Supply chain summary
Supply chain: A sequence of organizations—their facilities, functions, and activities—that are
involved in producing and delivering a product or service.
The sequence: Suppliers→...→Final customer
Facilities:Warehouses, factories, processing centers, offices, distribution centers, and retail outlets.
Functions and activities: Forecasting, purchasing, inventory management, information management,
quality assurance, scheduling, production, distribution, delivery, and customer service
SCM as a management philosophy
► A systems approach to viewing the supply chain as a whole (Centralized)
► A strategic orientation toward cooperative efforts (Synchronization)
► A customer focus to create unique and individualized sources of customer value (Customer-
oriented)
Operations is that part of a business organization that is responsible for producing what customer
wants
,Why some business organizations fail? (lessons learned) o Neglecting operations strategy.
o Failing to consider customer wants and needs.
The key to successfully competing:
determining what customers want and then directing efforts toward meeting (or even exceeding)
customer expectations.
Tactics are the methods, decisions and actions used to accomplish strategies
Tactics are more specific than strategies, and they provide guidance and direction for carrying
out actual operations
Tactics as the “how to” part of the process (e.g., how to reach the destination, following the
strategy roadmap) and operations as the actual “doing” part of the process.
Organizational strategy guides the organization by providing direction for,
and alignment of, the goals and strategies of the functional units.
● Three levels of decisions
► Strategic or long-term
► Tactical or mid-term
► Operational or short-term(daily)
Operations performance can be assessed at three levels. At the based on the Triple Bottom Line (TBL
or 3BL) framework
,► TBL balances three interests: →Economic (profit),
→Social (people), →Environmental (planet)
The 5 (or 6) Key Performance Objectives
Cost
o Cost of resources and purchased items
o Capital employed (machines, inventory)
Quality
o Quality products, Innovative products
o Quality service
Speed
o Order lead times
o Time to market
Dependability
o Reliability; availability, deliver up-to-promise
Flexibility (change-ability of Operations)
o Volume-flexibility, Delivery-flexibility, Mix-flexibility
o Product-flexibility (Customization)
Sustainability
Examples of KPIs used in organizations
Cost
o Utilization: used time / available time
o Productivity: items produced / labor usage
o Inventory turns: items sold / average inventory
o COGS: Cost of Goods Sold
Dependability
o Fill rate / Lost sales
o % on-time in-full (OTIF) deliveries
o Due date performance
Flexibility
o Volume adaptability (range of volume that can be absorbed)
o Change-over times
o # SKUs (level of customization)
o Skill-set range wrt adaptability to new technologies
Quality
o % defective produced (goal: Zero defects)
o # of complaints
Speed
o Order lead time
o Time-to-market of new product
o Time to volume
o Response time to a customer request
Sustainability
o Tons of Waste produced
o Cubic meters of Water used
o Green house emissions
o Philanthropy (Euros donated)
Prioritizing of the operation’s performance objectives
All operations have an interest in keeping their costs as low as compatible with the levels of
quality, speed, dependability and flexibility that their customers require.
, Determine a desired position on the key performance objectives via polar
diagram (prioritization)
Competitive factors and performance objectives
Low price
o Low cost
→ Ex. Walmart, Southwest Airlines, Action, McDonald’s restaurants
Responsiveness (how fast we respond to customer demand)
o Short processing time
→ Ex. McDonald’s restaurants, Express Mail, UPS, FedEx
o On-time delivery
→ Ex. Domino’s Pizza, FedEx
Differentiation High quality
o High-performance design and/or high-quality processing
→ Ex. Sony TV, Lexus, Rolex, Five-star restaurants or hotels
o Consistent quality
→ Ex. Coca-Cola, PepsiCo, Kodak, Motorola
Differentiation Newness
o Innovation
→ Ex. Apple, Google, Amazon, Microsoft
Differentiation Variety
o Flexibility
→ Hospital emergency room (they accept any types of patients)
o Volume
→ Ex. Toyota, Supermarkets
Differentiation Service
o Superior customer service
→ Ex. Amazon
Differentiation Location
Convenience → Ex. Supermarkets, Mall stores, ATMs
Supply chain: A sequence of organizations—their facilities, functions, and activities—that are
involved in producing and delivering a product or service.
