Operations Management – Mid-Term Materials

No. Topic Issue Covered

1. Operations and Supply Chain Introduction to the field, Operation and Supply Management,
Strategy Historical Development
(1) What factors account for the resurgence of interest in
OM today?
(2) What is operation and supply strategy?
(3) How to evaluate operation performance?
Key points:
Enable a close look at product development and market
launch strategies in an extremely competitive environment.
Introduce to the importance of managing networks of
suppliers, 3rd party developers, distributors, retailers and
customers during product development. Design product
launch and marketing strategies. Identify and manage the
operational issues of bringing products to market.
2. Basic Principals of Project Project Management Body of Knowledge (PMBOK), Project
Management management application:
Key points:
Illustrate the application of project management in a start-up
company and to suggest possible improvements as to solve
current issues and problems
3. Project Time Management Scheduling methods, Relationship between time and cost.
Key points:
Illustrates practically all aspects of the process of getting a
solution to developing a plan for managing a project.
4. Relational Based View of Main motives of global projects, cultural issues in project
Project Management management, project manager’s checklist, project team
challenges, dealing with conflict, project primary
Stakeholders
5. Introduction Supply Chain Definition of SCM, Key observation, Development of chain,
Management Global SCM, Uncertainty & Risk Factors, Evolution of SCM,
Complexity of SCM.
6. Product and Service Design Product development process, cost planning, value
analysis/value engineering, and measuring product
development performance.
Key points:
Develop a c around coherent operational strategy around
people that matches the business strategy of the firm. Discuss
how changes in customer attributes impact changes in
operational performance.
7. Global Logistics and Risk Highlights the changing nature of resources and problems
Management facing supply chain design, and need for supply chains to
continually evolve. As market condition, customer bases,
supply sources, technology, and competitive environment
change, a supply chain needs to evolve itself to meet the new
challenges.
Key points:
To foster an understanding of the requirement for continual
change of supply chains in a continually changing world
Strategy, Processes, and Analytics

Operations and supply chain management involves: Product design, Purchasing, Manufacturing,
Service operations, Logistics, Distribution, Success depends upon, Strategy, Processes to deliver products
and services, and Analytics to support the decisions needed to manage the firm.
a. What Is Operations and Supply Chain Management? The design, operation, and improvement of
the systems that create and deliver the firm’s primary products and services
b. Operations and supply chain management (OSCM) is A functional field of business Concerned
with the management of the entire production/delivery system

Operations and Supply Chain Processes

Operations: Manufacturing and service processes used to transform resources into products
Supply Chain: Processes that move information and material to and from the firm

Process Activities
Planning – processes needed to operate an existing supply chain
Sourcing – selection of suppliers that will deliver the goods and services needed to create the firm’s
product
Making – producing the major product or service
Delivering – logistics processes such as selecting carriers, coordinating the movement of goods and
information, and collecting payments from customers
Returning – receiving worn-out, excess, and/or defective products back from customers

Goods versus Services

Goods Services
Pure Goods Core Goods Core Services Pure Services
• Tangible • Intangible
• Less interaction with customers • Interaction with customer required
• Often homogeneous • Inherently heterogeneous
• Not perishable – can be inventoried • Perishable/time dependent
• Defined and evaluated as a package of
features

Historical Development of Operations and Supply Chain Management

Current Issues in OSCM: Coordinating relationships between members of SC, optimizing global network
of suppliers, producers, and distributors, managing customer touch points, raising awareness of OSCM as a
competitive weapon, and sustainability and triple bottom line.
 Efficiency Effectiveness Value
Doing something at the lowest Doing the right things to create The attractiveness of a product
possible cost. the most value for your relative to its cost.
customer.

Efficiency and Wall Street

Comparison of Firms is Important to Investors: from an operation and supply chain perspective, the
relative cost of providing a good or service is closely related to earnings growth.

Management Efficiency Ratios

- Labor productivity: Net income per employee, revenue (or sales) per employee.
- Asset productivity:

Receivables Turnover Ratio Annual Credit Sales

Average Account
Receivables

Inventory Turnover COGS

Average Inventory Value

Asset Turnover Revenue (or Sales)

Total Assets

Sustainable Strategy
The firm’s strategy describes how it will create and sustain value for its current shareholders
a. Shareholders – individuals or companies that legally own one or more shares of stock in the
company
b. Stakeholders – individuals or organizations who are directly or indirectly influenced by the actions
of the firm
Adding a sustainability requirement means meeting value goals without compromising the ability of future
generations to meet their own needs
Triple bottom line – evaluating the firm against social, economic, and environmental criteria

Triple Bottom Line

Economic
Prosperity

The Triple
Bottom
Line

Environm
Social
ental
Responsib
Stewards
ility
hip

Operations and Supply Chain Strategy

Setting broad policies and plans for using the resources of a firm – must be integrated with corporate
strategy: Corporate strategy provides overall direction and coordinates operational goals with those of the
larger organization.
Operations effectiveness – performing activities in a manner that best implements strategic priorities at a
minimum cost

Formulating an Operations and Supply Chain Strategy

Develop/Refine the Strategy Define vision, mission, and objectives. Conduct Strategic
(Yearly) Analysis, Define Strategic Competitive Priorities.
Translate the Strategy Product design/revision initiatives, sourcing/location of facilities
initialization
Major Focus Points and Projects Major operations initiatives, major logistics/distribution
initiatives

Competitive Dimensions
Price
Make the product or deliver the service cheap

Quality
Make a great product or delivery a great service

Delivery Speed
Make the product or deliver the service quickly

Delivery Reliability
Deliver it when promised

Coping with Changes in Demand

Change its volume

Flexibility and New-Product Introduction Speed

Change it

Trade-Offs
Management must decide which parameters of performance are critical and concentrate resources on those
characteristics. For example, a firm that is focused on low-cost production may not be capable of quickly
introducing new products. Straddling – seeking to match a successful competitor by adding features,
services, or technology to existing activities. Often a risky strategy.

Order Winners and Order Qualifiers

Order qualifiers are those dimensions that are necessary for a firm’s products to be considered for purchase
by customers. Features customers will not forego. Order winners are criteria used by customers to
differentiate the products and services of one firm from those of other firms. Features that customers use to
determine which product to ultimately purchase.

Assessing Risk Associated with OSCM Strategy

All strategies have an inherent level of risk. Uncertainty in the environment causes supply chain planners
to evaluate the relative riskiness of their strategies. Supply chain risk is the likelihood of a disruption that
would impact the ability of a company to continuously supply products or services. Supply chain
coordination risks are associated with the day-to-day management of the supply chain. Disruption risks are
caused by natural or manmade disasters.

Risk Mitigation Framework

1. Identify the sources of potential disruptions and assess a type of vulnerability. Focus on
highly unlikely events that would cause a significant disruption to normal operations.
 2. Assess the potential impact of the risk. Here the goal is to quantify the probability and the
potential impact of the risk. Could be based on financial impact, environmental impact, ongoing
business viability, Brand image/reputation, potential human lives, and so on.
3. Develop plans to mitigate the risk. A detailed strategy for minimizing the impact of the risk
could take many different forms, depending on the nature of the problem.

Risky Mitigation Strategies

Productivity Measurement
Productivity is a measure of how well resources are used

 Productivity =
 Productivity is a relative measure: Must be compared to something else to be meaningful.
Operations can be compared to each other. Firms can be compared to other firms.
Partial productivity measures compare output to a single input. Multifactor productivity measures compare
output to a group of inputs. Total productivity measures compare output to all inputs.
 Productivity Calculation

Design of Products and Services: in the IPPT Chap 003.