Service Operations Management:

The total experience

Chapter Five

Service Supply and Logistics Networks

 Supply networks: commercial organizations

A supply network comprises supply chains that are integral

to a system of organizations, people, technology, activities,
information and resources involved in transferring a
service from the provider to the customer.

Service delivery networks

The value chain

Fig. 5.1 Traditional representation of tangible
product supply chain
Fig. 5.2 Services input-transformation-
output model
Fig 5.3 Generic value chain
Supply networks: non-commercial organizations

‘Joining-up’ is high on e-government agendas for most

developed countries, and Australia is no exception, as
this is expected to improve service delivery to citizens
and businesses.

Coordination of a supply chain can take place under

a central or a decentralized control - emphasising
either optimisation of the business process, or in the
latter case, decentralised control fostering
autonomy at the expense of efficiency.
Fig 5.4
Representa
tion of a
supplier
network
 Supply-importance relationships
Not all services should be considered equal; some need
to be treated differently due to the inherent risk
associated with their delivery.

Kraljic's Matrix, also known as ‘supplier positioning’, is a method of

assessing supplier relationships in the context of associated risk. The
matrix shows the supplier as one axis, and service vulnerability (risk) to
their failure or disappearance as the other. The former has the great
advantage of being objectively measurable, while the latter is a matter
of judgment. The model generates four categories of supplier:
• Acquisition
• Security
• Profit
• Critical
Fig 5.5
The
Kraljic
matrix
Fig 5.6
Organization-
market
relationship
matrix
 Developing relationships with service suppliers
Mutual benefits can be gained through:
• Innovation in designing and developing services or processes
• Differentiate the services so as to reduce competitive pressure
• Reduce the time it takes to deliver new services to market
• Improved quality and service levels
• Enhancing brand and reputation recognition
• Outsourcing / offshoring
• Reduced capital requirement
• Cost reduction
• Risk reduction
• Joint forecasting
• Joint design
• Joint investment planning
• Sharing market intelligence
 Supply network co-ordination

Process requirements for co-ordination

• Long-term business planning

• Operational ordering and planning
• Request and feasibility study
• Exception handling
• Multi-sourcing co-ordination
• Visibility of order progress
• Network performance management
Demand and supply information visibility

Exception-focused supply chain planning and execution