Chapter 2

Introduction to
operations and
Supply Chain
Management

03/19/24
 Introduction

 The operations and supply chain management (OSCM) is designed

to learn how to manage operations in the business and government
context.
 The operations and supply chain management majorly focuses on
process excellence from both intra-organisational and inter-
organisational points of view.
 Operations management is responsible for supplying the product or
service of the organisation and managing the conversion or
transformation process that converts inputs into outputs Supply chain
management manages the flow of goods, and information and
services, in order to deliver maximum value to the consumer, while
minimizing the costs of the flow.
 1.1 Operations Management
A) Concept :
Operations are that part of a business organisation that is responsible for
producing goods and/or services Operations management is the conversion of
inputs into outputs, using physical resources, so as to provide the desired utility /
utilities of form, place, possession or state or a combination there of to the
customer while meeting the other organisational objectives of effectiveness,
efficiency and adaptability. It distinguishes itself from other functions such as
personnel, marketing, etc., by its primary concern for ‘conversion by using
physical resources’. There should be a number of situations in either marketing or
personal or other functions, which can be classified or sub classified under
operations management.
B) Definition :
“Operations management is an area of management concerned with overseeing,
designing, and controlling the process of production and redesigning business
operations in the production of goods or services.”
 1.1 Operations Management
C) Significance of Operations Management :
1) Improve Productivity :
A measure of efficiency Productivity, the ratio of output to input, is a measure
of a manager’s or an employee’s efficiency in using the organisation’s scarce
resources to produce goods and services.
2) Total Quality Approach to Operations Improvement:
The quality movement, with such approaches as small scale continuous
improvement processes and the large scale radical redesign of processes, is
directly affecting productivity and measures of efficiency.
3) Manage Transformation :
Operations management involves managing the transformation to create
products or services.
4) Decide the Process Flow :
The operations management will have some responsibility in deciding what
processes should be used to produce the product.
5) Increase Efficiency in Business :
Operations management is an important field in business which comprises all
the aspects of production, efficiency and production related processes.
 1.2 Functions of Operations
Management and Supply Chain
Management
A) Functions of Operations Management :
 1.2 Functions of Operations
Management and Supply Chain
A) Management
Functions of Operations Management
1) Location of Facilities :
Location of facilities for operations is a long-term capacity decision which
involves a long term commitment about the geographically static factors that
affect a business organisation
2) Plant Layout and Material Handling :
Plant layout refers to the physical arrangement of facilities. Material Handling
refers to the ‘moving of materials from the store room to the machine and from
one machine to the next during the process of manufacture.
3) Product Design :
Product design deals with conversion of ideas into reality.
4) Process Design :
Process design is a macroscopic decision-making of an overall process route
for converting the raw material into finished goods.
 1.2 Functions of Operations
Management and Supply Chain
5) ProductionManagement
Planning And Control :
Main functions of production planning and control includes planning, routing,
scheduling, dispatching and follow-up.
6) Quality Control :
Quality Control (QC) is a system that is used to maintain a desired level of
quality in a product or service.
7) Materials Management :
Materials management is that aspect of management function which is primarily
concerned with the acquisition, control and use of materials needed and flow of
goods and services connected with the production process having some
predetermined objectives in view.
8) Maintenance Management :
It is very important that the plant machinery should be properly maintained.
 1.2 Functions of Operations
Management and Supply Chain
B) FunctionsManagement
of Supply Chain Management :
1) Planning :
Supply chain management is applied to look forward and predict what will be
required in terms of resources and materials.
2) Procurement :
The commercial part of the supply chain is purchasing known as Buying or
Procurement.
3) Logistics :
Logistics refers to the movement of goods or materials, whether inbound,
through, or outbound.
4) Operations :
Sometimes supply chain found within Operations as well, these are a general
management type activity ensuring that a business uses its resources
effectively to meet its customer commitments.
5) Supply Chain Optimisation :
Supply chain optimisation is the application of processes and tools to ensure
the optimal operation of a manufacturing and distribution supply chain
 1.3 Physical Goods and Services
Perspectives in Operations
A)DifferencesManagement
between Services and Goods :
A service is an intangible process whereas a good is the physical output of a process. In
services, location of the service facility and direct customer involvement in creating the
output are often essential factors; in goods production they usually are not.
B)Operations as Service :
1) Information :
Information is the ability to furnish critical data on product performance, process
parameters and cost to internal groups.
2) Problem Solving :
Problem solving is the ability to help internal and external groups solve problems,
especially in quality.
3) Sales Support :
Sales support is the ability to enhance sales and marketing efforts by demonstrating
the technology, equipment, or production systems the company is trying to sell.
4) Field Support :
Field support is the ability to replace defective parts quickly or to replenish stocks
quickly to avoid downtime or stock outs.
 1.4 Quality in Operations
Management
A) Meaning :
Quality is the result of a comparison between what was required and what was
provided. It is judged not by the producer but by the receiver.
B) Definition :
“Quality is the ongoing process of building and sustaining relationships by
assessing, anticipating, and fulfilling stated and implied needs.”
C) Various Perspectives/Views of Quality :
1) Customer Views of Quality :
One view of quality is that it is defined entirely by
the customer or end user, and is based upon that
person's evaluation of his or her entire customer
experience.
2) Manufacturers View of Quality :
From the producer's perspective, developing and
producing the product in accordance with the
specifications is the path to achieving quality. In
the manufacturing industry it is commonly stated
that “Quality drives productivity.”
 1.5 Concept of Internal Customer
The concept of Internal Customer has developed out of a need to build quality into the
product rather than inspect the product for quality. The earlier practice was to inspect the
product thoroughly just before it left the factory so that only the product meeting
specifications could reach the customer. The meaning of customer now has been
expanded. Even within an organisation the product is processed in various stages.
A) Meaning:
Internal customers are people or departments who work in the same organization as the
service provider. For example, the marketing department is an internal customer of the
IT organization because it uses IT services. The head of marketing and the CIO both
report to the chief executive officer (CEO). If IT charges for its services, the money paid
is an internal transaction in the organization’s accounting system – i.e. not real revenue.
B) Definition:
Stephen Chapman:
“An employee who receives goods or services produced elsewhere an organisation as
inputs to his or her work.”
Tony Arnold:
”A customer within the company, which uses the products or services”
 1.6 Overview of TQM
A)Meaning :
Total Quality Management (TQM) is an integrative philosophy of management for
continuously improving the quality of products and processes. TQM is based on the
premise that the quality of products and processes is the responsibility of everyone
involved with the creation or consumption of the products or services which are offered
by an organisation, requiring the involvement of management, workforce, suppliers, and
customers, to meet or exceed customer expectations. Total Quality Management is
formally defined as, “the management philosophy and company practices that aim to
harness the human and material resources of an organisation in the most effective way
to achieve the objectives of the organisation.”
B)Definition :
“Total Quality is a people focused management system that aims at continual increase in
customer satisfaction at continually lower cost.”
C)Importance of TQM :
1)Production Disruption
2)Lowers Production Costs
3)Employee Resistance
3)Employee Participation
 1.7 Overview of LEAN
Management
Lean management is an important part of lean thinking. As we implement lean in any
organisation the traditional way of managing does not guarantee right focus nor help
sustaining lean initiatives.
A) Principles of LEAN Management :

