Operations and supply chain
Chapter 1
Learning objectives
- Describe what is meant by operations and supply chain management and
explain why activities in these are critical to an organization’s survival.
- Describe how electronic commerce, increased competition and globalization,
and relationship management to the forefront of manager’s attention.
- Identify the major professional organizations and career opportunities in
operation and supply chain management.
1.1 Why study operations and supply chain management?
1. Every organization must make a product or provide a service that someone
values. The operation function is the collection of people, technology and
systems within an organization that has primary responsibility for providing the
organization’s products or services.
2. Most organizations function as part of larger supply chains. A supply chain is
a network of manufactures and service providers that work together to create
products or services needed by end users. These manufactures and service
providers are linked together through physical flows, information flows and
monetary flows.
3. Organizations must carefully manage their operations and supply chains in
order to prosper and survive.
Operations management
The traditional way to think about
operations is as a transformation process
that takes a set of inputs and transforms
1
,them in some way to create outputs that a customer value. Operations are highly
dependent on the quality and availability of inputs. All operations activities require
coordination with other business functions. Lastly, operation management activities
are information and decision intensive. Operation management is the planning,
scheduling and control of the activities that transform inputs into finished goods and
services.
Supply chain management
Managers must also understand how the company is linked in with the operations of
its suppliers, distributors and customers, which is referred to as the supply chain.
Upstream are the activities or firms that are positioned earlier in the supply chain
relative to some other activity or firm of interest. Downstream are the activities or
firms that are positioned later in the supply chain relative to some other activity or
firm of interest. First-tier supplier is a supplier that provides products or services
directly to a firm. A second-tier supplier provides products or services to a firm’s
first-tier supplier. Most of the participants in a supply chain are both customers and
suppliers. Supply chain management is the active management of supply chain
activities and relationships in order to maximize customer value and achieve a
sustainable competitive advantage. It represents a conscious effort by a firm or
group of firms to develop and run supply chains in the most effective and efficient
ways possible. According to the supply chain operations reference (SCOR)
model supply chain management covers five broad areas:
- Planning activities: balance demand requirements against resources
- Sourcing activities: identifying, developing and contracting with suppliers and
scheduling the delivery of incoming goods.
- Make or production activities: the actual production
- Delivery activities: everything from entering customer orders and determining
delivery dates to storing and moving goods to their final destination
- Return activities: activities necessary to return and process defective products
or materials.
According to AIRMIC the following seven factors underlie supply chain failures:
1. Offshoring à making it increasingly difficult for firms to monitor supply chains
adequately
2. Increasing complexity of supply chains à meaning companies were often
unaware of who their suppliers were subcontracting to
3. Cost pressures à could lead to compromise on quality and ethics
4. Geographic clustering à making manufactures vulnerable to a localized
disaster
5. Modern communications à can damage reputations
6. Just-in-time production methods à have reduced the time to recover from
supply chain failure
7. Dependence on multiple suppliers à increasing vulnerability
1.2 Important trends
Electronic commerce
Electric commerce refers to the use of computer and telecommunications
technologies to conduct business via electronic transfer of data and documents.
Breakthroughs in information technology have made instantaneous communications
2
, across supply chain partners a reality. They
also provide visibility into incoming shipments
and delays and inventory.
Increasing competition and globalization
The rate of change in markets, products and
technology continues to escalate, leading to
situations where managers must make
decisions on shorter notice, with less
information, and with higher penalty costs if
they make mistakes.
Relationship management
Any efforts to improve operations and supply
chain performance are likely to be
inconsequential without the cooperation of
other firms. Therefore, more companies are
putting an emphasis on relationship management. Relationship management can be
difficult due to geographic distance or cultural differences.
Chapter 2
Learning objectives:
- Distinguish between structural and infrastructural elements of the business
- Explain the relationship between mission statements, business strategies and
functional strategies
- Explain some of the key ideas surrounding operations and supply chain
strategies, including concepts of customer value, performance trade-offs,
order winners and qualifiers, strate4egic alignment and core competencies
2.1 Elements of the business
A business is defined by structural and infrastructural elements. Structural
elements are tangible resources such as buildings, equipment and computer
systems. These elements require large capital investments that are difficult to
reverse. Infrastructural elements are the people, policies, decision rules and
organizational structure.
2.2 Strategy
Strategies are the mechanisms by which businesses coordinate their decisions
regarding their structural and infrastructural elements. The business strategy in this
vein must be:
- Clearly identify the targeted customers and indicate what the operations and
supply chain functions need to do to provide value to these customers
- Set time frames and performance objectives that managers can use to track
the firm’s progress towards fulfilling its strategy
- Identify and support the development of core competencies
Core competencies are an organizational strength of ability, developed over a long
period, that customers find difficult or even impossible to copy. Functional
3
Chapter 1
Learning objectives
- Describe what is meant by operations and supply chain management and
explain why activities in these are critical to an organization’s survival.
