Operations and Logistic Management
Niels Daas, E&BE Y2
Week 1 Chapters 1 & 2
Operations and Supply Chain Management (OSCM) is defined as the design, operations and
improvement of the systems that create and deliver the firm’s primary products and services.
Operations and supply chain processes:
1. Planning: Consists of the processes needed to operate
an existing supply chain strategically. So how demand
will be met with available resources. Important =
developing a set of metrics to monitor the supply
chain.
2. Sourcing: Involves the selection of suppliers that will
deliver the goods and services needed to create the
firm’s product. A set of pricing, delivery and payment
processes are needed together with the metrics to
improve relation between partner and firm.
3. Making: Where major product is produced or the service is provided.
4. Delivering: Carriers are picked to move products to warehouse and costumers, coordinate
and schedule the movement of the goods and information through the supply chain network,
develop and operate a network of warehouses, and run information to manage receipts and
payments.
5. Returning: Involves the process that helps customers who have problems with delivered
products.
Differences between products and goods:
There are 5 main differences between services and goods:
1. A service is an intangible process that cannot be weighed or meased, whereas a product can.
Therefore, a service innovation, unlike a product innovation, cannot be patented. Also, a
service cannot be tested beforehand, unlike a product.
2. A service requires some degree of interaction with the customer for it to be a service.
3. Services are heterogeneous, they vary from day-to-day because they rely on behaviour of
customer or servers.
4. Services are perishable and time dependent, and unlike goods, cannot be stored.
5. The specifications of services are defined and evaluated as a package of features that affect
the five senses.
Almost any product offering is a
combination of both goods and services.
- “Pure goods” often differentiate
by adding some services.
(Providing consultant advice)
, - “Core goods” already provide some sort of service. (automobile manufacturers provide
extensive spare parts distribution services to support repair centres at dealers)
- “Core services” must integrate tangible goods. (you cable television company provides HD
cable-boxes.
- “Pure services” do not necessary offer goods. (But can offer books for example)
Product-Service bundling refers to a company building service activities into its product offerings for
its customers. Typically, these firms generate more revenue but less profits, because the costs of the
additional investment that is required to cover service-related costs is more than often too high.
Efficiency, effectiveness and value:
Efficiency = doing something at the lowest possible cost.
Effectiveness = doing the right things to create the most value for the customer.
Value = the attractiveness of a product relative to its price.
Firms with a high efficiency usually shine during a recession, since their cost is fairly low and can
continue to make profit. (Opportunity to gain market share)
There is a direct relation between operating costs and profit margin. Benchmarking is a process in
which one company studies the processes of another company to identify the best practices.
Cash conversion cycle = company buys raw materials on credit, converts these materials into finished
products, sells the products to customers on credit, gets paid by customers in cash, and then reuses
the cash to purchase more raw materials . The cash conversion cycle time can be interpreted as
the time it takes a company to convert the money that it spends for raw materials into the profit that
it receives for the products that are sold and use those raw materials
- Days sale outstanding: The number of days it takes a company to collect cash from customer.
- Days inventory: The number of days’ worth of inventory the company holds in operation and
supply chain process.
- Payable period: How quickly suppliers are paid by a company.
Cash conversion cycle = Days sale outstanding + Days inventory – Payable period
Receivables turnover = the number of times receivables are collected, on average, during the fiscal
year. The receivables turnover ratio measures a company’s efficiency in collecting its sales on credit.
Accounts receivable = indirect interest-free loans that the company is providing to its clients.
Niels Daas, E&BE Y2
Week 1 Chapters 1 & 2
Operations and Supply Chain Management (OSCM) is defined as the design, operations and
improvement of the systems that create and deliver the firm’s primary products and services.
Operations and supply chain processes:
1. Planning: Consists of the processes needed to operate
an existing supply chain strategically. So how demand
will be met with available resources. Important =
developing a set of metrics to monitor the supply
chain.
2. Sourcing: Involves the selection of suppliers that will
deliver the goods and services needed to create the
firm’s product. A set of pricing, delivery and payment
processes are needed together with the metrics to
improve relation between partner and firm.
3. Making: Where major product is produced or the service is provided.
4. Delivering: Carriers are picked to move products to warehouse and costumers, coordinate
and schedule the movement of the goods and information through the supply chain network,
develop and operate a network of warehouses, and run information to manage receipts and
payments.
5. Returning: Involves the process that helps customers who have problems with delivered
products.
Differences between products and goods:
There are 5 main differences between services and goods:
1. A service is an intangible process that cannot be weighed or meased, whereas a product can.
Therefore, a service innovation, unlike a product innovation, cannot be patented. Also, a
service cannot be tested beforehand, unlike a product.
2. A service requires some degree of interaction with the customer for it to be a service.
3. Services are heterogeneous, they vary from day-to-day because they rely on behaviour of
customer or servers.
4. Services are perishable and time dependent, and unlike goods, cannot be stored.
5. The specifications of services are defined and evaluated as a package of features that affect
the five senses.
Almost any product offering is a
combination of both goods and services.
- “Pure goods” often differentiate
by adding some services.
(Providing consultant advice)
, - “Core goods” already provide some sort of service. (automobile manufacturers provide
extensive spare parts distribution services to support repair centres at dealers)
- “Core services” must integrate tangible goods. (you cable television company provides HD
cable-boxes.
- “Pure services” do not necessary offer goods. (But can offer books for example)
Product-Service bundling refers to a company building service activities into its product offerings for
its customers. Typically, these firms generate more revenue but less profits, because the costs of the
additional investment that is required to cover service-related costs is more than often too high.
Efficiency, effectiveness and value:
Efficiency = doing something at the lowest possible cost.
Effectiveness = doing the right things to create the most value for the customer.
Value = the attractiveness of a product relative to its price.
Firms with a high efficiency usually shine during a recession, since their cost is fairly low and can
continue to make profit. (Opportunity to gain market share)
There is a direct relation between operating costs and profit margin. Benchmarking is a process in
which one company studies the processes of another company to identify the best practices.
Cash conversion cycle = company buys raw materials on credit, converts these materials into finished
products, sells the products to customers on credit, gets paid by customers in cash, and then reuses
the cash to purchase more raw materials . The cash conversion cycle time can be interpreted as
the time it takes a company to convert the money that it spends for raw materials into the profit that
it receives for the products that are sold and use those raw materials
- Days sale outstanding: The number of days it takes a company to collect cash from customer.
- Days inventory: The number of days’ worth of inventory the company holds in operation and
supply chain process.
- Payable period: How quickly suppliers are paid by a company.
Cash conversion cycle = Days sale outstanding + Days inventory – Payable period
Receivables turnover = the number of times receivables are collected, on average, during the fiscal
year. The receivables turnover ratio measures a company’s efficiency in collecting its sales on credit.
Accounts receivable = indirect interest-free loans that the company is providing to its clients.
