Lecture-I
Operation and Supply Chain Management
WHY STUDY OPERATIONS AND SUPPLY CHAIN MANAGEMENT?
Operations function
The collection of people, technology, and systems within an organization that has primary responsibility for providing the organization's products or services.
Supply chain
A network of manufacturers and service providers that work together to convert and
move goods from the raw materials stage through to the end user. These manufacturers
and service providers are linked together through physical flows, information flows,
and monetary flows.
Need for Supply Chain Management
1. Every organization must make a product or provide a service that someone values.
Otherwise, why would the organization exist? Think about it. Manufacturers produce physical goods that are used directly by consumers or other businesses. Transportation companies provide valuable services by moving and storing these goods. Design firms use their expertise to create products or even corporate images for customers. The need to
provide a valuable product or service holds true for nonprofit organizations as well. Consider the variety of needs met by government agencies, charities, and religious groups, for example. The common thread is that each of the above organizations has an operations function, or operations, for short. The operations function is the collection of people, technology, and systems within an organization that has primary responsibility for providing the organization's products or services. Regardless of what career path you might choose, you will need to know something about your organization's operations function. As important as the operations function is to a firm, few organizations can-or even want to-do everything themselves. This leads to our second reason for studying operations and supply chain management.
2. Most organizations function as part o/larger supply chains.
A supply chain is a network of manufacturers and service providers that work together to convert and move goods from the raw materials stage through to the end user. These manufacturers and service providers are linked together through physical flows, information flows, and monetary flows. Put another way, supply chains link together the operations functions of many different organizations. Consider a store at the local mall that sells athletic shoes. Although the store doesn't actually make the shoes, it provides valuable services for its customers-a convenient location and a wide selection of products. Yet the store is only one link in a much larger supply chain that includes:
• Plastic and rubber producers that provide raw materials for the shoes;
• Manufacturers that mold and assemble the shoes;
• Wholesalers that decide what shoes to buy and when;
• Transportation firms that move the materials and finished shoes to all parts of the world;
• Software firms and Internet service providers (ISPs) that support the information
systems that coordinate these physical flows; and
• Financial firms that help distribute funds throughout the supply chain, ensuring that the
manufacturers and service firms are rewarded for their efforts.
3. Organizations must carefully manage their operations and supply chains in order to prosper, and, indeed, survive.. Some fundamental operations decisions that it must make include likes "How many shoes should we make and in what styles and sizes?" "What kind of people skills and equipment do we need?" "Should we locate our plants to take advantage of low-cost labor or to minimize shipping costs of the finished shoes?" In addition to these operations issues, the shoe manufacturer faces many decisions with regard to its role in the supply chain: "From whom should we buy our materials-the lower-cost supplier or the higher-quality one?" "Which transportation carriers will we use
to ship our shoes?" The right choices can lead to higher profitability and increased market
share, while the wrong choices can cost the company dearly, or even put it out of business.
Operation Management
Operations a little more fully and explaining what we mean by operations management. As we noted earlier, all organizations must make products or provide services that someone values, and the operations function has the primary responsibility for making sure this happens.
Steps includes in operation
Inputs
• Materials
• Intangible needs
• Information
Transformation Process
• Manufacturing operations
• Service operations
Outputs
• Tangible goods
• Fulfilled needs
• Satisfied customers
Operations management, then, is "the planning, scheduling, and control of the activities that transform inputs into finished goods and services." Operations management decisions can range from long-term, fundamental decisions about what products or services will be offered and what the transformation process will look like to more immediate issues, such as determining the best way to fill a current customer order. Through sound operations management, organizations hope to provide the best value to their customers while making the best use of resources.
Supply Chain Management
The traditional view of operations management still puts most of the emphasis on the activities a particular organization must perform when managing its own operations. But, as important as a company's operations function is, it is not enough for a company to focus on doing the right things within its own four walls. Managers must also understand how the company is linked in with the operations of its suppliers, distributors, and customers-what we refer to as the supply chain. As we noted earlier, organizations in the supply chain are linked together through physical flows, information flows, and monetary flows. These flows go both up and down the chain.
Example: Supply of good and services from one to another by various parties as follows:
A to B
Second-tier supplier to First-tier supplier
B to C
First-tier supplier to Producing Firm
C to D
Producing Firm to Wholesaler
D to E
Wholesaler to Retailer
E to F
Retailer to Final Customer
First-tier supplier
A supplier that provides products or services directly to a particular firm.
Second-tier supplier
A supplier that provides products or services to a firm's first-tier supplier.
