VALUE CHAIN

MANAGEMENT

MANAGEMENT 201
Trina Ched T. Escalante
Bryan M. Yarra
Gerald Eduard B. Dela Cruz
 Overview
1. Define operations management and explain its
importance to all types of organizations
2.

3. Define value chain and value chain management

4.

5. Discuss the goals of value chain management

6.

7. Explain the organizational and managerial

requirements for value chain management
8.

9. Describe the benefits of and obstacles to value chain

management
10.

11.Case: Seaoil Phils., Inc.

Operations Management
The design, operation, and control of the
transformation process that converts such
resources as labor and raw materials into
goods and services that are sold to customers
 Importance of
Operations Management
Encompasses both services and manufacturing
 Manufacturing organization - produces physical goods
 Service organization - produces non-physical outputs in
the form of services

Important in effectively and efficiently managing productivity
 Productivity - overall output of goods or services divided
by the inputs needed to generate that output

Plays a strategic role in an organization’s competitive success
 More organizations move toward managing their
organizations from a value chain perspective.


 It ’ s 11 PM , and you ’ re listening to a

voicemail from your parents saying they want to
buy you a computer for your birthday this year .
They want you to order so you have it to help
you in your studies this semester . You log on to
Dell Computer ’ s Website and configure your dream
machine that will serve even your most demanding
needs for the remainder of your college years .
You hit the order button and within three days ,
your dream computer is delivered to your front
door , built to your exact specifications , ready
to set up and use immediately to type that
assignment due tomorrow .


 source: management
 by Stephen Robbins


 “How can organizations deliver to customers in

such a timely manner the products to meet their
unique needs?”


VALUE CHAIN MANAGEMENT

MANAGEMEN
What is Value Chain?
The entire series of organizational work
activities that add value at each step
from raw materials to finished product

is th e a m o u n t
b u y e rs a re w illin g
to p a y fo r w h a t a
firm p ro v id e s
th e m .
How value is provided to
customers…..

Transformati
on

However, simple act of transformation from variety of resources into

something valuable to customers involves a vast array of interrelated
work activities performed by different participants (suppliers,
manufacturers, an even customers), that is …………..
Concept of Value Chain


 “ Transforming operations management

strategies and training organizations around the world
into finely tuned models of efficiency and
effectiveness strategically positioned to exploit the
competitive opportunities as they arise.”
 Value Chain Management


e sequence

of integrated activities and information about prod

- Externally oriented; effectiveness oriented

- Focuses on both incoming of raw materials an
outgoing of output
- Aims to create the highest value to customers
-
VALUE ACTIVITIES
Those activities that are distinct both
physically and technologically
Some activities are more vital than others
depending on industry
For instance, marketing activities would
be more vital in a very competitive
consumer goods industry than in a
telephone monopoly
Some activities are direct in the sense that
they are directly involved in creating
value for the buyer
VALUE ACTIVITIES
Some activities are indirect and are
involved only in making it possible to
perform the direct activities on a
continuing basi
(e.g. MAINTENANCE, SCHEDULING,
OPERATION OF FACILITIES, RECORD
KEEPING).
Some activities are primarily involved in
quality assurance and are involved
mainly in ensuring quality of other
activities
(e.g. MONITORING, INSPECTING, TESTING,
ETC.)
 VALUE ACTIVITIES
An activity can be separated from other
activities if it has any of the following
characteristics;


A.has different economics compared to

the others
B.has a high potential impact of
differentiation and,
C.represents a significant or growing
portion of the cost of production or
operation
Who has the “POWER”?


MANUFACTURERS
 IT IS………


 ARE

CUSTOMERS
 Value chain
 management


 To create a value chain strategy that meets and

exceeds customer’s needs and desires and
allows for full and seamless integration among
all members of the chain
The better the collaboration among the various
claim participants, the better the customer’s
solutions
 WHEN VALUE IS CREATED


EVERYBODY
BENEFITS
 Porter’s Generic Value Chain
ACTIVITIES

Firm Infrastructure

M
SUPPORT

AR
Human Resource Management

G
IN
Technology Development
Procurement

Inbound Operations Outbound Marketing & Service

IN
Logistics Logistics Sales

RG
MA
PRIMARY ACTIVITIES
 Porter’s Generic Value Chain
ACTIVITIES

Firm Infrastructure

M
SUPPORT

AR
Processes of transforming inputs
Human into finished
Resource products & services
Management
Identification of customer needs & generation of sales

