1. Business Driven Information Systems 2e
CHAPTER 8
OPERATIONS MANAGEMENT AND
SUPPLY CHAIN MANAGEMENT

2. Chapter Eight Overview
SECTION 8.1 – OPERATIONS MANAGEMENT
Operations Management Fundamentals
OM in Business
IT’s Role in OM
Competitive OM Strategy
OM and the Supply Chain
SECTION 8.2- SUPPLY CHAIN MANAGEMENT
Supply Chain Fundamentals
IT’s Role in the Supply Chain
Supply Chain Management Success Factors
Supply Chain Management Success Stories
Future Supply Chain Trends

3. OPERATIONS MANAGEMENT
SECTION 8.1
OPERATIONS MANAGEMENT

4. LEARNING OUTCOMES Define the term operations management
Explain operations management role in business
Describe the correlation between operations management and information technology

5. LEARNING OUTCOMES
Describe the five characteristics of competitive priorities
Explain supply chain management and its role in a business

6. OM FUNDAMENTALS
Production - is the creation of goods and services using the factors of production
Production management - describes all the activities managers do to help companies create goods
Operations management (OM) - the management of systems or processes that convert or transform resources into goods and services

7. OM FUNDAMENTALS
Transformation process - the actual conversion of inputs to outputs

8. OM FUNDAMENTALS

9. OM FUNDAMENTALS
Value-added - the term used to describe the difference between the cost of inputs and the value of price of outputs

10. OM IN BUSINESS
How does an airline service organization’s OM team adds value?
Forecasting
Capacity planning
Scheduling
Managing inventory
Assuring quality
Motivating and training employees
Locating facilities

11. IT’S ROLE IN OM
Managers use IT to heavily influence OM decisions including :
What: What resources will be needed and in what amounts?
When: When should the work be scheduled?
Where: Where will the work be performed?
How: How will the work be done?
Who: Who will perform the work?

12. OM Strategic Business Systems
Operations strategy addresses broad questions about using major resources to achieve corporate objectives
Major long-term issues addressed in operations strategy include:
How big to make the facilities?
Where to locate the facilities?
When to build additional facilities?
What type of process(es) to install to make the products?

13. OM Strategic Business Systems
Strategic planning - focuses on long range planning
Strategic business units (SBUs) - consist of several stand-alone businesses
Materials requirement planning (MRP) - use sales forecasts to make sure that needed parts and materials are available at the right time and place

14. OM Strategic Business Systems
Tactical planning - focuses on producing goods and services as efficiently as possible within the strategic plan
Global inventory management system - provides the ability to locate, track, and predict the movement of every component or material anywhere upstream or downstream in the production process

15. OM Strategic Business Systems
Operational planning and control (OP&C) - deals with the day-to-day procedures for performing work, including scheduling, inventory, and process management
Inventory management and control system
Transportation planning system
Distribution management system

16. COMPETITIVE OM STRATEGY
Five key competitive priorities which a company can add value to its OM decisions including:
Cost
Quality
Delivery
Flexibility
Service

17. COMPETITIVE OM STRATEGY
Cost: there can be only one lowest-cost producer, and that firm usually establishes the selling price in the market
Quality: is divided into two categories product and process quality
Six Sigma Quality
Malcolm Balridge National Quality Awards
ISO 900, ISO 14000
CMMI

18. COMPETITIVE OM STRATEGY
Delivery: a firms ability to provide consistent and fast delivery
Flexibility: a firms ability to offer a wide variety of products
Service: high-quality customer service adds tremendous value to an ordinary product

19. OM AND THE SUPPLY CHAIN
Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

20. OM AND THE SUPPLY CHAIN
Four basic components of supply chain management include:
Supply chain strategy – strategy for managing all resources to meet customer demand
Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services.
Supply chain operation – schedule for production activities
Supply chain logistics – product delivery process

21. OM AND THE SUPPLY CHAIN
Typical manufacturing supply chain

22. OM AND THE SUPPLY CHAIN
Typical service supply chain

23. OM AND THE SUPPLY CHAIN
Wal-Mart and Procter & Gamble (P&G) SCM

24. OM AND THE SUPPLY CHAIN
Effective and efficient SCM systems can enable an organization to:
Decrease the power of its buyers
Increase its own supplier power
Increase switching costs to reduce the threat of substitute products or services
Create entry barriers thereby reducing the threat of new entrants
Increase efficiencies while seeking a competitive advantage through cost leadership

25. OM AND THE SUPPLY CHAIN
Effective and efficient SCM systems effect on Porter’s Five Forces

26. OPENING CASE QUESTIONS DELL’S FAMOUS SUPPLY CHAIN
How would operations management be a critical component to a company like Dell?
How would Dell use each of the three OM planning strategies to improve its operations?
How might Dell use each of the five competitive priorities to increase value to its goods and services?
Illustrate Dell’s potential supply chain management system

