Interorganisational - Supply Chain Management

Have you ever wondered about the operational background to strategic alliances of airlines? Wasn’t the point to increase visibility, enlarge the potential network of destinations at the same time as decrease operational costs esp. in terminals? The latter should have included common check-in counters, a common catering, and common ticketing desks and service recovery stations (i.e. whose ever hub it is arranges for these operations for the rest of the alliance).

This is a note for those companies in alliance with SAS - which in Norway has a campaign running about re-launching its service (SAS relanserer service). Admittedly, the ads are quite interesting, but the operational side to it is… a joke. Sweetly, a NON-low-cost airline re-introduces food and polite flight attendants!

Ok, apart from all the fuzz in Norway about the campaign (sorry for most of the links being in Norwegian), here’s the socks-and-sandals story about the strategic alliance between SAS and Icelandair. Typically for strategic alliances, the check-in to Icelandair flights in Oslo is operated by SAS. So is the counter if you run into any problems, e.g. have trouble with the booking, need to reschedule your flight etc. This counter is taking the outsourcing of service operations to customers to the extreme. Not only do they not help you but instead of calling their partner, give you the number of Icelandair to call yourself. You end up arranging everything with Icelandair on your own mobile phone (btw, strangely enough at 14:00 Icelandair’s phone services did not operate in Norway nor Denmark, the message being to contact SAS - and the final call to set arrangements going directly to Iceland), then SAS kindly enough lets you pay for the service of changing your flight schedule. Is this what they call “good service”? (I wonder, was this before or after the re-launch?) Yes, SAS managed to distinguish between operational productivity and customer productivity, but might have missed out a point in Johnston and Jones’ (2004) article: balancing the two, and ultimately, keeping customers happy to improve customer service.

Gyöngyi

The moment I wake up
Before I put on my makeup….
I think about unpaid work…

At the end of many supply chains* you find consumers that are not only concerned about the price the pay for a product, but also the time they spend on various activities of acquiring these produtcs or services.

The number of books available on time management are not in shortage. A quick browse here reveals promises such as “Getting things done…”, “The one minute manager” (wonder if managerial problems can be put into a microwave?), and “Do It Tomorrow and Other Secrets of Time Management”. The idea of time management and stressful life has even translated into the chick lit genre. Take for example “I Don’t Know How She Does It” and “The Secret Dreamworld of a Shopaholic“.

‘Allo ‘Allo! — back to the more serious issues: Consumption, unpaid work, lean solutions and total cost of ownerhip.

In Lean Solutions from 2005, Womack and Jones assert that “consumption is often hard for the consumer and is unpaid work to boot”. One of the most expensive pieces of furniture we have bought at our house is a changing table. Unassembled.

Womack and Jones (2005: explain further: “…too many managers act as if production stops atthe office door or the factory gate. So we now use the term lean provision, which comprises all of the steps required to deliver the desired value from producer to customer…”.

Here is the problem: “… consumption often isn’t easy and consumers can’t get what they desire” (op cit, p. 9, my emphasis in bold). Let’s consider the first aspect, how easy (or difficult) it is to acquire products or services as consumers. To do this, it may be helpful to get some insight from the concept of total cost of ownership.

In this paper on Total cost of ownership: an analysis approach for purchasing, Lisa M. Ellram defines TCO as “purchasing tool and philosophy which is aimed at understanding the true cost of buying a particular good or service from a particular supplier”. This includes costs that may occur before transaction (e.g. searching for suppliers), during the transaction (e.g. transport) and after the transaction (e.g. acquiring after-sale services).

Although TCO has emerged as a tool within purchasing and supply management, it may be interesting to understand to what extent consumers are ignoring and/or appreciating the time dimensions implied in both Lean Solutions and Total Cost of Ownership. We could ask: what is the total cost of a mobile phone that has to be sent to repair by the consumer within 10 days of purchase, and the lead-time of this after-sale-service was 3 weeks? In addition, how will this articulation of consumers view on e.g. after-sale services translate into practices at the upstream level of the particular supply chain?! Will upstream levels of supply chains ever learn about the lead-times and costs of consumers at the downstream level of the supply chain, e.g. in the situation of after-sale services?

Árni

*We use many supply chains here, but this will be extended to include reverse logistics in some of the forthcoming blogs.

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Announcement: Since the nerds of service operations have a voice on this blog, we have decided to give them a particular tag for these entries: socks and sandals.