B) Advantages : C) Disadvantages:
Increase Earning  High Cost of Implementation
Working Space  Supply Problems
Smooth Pacing And Comfort  Lack of Acceptance by Employees
Profit Relationships  Customer Dissatisfaction Problems
Improvement in Organisation Culture
1.8 Impact of Global Competition
1.9 Impact of Technological Change
 1.10 Ethical Issues in Operations and
Supply Chain Management
A) Ethical Issues in Operations Management :
Operations managers are subjected to constant changes and challenges. The
physical and social environment changes, as do laws and values. These changes
present a variety of challenges that come from the conflicting perspectives of
stakeholders such as customers, Distributors, suppliers, owners, lenders, and
employees. These stakeholders, as well as government agencies at various levels,
require constant monitoring and thoughtful responses. Identifying the ethical and
socially responsible responses, while building productive systems, is not always
clear-cut. Among the many ethical challenge facing operations managers are :
 Efficiently developing and producing safe, quality products.
 Maintaining a clean environment.
 Providing a safe workplace.
 Honoring community commitments.
Managers must do all of this in an ethical and socially responsible way while
meeting the demands of the marketplace. If operations managers have a moral
awareness and focus on increasing productivity in at system where all stakeholders
have a voice, then many of the ethical challenges will be successfully addressed.
 1.10 Ethical Issues in Operations and
Supply Chain Management
B) Ethical Issues in Supply Chain Management :
1) Limits of Audits :
Audits are used by firms to monitor supplier performance. However, audits are not
commonly used to improve labour standards.
2) Challenges :
The future challenges for companies engaged in ethical supply chain management
include: aligning commercial and ethical agendas, building suppliers.
3) Governance Structures :
Most organisations have a wider network of vendors, suppliers, customers,
distributors and business partners. Understanding and leveraging the relationships
with all partners is a key success factor in managing supply chain.
4) Ethical Issues Pertaining to Producers :
Ethical issues concerning producers, particularly in developing countries, are
currently at the forefront of debate. Manufacturers are confronted with a plethora of
ethical subjects such as child labour, fair working conditions, fair wages, the
ecological sustainability of their production methods, intellectual property right
violations and counterfeits, to name just a few.
 1.11 Environmental Issues in
Operations and Supply Chain
1) Disposal Management
of Waste :
Product design and packaging, production processes and waste disposal practices
have direct bottom line impacts. Businesses that manufacture products create, at
some point in the manufacturing process, manufacturing waste. Environmental laws
and good environmental citizenship prohibit the indiscriminate dumping of
manufacturing byproducts, so businesses must decide how best to dispense with it.
Many implement recycling programs; others sell what they can of the waste to other
manufacturers who use it in their own manufacturing processes as raw material.
2) Emissions of Gas :
Manufacturing processes often generate air and/or water emissions, which include
particle or chemical-filled smoke, ash and particles and chemicals that seep into
ground water through run-off. Environmental protection laws require businesses to
protect the environment from exposure to these emissions. Remedial processes
include placing screens of specified gauges over smoke stacks, filtration of waste
water and lining of retention ponds with clay and poly liners.
3) Water Scarcity and Quality :
Some industries depend on a supply of water for their operations (e.g. extractive
industries, beverage producers, agriculture growers, bottlers and semi-conductor
producers).
 1.11 Environmental Issues in
Operations and Supply Chain
4) Management
Climate Change :
The need to reduce greenhouse gas emissions and adapt to the effects of climate
change impacts companies in most industries.
5) Energy :
Energy availability, cost, security, production and transportation are all affected by
environmental and social considerations that impact all companies and
stakeholders.
6) Air Pollution :
The impact of air pollution on human health, agriculture, forests and lakes has led
governments to impose regulations to control the quantity of pollutants emitted into
the environment.
7) Forest and Soil Degradation :
Deforestation and deterioration of forests impact habitats, biodiversity and air and
soil quality, particularly affecting lumber and pulp and paper companies. Further, soil
degradation harms agricultural productivity. Sustainability of forest management
practices can be an issue for customers and supply chain policies