27. SUPPLY CHAIN FUNDAMENTALS
SECTION 8.2
SUPPLY CHAIN FUNDAMENTALS

28. LEARNING OUTCOMES
List and describe the components of a typical supply chain
Define the relationship between information technology and the supply chain
Identify the factors driving supply chain management
Summarize the best practices for implementing a successful supply chain management system

29. SUPPLY CHAIN FUNDAMENTALS
The average company spends nearly half of every dollar that it earns on production
In the past, companies focused primarily on manufacturing and quality improvements to influence their supply chains

30. SUPPLY CHAIN FUNDAMENTALS
The supply chain has three main links:
Materials flow from suppliers and their “upstream” suppliers at all levels
Transformation of materials into semifinished and finished products through the organization’s own production process
Distribution of products to customers and their “downstream” customers at all levels

31. SUPPLY CHAIN FUNDAMENTALS
Organizations must embrace technologies that can effectively manage supply chains

32. SUPPLY CHAIN FUNDAMENTALS

33. IT’S ROLE IN THE SUPPLY CHAIN
IT’s primary role is to create integrations or tight process and information linkages between functions within a firm

34. IT’S ROLE IN THE SUPPLY CHAIN
Factors Driving SCM

35. Visibility
Supply chain visibility – the ability to view all areas up and down the supply chain
Bullwhip effect – occurs when distorted product demand information passes from one entity to the next throughout the supply chain

36. Consumer Behavior
Companies can respond faster and more effectively to consumer demands through supply chain enhances
Demand planning software – generates demand forecasts using statistical tools and forecasting techniques

37. Competition
Supply chain planning (SCP) software– uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain
Supply chain execution (SCE) software – automates the different steps and stages of the supply chain

38. Competition
SCP and SCE in the supply chain

39. Speed

40. SCM SUCCESS FACTORS

41. SCM SUCCESS FACTORS Segment customers Customize the logistics network
Listen to signals of market demand and plan accordingly
Differentiate products closer to the customer
Strategically manage sources of supply
Develop a supply chain IT strategy
Adopt performance evaluation measures

42. SCM SUCCESS FACTORS SCM industry best practices include:
Make the sale to suppliers
Wean employees off traditional business practices
Ensure the SCM system supports the organizational goals
Deploy in incremental phases and measure and communicate success
Be future oriented

43. SCM SUCCESS FACTORS
Top reasons why more and more executives are turning to SCM to manage their extended enterprises

44. SCM SUCCESS FACTORS
Numerous decision support systems (DSSs) are being built to assist decision makers in the design and operation of integrated supply chains
DSSs allow managers to examine performance and relationships over the supply chain and among:
Suppliers
Manufacturers
Distributors
Other factors that optimize supply chain performance

45. FUTURE SUPPLY CHAIN TRENDS
Fastest growing SCM components
Supply chain event management (SCEM)
Selling chain management
Collaborative engineering
Collaborative demand planning

46. OPENING CASE QUESTIONS Dell’s Famous Supply Chain
How might Dell use each of the five basic SCM components?
How had Dell influenced visibility, consumer behavior, competition, and speed though the use of IT in its supply chain?
Explain the seven principles of SCM in reference to Dell’s business model

47. CLOSING CASE ONE BudNet
Describe the five competitive priorities of operations management and how Budweiser can use each one to streamline production
How can an SCM system help a distributor such as Anheuser-Busch make its supply chain more efficient and effective?

48. CLOSING CASE ONE BudNet
SCM is experiencing explosive growth. Explain why this statement is true using BudNet as an example
Evaluate BudNet’s effect on each of the five factors that are driving SCM success
List and describe the components of a typical supply chain along with its ability to help Budweiser make effective decisions

49. CLOSING CASE TWO Listerine’s Journey
Explain the role of operations management for Warner-Lambert
Summarize SCM and describe Warner-Lambert’s supply chain strategy. Diagram the SCM components
Detail Warner-Lambert’s three operations management strategies and identify systems it could use to help make strategic decisions

50. CLOSING CASE TWO Listerine’s Journey
What would happen to Warner-Lambert’s business if a natural disaster in Saudi Arabia depletes its natural gas resources?
Assess the impact to Warner-Lambert’s business if the majority of the eucalyptus crop was destroyed in a natural disaster

51. CLOSING CASE THREE Levi’s
How did Levi Strauss achieve business success through the use of supply chain management?
What might have happened to Levi’s if its top executives had not supported investments in SCM?
David Bergen, Levi’s CIO, put together a cross-functional team of key managers from IT, finance, and sales to transform Levi’s systems to meet Wal-Mart’s requirements. Analyze the relationships between these three business areas and OM and SCM systems. How can OM and SCM systems help support these three critical business areas?

52. CLOSING CASE THREE Levi’s
Describe the five basic SCM components in reference to Wal-Mart’s business model
Explain RFID and provide an example of how Levi’s could use the technology to increase its business operations
Identify any security and ethical issues that might occur for a company doing business with Wal-Mart

53. BUSINESS DRIVEN BEST SELLERS
Built to Last, by Jim Collins

54. BUSINESS DRIVEN BEST SELLERS
Good to Great, by Jim Collins