Airline Value Chain

Topics: Supply chain management, Supply chain, Strategy Pages: 14 (3618 words) Published: April 3, 2011
Reprinted with permission of Auerbach Publications, CRC Press LLC, 535 Fifth Avenue, New York, NY 10017. All rights reserved.

Jim Ayers
By thinking in terms of supply chains instead of individual operations or departments, CIOs can improve their competitive strategies. These strategies, in turn, change organizational operations, roles, and information systems. This article shows how such “supply chain thinking” works.

upply chains are a hot management topic. Eyes are opening to a more global view of end-to-end material, information, and financial flows. As it is with most good ideas, commercial interest drives much of the hype. The management consulting industry contributes with new buzzwords to stimulate and sustain interest. So supply chain synthesis and demand flow leadership debut in press releases and seminars. Substantial contingents of software purveyors also vocalize the concept. Companies investing millions in new systems do not want yesterday’s solutions. “Supply chain thinking” is a better characterization. This term infers a more gradual infusion of new mindsets and methods into traditional tasks. Most managers have the same concerns today as managers had ten or 50 years ago. These concerns include products, markets, people and skills, operations, and finance. Supply chain thinking brings change to the tasks managers perform in dealing with these issues.


describes practical ways to bring supply chain thinking to the task of strategic planning. Too often strategic planning goes on in an operational vacuum. Gaining advantage from supply chains requires cross-functional thinking that is uncommon in most companies. SUPPLY CHAINS AND STRATEGIC ADVANTAGE


JIM AYERS is a principal with CGR Management Consultants in Playa del Rey, CA. He can be reached at (310) 822-6720.

Exhibit 1 lists five tasks important to supply chain design and operation. Alongside each is a brief description of the impact of supply chain thinking. Exhibit 2 shows the relationship of the tasks. Supply chain design begins with strategy, so it is at the center. The remaining tasks, including the development of information systems, need to align with these strategies. This article I N F O R M A T I O N S Y S T E M S S P R I N G 1 9 9 9

The competitive field in most markets requires well-designed products. However, at the margin, other factors govern the buying decision. For example, most airlines offer clean, modern aircraft and maintain good safety records. This is the price of entry to the “club.” If an airline did not qualify, we probably would not go near it. The way we view the airline likely depends on flight frequency, prices, frequent flier programs, or the coffee served on flights. Every product occupies a different competitive position. Traditionally, features of the product itself have dominated in determining this position. Now products increasingly compete on the supply chains that deliver them. The variables in airlines are not in the planes they use or the routes they fly, but in supply chain design. Supply chain thinking has untapped potential for maintaining a competitive position or moving a company from an unfavorable to a more advantageous position. For this discussion, we describe a product as its physical features or functionality. The supply chain includes all the processes that put the


EXHIBIT 1 Supply Chain Design and Operation

1. Designing supply chains for strategic advantage

2. Implementing collaborative relationships 3. Forging supply chain partnerships 4. Managing supply chain information 5. Making money from the supply chain

Today’s success stories show that innovation in supply chain design is vital to competitive advantage. Functional command and control will give way to new structures. Working together beats going it alone. The extended enterprise is for real. Opportunities to succeed wildly or fail miserably...
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