Engineering Logistics and Operations

Management – ENGG439/ENGG939
Dr. Marcella Papini
[email protected]
Spring Session, 2022
Week 2: Logistics and Operations
Decisions
This Week’s Learning Outcomes
§ Understand the nature of supply chain design/supply
network configuration decisions and how they relate to
competitiveness

§ Comprehend how decisions regarding the design and

operation of logistics systems affect performance at the a
supply network level

§ Recognise supply chain and logistics system level

performance goals and alternative perspectives of
performance measurement (continued in week 3)
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Decision Making in the Context of Organisations
Engineers have to make many decisions in their work life
Designing a new product Building a warehouse Installing a new assembling machine

Source: https://www.lisaadelhi.com/product- Source: https://www.waredock.com/magazine/time- Source: https://www.festo.com/cms/en-

development-vs-product-design/ required-to-build-a-warehouse/ au_au/70770.htm

- Set product specifications - Choose location - Mobilise resources

- Choose suitable material - Choose suitable material - Ensure instructions are followed
- Develop relevant protocols - Develop relevant procedures - Set up operations procedures

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Decision Making in the Context of Organisations
§ Decision making is central to all of the four major management functions
§ Decisions can be broadly classified into three categories
- Resource allocation decisions,
- Market positioning decisions, and
- Taking orders, - Acquisition of capital equipment
- Replenishing stock, and
- Scheduling jobs Design of network
Schedules operations
- Medium-term funding prioritisation,
- Market segmentation, and
- Manoeuvres
Source: https://anyaworksmart.com/2013/03/
Material flow management policies
Considering a supply network – what
would strategic, tactical and
operational decisions be?
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Operations and Logistics Decisions
§ Decisions related to the design and running of operations and logistics systems
§ Design decisions set the parameters of the supply network
§ Operations: entities, locations and capacity of manufacturing and assembly
facilities, etc
§ Logistics: transportation modes, location and capacity of distribution centres,
warehouses and depots, etc
§ Operations & Logistics: sort of technology
§ These decisions result from the buyer-supplier relationships
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Operations and Logistics Decisions
CHALLENGES

§ Align the goals of the individual organisations with those of the overall supply
network
§ Coordinate all the activities undertaken across the supply network
§ Maintain visibility across the supply network
§ Track and trace the flow of goods through the supply chains

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Operations and Logistics Decisions
§ Customer compare products based on the overall value offered
§ Customer do not care about the entities involved in the value creation process
§ Products compete based on the overall performance of the entire supply network
§ Most end products are associate with a brand name
§ To be competitive attributes need to be maximised across
the entire supply network

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Customer Value
§ To fully how grasp operations and logistics decisions are made, we need to
understand how customer purchase decisions are made
§ Customers make their purchasing decision emotionally and logically on a
perception of customer value
§ Customer value attributes reflect both the needs and wants of customers

Source: https://www.lisaadelhi.com/product- Source: https://www.wheninmanila.com/most- Source: https://thehospitalitydaily.com/5-most-

development-vs-product-design/ expensive-yachts-in-the-world/ luxury-hotels-in-maldives/
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Customer Value
§ Customer value can be expressed as
𝑃𝑟𝑜𝑑𝑢𝑐𝑡 𝑜𝑟 𝑆𝑒𝑟𝑣𝑖𝑐𝑒 𝑷𝒆𝒓𝒇𝒐𝒓𝒎𝒂𝒏𝒄𝒆
𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝑽𝒂𝒍𝒖𝒆 =
𝑃𝑟𝑜𝑑𝑢𝑐𝑡 𝑜𝑟 𝑆𝑒𝑟𝑣𝑖𝑐𝑒 𝑷𝒓𝒊𝒄𝒆
𝑓(𝑞𝑢𝑎𝑙𝑖𝑡𝑦, 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦, 𝑓𝑙𝑒𝑥𝑖𝑏𝑖𝑙𝑖𝑡𝑦, 𝑠𝑒𝑟𝑣𝑖𝑐𝑒, … )
𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝑉𝑎𝑙𝑢𝑒 =
𝑃𝑟𝑜𝑑𝑢𝑐𝑡 𝑜𝑟 𝑆𝑒𝑟𝑣𝑖𝑐𝑒 𝑃𝑟𝑖𝑐𝑒
What would you consider as the three
most important criteria when you
purchase these goods:
- Generic-brand product
- Consumer electronics
- Fancy restaurant
- Express post
- White goods
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Customer Value
Product/Service considered Key criteria used when buying

Generic-brand product

Consumer electronics

Up-market restaurants

Express post

White goods

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Customer Value
Product/Service considered Key criteria used when buying
Generic-brand product Price?
Consumer electronics Durability? after-sales? aesthetics?
Up-market restaurants Image? Superior quality?

Express post Delivery speed; on-time delivery

White goods Durability? after-sales? aesthetics?

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Customer Value
Customer value attributes fall into two classes
§ Order winners Winning attribute Qualifying attribute
Fingerprint recognising technology
§ Order qualifiers

Can you differentiate your previous Source: https://www.azosensors.com/

criteria in terms of order-winners and

order-qualifiers?

