1 - Operations and supply chain management
OCSM is the design, operation and improvement of systems creating and delivering a firm’s
primary products and services.
Operations are manufacturing and service processes transforming resources into products.
Supply chains move information and material to and from the manufacturing/service process of
the firm, such as logistics and storage.
Operations and supply chain processes are activities transforming inputs into outputs. The five
processes are planning; sourcing (selecting suppliers); making (production); delivering (logistics);
and returning (defects, guarantees).
Services can’t be weighted/measured, require customer interaction, vary depending on this
interaction, can’t be stored, and have intangible features. Varying depending on the interaction
means services are heterogeneous.
Pure goods include food/chemicals, and are low-margin commodities.
Core goods are goods that include some service: Automobiles offer repair centers.
Core services such as hotels and airlines must integrate tangible goods.
Pure services need little facilitating goods: Financial consulting.
Product-service bundling means building service activities into product offerings to create
additional customer value.
Efficiency: Doing something at the lowest cost possible.
Effectiveness: Doing the right things to create the most customer value.
Having the highest effectiveness (e.g. very short waiting times) often requires less efficiency (a lot
of cashiers).
Value is the attractiveness of a product relative to its price.
Wall Street benchmarks companies using management efficiency ratios:
-Net income/Revenue per employee.
-Receivables turnover: Annual credit sales / Average accounts receivable.
-Inventory turnover: Cost of goods sold / Average inventory value.
-Asset turnover: Revenues / Total assets.
Historical OSCM
The 70s/80s saw the manufacturing strategy paradigm arise which emphasises how a factory’s
capabilities could be used strategically to gain advantage over competitors.
The 80s saw Just-in-time JIT production: An integrated set of activities designed to achieve high-
volume production using minimal inventories of parts arriving exactly when needed.
Coupled with total quality control TQC which aggressively seeks to eliminate causes of
production effects, JIT and TQC form lean manufacturing.
Total quality management TQM is managing the entire organisation to excel on all dimensions
important to the customer.
Business process reengineering BPR is an approach to improving business processes that seeks
to make revolutionary changes as opposed to evolutionary (small) changes: Eliminate non-value
adding steps.
Six Sigma is part of TQM and a statistical term describing no more than 3.4 defects out of a
million units.
Mass customisation is the ability to produce a unique product exactly to a particular customer’s
requirements.
Sustainability is meeting current resource needs without composing future generations’ ability to
need theirs. Part of it is the triple bottom line: Social, economic and environmental criteria.
Business analytics uses date to solve business problems with mathematical analysis.
, 2 - Strategy and sustainability
Sustainability is the ability to meet current resource needs without compromising that of future
generations to meet theirs. Many companies no longer just regard shareholders but also
stakeholders: Individuals or organisations influenced by firm’s actions.
The triple bottom line evaluates firms against social (fair labor and supporting the community),
economic (compensating shareholders), and environmental criteria.
Operations and supply chain strategy is the setting of broad policies and plans guiding the use of
resources needed by the firm to implement corporate strategy.
Operations effectiveness is performing activities in a manner best implementing strategic priorities
at minimum cost.
Competitive dimensions
-Cost or price: Being the cheapest.
-Quality: Best product or greatest service.
-Delivery speed/reliability.
-Coping with changes in demand: Quickly adapt to demand fluctuations.
-Flexibility and speed in introducing new products.
Firms can’t excel on all: Speed of delivery will come at higher costs or less product variety.
Straddling is a firm seeking to match a competitor by adding new features/services to existing
activities, often creating problems if certain trade-offs need to be made. E.g. a quality airline
seeking to match a budget airline by eliminating some services and competing with it.
Competitive succes of a products depends on:
-Being an order winner: Having market-oriented dimensions clearly differentiating it from
competing products, setting it apart by e.g. quality or price.
-Being an order qualifier means including the dimensions used to screen a product as a candidate
for purchase, so the requirements for even being considered.
Supply chain risk is the likelihood of a disruption that would impact a company’s ability to
continuously supply products.
Supply chain coordination risks are associated with day-to-day management, and delay with
using e.g. safety stock. Disruption risks come from man-made or natural disasters.
A firm must identify sources of potential disruptors; asses the potential impact of the risk; and
develop plans to mitigate the risk.
Productivity is a measure of how well resources are used: Number of outputs relative to inputs.
10 - Quality management and six sigma
Total Quality Management TQM manages the entire organisation to excel on every dimension
important to the customer. This means (1) careful design and (2) assurance that the
organisations’s systems can consistently produce the design.
Design quality is the internet value of the product in the market place. They include performance
(primary product characteristics); features (added secondary characteristics); reliability and
durability; serviceability (ease of repair); aesthetics (look/feel); and perceived quality (reputation).
Conformance quality is the degree to which the product or service design specifications are met.
Quality at the source means making the person doing the work responsible for ensuring
specifications are met.
Dimensions of quality are criteria by which it’s measured, e.g. for a printer:
Performance by pages per minute; features by color capability; reliability by mean time between
failures; serviceability is modular design; aesthetics is look; perceived quality is brand reputation.
Cost of quality COQ are expenditures related to achieving product or service quality. COQ is
justified its costs by 3 principles: Failures occur; prevention is cheaper; performance can be
measured. There are 4 types of costs of quality:
-Appraisal costs: Inspecting, testing, other tasks ensuring the product is acceptable to sell.
