Introduction to Operations and Supply

Chain Management

Text: Introduction to Operations and Supply Chain ManagementCustom edition for Farmingdale State College

Authors: Cecil Bozarth & Robert Handfield

Where appropriate reference text page numbers will be on bottom of slides

OSC may be used as an abbreviation of Operations and Supply Chain

Chapter Objectives

Be able to: Describe what the operations function is and why it is

critical to an organization’s survival. Describe what a supply chain is and how it relates to a

particular organization’s operations function. Discuss what is meant by operations management and

supply chain management. Identify some of the major operations and supply chain

activities, as well as career opportunities in these areas. Make a case for studying both operations management

and supply chain management.

Introduction

• Why study Operations and Supply Chain Management?

• Operations Management

• Supply Chain Management

• Important trends

• LeapFrog case study

Focus

• Key issues surrounding the design and ongoing management of these areas

• Common tools and techniques– Introduction to the SCOR model

• Analytical skills (both qualitative and quantitative)

Why Study Operations andSupply Chain Management?

Three Basic Truths

I. Pervasiveness

II. Interdependence

III. Profitability and Survival

PervasivenessEvery organization must make a product or

provide a service that someone values………….

Manufacturer.Retailer.Design firm.University.Health services.

Interdependence

Most organizations function as part of a larger supply chain

Supply Chains

• Networks of manufacturers and service providers that work together to move goods from the raw material stage through to the end user

• Linked through physical, information, and monetary flows

Profitability and Survival

Organizations must carefully manage their operations and supply chains to prosper, and indeed, survive!

Shoe manufacturer:How many shoes should we make? What mix?What resources do we need? What will we outsource?Location?Key performance criteria -- Cost? Quality? Speed?

Operations Management

The planning, scheduling, and control of the activities that transform inputs

into finished goods and services

Operations Function

The collection of people, technology, and systems within a company ...

… that has primary responsibility ...

… for providing the organization’s products and/or services.

Viewing Operations as a Transformation Process

TransformationProcess

Manufacturing operations

Service operations

Inputs Outputs

MaterialsPeopleEquipmentIntangible needsInformation

Tangible goodsFulfilled requestsInformationSatisfied Customers

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.

Services

• Intangible “Product” or Service

– Location, Exchange, Storage, Physiological, Information

• Key decisions:

– How much customer involvement?

– How much customization?

Cross-Functional Linkages

Operations and Supply Chain

FinanceBudgeting.Analysis.Funds.

MarketingWhat products?What volumes?Costs? Quality?Delivery?

HumanResourcesSkills? Training?# of Employees?

AccountingPerformance measurement systems.Planning and control.

MISWhat IT solutionsto make it all worktogether?

DesignSustainability.Quality.Manufacturability.

Supply Chain Management

Active management of supply chain activities and relationships to maximize customer value and achieve a sustainable competitive advantage

Alcoa Ball Corp Anheuser-Busch M&M Meijer

First TierSupplier Distributo

rRetailer

Transportation companies

Finalcustomers

Upstream Downstream

Alcoa

Second TierSupplier

Material Flows

Supply Chain Issues

• Length of the chain

• Complexity

• Stability

• Physical, informational, and monetary flows

Supply-Chain Operations Reference (SCOR)* ModelConsists of:• Planning activities• Sourcing activities• “Make” or production activities• Delivery activities• Return activities

* Supply-Chain Council, 2007. www.supply-chain.org

SCOR Model

© Supply-Chain Council, 2007

Wal-Mart — Early 1990s

• Individual stores sent sales data daily to Wal-Mart’s suppliers via satellite

• Suppliers plan production and ship based on this sales data

• Wal-Mart used its own dedicated fleet to ship from its warehouses to stores

Panera Bread — 2006

• 4th quarter revenues and profits up 25% and 8%, respectively, over 2005 4th quarter*

• >200 million pounds of dough delivered by 110 trucks traveling 9.7 million miles annually

*Panera Bread, 4th Quarter 2006 Earnings Report, www.panera.com/about/investor/reports.php.

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

Operations and Supply Chain Management and You

• Analyst• Commodity Manager• Customer Service

Manager• International Logistics

Manager• Logistics Services

Salesperson• Production Manager

• Sourcing Analyst• Logistics and Material

Planner• Systems Support

Manager (MIS)• Transportation Manager• Process Analyst• Scheduler• Purchasing Agent

Some of the many career positions

Operations and Supply Chain Activities

• Process selection, design, and improvement• Forecasting for decision making• Capacity planning for capital investment and

resource levels• Inventory management for amount and location• Planning and control for work scheduling and

meeting demand• Purchasing, managing supplier relationships• Logistics or acquisition and distribution

Case Study Introducing Operations and Supply Chain

Management

LeapFrog