G
IN
Technology Development
Procurement

Inbound Operations Outbound Marketing & Service

IN
Logistics Logistics Sales

RG
MA
PRIMARY ACTIVITIES
Warehousing & distribution of finished goods
upport of customers after the products & services are sold to them
Receiving, warehousing & distribution of raw mat
 Porter’s Generic Value Chain
ational structure, control systems, company culture, etc.
Employee recruiting, hiring, training, development & compe
ACTIVITIES

Firm Infrastructure

M
SUPPORT

AR
Human Resource Management

G
IN
Technology Development
Procurement

Inbound Operations Outbound Marketing & Service

IN
o
nT
ch
e rva
istu
lg p -
Logistics Logistics Sales

RG
Purchasing of inputs such as materials, supplies & equipment

MA
PRIMARY ACTIVITIES
Requirements for Successful
Value Chain Management
 Requirements for Successful
Value Chain Management

 Coordination and Collaboration -

comprehensive and seamless integration
among all members of the chain


 Technology Investment - information

technology can be used to restructure the value
chain to serve end-users
 Technology is used in every
value-creating activity:
Primary Activities Support Activities

Inbound Logistics Technologies Technologies related to

Transportation, material handling, material storage, training, computer-aided
communications, testing, information systems design, software development
Operations Technologies
Process, materials, machine tools, material handling,

packaging, maintenance, testing, building design &

operation, information systems
Outbound Logistics Technologies
Transportation, material handling, packaging,

communications, information systems

Marketing & Sales Technologies

Media, audio/video, communications, information systems

Service Technologies
Testing, communications, information systems
 Requirements for Successful
Value Chain Management

 Organizational Processes - the way that

organizational work is done

must examine core competencies to determine
where value is being added
non-value-adding activities should be eliminated

 Leadership - outlines expectations for
organization’s pursuit of value chain management
 Requirements for Successful
Value Chain Management
 Employees/Human Resources
flexibility in the design of jobs
hiring of workers who have the ability to learn
and adapt
significant investments in continual and ongoing
employee training

 Organizational Culture and Attitudes -
important for employees to have favorable attitudes
regarding sharing, collaborating, openness,
flexibility, mutual respect, and trust

Value Chain
Benefits
Value Chain Benefits
Improved Customer Service
Cost Savings and Accelerated
Service Time
Improved Quality
Inventory Reductions
Improved Logistics Management,
Increased Sales, and Increased
Market Shares
 Organizational
Barriers
Refusal/Reluctance to share
information
Refusal/Reluctance of employees
to shake up status qou
Security issues

 Cultural Attitudes
Trust (lack and too much)
 Intellectual property- proprietary
company info that is critical to its
effective and efficient functioning &
competitiveness
Control
 Required
Capabilities
There are number of capabilities
that value chain partners must
have and are not easy to
develop or to do
 People
Reluctance of organization’s
members to be flexible
Employee’s motivation
Lack of experienced managers
 CASE STUDY
Seaoil Philippines, Inc
Company Profile
Seaoil Philippines, Inc is the brainchild of a
hardworking middle-class couple who began
their careers in the petroleum industry as
gasoline station operators. The company was
into wholesale dealership of petroleum
products when it began its operations in the
early 70’s.
Company Profile
Seaoil opened its own bulk distribution
depot and processing facility in
Mandaluyong, right beside the Pasig River
in 1980. This served as a storage facility
of bunker fuel oil for a host of industrial
customers. The depot has a storage
capacity of 20,000,000 liters distributed
over a number of vertical tanks.
Additional tanks were also constructed
and leased out to local and other
multinational companies for their various
storage requirements. This depot facility
is reputed to be the largest storage
facility in Metro Manila, among
independent players.

Company Profile
 With the onset of oil deregulation during the first
quarter of 1997, Seaoil gained more popularity
when it was the first independent petroleum
player to open a gasoline retail station. This is
in pursuit of the desire to better service for the
Filipino nation.
Vision


SEAOIL: A Conglomerate of Fuel Related

Businesses (from retailing, to logistics and
manufacturing) that is #1 in terms of Biofuels
and #3 in terms of retail presence by 2010.
Mission

To be the service station of choice in the areas
that we are in and the leader in the products
and services that we offer

The SEAOIL WAY


a culture of innovation
speed to market
excellence in execution
doing even more with even less

Values


1.INTEGRITY is paramount in everything that we do.