Supply chain management
The active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient ways possible. Finally, the supply chain must be very efficient, as the final price of the good must cover all of the costs involved plus a profit for each participant in the chain.
While you were reading through the above example, you might have thought to yourself,
"Supply chains aren't new" -and you'd be right. Yet most organizations historically performed their activities independently of other firms in the chain, which made for disjointed and often inefficient supply chains. In contrast, supply chain management is the active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient ways possible.Wal Mart is an important example of supply chain management.
Lecture- 2
Important Trends and OSCM
Three major developments that have brought operations and supply chain management to the forefront of managers' attention:
Electronic commerce
Increasing competition and globalization
Relationship management
Electronic Commerce (e-commerce)
Electronic commerce (or e-commerce, for short) refers to the use of information technology (IT) solutions to automate business transactions. Electronic commerce promises to improve the speed, quality, and cost of business communication. The late 1990s and early 2000s, for example, saw the emergence of Internet-based "trading communities" that put hundreds of buyers and sellers in touch with one another. Now, instead of looking through a catalog, filling out a paper order form, and faxing it a supplier, buyers in many companies can search for what they need via their computer and, with a couple of clicks, place an order. Many paper transactions are becoming increasingly obsolete. At the same time, the proliferation of new telecommunications and computer technology has made instantaneous communications a reality. Such information systems-for example, Wal-Mart's satellite network-can link together suppliers, manufacturers, distributors, retail outlets, and, ultimately, customers, regardless of location.
Increasing competition and globalization
The second major trend is the increasing level of competition and globalization in the, world economy. The rate of change in markets, products, and technology is escalating, leading to situations where managers must make decisions on shorter notice, with less information, and with higher penalty costs. Customers are demanding quicker delivery, state-of-the-art technology, and products and services better suited to their individual needs. At the same time, new competitors are entering into markets that have traditionally been dominated by "domestic" firms. Despite these challenges, many organizations are thriving. In later chapters, for example, you will read how such companies as Dell Computers, Honda, The Procter & Gamble Company, and Herman Miller have embraced the changes facing today's markets and have put a renewed emphasis on improving their operations and supply chain performance. In some ways, the increased competition and globalization of businesses have given many firms the chance to break away from the pack.
Relationship Management
The information revolution of the last 20 years has given companies a wide range of technologies for better managing their operations and supply chains. Furthermore, increasing customer demands and global competition have given firms the incentive to improve in these areas. But this is not enough. Any efforts to improve operations and supply chain performance are likely to be inconsequential without the cooperation of other firms. As a result, more companies are putting an emphasis on relationship management. Of all the activities operations and supply chain personnel perform, relationship management is perhaps the most difficult, and therefore the most susceptible to breakdown. Poor relationships within any link of the supply chain can have disastrous consequences for all other supply chain members. To avoid such problems, organizations must manage the relationships with their upstream suppliers as well as their downstream customers.
So it becomes more important to choose a few, select suppliers, thereby paving the way for informal interaction and information sharing.
Cross functional and inter-organizational linkage
Operations and Supply Chain Activities include followings:
Process Selection- Design and implement the transformation Engineering processes that best meet the needs of the customer and the firm
Key inter-functional Participants
Engineering
Marketing
Finance
Human Resources
IT
Key Inter-organizational Participants
Customers
Forecasting- Develop the planning numbers needed for effective decision making.
Key inter-functional Participants
Marketing
Finance
Accounting
Key Inter-organizational Participants
Customers
Suppliers
Capacity Planning- Establish strategic capacity levels ("bricks & mortar") and tactical capacity levels (workforce inventory)
Key inter-functional Participants
Finance
Accounting
Marketing
Human Resources
Key Inter-organizational Participants
Customers
Suppliers
Inventory Management- Manage the amount and placement of inventory within the company and the supply chain.
Key inter-functional Participants
IT
Finance
Key Inter-organizational Participants
Customers
Suppliers
Planning and Control- Schedule and manage the flow of work through an organization and the supply chain; match customer demand to supply chain activities.
Key inter-functional Participants
Marketing
IT
Key Inter-organizational Participants
Customers
Suppliers
Purchasing- Identify and qualify suppliers of goods and services; manage the ongoing buyer- supplier relationships.
Key inter-functional Participants
Engineering
Finance
Marketing
Key Inter-organizational Participants
Suppliers
Logistic- Manage the movement of physical goods throughout the supply chain.
Key inter-functional Participants
Marketing
Engineering
Key Inter-organizational Participants
Suppliers
Customers
In this way we can say that Operation and Supply Chain Management is an very integral part of an organization.
