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OMGT1053 Advanced Supply Chain Management

Striving for Operations Excellence

within Queensland Rail Supply
Division

Course Coordinator: Charles Lau

Tutor Name: Mingjuan Ding

Student Name: Ningchuan Chen

Student No: s3174882

Word Count: 2970 words

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Executive summary

This case is talking about how the Queensland Rail will change its operations to meet
the new market competitive and requirements, which change to a for-profit business.
The major operation department is supply division and the main methodology they
used is called BEF (Business Excellence Framework) system with seven categories:
leadership, strategy and planning process, information and knowledge, people,
customer and market focus, process management, improvement and innovation, and
success and sustainability.
Although QR achieved successes in each aspect of BEF system, the strategies which
developed by supply division are lack of sustainability for the long term operations.
Also QR is still facing challenges in each means of the BEF system in the future
operations.

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Table of Content
Case Summary...............................................................................................................5

Issues identify.................................................................................................................6

Answer questions...........................................................................................................7

References....................................................................................................................16

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List of Tables and Figures
Table cs5.2…………………………………………………..………………………12

Figure cs5.2…………………………………………………..………………………8

Figure cs5.4…………………………………………………..………………………9

Figure cs5.9………………………………………………..………………………..10

Figure cs5.5…………………………………………………..……………………..12

Figure cs5.10……………………………………………..…………………………13

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Case Summary
QR is one of the largest and most modern transport providers in Australia. QR
changed the regime from government owned to commercial manner, so the supply
division changed its strategies, HR structure, and process and management
methodology to adopt the new market. The BEF theory is used by QR for changing its
structure.
The BEF system is consisting with seven, interconnected aspects: leadership, strategy
and planning process, information and knowledge, people, customer and market
focus, process management, improvement and innovation, and success and
sustainability.
According to the BEF, supply division changed its leadership from strong hierarchical
control to egalitarian; more new elements add to the relationship, such as people with
different background, abolish discrimination of female, and out sourcing staff from
other branches. But culture change for the company still need time and better abilities
and implement. The Supply used Supply Chain Initiative (SCI) project to save its
revenue, in order to efficient and effect the supply chain process, but it ignore the add
value services. And because of the few capital intensive suppliers for QR, the new
form contracts will be high risk during the change process. The measurements of the
Supply are including Enterprise Resource System (ERP) and Scorecard Reporting.
Although the ERP system data upgrade is easier for procurement easier to set generate
measurements and benefit for integration, but not well to large transaction with large
corporations and costly. The inventory dashboard helps QR to better reduce cost and
increase information accuracy. The company is seeking for one system can manage
all types of procurement strategy, but still pay no attention on adding value activities.
QR seeks for more professional staff and attract them working for the company, the
Supply retrains their staff, recruits from trainees and graduates, and also supports the
university, but lack of measurements for making decision of who leave and remain.
At the customer and demand forecasting aspect, Procure to Pay project (P2P) is the
right system for QR to measure whether meet the customer needs and uncertainty
market environment.
Finally, although QR achieve successful regime change and make profit, but
according to the BEF system, these strategies still short term operations, looking for
better competitive in the new market, QR still need to improve integration and
alignment with corporate strategy to implement long term success.

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Issues identify
From QR’s case, the issues faced by the company are from seven aspects.
Firstly is relevant to the leadership, the major obstacles faced by the management
around effective leadership is including: ensuring consistency of messages in all
forms of communication, modelling values and behaviours in a stable and predictable
manner, and be able to measure the effectiveness of a nebulous concept leadership.
These disadvantages came from the wider corporation background. And the slow and
complex culture change would interrupt the development of the company.
Secondly, the challenges with strategy and planning are including: the operational
excellence strategy will continue to deliver minor benefit, but limited to continue to
generate larger step improvement.
Thirdly, data collection and manage the information should be developed in the
information system and process. The other challenges of progress are including: add
value process of the system, more systematic way for using data in decision making,
applying statistical thing, understanding in processes in order to better manage risk
and reduce forecasting error, adopting more approaches in training staff and interpret
the report, identifying and managing the value of intangible assets, improve better
decision support, develop process and interactive measures, and more seamlessly
interact with suppliers’ measurement system.
Fourthly, the HR challenges in the future are, quicker formalised ways of responding
to ideas and suggestions, influencing HR policies for different workforce, better
measurement and management the people who leave and remain, and being able to
cope with changing market conditions.
Fifthly, in the customer and market aspect, the most critical issue is that being able to
successfully address, is around benefit realisation.
Sixthly, in the ERP system, the time has come to challenge the scale and volume
arguments of ERP vendors. And identify the limitation of ERP system which work
not well with large volume transactions with other large corporations, and also
balanced the volume and value.
The last but not least, the sustainability for QR, integrating the separate silos, which
with many disconnects and complexities, and alignment with corporate strategy, the
strategy of operations needs to find more effective ways of engaging Boards and
Senior Executives, in order to be able to identify and use the respect and resources
needed to deliver the value that it can add to most modern large corporations.