OCSM is the design, operation and improvement of systems creating and delivering a firm’s
primary products and services.
Operations are manufacturing and service processes transforming resources into products.
Supply chains move information and material to and from the manufacturing/service process of
the firm, such as logistics and storage.
Operations and supply chain processes are activities transforming inputs into outputs. The five
processes are planning; sourcing (selecting suppliers); making (production); delivering (logistics);
and returning (defects, guarantees).
Services can’t be weighted/measured, require customer interaction, vary depending on this
interaction, can’t be stored, and have intangible features. Varying depending on the interaction
means services are heterogeneous.
Pure goods include food/chemicals, and are low-margin commodities.
Core goods are goods that include some service: Automobiles offer repair centers.
Core services such as hotels and airlines must integrate tangible goods.
Pure services need little facilitating goods: Financial consulting.
Product-service bundling means building service activities into product offerings to create
additional customer value.
Efficiency: Doing something at the lowest cost possible.
Effectiveness: Doing the right things to create the most customer value.
Having the highest effectiveness (e.g. very short waiting times) often requires less efficiency (a lot
of cashiers).
Value is the attractiveness of a product relative to its price.
Wall Street benchmarks companies using management efficiency ratios:
-Net income/Revenue per employee.
-Receivables turnover: Annual credit sales / Average accounts receivable.
-Inventory turnover: Cost of goods sold / Average inventory value.
-Asset turnover: Revenues / Total assets.
Historical OSCM
The 70s/80s saw the manufacturing strategy paradigm arise which emphasises how a factory’s
capabilities could be used strategically to gain advantage over competitors.
The 80s saw Just-in-time JIT production: An integrated set of activities designed to achieve high-
volume production using minimal inventories of parts arriving exactly when needed.
Coupled with total quality control TQC which aggressively seeks to eliminate causes of
production effects, JIT and TQC form lean manufacturing.
Total quality management TQM is managing the entire organisation to excel on all dimensions
important to the customer.
Business process reengineering BPR is an approach to improving business processes that seeks
to make revolutionary changes as opposed to evolutionary (small) changes: Eliminate non-value
adding steps.
Six Sigma is part of TQM and a statistical term describing no more than 3.4 defects out of a
million units.
Mass customisation is the ability to produce a unique product exactly to a particular customer’s
requirements.
Sustainability is meeting current resource needs without composing future generations’ ability to
need theirs. Part of it is the triple bottom line: Social, economic and environmental criteria.
Business analytics uses date to solve business problems with mathematical analysis.
, 2 - Strategy and sustainability
Sustainability is the ability to meet current resource needs without compromising that of future
generations to meet theirs. Many companies no longer just regard shareholders but also
stakeholders: Individuals or organisations influenced by firm’s actions.
The triple bottom line evaluates firms against social (fair labor and supporting the community),
economic (compensating shareholders), and environmental criteria.
Operations and supply chain strategy is the setting of broad policies and plans guiding the use of
resources needed by the firm to implement corporate strategy.
Operations effectiveness is performing activities in a manner best implementing strategic priorities
at minimum cost.
Competitive dimensions
-Cost or price: Being the cheapest.
-Quality: Best product or greatest service.
-Delivery speed/reliability.
-Coping with changes in demand: Quickly adapt to demand fluctuations.
-Flexibility and speed in introducing new products.
Firms can’t excel on all: Speed of delivery will come at higher costs or less product variety.
Straddling is a firm seeking to match a competitor by adding new features/services to existing
activities, often creating problems if certain trade-offs need to be made. E.g. a quality airline
seeking to match a budget airline by eliminating some services and competing with it.
Competitive succes of a products depends on:
-Being an order winner: Having market-oriented dimensions clearly differentiating it from
competing products, setting it apart by e.g. quality or price.
-Being an order qualifier means including the dimensions used to screen a product as a candidate
for purchase, so the requirements for even being considered.
Supply chain risk is the likelihood of a disruption that would impact a company’s ability to
continuously supply products.
Supply chain coordination risks are associated with day-to-day management, and delay with
using e.g. safety stock. Disruption risks come from man-made or natural disasters.
A firm must identify sources of potential disruptors; asses the potential impact of the risk; and
develop plans to mitigate the risk.
Productivity is a measure of how well resources are used: Number of outputs relative to inputs.
10 - Quality management and six sigma
Total Quality Management TQM manages the entire organisation to excel on every dimension
important to the customer. This means (1) careful design and (2) assurance that the
organisations’s systems can consistently produce the design.
Design quality is the internet value of the product in the market place. They include performance
(primary product characteristics); features (added secondary characteristics); reliability and
durability; serviceability (ease of repair); aesthetics (look/feel); and perceived quality (reputation).
Conformance quality is the degree to which the product or service design specifications are met.
Quality at the source means making the person doing the work responsible for ensuring
specifications are met.
Dimensions of quality are criteria by which it’s measured, e.g. for a printer:
Performance by pages per minute; features by color capability; reliability by mean time between
failures; serviceability is modular design; aesthetics is look; perceived quality is brand reputation.
Cost of quality COQ are expenditures related to achieving product or service quality. COQ is
justified its costs by 3 principles: Failures occur; prevention is cheaper; performance can be
measured. There are 4 types of costs of quality:
-Appraisal costs: Inspecting, testing, other tasks ensuring the product is acceptable to sell.
