational

important for employees to have favorable attitudes regarding sharing, collaborating, openness, flexibility, mutual respect, and trust

Culture and Attitudes -

Value Chain Benefits

Value Chain BenefitsImproved Customer Service Cost Savings and Accelerated

Service Time Improved Quality Inventory Reductions Improved Logistics Management, Increased Sales, and Increased Market Shares

Organizational BarriersRefusal/Reluctance to share

information Refusal/Reluctance of employees to shake up status qou Security issues

Cultural AttitudesTrust (lack and too much)

Intellectual property- proprietary company info that is critical to its effective and efficient functioning & competitiveness

Control

Required CapabilitiesThere are number of capabilities

that value chain partners must have and are not easy to develop or to do

PeopleReluctance of organizations

members to be flexible Employees motivation Lack of experienced managers

CASE STUDY

Seaoil Philippines, Inc

Company ProfileSeaoil Philippines, Inc is the brainchild of a

hardworking middle-class couple who began their careers in the petroleum industry as gasoline station operators. The company was into wholesale dealership of petroleum products when it began its operations in the early 70s.

Company Profile distribution Seaoil opened its own bulk

depot and processing facility in Mandaluyong, right beside the Pasig River in 1980. This served as a storage facility of bunker fuel oil for a host of industrial customers. The depot has a storage capacity of 20,000,000 liters distributed over a number of vertical tanks. Additional tanks were also constructed and leased out to local and other multinational companies for their various storage requirements. This depot facility is reputed to be the largest storage facility in Metro Manila, among independent players.

Company Profile

With the onset of oil deregulation during the first quarter of 1997, Seaoil gained more popularity when it was the first independent petroleum player to open a gasoline retail station. This is in pursuit of the desire to better service for the Filipino nation.

Vision

SEAOIL: A Conglomerate of Fuel Related

Businesses (from retailing, to logistics and manufacturing) that is #1 in terms of Biofuels and #3 in terms of retail presence by 2010.

Mission To be the service station of choice in the areas

that we are in and the leader in the products and services that we offer

The SEAOIL WAY

a culture of innovation speed to market excellence in execution doing even more with even less

Values

1.INTEGRITY is paramount in everything that we do. 2.We continuously strive to possess- A PASSION FOR WINNING. 3.We must possess LEADERSHIP qualities. 4.We must have SENSE OF OWNERSHIP (Pagmamalasakit) and ACCOUNTABILITY (Taking responsibility) 5.We must show TRUST to the Company, our extended family

Products and ServicesGasoline: E10 G5 X-treme E10 G5 Unleaded Diesel: Bioxceed Diesel Kerosene

Auto- LPG

Lubricants: Diesel Engine Oil (DEO) Gasoline Engine Oil (GEO) Motorcycle Oil

Special Products: Battery Water Engine and Radiator Coolant Heavy Duty Degreaser Multi-purpose Penetrating Oil Promax MP3 Grease

SPECIAL PRODUCTS

Fluids: DOT3 Brake Fluid DEX3 Automatic Transmission Fluid

ServicesTransport Logistics Terminalling Laboratory Services Palamig

Value Chain System

Refinery Extraction/Drilling Production Storage Transportation

Upstream- more focused with based oilTransportation

Land Transport

Ocean Transport Distribution

Storage

SEAOIL Service Station/Retailing

Downstream this is more into the processed fuel

Supply and Operations

Mandaluyong TerminalAmong

the independent players, SEAOIL boasts of the largest storage facility in Metro Manila.Its

12 storage tanks have a total capacity of over 15 million liters.A

portion of the terminal space is also used as a manufacturing and warehousing facility for its lubricant product line.

Supply and OperationsMabini TerminalDeep

waters surround the terminal, enabling large ships to anchor close to the terminal thereby removing the need for costly lighterage or a long receiving pipe line.The

terminal cover 18 hectares of land with a total storage capacity of 40 million litres. Other AreasBacolod Dipolog

Terminal Terminal

Supply and OperationsTransport Logistics (Marine)

Ocean Tankers CorporationOperates

a fleet of shipping

Its transport assets include a self propelled tankers, tug boats, barges and delivery trucks.

Supply and Operations

Transport Logistics (Land)A

fleet of accredited haulers to transport products to SEAOIL's customers and retail distribution network.

Operating HighlightsMarket Share

Marketing / RetailingMarket

Others 12% SEAOIL 3% Caltex 14% Petron 38%

Share

Petron Shell Caltex SEAOIL Others

Shell 33%

Source: DOE 2006

Retail Distribution Network2007Existing

vs

2008Projection

Manila North Luzon South Luzon Visayas Mindanao

30 stations 36 stations - 19 station 24 stations - 25 stations 16 stations - 11 stations 16 stations - 34 stations 38 stations 119 stations 130 stations

Total

Franchising Packages Company-Owned, Dealer-Operated (CODO) Station Conversion Package (for Dealer-Owned, Dealer Operated stations) 2 Types of Station * Franchise packages are at very affordable costsEXPRESS STATION FULL STATION

Franchise Term: 10 years

Operating HighlightsMembership Expansion Values, Incentives, Privileges (VIP ) existing Fleet Card (2008) Station Re-imaging making a standard look/ image for all SEAOIL Station. New Design Old Design

Operating Highlights

Brand Building Initiatives SEAOIL C.A.R.E.S. - A brand campaign that highlights 5 brand attributes of SEAOIL.