Lecture-3
Operation and Supply chain Strategies
The operations and supply chain strategy is a functional strategy that indicates
how structural and infrastructural elements within the operations and supply chain areas
will be acquired and developed to support the overall business strategy. Executing
successful operations and supply chain strategies means choosing and implementing the
right mix of structural and infrastructural elements. What constitutes the best mix of these structural and infrastructural elements is a subject of ongoing debate among business and academic experts alike.
Nevertheless, we can identify three primary objectives of an operations and supply chain strategy:
To help management choose the right mix of structural and infrastructural elements, based on a clear understanding of the performance dimensions valued by customers and the trade-offs involved;
To ensure that the firm's structural and infrastructural choices are strategically aligned with the firm's business strategy; and
To support the development of core competencies in the firm's operations and supply chains.
INFRA STRUCTURAL STRUCTURAL DECISION CATEGORIES DECISION CATEGORIES
Capacity • Amount of capacity
• Type of capacity
• Timing of capacity changes (lead, lag, or match market demands)
Facilities
• Service facilities
• Manufacturing plants
• Warehouses
• Distribution hubs
• Size, location, degree of specialization
Technology
• M;anufacturing processes
• Services processes
• Material handling equipment
• Transportation equipment
• Computer systems
Organization
• Structure-centralization/ decentralization
• Control/reward systems
• Workforce decisions
Sourcing decisions & purchasing process
• Sourcing strategies
• Supplier selection
• Supplier performance measurement
Planning & control
• Forecasting
• Tactical planning
• Inventory management production planning and control
Quality management
• Total quality management (TQM)
• Continuous improvement
• Statistical quality control
Product t& service development
• Development process
• Organizational and supplier roles
Operations and supply chains can have an enormous impact on business performance.
Experience suggests that four generic performance dimensions are particularly relevant to operations and supply chain activities. These are:
1. Quality;
2. Time;
3. Flexibility;
4. Cost.
QUALITY.
Quality is defined as the characteristics of a product or service that bear on its ability to satisfy stated or implied needs. The concept of quality is broad, with a number of sub dimensions, including performance quality (What are the basic operating characteristics of the product or service?), conformance quality (Was the product made or the service performed to specifications?), and reliability quality (Will a product work for a long time without failing or requiring maintenance? Does a service operation perform its tasks consistently over time? One buyer may be more interested in performance, another in reliability. To compete on the basis of quality, a firm's operations and supply chain must consistently meet or exceed customer expectations or requirements on the most critical quality dimensions.
TIME.
Time has two basic characteristics: speed and reliability. Delivery speed generally refers to how quickly the operations or supply chain function can fulfill a need, once it has been identified. Delivery reliability refers to the ability to deliver products or services when promised. Note that a firm can have long lead times, yet still maintain a high degree of delivery reliability. Typical measures of delivery reliability include the percentage of orders that are delivered by the promised time and the average tardiness of late orders. Delivery reliability is especially important to companies that are linked together in a supply chain. Consider the relationship between a fish wholesaler and its major customer, a fish processing facility. If the fish arrive too late, the processing facility may be forced to shut down. On the other hand, fish that arrive too early may go bad before they can be processed. Obviously, these two supply chain partners must coordinate their efforts so that the fish will arrive within a specific delivery window, which is defined as the acceptable time range in which deliveries can be made.
FLEXIBILITY.
Many operations and supply chains compete by responding to the unique needs of different customers. Both manufacturing and service firms can demonstrate flexibility. A full-service law firm, for instance, will handle any legal issue a client faces. (Some law firms specialize in only real estate transactions or divorce settlements.) A full- service hotel will go to great lengths to fulfill a guest's every need. Many firms distinguish among several types of flexibility, including mix flexibility (the ability to produce a wide range of products or services), changeover flexibility (the ability to provide a new product with minimal delay), and volume flexibility (the ability to produce whatever volume the customer needs).
Flexibility has become particularly valuable in new product development. Some firms
compete by developing new products or services faster than their competitors, a competi-
tive posture that requires operations and supply chain partners who are both flexible and
willing to work closely with designers, engineers, and marketing personnel.
COST
Cost is always a concern, even for companies that compete primarily on some other dimension. However, "cost" covers such a wide range of activities that companies commonly categorize costs in order to focus their cost management efforts. Some typical cost categories include:
Labor costs
Material costs
Engineering costs
At the time of selecting OSCM strategies all the above major points should be kept in mind by management.
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