Introduction to Operations and Supply Chain Management PDF (2023)

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Introduction to Operations and Supply Chain Management
1. Introduction to Operations and Supply Chain Management
1.1. Why study Operations and Supply Chain Management?
•Three reasons:
1.Every organization must make a product or provide a service that someone values
•Each organization has an operations function/ operations
•This is the collection of people, technology and system in an organization that has primary
responsibility for providing the organization’s products or services
2.Most organizations function as part of larger supply chains
•Supply chain= network of manufacturers and service providers that work together to create
products or services needed by end users
•Manufacturers are linked together through physical, information and monetary flows
•Much supply chain activities are conversion, storage and movement of materials and products
•Supply chains link together the operations functions of many different organizations to provide
real value to consumers
3.Organizations must carefully manage their operations and supply chains in order to prosper and
survive
•Organizations faces many decisions with regards to its role in the supply chain
•The right choice can lead to higher profitability andincreased market share
•The wrong choice can cost the company dearly or even put it out of business
•Operations Management
•Traditional way to think about operations is as a transformations process
Inputs (Materials, intangible needs, information’s likedemand forecast)
Transformation Process (manufacturing operations, service operations)
Outputs (tangible goods, fulfilled needs, satisfied customers, intangible services = nicht greifbar
-> law firm)
•Operations areoften highly dependent on the quality and availability of inputs
•Nearly all operations activities require coordination with other business functions-> cross
functional decision making
•Operations management activities are information and decision intensive

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•Operations Management = the planning, scheduling and control of the activities that
transform inputs into finished goods and services
•Operations management decisions can range from long-term, fundamental decisions to more
immediate issues
•With operations management, organizations hope to provide the best value to their costumers
while making the best use of resources
•Supply Chain Management (SCM)
•Operations management mostly focuses on managing its own operations
•But managers must also understand how the company is linked with the operations of its
suppliers, distributors and costumers-> supply chain
•Organizations in supply chain are linked through physical, information and monetary flows
•Flows go both up and down the chain-> flows go both ways
•INBEV returning empty pallets to its firs-tier supplier-> flow of physical goods back up the
supply chain
•Most of the participants in a supply chain are both customers and suppliers
•Supply chain must be very efficient
•Supply chains are not new
•Supply chain management = active management of supply chain activities and relationships
in order to maximize customer value and achieve a sustainable and competitive advantage
➢It represents a conscious effort by a firm or a group of firms to develop and run supply
chains in the most effective and efficient way possible
•Supply Chain Reference model (SCOR)
•It is a framework, developed by the Supply Chain council, that seeks to provide standard
descriptions of the processes, relationships and metrics that defineSCM

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•According to SCOR-model, SCM covers five broad areas:
1.Planning activities:to balance demand requirement against resources and communicate
these plans to all the participants
2.Sourcing activities:identifying, developing and contracting withsuppliers and scheduling
the delivery of incoming goods and services
3.Productions activities:actual production of a good or service
4.Delivery activities:all the activities from entering customer orders and determining
delivery dates to storing and movinggoods to theit final destination
5.Return activities:activities necessary to return and process defective or excess products or
materials
•Walmart is one of the earliest proponents of SCM (1980er and 1990er)
➢Stores sent daily sales information’s to Walmart to use them for the production
➢Dedicated fleet of trucks to ship good from warehouse to store in less than 48 hours
➢They replenish store inventories twice a week
➢Result: better customer service (products always available), lower production and
transportation cost (suppliers made and shipped only what was needed) and better use
of retail store space
•Now many retailers make multiple shipments to stores each day based on continuous sales
updates
•Two cases:
1.One very powerful firm took primary responsibility for improving performance across its
own supply chain-> Walmart
2.Companies within an industry form councils or groups to identify and adopt supply chain
practices that will benefit all firm in the industry
➢Automotive Industry Action Group (AIAG): provide an open forum where members
cooperate in developing and promoting solutions than enhance the prosperity of
the automotive industry

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➢Grocery Manufacturers of America (GMA)
➢Supply Chain Council (SCC): improve supply chain performance across many
industries
1.2. Important Trends
•Operations management and SCM require interaction and trust between companies
•Three developments made operations and supply chain management so important for
managers:
1.Electronic commerce
2.Increasing Competition and Globalization
3.Relationship management
•Electronic Commerce
•Use of computer and telecommunications technologies to conduct business via electronic
transfer of data and documents
•Breakthroughs in information technology have made instantaneous communications across
supply chain partners a reality
•It linked together suppliers, manufacturers, distributors, retail outlets and customers regardless
of location
•Provide visibility into incoming shipments and delays
•Increasing Competition and Globalization
•Rate of changein markets is escalating
•So managers must make decisions on shorter notice with less information and higher penalty
costs if they make mistakes
•Customers want quicker delivery and services suited to their individual needs
•New competitors entering markets
•Increasing Competition and Globalization have given opportunities to many firms to break
away from the pack
•Relationship Management
•The improve supply chain performance you need the cooperation with other firms->
companies invest more in relationshipmanagement
•But relationship management is difficult and poor relationships in the supply chain have
disastrous consequences for all the members