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Answer questions
1. According to the BEF (Business Excellence Framework) strategy which QR
used in the five years, I will analysis the key operational and supply
capabilities from seven means. Firstly, the leadership of QR has been changed
from strong hierarchical control to egalitarian. The new staff with different
background and abolish discrimination, build up trust and collaboration. And
the new team is consisting of wider skills; the supply division became more
effective within supply chain. The new leadership is more flexible and
responsive to meeting customer needs. Secondly, the SCI (Supply Chain
Initiative) project helps QR save 100 million dollars in the five years. There
are three strategies in the project, operational strategy, supply chain
optimization and virtual supply chain. QR cooperated with PwC to operate the
operational excellence strategy, and achieve the goal well. The SCI operation
made QR reduce cost of procurement and inventory, better manage the supply
chain and improve flexibility and responsiveness to meet the uncertainty
demand. The third mean is the measurement in QR, the procurement
measurement based on ERP upgrade data, it was easier to generate. And the
Scorecard Reporting was developed for the inventory measurement. Despite
these two systems helped QR get the capabilities to measure the process
within supply chain, the information system and process also need to be
developed and put in the place to get the right details to manage, such as what
data should be collected and how information should be handle, stored and
analysed. The forth mean is focus on people, QR choose staff from re-trainees,
graduates and trainees. Fifthly, the supply division took a facilitation role with
customers to ensure their needs are met. P2P system is a good example for QR
to improve its customer service. And the next mean is process management,
improvement and innovation, ERP system was developed for QR to improve
the integration, but not work well in large transaction with large corporations.
The supply division should not only focus on high number but also high value.
The final mean is sustainability; the supply division should pay more attention
to integration and alignment with corporate strategy in order to improve long-
term sustainability of corporation.

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2. QR initiated the Supply Chain Initiative (SCI) with the five years potential
savings opportunity. This project consists with three targets, operational
excellence, supply chain optimisation and virtual supply chain. Operational
excellence (figure cs5.2) is the most impact compare to the other two, because
of the most revenue it saved and company did successfully in keeping the
money. The company also focus on flexible, in order to satisfy customer needs
and meet uncertainty demand. But the operational excellence strategy just can
continue to deliver minor benefits, and still can not achieve large step of
improvement to fix the problem.

Operation excellence strategy helps the company reduce cost, increase cash flow
and efficiency.
The new concept of operational excellence is creating greater dependency upon
suppliers, and with long term single relationship, relationship used is rather than
power because the regime changed.
Changing the contract type from traditional to new forms such as strategic
alliance and joint ventures(figure cs5.4), also helps QR save revenue and share
responsibility, but it with high risk at that period. Because of that the few high
value contract associated with key assets and limited competitive market. But
from the figure cd5.4, the new types of contract will be more common in the
future.

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3. The most important measure of operating performance used at QR is
integration which controlled by Enterprise Resource System (ERP) system.
Supply developed a business process which can translate user requirement
firstly into process requirements and then into system requirements, it seemed
like to satisfy any user of the system, and can get the temporary high level of
integration, but it is too slow and short term operation. It has no ability to
respond rapid changing market environment and too complexity to control the
forecasting. Also the company was seeking for one system can fit all
purchasing actives (figure cs5.9). It was hard to realize because the changing
of demand, customer needs and regulations. And it is difficult to realize
placing all types of transaction in ERP system. ERP system which was used
by QR is limited to work well with large transactions with large corporations.
And also ERP system is costly and may create ill-will with smaller suppliers.
It will lead the company lose value and customers.

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 In my opinion, QR can not just seek for integration, integration just a part of
company measurement, it can pay more attention to long term relationship and
demand forecasting, and also do not ignore the smaller supplier to maximize
the value. Combine with Procure to Pay (P2P) system; cope with large volume
and high value.

4. The previous leadership the QR is strong hierarchical control in order to

centralize power, strongly focused on generating and maintaining internal
processes, so that the services were not flexible and responsiveness. Focus on
these problems, the new general manager set up a new concept about the
relationship and operations. Establish off site management workshops, some
of them involved key customers and suppliers, and strive to offer total supply
chain management for its customer, resulting in optimal procurement and
inventory practices. The manager used the aligning strategies to achieve the
goals. The manager also created a multicultural environment not only for the
staff but also for the suppliers and customers, this strategy made the staff work
effectively within the company, and achieve a diverse range of suppliers. The

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 new concept also got advantages for flexibility and responsiveness to meeting
customer needs. The values were seen to be transmitted primarily through
relationships from the management team. But there is still disadvantage
between this relationship, such as human errors, misunderstanding and the
concept of leadership was not clear, as results of wider corporation which is
running in the rapidly changing environment and demand uncertainty. And
also in order to meet faster and more flexibility of uncertainty customer needs
and market demand, QR never stop changing their systems and strategies.
Such as use strategic alliances and joint ventures contracts with their
customers and suppliers.