- Describe how electronic commerce, increased competition and globalization,
and relationship management to the forefront of manager’s attention.
- Identify the major professional organizations and career opportunities in
operation and supply chain management.
1.1 Why study operations and supply chain management?
1. Every organization must make a product or provide a service that someone
values. The operation function is the collection of people, technology and
systems within an organization that has primary responsibility for providing the
organization’s products or services.
2. Most organizations function as part of larger supply chains. A supply chain is
a network of manufactures and service providers that work together to create
products or services needed by end users. These manufactures and service
providers are linked together through physical flows, information flows and
monetary flows.
3. Organizations must carefully manage their operations and supply chains in
order to prosper and survive.
Operations management
The traditional way to think about
operations is as a transformation process
that takes a set of inputs and transforms
1
,them in some way to create outputs that a customer value. Operations are highly
dependent on the quality and availability of inputs. All operations activities require
coordination with other business functions. Lastly, operation management activities
are information and decision intensive. Operation management is the planning,
scheduling and control of the activities that transform inputs into finished goods and
services.
Supply chain management
Managers must also understand how the company is linked in with the operations of
its suppliers, distributors and customers, which is referred to as the supply chain.
Upstream are the activities or firms that are positioned earlier in the supply chain
relative to some other activity or firm of interest. Downstream are the activities or
firms that are positioned later in the supply chain relative to some other activity or
firm of interest. First-tier supplier is a supplier that provides products or services
directly to a firm. A second-tier supplier provides products or services to a firm’s
first-tier supplier. Most of the participants in a supply chain are both customers and
suppliers. Supply chain management is the active management of supply chain
activities and relationships in order to maximize customer value and achieve a
sustainable competitive advantage. It represents a conscious effort by a firm or
group of firms to develop and run supply chains in the most effective and efficient
ways possible. According to the supply chain operations reference (SCOR)
model supply chain management covers five broad areas:
- Planning activities: balance demand requirements against resources
- Sourcing activities: identifying, developing and contracting with suppliers and
scheduling the delivery of incoming goods.
- Make or production activities: the actual production
- Delivery activities: everything from entering customer orders and determining
delivery dates to storing and moving goods to their final destination
- Return activities: activities necessary to return and process defective products
or materials.
According to AIRMIC the following seven factors underlie supply chain failures:
1. Offshoring à making it increasingly difficult for firms to monitor supply chains
adequately
2. Increasing complexity of supply chains à meaning companies were often
unaware of who their suppliers were subcontracting to
3. Cost pressures à could lead to compromise on quality and ethics
4. Geographic clustering à making manufactures vulnerable to a localized
disaster
5. Modern communications à can damage reputations
6. Just-in-time production methods à have reduced the time to recover from
supply chain failure
7. Dependence on multiple suppliers à increasing vulnerability
1.2 Important trends
Electronic commerce
Electric commerce refers to the use of computer and telecommunications
technologies to conduct business via electronic transfer of data and documents.
Breakthroughs in information technology have made instantaneous communications
2
, across supply chain partners a reality. They
also provide visibility into incoming shipments
and delays and inventory.
Increasing competition and globalization
The rate of change in markets, products and
technology continues to escalate, leading to
situations where managers must make
decisions on shorter notice, with less
information, and with higher penalty costs if
they make mistakes.
Relationship management
Any efforts to improve operations and supply
chain performance are likely to be
inconsequential without the cooperation of
other firms. Therefore, more companies are
putting an emphasis on relationship management. Relationship management can be
difficult due to geographic distance or cultural differences.
Chapter 2
Learning objectives:
- Distinguish between structural and infrastructural elements of the business
- Explain the relationship between mission statements, business strategies and
functional strategies
- Explain some of the key ideas surrounding operations and supply chain
strategies, including concepts of customer value, performance trade-offs,
order winners and qualifiers, strate4egic alignment and core competencies
2.1 Elements of the business
A business is defined by structural and infrastructural elements. Structural
elements are tangible resources such as buildings, equipment and computer
systems. These elements require large capital investments that are difficult to
reverse. Infrastructural elements are the people, policies, decision rules and
organizational structure.
2.2 Strategy
Strategies are the mechanisms by which businesses coordinate their decisions
regarding their structural and infrastructural elements. The business strategy in this
vein must be:
- Clearly identify the targeted customers and indicate what the operations and
supply chain functions need to do to provide value to these customers
- Set time frames and performance objectives that managers can use to track
the firm’s progress towards fulfilling its strategy
- Identify and support the development of core competencies
Core competencies are an organizational strength of ability, developed over a long
period, that customers find difficult or even impossible to copy. Functional
3