C A R E S

-onvenient -ffordable -eliable -nvironment-friendly -ervice-oriented

SEAOIL Organizational Structure

President / Chief Executive Officer Glenn L . Yu Reseller RMNLReseller Manila RNORReseller North RSOUReseller South RVISReseller Visayas RMINReseller Mindanao RLUBReseller Lubes MKTG- Marketing MarcomMarketing Communications Retail Development Card Development SPMLubes & Special Promo Marketing QCPD- Quality Control & Product Development TNDDTraining & Development Department CRMD- Customer & Relationship Management Department LCAD- Legal & Corporate Affairs Department SUPPSupply

Chief Operations Officer CSDCCorporate Systems & Document Control LMRNLogistics Marine LLNDLogistics Land LBATLogistics Batangas LVISLogistics Visayas LMINLogistics Mindanao ISSDInventory, Security, Safety Dept. PBFDProduction of Bio-Fuel Dept. RENSRetail Engineering PRCHPurchasing WAREWarehouse MAENMaintenance & Engg

Reseller Composed of RMNL, RNOR, RSOU, RMIN, RVIS, and RLUB They are the groups who are responsible in getting accounts

(franchise, distributorship) that helps great more retail stations, industrial accounts, and lubes distributorship. Sales force of SEAOIL Marketing Composed of Marcom, Retail Devt., Card Devt., and LSPM. Marcom is marketing communication and its main role is to communicate all marketing initiatives to all, both internal and external. Retail Devt is responsible for marketing and introducing the brand SEAOIL. He is the one who come-up with different strategies to gain more and improve all the Retail Stations. Card Devt is the group who introdues the VIP Card and soon the Fleet card of SEAOIL. Their main tasks is to gain more loyal customers of SEAOIL. LSPM is the one who handles all the lubricants and responsible for developing new lubricant products and mainly focuses on how to market them by means of promos, packaging, and pricing

QCPD

TNDD

This are the group who conducts product testing, to make sure that all products are made with high quality. They are also the ones who formulate new products and do laboratory testing to be sure that all chemicals, and additives that will be used are safe and effective.

CRMD (SCIC) One who handles all customer interaction (comments, suggestions, complaints, and recommendations). Do the specific actions in all interactions. LCAD This group handles and are responsible in processing all important documents, esp. permits needed for a SEAOIL Station Constructions.

CSDCCorporate Systems & Document Control LMRNLogistics Marine Ocean Tankers Corporation - Operates a fleet of shipping.

Its transport assets include a self propelled tankers, tug boats, barges and delivery trucks.

LLNDLogistics Land

- A fleet of accredited haulers to transport products to SEAOIL's customers and retail distribution network.

LBATLogistics Batangas LVISLogistics Visayas LMINLogistics Mindanao ISSDInventory, Security, Safety Dept.

of the plant is done properly PBFDProduction of Bio-Fuel Dept. Department who is in-charge of manufacturing of petroleum products.

Dept. assigned to ensure that all Health, Safety and Security

R E N G R e ta i E n g i e e ri g l n n D e p a rtm e n t w h o i re sp o n si l fo r th e re ta i s b e l e n g i e e ri g o f n e w sta ti n s a n d th e te ch n i l n n o ca co n stru cti n . o PR C H Pu rch a si g n G ro u p w h o l o ks/ se a rch fo r p o ssi l su p p l e rs o f o b e i d i re n t re q u e sts o f th e d i re n t d e p a rtm e n ts. ffe ffe W A R E W a re h o u se sto ra g e fa ci i o f a l o ffi su p p l e s, e n g i e e ri g , a n d l ty l ce i n n m e ch a n i l e q u i m e n ts/ m a te ri l ca p as M A E N M a i te n a n ce & E n g g n re sp o n si l fo r th e m a i te n a n ce o f a l H S S E a n d b e n l d e ve l p m e n t o f p l n t fa ci i e s o a l ti

HRCAHuman Resources & Corporate Administration FINAFinance ACCTAccounting CCODCredit , Collection, Order & Dispatching

department who is in-charge in reconciling all the company finances Responsible in accepting & approving product orders at the same time assures that all orders are dispatched accordingly.

ITECInformation Technology team that is responsible for the maintenance of company softwares, internet security, and all hardware facilities. they are also the ones who assists in web constructions, and in general all aspects of information tech.

THANK YOU!!!