VALUE CHAIN MANAGEMENT

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

Overview
1. Define operations management and explain its importance to all types of organizations
2.

3. Define value chain and value chain management
4.

5. Discuss the goals of value chain management
6.

7. Explain the organizational and managerial requirements for value chain management
8.

9. Describe the benefits of and obstacles to value chain management
10.

11.Case: Seaoil Phils., Inc.

Operations Management
The 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 Management Encompasses both services and manufacturing  Manufacturing 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 organization’s competitive success  More organizations move toward managing their organizations from a value chain perspective.produces physical goods  Service organization .

source: management by Stephen Robbins    . 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 . ready to set up and use immediately to type that assignment due tomorrow . You hit the order button and within three days . They want you to order so you have it to help you in your studies this semester . your dream computer is delivered to your front door . built to your exact specifications . and you ’ re listening to a voicemail from your parents saying they want to buy you a computer for your birthday this year .  It ’ s 11 PM .

  “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 th e a m o u n t b u y e rs a re w illin g to p a y fo r w h a t a firm p ro v id e s th e m . .

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

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VALUE ACTIVITIES Those activities that are distinct both physically and technologically Some activities are more vital than others depending on industry For 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 .

OPERATION OF FACILITIES.) (e. TESTING.Some activities are indirect and are VALUE ACTIVITIES involved only in making it possible to perform the direct activities on a continuing basi (e. RECORD KEEPING). MAINTENANCE. SCHEDULING.g.g. INSPECTING. MONITORING. . Some activities are primarily involved in quality assurance and are involved mainly in ensuring quality of other activities ETC.

represents a significant or growing portion of the cost of production or operation .An activity can be separated from other VALUE ACTIVITIES activities if it has any of the following characteristics.  A.has a high potential impact of differentiation and.has different economics compared to the others B. C.

Who has the “POWER”?   MANUFACTURERS .

   IT IS……… ARE CUSTOMERS .

.

   Value chain management To create a value chain strategy that meets and exceeds customer’s needs and desires and allows for full and seamless integration among all members of the chain .

the better the customer’s solutions WHEN VALUE IS CREATED EVERYBODY BENEFITS .The better the collaboration among the various   claim participants.

Porter’s Generic Value Chain SUPPORT ACTIVITIES Firm 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 .

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 .Porter’s Generic Value Chain SUPPORT ACTIVITIES Firm 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.

etc. supplies & equipment . training. development & compe Porter’s Generic Value Chain Firm Infrastructure Human Resource Management Technology Development Procurement SUPPORT ACTIVITIES N IN GI G AR AR M M PRIMARY ACTIVITIES MA RG IN o 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. control systems. company culture.ational structure. Employee recruiting. hiring.

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 .

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

outlines expectations for organization’s pursuit of value chain management .the way that  must examine core competencies to determine where value is being added non-value-adding activities should be eliminated   Leadership .Requirements for Successful Value Chain Management  Organizational organizational work is done Processes .

collaborating. flexibility. openness. and trust Culture and Attitudes -  . mutual respect.Requirements for Successful Value Chain Management  Employees/Human flexibility 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.

Value Chain Benefits .

and Increased Market Shares .Value Chain Benefits Improved Customer Service Cost Savings and Accelerated Service Time Improved Quality Inventory Reductions Improved Logistics Management. Increased Sales.

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Organizational Barriers Refusal/Reluctance to share information Refusal/Reluctance of employees to shake up status qou Security issues  .

Cultural Attitudes Trust (lack and too much)  Intellectual property.proprietary company info that is critical to its effective and efficient functioning & competitiveness Control .

Required Capabilities There are number of capabilities that value chain partners must have and are not easy to develop or to do .

People Reluctance of organization’s members to be flexible Employee’s motivation Lack of experienced managers .

Inc .CASE STUDY Seaoil 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 70’s.Company Profile Seaoil Philippines.

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

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. .

to logistics and manufacturing) that is #1 in terms of Biofuels and #3 in terms of retail presence by 2010. .Vision  SEAOIL: A Conglomerate of Fuel Related Businesses (from retailing.

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

Products and Services Gasoline: 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 .

Services Transport Logistics  Terminalling  Laboratory Services  Palamig  .

Value Chain System Refinery Extraction/Drilling Production Storage Transportation Upstream.more focused with based oil Transportation Land Transport Ocean Transport Distribution Storage SEAOIL Service Station/Retailing Downstream – this is more into the processed fuel .

. SEAOIL boasts of the largest storage facility in Metro Manila. •Its 12 storage tanks have a total capacity of over 15 million liters.Supply and Operations Mandaluyong Terminal •Among the independent players. •A portion of the terminal space is also used as a manufacturing and warehousing facility for its lubricant product line.