2.We continuously strive to possess- A PASSION FOR
WINNING.
3.We must possess LEADERSHIP qualities.
4.We must have SENSE OF OWNERSHIP
(Pagmamalasakit) and ACCOUNTABILITY (Taking
responsibility)
5.We must show TRUST to the Company, our
extended family


Products and Services
Gasoline:
E10 G5 X-treme
E10 G5 Unleaded

Diesel:
Bioxceed Diesel

Kerosene

Auto- LPG
Lubricants:
Diesel Engine Oil (DEO)
Gasoline Engine Oil (GEO)
Motorcycle Oil
Special Products:
SPECIAL PRODUCTS
Battery Water
Engine and Radiator Coolant
Heavy Duty Degreaser
Multi-purpose Penetrating Oil
Promax MP3 Grease

Fluids:
DOT3 Brake Fluid
DEX3 Automatic Transmission Fluid
Services
Transport Logistics

Terminalling

Laboratory Services

Palamig

 Value Chain System

Refinery
Extraction/Drilling Production Storage Transportation

Upstream- more focused with based oil

Transportation

Land Transport Ocean Transport

Storage
Distribution
SEAOIL Service
Station/Retailing

Downstream – this is more into the processed fuel

 Supply and Operations

Mandaluyong Terminal
•Among the independent players, SEAOIL
boasts of the largest storage facility in Metro
Manila.
•Its
12 storage tanks have a total capacity of
over 15 million liters.
•A portion of the terminal space is also used
as a manufacturing and warehousing facility
for its lubricant product line.
 Supply and Operations

Mabini Terminal
•Deep waters surround the terminal, enabling large ships to
anchor close to the terminal thereby removing the need for costly
“lighterage” or a long receiving pipe line.
•Theterminal cover 18 hectares of land with a total storage
capacity of 40 million litres.
Other Areas
•Bacolod Terminal
•Dipolog Terminal
 Supply and Operations

Transport Logistics
(Marine)

Ocean Tankers Corporation

•Operates a fleet of shipping
• Its transport assets include a self propelled
tankers, tug boats, barges and delivery trucks.
 Supply and Operations

Transport Logistics
(Land)

•Afleet of accredited haulers to transport products to SEAOIL's

customers and retail distribution network.
 Operating Highlights

Market Share

Others
Marketing / Retailing 12%
SEAOIL
•Market Share 3%
Petron Petron
Caltex 38% Shell
14%
Caltex
SEAOIL
Others

Shell
33%

Source: DOE 2006

 Retail Distribution Network

2007 vs 2008
Existing Projection

Manila - 30 stations 36 stations

North Luzon - 19 station 24 stations
South Luzon - 25 stations 16 stations
Visayas - 11 stations 16 stations
Mindanao - 34 stations 38 stations

Total 119 stations 130 stations

Franchising Packages
•Company-Owned, Dealer-Operated (CODO)
•Station Conversion Package (for Dealer-Owned, Dealer Operated
stations)
* Franchise packages are at very affordable costs
2 Types of Station
EXPRESS STATION FULL STATION
Franchise Term:
10 years
Operating Highlights
Membership Expansion

Values, Incentives, Privileges (VIP ) -
existing
Fleet Card (2008)
Station Re-imaging – making a standard look/ image for all

SEAOIL Station.
New Design
Old Design
Operating Highlights

 Brand Building Initiatives

SEAOIL C.A.R.E.S. - A brand campaign that highlights
5 brand attributes of SEAOIL.

