256 • CASES IN OPERATIONS MANAGEMENT
make significant changes. But, if we don't offer
service guarantee, they left several questions
unresolved. Should the division guarantee its
=vice? If so, what should the details of the
guarantee be? If oat, what -would happen if one
or more of the division's competitors success-
fully introduced a. guarantee? Mr. Brown now
had to decide whether to accept the working
group's main recommendatioe, and, if so, what
changes he should make to the proposal and how
he should answer the unresolved issues. The
decision was not an easy one for him:
A guarantee is really a leap of faith. f don't
think anyone can really tell in advance exactly
whit will happen. The guarantee could he seen as
a blank cheque and going with one is essentially an
irreversibk decision. Once we offer one, it will be
almost impossible to step back from it, or even to
one, how else can we continue to demonstrate our
commitment to service and differentiate ourselves?
NaTE.S
1, J. Chides, "Sea of Shove." Benefits Canada, 10
(7), 32-35. July-August 1992.
2. N. COgrols,"EmPtollees Are
Demanding Mare Prom Their Claims
Administrators," Saltless and Health. 10 (5).
70-73. April, 1992; and, "Data Wrack
Tackling Claims Administration Expenses,"
Business and Health, 10 (5), 18-19, April,
1992.
SUPPLY CHAN MANAGEMENT
 3. This section presents edited entirety.
extracts from the report, not the report in its

E very organization, whether a manufacturer or service provider, is required to

execute or manage a number of distinct "upstream" and "downstream" opera-
tional activities critical to the delivery of products and services that customers
value. Upstream operational activities include purchasing and inbound logistics. whereas
downstream operational activities include outbound Logistics and service. However, most firms
lack the necessary resources and competencies to successfully perform each of these
important activities on their own. This has required that managers look beyond their
,
.p
-A organization's "four walls" to their supply chain and consider how suppliers and customers
!-• could be used to create the type of value required for long-term sustainable advantage.
•.4 A supply chain is the set of value-adding activities spanning multiple organizations that
V. connects a firm's suppliers to the firm's customers (see Figure 6.1).
I According to The Global Supply Chain Forum, supply chain management "is the inte-
'N'' gration of key business proces.ses from end user through original suppliers that provides
Products. services, and information dud add value for customers" (Cooper, Lambert, ift Pagh, 1997.
p. 2). Supply chain management focuses on the efficient flows of material, information. and capital that
integrate tiers of material suppliers, service providers, and customers to minimize systemwide costs while
simultaneously satisfying service level requirements.
Despite the bet that supply chain systems' aetivities—cornmunietilloci, inventory management,
warehousing, transportation, and facilities location—have been ongoing operational concerns since the
start of commercial activity, only recently has there been widespread recognition of the strategic
importance in effectively managing these activities. The emergence of supply chain management as an
important operations consideration has largely been driven by shrinking product life cycles and
more intense competition found in many industries. In the Daikin Industries case, for example, you will
need to reconsider the cumin configuration of Daikin's supply chain, given some of these external
pressures.
In theory, effective supply chain management enhances coordination and conununica_ don
among the different members of the entire supply chain or distribution channel. Improvements in
coordination and communication, in turn, lead to more efficient materials management among supply
chain partners, with total system inventory reduced, cycle

257