Supply and Operations Mabini Terminal •Deep waters surround the terminal. •The terminal cover 18 hectares of land with a total storage capacity of 40 million litres. enabling large ships to anchor close to the terminal thereby removing the need for costly “lighterage” or a long receiving pipe line. Other Areas •Bacolod •Dipolog Terminal Terminal .

Supply and Operations Transport Logistics (Marine) Ocean Tankers Corporation •Operates • 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 Highlights Market Share Marketing / Retailing •Market Others 12% SEAOIL 3% Caltex 14% Petron 38% Share Petron Shell Caltex SEAOIL Others Shell 33% Source: DOE 2006 .

34 stations 38 stations 119 stations 130 stations Total .19 station 24 stations .25 stations 16 stations .Retail Distribution Network 2007 Existing vs 2008 Projection Manila North Luzon South Luzon Visayas Mindanao  30 stations 36 stations .11 stations 16 stations .

Dealer Operated stations) 2 Types of Station * Franchise packages are at very affordable costs EXPRESS STATION FULL STATION Franchise Term: 10 years .Franchising Packages •Company-Owned. Dealer-Operated (CODO) •Station Conversion Package (for Dealer-Owned.

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

E.R.A.A brand campaign that highlights 5 brand attributes of SEAOIL.  C A R E S -onvenient -ffordable -eliable -nvironment-friendly -ervice-oriented .S. .Operating Highlights  Brand Building Initiatives SEAOIL C.

SEAOIL Organizational Structure .

Quality Control & Product Development TNDD—Training & Development Department CRMD. Yu Reseller RMNL—Reseller Manila RNOR—Reseller North RSOU—Reseller South RVIS—Reseller Visayas RMIN—Reseller Mindanao RLUB—Reseller Lubes MKTG.Legal & Corporate Affairs Department SUPP—Supply .President / Chief Executive Officer — Glenn L .Customer & Relationship Management Department LCAD.Marketing Marcom—Marketing Communications Retail Development Card Development SPM—Lubes & Special Promo Marketing QCPD.

PBFD—Production of Bio-Fuel Dept. Safety Dept. RENS—Retail Engineering PRCH—Purchasing WARE—Warehouse MAEN—Maintenance & Eng’g .Chief Operations Officer CSDC—Corporate Systems & Document Control LMRN—Logistics Marine LLND—Logistics Land LBAT—Logistics Batangas LVIS—Logistics Visayas LMIN—Logistics Mindanao ISSD—Inventory. Security.

RVIS. Their main tasks is to gain more loyal customers of SEAOIL. and LSPM. RSOU. distributorship) that helps great more retail stations. Reseller  Composed of RMNL. RNOR. industrial accounts. He is the one who come-up with different strategies to gain more and improve all the Retail Stations.  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. both internal and external. and lubes distributorship.  Marcom is marketing communication and its main role is to communicate all marketing initiatives to all.. packaging.  Retail Dev’t is responsible for marketing and introducing the brand SEAOIL. RMIN. and pricing .  Card Dev’t is the group who introdues the VIP Card and soon the Fleet card of SEAOIL. Retail Dev’t. Card Dev’t. and RLUB  They are the groups who are responsible in getting accounts (franchise.  Sales force of SEAOIL  Marketing  Composed of Marcom..

Do the specific actions in all interactions.•QCPD •TNDD •This are the group who conducts product testing. to make sure that all products are made with high quality. esp. • • • . permits needed for a SEAOIL Station Constructions. and additives that will be used are safe and effective. complaints. •LCAD •This group handles and are responsible in processing all important documents. •They are also the one’s who formulate new products and do laboratory testing to be sure that all chemicals. and recommendations). • •CRMD (SCIC) •One who handles all customer interaction (comments. suggestions.

Its transport assets include a self propelled tankers. of the plant is done properly  PBFD—Production of Bio-Fuel Dept.A fleet of accredited haulers to transport products to SEAOIL's customers and retail distribution network. assigned to ensure that all Health. Safety Dept.   LLND—Logistics Land  . Security.  Department who is in-charge of manufacturing of petroleum products. tug boats. barges and delivery trucks. Safety and Security . CSDC—Corporate Systems & Document Control  LMRN—Logistics Marine  Ocean Tankers Corporation .   Dept.   LBAT—Logistics Batangas  LVIS—Logistics Visayas  LMIN—Logistics Mindanao  ISSD—Inventory.Operates a fleet of shipping.

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. 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  .•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. e n g i e e ri g .

and all hardware facilities.•HRCA—Human Resources & Corporate Administration • •FINA—Finance • •ACCT—Accounting •CCOD—Credit . internet security. Collection. •ITEC—Information Technology •team that is responsible for the maintenance of company softwares. •they are also the one’s who assists in web constructions. and in general all aspects of information tech. 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. • • • • .

THANK YOU!!! .

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