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 Different types of products compete based on different
Customer Value attributes in different market segments!

Product/Service Key criteria used when

Order-winner? Order-qualifier?
considered buying
Generic-brand product Price?
Durability? after-sales?
Consumer electronics
aesthetics?
Up-market restaurants Image? Superior quality?

Delivery speed; on-time

Express post
delivery
Durability? after-sales?
White goods
aesthetics?

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Customer Value Woolworths Homebrand Products

Coles Homebrand Products

Source: https://www.woolworths.com.au/shop/discover/our-
brands/homebrand

Aldi does not offer delivery service

Source: https://www.coles.com.au/about-coles/exclusive-
brands/coles-brand/

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Dynamics of Competition
Organisations can maximise customer value in three ways Effectiveness/Differentiation

𝑓(𝑞𝑢𝑎𝑙𝑖𝑡𝑦, 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦, 𝑓𝑙𝑒𝑥𝑖𝑏𝑖𝑙𝑖𝑡𝑦, 𝑠𝑒𝑟𝑣𝑖𝑐𝑒, … )

𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝑉𝑎𝑙𝑢𝑒 =
𝑃𝑟𝑜𝑑𝑢𝑐𝑡 𝑜𝑟 𝑆𝑒𝑟𝑣𝑖𝑐𝑒 𝑃𝑟𝑖𝑐𝑒

Efficiency/Productivity

Efficiency vs effectiveness?
Efficiency is the ability to produce an intended result in the way that
results in the least waste of time, effort, and resources. Effectiveness is
the ability to produce a better result, one that delivers more value or
achieves a better outcome

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 Competition at Supply Network Level
VALUE-PRICE-COST FRAMEWORK

Value the offering is creating

The Value-Price-Cost Framework
Customer benefit

Price the organisation charges

How could you amend this

figure to account for the
Cost of creating and delivering the offering synergies derived through
partnerships in the supply
network?
Company benefit
Source: https://www.okx.com/academy/en/value-price-and-cost-how-blockchain-changes-business-value

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Competition at Supply Network Level
VALUE-PRICE-COST FRAMEWORK

§ VPC framework can be adapted to an entire supply chain

Value perceived by 𝑉!
§ Once the members begin to practice SCM the end user Value added by SCM
𝑉
§ Cost reduction 𝑃!
Sum of value added by
firms
Price perceived by end user Profits from increased
price from SCM value
§ Profits increased 𝑃
gains

Sum of the costs incurred by all chain members Sum of profits

§ Value added 𝐶
Cost reductions due to
SCM
𝐶!
Sum of the costs after
SCM cost reductions

Crook, T.R. and Combs, J.G. (2007), Sources and consequences of bargaining power in supply chains. Journal of Operations
Management, 25: 546-555. https://doi-org.ezproxy.uow.edu.au/10.1016/j.jom.2006.05.008
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The Link between Operations and Logistics
Decisions and Competitiveness
§ Organisations compete against each other by offering a superior
customer value

§ The key parties involved in this “game” of competition are the incumbent
organisation, other organisations and customers

§ Decisions will have an impact on the capacity and capability of the system

§ Socio-technical systems determine the ability of SC entities to offer a

superior customer value
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The Link between Operations and Logistics
Decisions and Competitiveness https://edition.cnn.com/videos/business/2021/05/21/
marketplace-asia-alibaba-cainiao.cnnbusiness

§ Coordinated efforts can result in gains in terms of

§ Optimisating capacity utilisation
§ Minimising inventory levels These gains will have a direct impact on supply network
performance with respect to efficiency, speed and
§ Reducing lead times responsiveness

§ Well-designed information and communication system will facilitate

collection of information across the entire SC
§ Timely decision making
§ Tracking and tracing of the flow of goods
§ Lower inventory levels
§ Higher responsiveness
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The Link between Operations and Logistics
Decisions and Competitiveness

Using the Regal Marine’s example

featured in the video, illustrate how
operations and logistics decisions can
contribute to the performance of the
individual entities that make up a
supply chain, as well as the
performance of the overall supply
network.

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Practice Case Study
§ What is the underlying theme this case study brings out?

§ What are the key issues/challenges the case covers?

Check Case Studies Guidelines and Marking Rubric Submit report by August 7th (10pm)
docs (available on Moodle)
Discuss answers on August 8th

Assignments allocation on August 8th

Peer review to be submitted on August 19th (10pm)

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Practice Case Study
§ On what basis SES has been competing against its rivals up to now? What appears to be
the basis of competition for SES moving forward? Why do you think the basis of
competition might be/might have changed? Make sure to identify and differentiate
between order qualifying and order winning attributes of the products concerned.

§ Identify at least five distinct operations and logistics issues/challenges highlighted in the
case.
§ What are the key decisions that would need to be made in addressing the
issues/challenges identified above? Categorise them in terms of strategic, tactical and
operations, supported by a brief explanation.
§ Identify three key ways in which SES could change and/or improve their operations and
logistics to retain the contract with BAG. In other words, how could they maintain their
preferred supplier status with BAG?
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