Author: Michael Gamper
Clothes hang on rack

What is an Operating Model?

Managing the complexity of an enterprise and the related supply chain and enterprise functions requires robust framework. Such as framework must enable the management of the four key dimensions of an enterprise. Those 4 dimensions are:

  • Processes, describing the business processes an enterprise is using to manage its business
  • Organisation, describing the organisational structure including roles and responsibilities
  • Technology, describing the system landscape supporting the enterprise
  • Data, describing

This framework is referred to as the operating model. Below is an example of such as an operating model for the fashion industry.

Operating Model for the Fashion Industry

How is the Operating Model used?

The starting point of the operating model are the business processes required to operate the enterprise. Based on those business processes all other 3 dimensions are superimposed to describe all supporting elements such as ERP systems and what business processes are covered.

The Operating Model objective is to drive operational excellence across the operation and the supply chain eco-Systems of the enterprise. Using state of the art and industry specific operating models covering business processes, systems, organisation and people, as well as data and metrics. They are called the 4 dimensions. The definition and use of the key descriptive elements of the operating model are:

What are Operations: all core functions of an enterprise from product development, Omni-channel selling activities, distribution, logistics, production, sourcing to procurement and finance. The functions are supported by business processes which are the first layer of description of the Operating Model and the entry point into all other dimensions.

What do the Business Processes of an Operating Model describe: they cover all information (planning and transactional) and material/product flow from development to buying to selling internal and external to an enterprise. The core business processes of an enterprise are described as follows:

 

Concept to Shelf: describing the development process from the ideation of a product to its availability on shelf

 

Order to Cash: describing the fulfilment of demand either in retail stores, e-commerce and wholesale channels

 

Procure to Pay: describing all sourcing, procurement and purchasing activities

 

Demand to Build: describing all strategic, tactical, operational planning and scheduling activities including production activities and execution

 

Budget to Report: describing all financial activities from budgeting, financial management to controlling and performance management

 

Hire to Retire: describing all activities from talent acquisition, to hiring, managing the employ life cycle to retiring an employee

What are Supply Chain Eco-Systems: a supply chain Eco-systems represents a network of trading partners and service providers required to develop, buy, make, move, store and sell products.

Working with the Operating Model

The operating model is the based for development a company specific version which serves as the base for all other dimensions. Every enterprise, even when operating in the same industry, function in different ways to make it unique. Competitive advantage is not achieved through just copying others. The operating model must reflect those specific ways an enterprise chose to operate in its markets, with its trading partners and competitors.

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