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 Representation 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 suppliersMutual 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