Operations and supply chain management involves: Product design,Purchasing,ManufacturingService operations,Logistics,Distribution.

(Success depends upon:Strategy,Processes to deliver

products and services,Analytics to support the decisions needed to manage the firm. OSCM: The design, operation, and improvement of the systems that create and deliver the firm’s primary
products and services. (OSCM) is:A functional field of business,Concerned with the management of the entire production/delivery system. Production: Creation of goods and services.
Operations management: Set of activities that create value in the form of goods and services by transforming inputs into outputs. Supply Chain - A global network of organizations and activities
that supply a firm with goods and services.Process activities: Planning –processes needed to operate an existing supply chainSourcing – selection of suppliers that will deliver the goods and
services needed to create the firm’s productMaking – producing the major product or serviceDelivering – logistics processes such as selecting carriers, coordinating the movement of goods and
information, and collecting payments from customersReturning – receiving worn-out, excess, and/or defective products back from customers.Goods versus Services: Pure Goods,Core Goods,
Core Services, Pure Services.Tangible:Less interaction with customers,Often homogeneous,Not perishable – can be inventoried.Intangible:Interaction with customer required,Inherently
heterogeneous,Perishable/time dependent,Defined and evaluated as apackage of features.Goods versus Services: CHARACTERISTICS OF SERVICES(Intangible: Ride in an airline
seat,Produced and consumed simultaneously: Beautysalon produces a haircut that is consumed as it isproduced,Unique: Your investments and medical care areunique,High customer interaction:
Often what the customer ispaying for (consulting,education),Inconsistent product definition: Auto Insurancechanges with age and type of car,Often knowledge based: Legal, education,
andmedical services are hard to automate,Services dispersed: Service may occur at retail store,local office, house call, or via internet,Quality may be hard to evaluate: Consulting,education, and
medical services, Reselling is unusual: Musical concert or medical care)CHARACTERISTICS OF GOODS:(Tangible: The seat itself,Product can usually be kept in inventory (beauty
careproducts),Similar products produced (iPods),Limited customer involvement in production,Product standardized (iPhone),Standard tangible product tends to make automationfeasible,Product
typically produced at a fixed facility,Many aspects of quality for tangible products are easyto evaluate (strength of a bolt) ,Product often has some residual value). Productivity =Units
produced/Input used,Measure of process improvement,Represents output relative to input,Only through productivity increases can our standard of living improve. Productivity Calculations:Labor
Productivity=Units produced/Labor-hours used.Multi-Factor Productivity: Productivity =Output/Labor + Material + Energy +Capital + Miscellaneous. Also known as total factor productivity,
Output and inputs are often expressed indollars.Productivity Variables: 1. Labor - contributesabout 10% of the annual increase.2. Capital – contributes about 38% of the annual increase3.
Management -contributes about 52%of the annual increase.Efficiency:DOING THINGS RIGHT / Doing something at the lowestpossible cost.Effectiveness:DOING THE RIGHT THINGS to
create the mostvalue foryour customer.Value:The attractiveness of a product relative to its cost.Efficiency Metrics:Labor productivity( Net income per employee, Revenue (or sales) per
employee). Asset productivity, Receivables turnover ratio =annual credit sale/avg account receivable,Inventory turnover =COGS/ag. Inventory value,Asset turnover =revenueor sales/total
assets.Effectiveness Metrics: customer satisfaction, customer retention rate, number of returned customer,Challenges in OM:Global focus,Supply-chain partnering,Sustainability, Rapid product
development,Mass customization,Just-in-time performance, Empowered employees.
Strategy:Action plan to achieve mission,Functional areas have strategies,Strategies exploit opportunities andstrengths, neutralize threats, and avoid weaknesse. Mission and Strategy: Mission
statements tell an organizationwhere it is going, The Strategy tells the organization how to get there. Formulating an Operations and Supply Chain Strategy: Strategic Planning (Yearly, define
vision, mission and obj, conduct strategic analysis, define strategic initiatives),Tactical Planning( quarterly, define/revise initiatives, define budgets, define measures and targets),Operational
Planning(dev sales and operation plan,plan resource capacity, evaluate budgets). Reasons to Globalize:Improve the supply chain,Reduce costs (labor, taxes, tariffs, etc.),Improve
operations,Understand markets, Improve products,Attract and retain global talent. Improve the Supply Chain: Locating facilities closer to uniqueresources,Auto design to California,Athletic shoe
production to China,Perfume manufacturing in France. Reduce Costs: Foreign locations with lower wage rate can lower direct and indirect costs,Trade agreements can lower
tariffs(Maquiladoras, (WTO),(NAFTA),APEC, SEATO, MERCOSUR, CAFTA,European Union (EU). Improve Operations: Understand differences between howbusiness is handled in other
countries,Japanese – inventory management,Scandinavians – ergonomics,International operations can improveresponse time and customer serviceEx: Old navy, gap, banana republic, athleta.
