1. Operations and Supply Chain Management
MGMT 3306
Lecture 01
Instructor: Dr. Yan Qin

2. Outline – Week 1 Course overview
Topics to be covered
Assessment items
Operations and Supply Chain Management (O&SCM)
What is OSCM
Services Vs. Goods
Efficiency Vs. Effectiveness
Productivity Measurement
Operations Strategies

3. Topics to cover in this course
Global Operations Strategy
Project Management
Quality Management
Statistical Process Control
Demand Management and Forecasting
Inventory Management
Location Strategy
Decision Making Tools

4. Grading scale
Your letter grade is determined using the grade distribution that follows. You can calculate your percentage grade at any time in the semester by dividing the points you have accrued by the total points available up to that point. This percentage is then matched to a letter grade.
A 90% or higher
B 80 to 89%
C 70 to 79%
D 60 to 69%
F Less than 60%

5. Course Assessment Grade breakdown Class Participation 10%
Individual Assignments %
Two Exams %
* Please refer to the tentative class schedule for the post and due dates of each individual assignments.

6. Class participation
Class discussion will be held on the Forum (used to be called Discussion Board in Vista 8) in the Learn 9 system. A set of 2-4 new questions will be posted each week with their end dates stated. For each set of questions, you are expected to answer at least one of the initial questions and reply to at least one of your classmates responses for full credit.
Detailed netiquette rules you are expected to follow are available on the Discussion Forum of Week 1.

7. Assignments and Exams Individual Assignments Two Exams
There are 4 individual assignments in total. Each assignment consists of problem-solving questions and essay questions about the topics covered in class. Each assignment accounts for 5% of the final grade.
Two Exams
There will be two non-cumulative exams in total. Each accounts for 35% of the final grade. The exams will be individual, timed, and open-book/notes. Only multiple- choice questions will be given on the exams.

8. Contact information
Course Website:
or via “Messages” function in Learn 9
My Office: Room 338, Brazos Hall, UHSSL
Office Hours: 4:00 pm – 5:00 pm on Tuesdays or by appointment (You can either drop by my office in Brazos Hall or meet me online at:
Office Phone number:
For technical questions about Learn 9, please our online support technicians at .

9. What is OSCM
Operations include all the activities that relate to the creation of good and services through the transformation of inputs to outputs.
Operations Management (OM) refers to the management of Operations activities to ensure the efficient utilization of all kinds of resources in meeting customer expectations.
Supply Chain Management (SCM) deals with the management of materials, information, and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers.

10. Example: OSCM Activities in a Commercial Bank
Operations:
Teller scheduling
Check Clearing
Collection
Transaction Processing
Facility Layout/design
Vault Operations
Maintenance
Security
Finance:
Investment
Securities
Real estate
Marketing:
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Accounting
Auditing
Trust Department

11. Example: OSCM Activities in a Manufacturing Organization
Operations:
Facilities
Construction; Maintenance
Production and Inventory Control
Quality assurance and control
Supply Chain Management
Product Design
Industrial Engineering
Efficient use of machine, space
Process analysis
Finance:
Disbursements/credits
Accounts receivable
Accounts payable
Funds Management
Capital requirements
Stock issue
Bond issue and recall
Marketing:
Sales promotion
Advertising
Sales
Market research

12. OM’s Transformation Role
Inputs are transformed into Goods and Services via OSCM activities.

13. Differences between Services and Goods
Attributes of Goods
Attributes of Services
Tangible product
Intangible product
Product can be resold.
Reselling a service is unusual.
Product can be inventoried.
Many services cannot be inventoried.
Some aspects of quality are measurable.
Many aspects of quality are difficult to measure.
Selling is distinct from production.
Selling is often a part of the service.
Product is transportable.
Provider, not product, is often transportable.
Site of facility is important for cost.
Site of facility is important for customer contact.
Often easy to automate.
Service is often difficult to automate.

14. Goods – Services Continuum
In reality, almost all services and goods are a mixture of a service and a tangible product.

15. “We need to have things done efficiently and effectively
“We need to have things done efficiently and effectively!” said your supervisor one day. But what does this mean?