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➢Organizations must manage the relationships with their upstream suppliers and
downstream costumers
1.3. Operations and Supply Chain Management to you
•Many careers option
•Professionals Organizations can help
1.APICS: Association for Operations Management
➢Society for persons interested in operations and supply chain management; In USA
2.ISM: Institute for SupplyManagement
➢Provide national and international leadership in purchasing and materials management
3.CSCMP: Council of SCM Professionals
➢Providing worldwide leadership for the evolving logistics profession through the
development, dissemination and advancement of logistic knowledge
4.ASQ: American Society for Quality
➢Education and quality improvement
•Operations and SCM work together with other functions in firms and are nor working in a
vacuum
1.4. Chapter Summary
•Every organization must provide a product or service that someone values
➢Primary responsibility of the operations function
•Most organizations activities are linked with those of other organizations through supply chains
➢You need management of operations and suppl chain
2. Operations andSupply Chain Strategies
2.1. Elements of the Business
•Business elements include structural and infrastructural elements
1.Structural Elements
•Tangible resources such as buildings, equipment and information technology
•these resources require large capitalinvestment that are difficult to reverse
➢high cost and inflexibility
•structural elements are changed infrequently and after much deliberation

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2.Infrastructural Elements
•People, policies, decision rules and organizational structure choices made by thefirm
•Elements are often not visible but very important
✓All the elements must work together
✓Businesses need to ensure that their decisions are appropriate and consistent with one another
✓Strategy is necessary
2.2. Strategy
•Strategy= a mechanism bywhich a business coordinates their decisions regarding their
structural and infrastructural elements
➢Do many things well not only a few
➢Integrating
➢Strategies are long-term game plans (several years ore more)
➢Most organizations have many levels of strategy from upper-level business strategies to
more detailed ones
➢When organizations have different businesses–they have an overall corporate strategy
and individual business unit strategies
•Mission statement =explains why an organization exist–it describes what is important to the
organization, called it core values, and identifies the organization’s domain

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✓Example: mission statement = Become a world-class competitor in our industry
Business strategy = Increase our European businesspresence
Functional level = develop a European source for raw material x
•Business Strategy =strategy that identifies a firm’s targeted customers and sets time frames and
performance objectives for the business
•Business Strategy parts,which are relevant for operations and SC-strategies:
1.Identify the firms targeted customers and indicate wat the operations and supply chain functions
need to do to provide value to these customers
2.Set time frames and performance objectives than managers can use to track the firm’s progress
toward fulfilling its business strategy
3.Identify and support the development of core competencies in the operations and supply chain
areas
•Core Competencies =organizational strengths or abilities, developed over a long period, that
customers find valuable and competitors find difficult or impossible to copy
➢Could also be the ability to manage its supply chain partners
•Functional Strategy =translate a business strategy into specific actions for functional areas suchas
marketing, ...
➢Supply chain strategy might address the manufacturing or service process
➢A firm’s strategy should also be aligned across the functional areas
➢Many functional–level strategies (new product development) are described as cross-
functional because the responsibility often reside in multiple areas
2.3. Operations and Supply Chain Strategies
•Operations and Supply Chain Strategy =functional strategy that indicates how structural and
infrastructural elements within the operations and supplychain areas will be acquired and
developed to support the overall business strategy
✓Executing successful operations and supply chain strategies means choosing and implementing the
right mix of structural and infrastructural elements

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•Three primary objectives of an operations and supply chain strategy:
1.Help management choose the right mix of structural and infrastructural elements, based on a clear
understanding of the performance dimensions valued by customers and the trade-offs involved
2.Ensure that the firms structural and infrastructural choices are strategically aligned with the firm’s
strategy
3.Support the development of core competencies in the firm’s operations and supply chains
•Customer Value
•Must customers evaluateproducts and services based on multiple performance dimensions
such as performance quality and delivery speed
•The organizations that provide the best mix of these dimensions will have the highest value
➢Example for calculating value:
1.Choose categories andgive the numbers for the importance (1 = not important, 5
=very)-I
2.Give the company’s grades for the category’s (1= poor, 5= excellent)-P
3.V (Value) = Summe (IxP)
•Four Performance Dimensions
1.Quality
2.Time
3.Flexibility
4.Cost