Understand Markets:Interacting with foreign customers,suppliers, competition can lead to new opportunities,Cell phone design moved from Europe to Japan,Extend the product life cycle ex:
Dunkin donuts. Improve Products: Remain open to free flow of ideas,Toyota and BMW manage joint research and development, Reduced risk, state-of-the-art design, lower costs, Samsung and
Bosch jointly produce batteries. Attract and Retain Global Talent: Offer better employment opportunities,Better growth opportunities andinsulation against unemployment,Relocate unneeded
personnel to more prosperous locations ex: Bangalore.Strategies for Competitive Advantage:Differentiation – better, or at least different/Cost leadership – cheaper/Response – more responsive.
Competing on Differentiation:Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of valueEx:Walt
Disney Magic Kingdom –experience differentiation,Hard Rock Cafe – dining experience. Competing on Cost: Provide the maximum value as perceived by customer. Does not imply low
quality.EX:Southwest Airlines – secondaryairports, no frills service, efficient utilization of equipment,Walmart – small overhead, shrinkage,and distribution costs, Aldi, sprint airline. Competing
on Response:Flexibility is matching market changes in design innovation and volumes Ex;A way of life at Hewlett-Packard,Reliability is meeting schedules EX: German machine industry,
Timeliness is quickness in design, production,and delivery Ex: Johnson Electric,Pizza Hut, Motorola. OM’s Contribution to Strategy: 10 operations decisions: product, quality, process, location,
layout, HR, Supply chain, inventory, Scheduling, maintainence. DIFFERENTIATION:Innovative design(Safeskin’s innovative gloves), Broad product line(Fidelity Security’s mutual
funds),After-sales service (Caterpillar’s heavy equipment), Experience(Hard Rock Café’s dining). COST LEADERSHIP:Low overhead (Franz-Colruyt’s warehouse-type stores),Effective
capacity(Southwest Airline’s), Inventory( Walmart’s sophisticated management distribution system). RESPONSE:Flexibility (Hewlett-Packard’s response to volatile world
market),Reliability(FedEx’s “absolutely, positively,on time),Quickness(Pizza Hut’s 5-minute guarantee).Issues In Operations Strategy: Resources view,Value-chain analysis,Porter’s Five Forces
model,Operating in a system with many external factors,Constant change. Resource View: resource can be a source of competitive adv. But resources have to be: Valueable, rare, Inimitable,non
substitutable Ex: oil. Five Forces model(threat to new entants, Bargaining power of buyer, threat of substitute producs or service, bargaining power of suppliers,(Mid) Rivalry among existing
competitors). Product Life Cycle: Introduction(Best period to increase market share,R&D engineering is critica, Product design and developmentcritical,Frequent product and process design
changes, Short production runs, High production costs,Limited models, Attention to qualityl ex: 3d game),Growth(Practical to change price or quality image, Strengthen niche, Forecasting
critical,Product and process reliability,Competitive product improvements and options,Increase capacity, Shift towardproduct focus, Enhance distribution Ex;Internet search engines,Xbox
360),Maturity(Poor time to change image,price, or quality, Competitive costs become critical, Defend market position, Standardization,Fewer product changes, moreminor changes, Optimum
capacity,Increasing stability of process, Long production runs, Product improvement and cost cuttingex: drive through restaurants),Decline(Cost control critical, Little product
differentiation,Cost minimization, Overcapacity in the industry,Prune line to eliminate item not returning good margin,Reduce capacity ex: analog tv,dvd). Theory of Comparative Advantage:If
an external provider can perform activities more productively than the purchasing firm, then the external provider should do the work,Purchasing firm focuses on core competencies, Drives
outsourcing ex: Apple). Outsourcing – transferring activities that traditionally been internal to external suppliers ◻ Accelerating due to: Increased technological expertise, More reliable and
cheaper transportation, Rapid development and deployment of advancements in telecommunications and computers. Subcontracting - contract manufacturing Outsourced activities: Legal
services,Travel services, Payroll, Production,Surgery. Risks of Outsourcing: ADVANTAGES(Cost savings,Gaining outside expertise,Improving operations and service,Maintaining a focus on