16. Efficient Vs. Effective Operations
Efficiency: Doing something at the lowest possible cost.
Effectiveness: Doing the right things to create the most value for the company.
Now you know that 4 situations can happen to you:
Efficient but Ineffective
Inefficient but Effective
Efficient and Effective
Inefficient and Ineffective

17. Efficient Vs. Effective Operations
From:

18. The 10 major OM decisions Ten Decision Areas Sample Issues
Design of goods and services
What good or service should we offer?
Managing quality
How do we define the quality?
Process and capacity
What process and what capacity will these products require?
Location strategy
Where should we put the facilities?
Layout strategy
How should we arrange the facilities?
Human resources and job design
How do we provide a reasonable work environment?
Supply chain management
Should we make or buy this component?
Inventory, material requirements planning, and JIT
How much inventory of item should we have? When do we reorder?
Intermediate and short-term scheduling
Are we better off keeping people on the payroll during slowdowns?
Maintenance
Who is responsible for maintenance?

19. Productivity Measures
Productivity is a measure of efficiency.
It shows how well a country, industry, or business unit is using its resources (or factors of production).
Formula:
Productivity = outputs / inputs

20. Three types of productivity measures
There are three types of productivity measures:
Partial: Exactly one input is considered in measuring productivity
Multifactor: More than one input but not all inputs are included when measuring productivity.
Total: All the inputs are included when measuring productivity.
Note that when one than one input is used to calculate productivity, the inputs should be measured by the same unit. (More details will be provided in the following.)

21. Example: Partial measures
According to the 2006 edition of the Harbour Report on North American auto-factory productivity
GM : labor hrs to build 1 vehicle
Honda: 41 minutes less than GM
Nissan: 500 autos with 14,230 labor hrs
Question 1: If GM’s labor productivity in year 2007 was vehicles/ hr, what was GM’s change in labor productivity?
Question 2: How many hours did it take to build a vehicle at GM in year 2007?
Labor, capital, materials, energy…

22. Example: Question 1 Answer:
GM’s labor productivity in year 2006 = output / input
= 1/ 33.19
= 0.03 vehicles/hr
GM’s labor productivity in year 2007 = (given)
Change in labor productivity = =

23. Example: Question 2 Answer:
GM’s labor productivity in year 2007 = vehicle/hr (given)
The number of labor hours it took to produce a vehicle in year 2007 =

24. Example: Multi-factor measures
Suppose an automaker shows the following results:
Output : 500,000 vehicles
Labor = 29.4 hrs/ vehicle at $47/hr
O/H Charge = $327 per Labor hour
Material Cost = $6.5 Billion
Please calculate the multifactor productivity for labor and material together.

25. Example: Solution - 1 Using the formula for productivity,
Multifactor productivity for labor and material
= Output / (Labor cost + Material cost)
(1) Note that in this case we should use labor cost, instead of labor hour, since materials are measured by dollar. Inputs should be measured by the same unit.
(2) The unit of Output can be different from the unit of Input. For example, the output in this example is the number of vehicles produced and the input is the total amount of money put in labor and material.

26. Example: Solution - 2
The total material cost is $6.5 billion as given.
We now need to calculate the total labor cost:
Labor = 29.4 hrs per vehicle at $47/hour (given)
Labor cost per vehicle = 29.4 hrs/vehicle * $47/hr
= $ per vehicle
Output = 500,000 vehicles
Therefore, the total labor cost incurred to produce the 500,000 vehicles = $ per vehicle * 500,000 vehicles
= $ billion

27. Example: Solution - 3 Multifactor productivity for labor and material
= Output / (Labor cost + material cost)
= 500,000 vehicles / ($ billion + $6.5 billion)
= 500,000 vehicles / $ billion
= vehicle per dollar

28. Example: Total productivity
Company A received the data below for its rodent cage production unit. Please find the total productivity.
Output
Input
50,000 cages
Sales price: $3.50 per unit
Production time
620 labor hours
Wages
$7.50 per hour
Raw material cost
$30,000
Component cost
$15,350

29. Example: Solution
The output here can be either the total number of cages or the total revenue.
Suppose we use total revenue as output in this case.
Then, Total Productivity
= Output / Sum of Inputs (in $)
= Revenue / (labor cost + raw material cost + cost of components)
= (50,000 * $3.5 per unit) / (620* $7.5 per hr + $30, $15,350)
= 3.5

30. Reasons to Globalize
Reasons why domestic business operations decided to change to some form of international operations:
Reduce costs (labor, taxes, tariffs, and etc.)
Improve supply chain
Provide better goods and services
Understand markets
Learn to improve operations
Attract and retain global talent

31. Reasons to Globalize
Reduce costs: Foreign locations with lower wage rates can lower direct and indirect costs.
Maquiladoras: Mexican factories located along the U.S.- Mexico border that receive preferential tariff treatment.
World Trade Organization (WTO)
North American Free Trade Agreement (NAFTA)
APEC, SEATO, MERCOSUR, CAFTA
European Union (EU)

32. Reasons to Globalize
Improve the Supply Chain: Locating facilities closer to unique resources, such as Athletic shoe production to China and Perfume manufacturing in France
Provide Better Goods and Services: Some characteristics of goods and services can be subjective and difficult to measure. A local presence permits firms to
Have a better understanding of local goods and service requirements ,and
Reduce response time to meet customers’ changing requirements.