C -onvenient

A -ffordable

R -eliable

E -nvironment-friendly

S -ervice-oriented
SEAOIL Organizational
Structure
President / Chief Executive Officer — Glenn L . Yu
Reseller
RMNL—Reseller Manila
RNOR—Reseller North
RSOU—Reseller South
RVIS—Reseller Visayas
RMIN—Reseller Mindanao
RLUB—Reseller Lubes
MKTG- Marketing
Marcom—Marketing Communications
Retail Development
Card Development
SPM—Lubes & Special Promo Marketing
QCPD- Quality Control & Product Development
TNDD—Training & Development Department
CRMD- Customer & Relationship Management Department
LCAD- Legal & Corporate Affairs Department
SUPP—Supply
Chief Operations Officer
CSDC—Corporate Systems & Document Control
LMRN—Logistics Marine
LLND—Logistics Land
LBAT—Logistics Batangas
LVIS—Logistics Visayas
LMIN—Logistics Mindanao
ISSD—Inventory, Security, Safety Dept.
PBFD—Production of Bio-Fuel Dept.
RENS—Retail Engineering
PRCH—Purchasing
WARE—Warehouse
MAEN—Maintenance & Eng’g
 Reseller
 Composed of RMNL, RNOR, RSOU, RMIN, RVIS, and RLUB
 They are the groups who are responsible in getting accounts
(franchise, distributorship) that helps great more retail stations,
industrial accounts, and lubes distributorship.
 Sales force of SEAOIL
 Marketing
 Composed of Marcom, Retail Dev’t., Card Dev’t., and LSPM.
 Marcom is marketing communication and its main role is to
communicate all marketing initiatives to all, both internal and
external.
 Retail Dev’t is responsible for marketing and introducing the brand
SEAOIL. He is the one who come-up with different strategies to
gain more and improve all the Retail Stations.
 Card Dev’t is the group who introdues the VIP Card and soon the Fleet
card of SEAOIL. Their main tasks is to gain more loyal customers of
SEAOIL.
 LSPM is the one who handles all the lubricants and responsible for
developing new lubricant products and mainly focuses on how to
market them by means of promos, packaging, and pricing
•QCPD
•This are the group who conducts product testing, to make sure
that all products are made with high quality.
•They are also the one’s who formulate new products and do
laboratory testing to be sure that all chemicals, and additives
that will be used are safe and effective.
•TNDD
•
•CRMD (SCIC)
•One who handles all customer interaction (comments,
suggestions, complaints, and recommendations). Do the specific
actions in all interactions.
•LCAD
•This group handles and are responsible in processing all
important documents, esp. permits needed for a SEAOIL Station
Constructions.
•
•
•
 CSDC—Corporate Systems & Document Control
 LMRN—Logistics Marine
 Ocean Tankers Corporation - Operates a fleet of shipping.
Its transport assets include a self propelled tankers, tug
boats, barges and delivery trucks.

 LLND—Logistics Land
 - A fleet of accredited haulers to transport products to
SEAOIL's customers and retail distribution network.

 LBAT—Logistics Batangas
 LVIS—Logistics Visayas
 LMIN—Logistics Mindanao
 ISSD—Inventory, Security, Safety Dept.
 Dept. assigned to ensure that all Health, Safety and Security
of the plant is done properly
 PBFD—Production of Bio-Fuel Dept.
 Department who is in-charge of manufacturing of petroleum
products.

•R E N G —R e ta il E n g in e e rin g
•D e p a rtm e n t w h o is re sp o n sib le fo r th e re ta il
e n g in e e rin g o f n e w sta tio n s a n d th e te ch n ica l
co n stru ctio n .
•PR C H —Pu rch a sin g
•G ro u p w h o lo o ks/ se a rch fo r p o ssib le su p p lie rs o f
d iffe re n t re q u e sts o f th e d iffe re n t d e p a rtm e n ts.
•W A R E —W a re h o u se
•sto ra g e fa cility o f a ll o ffice su p p lie s, e n g in e e rin g , a n d
m e ch a n ica l e q u ip m e n ts/ m a te ria ls
•M A E N —M a in te n a n ce & E n g ’ g
•re sp o n sib le fo r th e m a in te n a n ce o f a ll H S S E a n d
d e ve lo p m e n t o f p la n t fa cilitie s

•HRCA—Human Resources & Corporate Administration
•
•FINA—Finance
•
•ACCT—Accounting
•department who is in-charge in reconciling all the company
finances
•CCOD—Credit , Collection, Order & Dispatching
•Responsible in accepting & approving product orders at the
same time assures that all orders are dispatched accordingly.
•ITEC—Information Technology
•team that is responsible for the maintenance of company
softwares, internet security, and all hardware facilities.
•they are also the one’s who assists in web constructions,
and in general all aspects of information tech.
•
•
•
•
THANK YOU!!!