core competencies,Accessing outside technology)DISADVANTAGES(Increased logistics and inventory costs,Loss of control (quality, delivery, etc.),Potential creation of future
competition,Negative impact on employees,Risks may not manifest themselves for years) Rating Outsourcing Providers: Insufficient analysis most common reason for failure, Factor rating
method :Points and weights assigned for each factor to each. Global Operations Strategy Options: Global strategy high cost-low response(eg, Caterpillar,Texas Instruments,Otis Elevator,
Standardize product,Economies of scale,Cross-cultural learning,CENTRALIZED), Transnational strategy high-high(eg, Coca-Cola, Nestlé;Move material,people, ideas across national
boundaries,Economies of scale,Cross-cultural learning,AUTONOMY), International strategy low-low(eg, Harley-Davidson; Import/export orlicense existing product,LITTLE OR
NOINVESTMENT INLOCAL MARKET), Multi-domestic strategy low high(eg, Heinz, McDonald’s,The Body Shop,Hard Rock Café;Use existing domestic model globally, Franchise, JV
subsidiaries,DECENTRALIZED)

Goods and Services Selection: Organizations exist to provide goods or services to society, Great products are the key to success, New products generate substantial revenue.New products or
service lead to competitive adv, growth, success. Product Decision: The objective of the product decision is to develop and implement a product strategy that meets the demands of the
marketplace with a competitive advantage. Product / Service Strategy: Differentiation,Low cost, Rapid response. Generating New Products: Understanding the customer, Economic change,
Sociological and demographic change,Technological change, Political and legal change,Market practice, professional standards, suppliers, distributors. Product Development Stages: Concept,
Feasibility, Customer Requirements, Functional Specifications,Product Specifications, Design Review,Test Market, Introduction, Evaluation. Manufacturability and Value Engineering: Benefits:
Reduced complexity of the product, Reduction of environmental impact, Additional standardization of components, Improvement of functional aspects of the product, Improved job design and
job safety, Improved maintainability (serviceability) of the product, Robust design. Issues for Product Design: Robust design,Modular design,Computer-aided design (CAD),Computer-aided
manufacturing (CAM), Virtual reality technology, Value analysis, Sustainability and Life Cycle Assessment(LCA). Robust Design:Concept proposed by Genichi Taguchi, Making the product or
process insensitive to variation,Product is designed so that small variations in production or assembly do not adversely affect the product. Examples: Umbrella fabric that will not deteriorate
when exposed to varying environments (externalvariation), Food products that have long shelf lives (internal variation), Typically results in lower cost and higher quality. Modular Design:
Products designed in easily segmented components, Adds flexibility to both production and marketing, Improved ability to satisfy customer requirements, Ex: laptops. Computer Aided Design
(CAD): Using computers to design products and prepare engineering documentation, Shorter development cycles, improved accuracy, lower cost;Information and designs can be deployed
worldwide. Extensions of CAD: Design for Manufacturing and Assembly(DFMA)(Solve manufacturing problems during the design stage), 3-D Object Modeling(Small prototype development),
CAD through the internet, International data exchange through STEP. Computer-Aided Manufacturing (CAM): Utilizing specialized computers and program to control
manufacturingequipment, Often driven by the CAD system(CAD/CAM). Benefits of CAD/CAM: Product quality, Shorter design time, Production cost reductions, Database availability, New
range of capabilities. Virtual Reality Technology: Computer technology used to develop an interactive, 3-D model of a product from the basic CAD data, Allows people to ‘see’ the finished
design before a physical model is built, Very effective in large-scale designs such as plant layout, less time Ex: Pilot training. Value Analysis: Focuses on design improvement during
production, Seeks improvements leading either to a better product or a product which can be produced more economically with less environmental impact. Sustainability and Life Cycle
Assessment (LCA):