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scm_ch09 - Supply Chain Management From Vision to...

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Supply Chain Management: From Vision to Implementation Chapter 9: Core Competencies and Outsourcing
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2 Chapter 9: Learning Objectives 1. Describe the notion of core competency. Identify an organization’s competencies and determine whether they pass the three-fold test of a core competency. 2. Define outsourcing and discuss reasons why companies outsource. 3. Describe the three phases to developing and executing an outsourcing strategy.
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3 Chapter 9: Learning Objectives 1. Identify and assess some of the potential risks associated with outsourcing. 1. Conduct a make-or-buy analysis to support an outsourcing decision.
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4 What is a Core Competence? Core competency is the set of activities, skills, or advantages that distinguishes a company for its competitors. “… the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies.” - Prahalad & Hamel
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5 Core Competence To compete and win in the global marketplace a company must be uniquely good at at least one thing that the customer values. Most industry leaders build their core competencies around a handful of essential skills.
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6 Identifying Core Competencies Does the identified skill set contribute significantly to what customers perceive as our organization’s value-added? Is the skill set difficult for others to replicate or imitate? Are we particularly good at the skill set, or willing to invest the resources to become excellent? Is the skill set broad enough that it allows us to the opportunity to enter many diverse markets or businesses?
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7 Complementary Core Competencies Once a company finds its core competency, it can design a supply chain to support its competitive strategy, value proposition, and competency development. Outsourcing non-critical activities to supply chain partners allows companies to leverage complementary core competencies.
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8 Outsourcing Flowchart
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9 The Outsourcing Challenge Outsourcing is the process of moving an aspect of production, service, or business function from within an organization to an outside supplier. Government public agency outsourcing is called privatization.
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10 Outsourcing Trends Contract Manufacturing (CM) – a third-party makes an end product or major component under another company’s brand. Third-Party Logistics (3PL) – using a supplier to provide some combination of logistics activities. Offshoring – outsourcing to a different country. Business Process Outsourcing (BPO) – outsourcing support functions such as: HR, payroll, logistics, etc.
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11 Benefits of Outsourcing By outsourcing non-strategic processes, an organization can focus its attention on those things it does best to satisfy the customer.
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