33. Reasons to Globalize
Learn to improve operations: Remain open to the free flow of ideas
General Motors partnered with a Japanese auto manufacturer to learn new approaches to production and inventory control
Equipment and layout have been improved using Scandinavian ergonomic competence
Attract and Retain Global Talent

34. Example: Global Strategies
Benetton – moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution
Volvo – considered a Swedish company but until controlled by an American company, Ford, and later on acquired by Geely, a Chinese automaker.

35. Example: Global Strategies
Sony – purchases components from suppliers in Thailand, Malaysia, and around the world
Boeing – sales and production are worldwide
Haier – A Chinese company, produces compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina

36. Concerns when going international
Cultures can be quite different
Attitudes can be quite different towards:
Punctuality
Lunch breaks
Environment
Intellectual property
Thievery
Bribery
Child labor

37. Concerns when going international
Companies want to consider:
National literacy rate
Rate of innovation
Rate of technology change
Number of skilled workers
Political stability
Product liability laws
Export restrictions
Variations in language
Work ethic
Tax rates
Inflation
Availability of raw materials
Interest rates
Population
Number of miles of highway
Phone system

38. Developing Missions and Strategies
Mission statements tell an organization where it is going
The Strategy tells the organization how to get there

39. Mission where are you going? Organization’s purpose for being
Answers ‘What do we provide society?’
Provides boundaries and focus

40. Examples of Mission:
Merck: Provide society with superior products and services—innovations and solutions that improve the quality of life and satisfy customer needs—to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return.
Hard Rock Café: To spread the spirit of Rock ’n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success.
Labor, capital, materials, energy…

41. Factors Affecting Mission
Philosophy and Values
Profitability and Growth
Environment
Customers
Public Image
Mission
Benefit to Society

42. Strategy Action plan to achieve mission
Functional areas have strategies
Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

43. Strategies for Competitive Advantage
Competitive advantage implies the creation of a system that has a unique advantage over competitors.
Each of the following strategies provides an opportunity for operations managers to achieve competitive advantage:
Competing on Differentiation: Better or at least different
Competing on Cost: Cheaper
Competing on Response: Rapid Response

44. Competing on Differentiation
Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value.
Examples of businesses competing on differentiation:
Safeskin gloves – leading edge products
Walt Disney Magic Kingdom – experience differentiation
Hard Rock Cafe – dining experience

45. Competing on Cost
Provide the maximum value as perceived by customer. Does not imply low quality.
Examples of businesses competing on cost:
Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment
Wal-Mart – small overhead, shrinkage, distribution costs
Franz Colruyt – no bags, low light, no music, doors on freezers

46. Competing on Response
Response is often considered as flexible response, but it also refers to reliable and quick response.
Flexibility is matching market changes in design innovation and volumes. (ex: A way of life at Hewlett- Packard)
Reliability is meeting schedules (ex: German machine industry)
Timeliness is quickness in design, production, and delivery (ex: Johnson Electric, Pizza Hut, Motorola)

47. Strategy Development Process
Analyze the Environment
Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors.
Determine the Corporate Mission
State the reason for the firm’s existence and identify the value it wishes to create.
Form a Strategy
Build a competitive advantage, such as low price, design, or volume flexibility, quality, quick delivery, dependability, after-sale service, broad product lines.
Figure 2.6

48. Implement Strategy
The operations manager’s job is a three-step process:
Support a Core Competence and implement strategy by identifying and executing the Key Success Factors in the Functional Areas.
Build and staff the organization
Integrate OM with other strategy

49. KSFs and Core Competencies
A successful strategy requires determining the firm’s Key success factors (KSFs) and core competencies.
KSFs are those activities that are necessary for a firm to survive in its industry and achieve its goals.
KSFs are often necessary, but not sufficient for competitive advantage.
Core competencies are the set of unique skills, talents, and capabilities that a firm does a world-class standard.
Core competencies allow a firm to set itself apart and develop a competitive advantage.