The sequence: Suppliers→...→Final customer
Facilities:Warehouses, factories, processing centers, offices, distribution centers, and retail outlets.
Functions and activities: Forecasting, purchasing, inventory management, information management,
quality assurance, scheduling, production, distribution, delivery, and customer service
SCM as a management philosophy
► A systems approach to viewing the supply chain as a whole (Centralized)
► A strategic orientation toward cooperative efforts (Synchronization)
► A customer focus to create unique and individualized sources of customer value (Customer-
oriented)
Operations is that part of a business organization that is responsible for producing what customer
wants
,Why some business organizations fail? (lessons learned) o Neglecting operations strategy.
o Failing to consider customer wants and needs.
The key to successfully competing:
determining what customers want and then directing efforts toward meeting (or even exceeding)
customer expectations.
Tactics are the methods, decisions and actions used to accomplish strategies
Tactics are more specific than strategies, and they provide guidance and direction for carrying
out actual operations
Tactics as the “how to” part of the process (e.g., how to reach the destination, following the
strategy roadmap) and operations as the actual “doing” part of the process.
Organizational strategy guides the organization by providing direction for,
and alignment of, the goals and strategies of the functional units.
● Three levels of decisions
► Strategic or long-term
► Tactical or mid-term
► Operational or short-term(daily)
Operations performance can be assessed at three levels. At the based on the Triple Bottom Line (TBL
or 3BL) framework
,► TBL balances three interests: →Economic (profit),
→Social (people), →Environmental (planet)
The 5 (or 6) Key Performance Objectives
Cost
o Cost of resources and purchased items
o Capital employed (machines, inventory)
Quality
o Quality products, Innovative products
o Quality service
Speed
o Order lead times
o Time to market
Dependability
o Reliability; availability, deliver up-to-promise
Flexibility (change-ability of Operations)
o Volume-flexibility, Delivery-flexibility, Mix-flexibility
o Product-flexibility (Customization)
Sustainability
Examples of KPIs used in organizations
Cost
o Utilization: used time / available time
o Productivity: items produced / labor usage
o Inventory turns: items sold / average inventory
o COGS: Cost of Goods Sold
Dependability
o Fill rate / Lost sales
o % on-time in-full (OTIF) deliveries
o Due date performance
Flexibility
o Volume adaptability (range of volume that can be absorbed)
o Change-over times
o # SKUs (level of customization)
o Skill-set range wrt adaptability to new technologies
Quality
o % defective produced (goal: Zero defects)
o # of complaints
Speed
o Order lead time
o Time-to-market of new product
o Time to volume
o Response time to a customer request
Sustainability
o Tons of Waste produced
o Cubic meters of Water used
o Green house emissions
o Philanthropy (Euros donated)
Prioritizing of the operation’s performance objectives
All operations have an interest in keeping their costs as low as compatible with the levels of
quality, speed, dependability and flexibility that their customers require.
, Determine a desired position on the key performance objectives via polar
diagram (prioritization)
Competitive factors and performance objectives
Low price
o Low cost
→ Ex. Walmart, Southwest Airlines, Action, McDonald’s restaurants
Responsiveness (how fast we respond to customer demand)
o Short processing time
→ Ex. McDonald’s restaurants, Express Mail, UPS, FedEx
o On-time delivery
→ Ex. Domino’s Pizza, FedEx
Differentiation High quality
o High-performance design and/or high-quality processing
→ Ex. Sony TV, Lexus, Rolex, Five-star restaurants or hotels
o Consistent quality
→ Ex. Coca-Cola, PepsiCo, Kodak, Motorola
Differentiation Newness
o Innovation
→ Ex. Apple, Google, Amazon, Microsoft
Differentiation Variety
o Flexibility
→ Hospital emergency room (they accept any types of patients)
o Volume
→ Ex. Toyota, Supermarkets
Differentiation Service
o Superior customer service
→ Ex. Amazon
Differentiation Location
Convenience → Ex. Supermarkets, Mall stores, ATMs