5. Scorecard reporting was developed by QR to measure represented a major

turning point in implementing the supply chain optimisation strategy. This
measurement not only provides report to all level of corporations but also can
be detailed recommendations on the way of improvement initiatives. The
sample is shown on figure cs5.5. But it had been instead of a less complex
system which is shown on the Table cs5.2. But we have to say, the inventory
dashboard contributed the enormous effort for developing reporting capability.
This system helped the cataloguing team of QR successfully removed 130,000
duplicated, unnecessary and incorrectly materials. Compare the dashboard
with the measurements, some measures has been cancelled from the dashboard
format.

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6. In the case, the three key operational risks may be the culture change risk,
change contract types risks and Human Resource (HR) control risk.
In order to realise radically change the regime of the company, culture
changing is one the most critical issues for the manager, but because of the
complexity and long time, it is also a high risk for the company.

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 QR changed traditional contracts into new forms such as joint ventures and
strategic alliances. The suppliers of QR are capital intensive industries, it
means the suppliers of QR were few, so that there was restricted of few high
value contracts associated with key assets and limited competitive
environment faced to the company. And it is also hard to measure intangible
assets between QR and suppliers or customers, such as trust and collaboration.
HR is the most valuable asset of the company, QR spend to retrain the staff
and pay high wages for trainees and graduate, and supported university for
future development. But if these staff are not work for QR, it will waste the
revenue of the company, decrease competitive power of the company and
increase other companies’, also the global strategy will be at risk of failing.
For these kinds of risk that mentioned above, the company can employ
expertises at risk management to evaluate the risk, better manage at market
forecasting and make contracts with the retrain staff or graduates.
7. From figure cs5.10, procurement model is consisting with corporate strategy,
supplier management, technology, procurement positioning and process, and
external collaboration.

The corporate strategy of QR was that use sourcing strategy, means corporate
with other companies which professional at the particular area, such as

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 PriceWaterhouseCoopers(PwC). That made QR did successfully in the
particular area. For example, QR did successfully in keeping money of the
three strategies, and also remain flexible and responsiveness for its suppliers
and customers.
In supplier management, QR corporate with few capital intensive industries,
actives with P2P system, the advantages are improving monitoring and
reporting capacities to key stakeholders and using technology to make
sourcing activities easier to perform, and also reduced cost of transaction and
increased functionality of the transaction activities.
At the part of procurement positioning and process, QR just focuses on
integration, and ignored smaller suppliers and flexible reflection of the
uncertainty demand, I think the company should combine with another system
to optimize or balance the integration and competitiveness.
At the external collaboration side, because of the power shifting, it worked
with an extended enterprise model that uses relationships rather than power.
And QR also moving from tradition contract to new forms included strategic
alliances and joint ventures. But it involved in high risk in that period. Maybe
QR can input more flexible ideas to through the innovation period, such as
search more suppliers and market survey.
The last but not least mean is technology, P2P system is good for streamline
the procurement processes and ensure the lowest unit cost, but strongly
suggests that unless changes in technology are supported by parallel changes
in job roles and cultures practices, it would be hard to sustain improvement.
ERP system could not work well with large number of transactions with large
corporations, costly and slow, but well at improving integrations. QR must
evaluate these two systems or others well, and pay more attention on
satisfaction of customers and uncertainty demand, to optimal its system.
In my opinion, the procurement strategy may be not the best for QR.

8. The functions of BEF is that assess and improve any aspect of the
organisation, there are 7 interconnected categories: leadership, strategy and
planning process, data information and knowledge, people, customer and
market focus, process management, improvement and innovation, and success
and sustainability. These seven categories measurements helped QR to realise

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its advantages and disadvantages. Gave the industry innovation an benchmark
to select system, methodology for management and what challenges was faced
by the company. The theory of BEF helped QR successfully change leadership
from power centralised to egalitarian, made the process more efficient.
Strategy and planning process helped QR save 100 million within five years,
reduce duplication and unnecessary cost within the entire supply chain, also
more effective and efficient cash flow within the supply chain. Data
information and knowledge gave the criterions for QR to develop scorecard
reporting measurement, and the inventory dashboard made QR reduce
inventory cost and errors. QR also follows the BEF to recruit and retrain the
staff for higher skills and more professional on the logistics area. According
to the BEF, QR pay more attention to customer and uncertainty market, found
out the disadvantages of its operations, such as global contracts did not always
satisfy local regional requirements, and change the strategy to fit the
competitive environment to achieve goals. BEF helped QR to identify the real
needs, and then select the right system to improve competitive power. And
finally, QR identifies the future challenges for the long term sustainability of
the corporation.

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References
Australia, 2010, QR Services, Complete Rail Based Asset Solutions, Australia, viewed
at 28th March 2010.

Burgess K, Samsn D, Singh P.J., 2008, Operations Management: An Integrated

Approach, Striving for Operation Excellence within Queensland Rail Supply Division,
Cambridge University Press, New York, pp;.450-472

Chopra S. and Meindl P., 2010, Supply Chain Management: Strategy, Planning, &
Operations, 4th Edition, Pearson Prentice-Hall, Boston.

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