1. McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Operations and Supply Chain Management Chapter 01

2. 1-2 Learning Objectives 1. Understand operations and supply chain processes and why it is important to study them. 2. Contrast the differences between services and goods producing processes. 3. Define efficient and effective operations. 4. Identify operations and supply chain management career opportunities. 5. Learn how the field has developed over time.

3. 1-3 Strategy, Processes, and Analytics  Operations and supply chain management involves  Product design  Purchasing  Manufacturing  Service operations  Logistics  Distribution  Success depends upon  Strategy  Processes to deliver products and services  Analytics to support the decisions needed to manage the firm

4. 1-4 What is Operations and Supply Chain Management?  The design, operation, and improvement of the systems that create and delivery the firm’s primary products and services  Operations and Supply Chain Management (OSCM) is  A functional field of business  Concerned with the management of the entire production/delivery system

5. 1-5 Operations and Supply Chain Processes Operations Manufacturing and service processes used to transform resources into products Supply Chain Processes that move information and material to and from the firm

6. 1-6 OSCM: The Core - Organization What should our operations and supply chain strategy be? What do we expect demand to be? How much capacity will we need in the future? How do we implement change with projects? Section 1: Strategy and Analytics How are manufacturing processes organized? How are service processes organized? What is the relationship between waiting time and the capacity of a process? How do we make a plan for meeting future demand? How do we calculate the material needed to meet our plan? How do we make improvements to our process and ensure quality? Section II: Manufacturing and Service Process and Analytics How is inventory managed? What is a “lean” supply chain? How are materials and services bought? Where do we locate our facilities? Seciton III: Supply Chain Processes and Analytics

7. 1-7 Process Activities  Planning –processes needed to operate an existing supply chain  Sourcing – selection of suppliers that will deliver the goods and services needed to create the firm’s product  Making – producing the major product or service  Delivering – logistics processes such as selecting carriers, coordinating the movement of goods and information, and collecting payments from customers  Returning – receiving worn-out, excess, and/or defective products back from customers

8. 1-8 Goods versus Services Tangible Less interaction with customers Often homogeneous Not perishable – can be inventoried Pure GoodsCore Goods Intangible Interaction with customer required Inherently heterogeneous Perishable/time dependent Defined and evaluated as a package of features Core ServicesPure Services GoodsServices

9. 1-9 Efficiency, Effectiveness, and Value Doing something at the lowest possible cost Efficiency Doing the right things to create the most value for your customer Effectiveness The attractiveness of a product relative to its cost Value

10. 1-10 Evaluating Efficiency  Comparison of firms 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  Management efficiency ratios  Labor productivity Net income per employee Revenue (or sales) per employee  Asset productivity Receivables turnover ratio Inventory turnover Asset turnover

11. 1-11 Careers in Operations and Supply Chain Management Plant manager Hospital administrator Branch manager Department store manager Call center manager Supply chain manager Purchasing manager Quality control manager Business process improvement analyst Lean improvement manager Project manager Production control analyst Facilities manager Chief operating officer

12. 1-12 Historical Development of Operations and Supply Chain Management Late 1970’s Early 1980’s Mid 1980’s Early 1990’s Mid 1990’s Late 1990’s Early 2000’s Mid 2010’s Manufacturing strategy developed Just-in-time (JIT) production pioneered by the Japanese Service quality and productivity Total Quality Management (TQM) and Quality Certification programs Business Process Reengineering (BPR) Electronic commerce Business Analytics Service Science Supply Chain Management (SCM) Six-Sigma Quality