February 28, 2009

OPERATIONAL MANAGEMENT LESSON 5 EXERCISE– REFLECTIVE ONLINE LEARNING

OPERATIONAL MANAGEMENT LESSON 5 EXERCISE– REFLECTIVE ONLINE LEARNING

“The IT Sector has a distinctive pattern of levels of integration. For one section of your organisation, write about the advantages and disadvantages of having an integrated supply chain. Comment on your impression of the levels of market force that apply to your chosen section.”

For this exercise I have chosen to analyse the Consultancy Services Supply Chain formed by the group of human resources who finally give final performance to customers, and moreover the evolution this sector has been through from a fully integrated SC to a worldwide decentralised one.

Consultancy Services SC use to be quite a simple one compared to manufacturing companies, just a group of human resources organised by experience, role or process who belonged to the consultancy firm and where used on each of the final customer project.

SC1

But on the last 10 years market trend has evolved drastically based on three main factors:

1)     Business globalisation

2)     Need of cost reduction and cost modularity

3)     the development of the technology capable to work over distance

This market trend has moved consultancy services from a quite simple and comfortable position (A) where customers could afford to pay high price per hour to get what they need when they wanted on a quite predictable environment, to (b) where market has evolved to unpredictability, and customers cannot afford previous prices and now finally to (c) where customers are in fact outsourcing their own processes into IT and consultancy services (c1) and core consultancy services must be delivered on an unpredictable market with low tariffs.

C Mket

This market evolution has provoked a huge change on the Supply Chain of consultancy firms, in order to be capable to cope with this market demands while remain profitable.

SCC

Performance Objectives

A market

B market

C market

Quality

Quality was the main driver when consultancy services were delivering without subcontracting and without global delivery. Client could pay and wanted to pay for quality, so one of the main issues of consultancy firms was knowledge management and attrition control

Quality was still important but not as important as on A market. Customer could not pay such higher tariffs, and market was so unpredictable that they couldn’t afford to wait until best work was done.

Quality is not the driving driver, time to market is. Therefore customer pays for done on time more than done with quality. This causes a reduction on price and therefore a reduction on cost structures, increasing the need to subcontract.

Speed

Market was more predictable, so time to market was not the main issue. Long and mid term impact was enough important to take the necessary time to do things correct

Time to market was getting more important

Time to market is the driving driver, moreover when part of the customer business chain can be provided by consultancy firms (outsourcing). So the distance between the consultancy provider and the customer’s customer is narrowing

Dependability

Consultancy was focused on strategy and not on daily operations, therefore dependability was low

Consultancy began to enter the legacy and operations systems, therefore dependability was getting important

Absolute dependability, customer final service or products can depend on consultancy service given

Flexibility

Market predictability was high, therefore flexibility was less needed, but due to high prices, customer claim for this flexibility. Flexibility was being given by consultancy firms through overcapacity.

Market requires more flexibility, so consultancy firms begin to subcontract part of their SC

Flexibility is a key issue, but prices don’t allow to have overcapacity, therefore GDD must be used

Cost

Customer could afford to pay for high value services

Lower services and less money to be paid

Cost reduction through high scale services

As a conclusion we could see how this market is changing over the years, and how this change has affected what it looked as a simple Supply Chain into a each day more complex one.


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