OPERATIONS AND

SUPPLY CHAIN
MANAGEMENT

Chapter 1 11-
 Important Notes

The information that appears in many of these slides

is based on support materials that accompany the
primary text for this course:
 Operations and Supply Chain Management: The

Core 5th edition by Jacobs and Chase.

 Sources for other information are cited where

appropriate.

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Learning Objectives

1. Identify the elements of operations and supply chain management

(OCSM)
2. Evaluate the efficiency of the firm
3. Know the potential career opportunities in operations and supply
chain management
4. Recognize the major concepts that define the operations and supply
chain management field

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Strategy, Processes, and Analytics
 Operations and supply chain management involves specialists in:
 Product design
 Purchasing
 Manufacturing
 Service operations
 Logistics
 Distribution
 Success depends upon:
 Operations-related strategy
 Processes to deliver products and services
 Analytics to support the decisions needed to manage the firm

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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
 Operations and Supply Chain Management (OSCM) is concerned with the
management of the entire product production or service delivery system
 The functional fields of business are:
 Operations and Supply Chain Management

 Marketing

 Finance

 Sales

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Operations and Supply Chain Processes

Supply
Operations
Chain
Manufacturing and service Processes that move
processes used to transform information and material to
resources into products and from the firm
• Manufacturing produces physical • Logistics processes move
products products
• Services produce intangible • Warehousing processes store
products products
• Information makes the process
more efficient

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Operations and Supply Chain Processes (2)
 Planning – processes needed to operate an existing supply chain strategically
 Sourcing – selection of suppliers that will deliver the goods and services needed to
create the firm’s product. A set of pricing, delivery, payments, and partner
relationship metrics needed
 Making – producing the major product or providing the service
 Delivering – logistics processes such as selecting carriers, coordinating the
movement of goods and information, and collecting payments from customers
 Returning – processes for receiving worn-out, defective, and excess products back
from customers

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Supply Chain Processes

Exhibit 1.2

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Goods vs Services

Goods Services

Pure Goods Core Goods Core Services Pure Services

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

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 The Goods – Services Continuum

Exhibit 1.3

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1-
Product - Service Bundling
 Refers to a company building service activities into its
product offerings
 Many firms offer a combination of goods and services
 Products are supported by services such as warranties and training
 Services are enhanced through the inclusion of products

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1-
Efficiency, Effectiveness, and Value

Efficiency

• Doing something at the lowest possible cost

Effectiveness

• Doing the right things to create the most value for the
customer

Value

• The attractiveness of a product relative to its price

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Evaluating Efficiency
 Benchmarking – a process in which one company studies
the processes of another company to identify best practices
 Benchmarking is important to investors
 From an operations and supply chain perspective, the relative cost of
providing a good or service is closely related to earnings growth

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Management Efficiency Ratios
 Days sales outstanding – number of days that it takes to collect
cash from customers
 Days inventory – number of days’ worth of inventory
 Payables period – how quickly suppliers are paid
 Cash conversion cycle – how quickly a company converts the cash it receives
from sales to company profits
 Receivables turnover – number of times receivables are collected
 Inventory turnover – average number of times inventory is sold and replaced
during the year
 Asset turnover – the amount of sales generated for every dollar’s worth of assets

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Management Efficiency Ratios (2)

𝑪𝒂𝒔𝒉
  𝒄𝒐𝒏𝒗𝒆𝒓𝒔𝒊𝒐𝒏 𝒄𝒚𝒄𝒍𝒆= 𝑫𝒂𝒚𝒔 𝒔𝒂𝒍𝒆𝒔 𝒐𝒖𝒕𝒔𝒕𝒂𝒏𝒅𝒊𝒏𝒈 + 𝑫𝒂𝒚𝒔 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 − 𝑷𝒂𝒚𝒂𝒃𝒍𝒆 𝒑𝒆𝒓𝒊𝒐𝒅

  𝑨𝒏𝒏𝒖𝒂𝒍 𝒄𝒓𝒆𝒅𝒊𝒕 𝒔𝒂𝒍𝒆𝒔

𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓=
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒂𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆

  𝑪𝒐𝒔𝒕 𝒐𝒇 𝒈𝒐𝒐𝒅𝒔 𝒔𝒐𝒍𝒅

𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓=
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒗𝒂𝒍𝒖𝒆

 𝑨𝒔𝒔𝒆𝒕 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓= 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 (𝒐𝒓 𝑺𝒂𝒍𝒆𝒔 )

𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔

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Careers in Operations and Supply Chain
Management
Hospital Branch Department
Plant manager
administrator manager store manager

Call center Supply chain Purchasing Quality control

manager manager manager manager

Business
Lean
process Project Production
improvement
improvement manager control analyst
manager
analyst

Facilities Chief operating

manager officer

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Careers in Operations and Supply Chain
Management (2)
 Plant manager - oversees the workforce and physical resources (inventory, equipment, and
information technology) required to produce the organization’s product
 Hospital administrator - oversees human resource management, staffing, and finances at a health
care facility
 Branch manager (bank) - oversees all aspects of financial transactions at a branch
 Department store manager - oversees all aspects of staffing and customer service
 Call center manager - oversees staffing and customer service activities at a call center.
 Supply chain manager - negotiates contracts with vendors and coordinates the flow of material
inputs to the production process and the shipping of finished products to customers
 Purchasing manager - manages the day-to-day aspects of purchasing, such as invoicing and
follow-up

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Careers in Operations and Supply Chain
Management (3)
 Logistics manager - oversees the movement of goods throughout the supply chain
 Warehouse/Distribution manager - oversees all aspects of running a warehouse
 Business process improvement analyst - applies the tools of lean production to reduce cycle time
and eliminate waste in a process
 Quality control manager - applies techniques of statistical quality control
 Lean improvement manager - trains organizational members in lean production and continuous
improvement methods
 Project manager - plans and coordinates staff activities, such as new-product development, new-
technology deployment, and new-facility location
 Production control analyst - plans and schedules day-to-day production.
 Facilities manager - ensures that the building facility design, layout, furniture, and other
equipment are operating at peak efficiency
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Historical Development of Operations and Supply Chain Management

Exhibit 1.6
Late 1970’s Manufacturing strategy developed

Early 1980’s Just-in-time (JIT) production

pioneered by the Japanese
Mid 1980’s Service quality and productivity
Total Quality Management
Early 1990’s
(TQM) and Quality Six Sigma Quality
Certification programs Mid 1990’s
Supply Chain
Business Process Late 1990’s Management (SCM)
Reengineering (BPR)
Early 2000’s Service Science
Electronic commerce
Mid 2010’s Sustainability
Business Analytics
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Current Issues in OSCM

Coordinating relationships between organizations

Managing the companies that produce components and supply major business
functions for the firm

Optimizing global supplier, production and distribution networks

Leveraging the information available to the firm to make decisions concerning

inventory, transportation, and production

Managing customer touch points

Recognize that resource utilization decisions must consider both the cost of
staffing and the costs associated with lost customers

Raising awareness of the competitive advantages of OSCM

Many companies have created significant advantages through OSCM

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