Introduction to Operations and Supply Chain Management Chapter 1

A New Business Environment Businesses try to break down the “silos” that used to define business functions.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall1 - 3  Technological progress is moving at a tremendous rate  There are many new products and services in addition to old ones  Rapid change is the norm A New Business Environment

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall1 - 4 Operations Management  What is operations management?  “The management of resources used to create saleable products and services.”  The management of an organization’s productive resources or its production system, which converts inputs into the organization’s products and services.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall1 - 5 Operations Management  Operations Management – The planning, scheduling, and control of the activities that transform inputs into finished goods and services. Figure 1.1 © 2010 APICS Dictionary

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall1 - 6 Manufacturing  Tangible product  Key decisions driven by physical characteristics of the product:  How is the product made?  How do we store it?  How do we move it?  Etc.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall1 - 7 Services  Intangible Product or Service  Location, Exchange, Storage, Physiological, Information  Key decisions:  How much customer involvement?  How much customization?

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall1 - 8 Effectiveness vs. Efficiency  Effectiveness – the ability to choose appropriate goals and achieve them.  Efficiency – the ability to make the best use of available resources in the process of achieving goals.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall1 - 9 Supply Chain  Supply Chain – A network of manufacturers and service providers that work together to create products or services needed by end users.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Supply Chains Basic Producer ConvertersFabricatorsAssemblers Support Services Transport Storage Finance, etc. Basic Producer – Mines, extracts or harvests natural resources Converter – Refines natural resources Fabricator – Converts refined materials into usable components Assembler – Assembles components into finished products

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Supply Chain Management  Supply Chain Management – The active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall A Supply Chain Example Figure 1.2

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Supply Chain Terminology  Upstream – Activities positioned earlier in the supply chain.  Downstream – Activities positioned later in the supply chain.  First-tier supplier – A supplier that provides products or services directly to a firm.  Second-tier supplier – A supplier that provides products or services to a first-tier supplier.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Supply Chain Operations Reference (SCOR) Model © Supply-Chain Council, 2011 Figure 1.3

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Why study Operations and Supply Chain Management?  Every organization must make a product or a service that someone values.  Most organizations function as part of larger supply chains.  Organizations must carefully manage their operations and supply chains in order to prosper, and indeed, survive.

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Adopting SCM  Increased competition  The impact of customers on suppliers  The impact of suppliers on customers  Technological advances

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Supply Chain Management (SCM) Consists of:  Planning activities  Sourcing activities  “Make,” or production, activities  Delivery activities  Return activities © Supply-Chain Council, 2011

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Supply Chain Operations Reference (SCOR) Model © Supply-Chain Council, 2011 Figure 1.3

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Historical Development of OM  The Industrial Revolution  Post-civil war period  Scientific Management  Human Relations and Behavioralism  Operations Research  Service Revolution  Computer Revolution

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Contributions to Society  Higher standard of living  Better quality goods and services  Concern for the environment  Improved working conditions

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Important Trends  Electronic commerce  Reduces the costs and time associated with supply chain relationships  Increasing competition and globalization  Fewer industries protected by geography  Relationship management  Competition between chains, not individual firms  Trust and coordination

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Tangible Resources  Inventory  Workforce  Capacity  Facilities

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Intangible Resources  Customer relationships  Resource planning  Lean systems  Total Quality management (TQM)  Constraint management  Supply chain management

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall Professional Organizations  APICS – Association for Operations Management  ISM – Institute for Supply Management  CSCMP – The Council of Supply Chain Management Professionals  ASQ – The American Society for Quality