Operations and logistics management lecture 1
Matching Supply and demand
• Supply (stock) need to be prepared in advance to satisfy the uncertain demand
• Actual customer demand can be higher or lower than the prepared stocks.
• Little chance that realized demand is equal to available supply
Happens to both manufacturing and service sectors
To managers, excess demands means lost revenue
Excess supply means wasted revenue
Mis-Matched supply & demand in service
A customer calling into a call centre may wait for several minutes to get a
representative demand>supply
In the same call centre, at another time, it’s likely to have representatives waiting
unproductively for customers to call. Demand<supply
DEFINITION OF OSM (Operation supply chain management)
The design, operation, and improvement of the system that creates and delivers
the firm’s primary products and services
How do I allocate my resource?
Process analysis & project management
› How do I process the customer orders?
Scheduling
› How do I produce high-quality products?
Quality management
› How much inventory do I prepare?
Inventory control/management
› How to distribute my products in an efficient way (low cost and high reliability)?
,Logistics and supply chain management
Process view of organizations
Input ( raw materials, workers, facilities ect.) → transformation process → Outputs (goods)
OSM is the management of the transformation processes to create value for the company.
Management of work and flow OSM resides at the technological core of the firm
SUPPLY CHAIN
Supplier
➢ Supplies raw materials, semi-finished products and finished products to downstream
customers ( any thing you are delivering to your customers and flowing perhaps to
their own customers is part of your downstream network.)
Two key strategies:
1. Suppling demand at the lowest possible cost
2. Responding quickly to changing requirements and to demand to minimize stockouts
,Manufacturer
➢ Make-or-buy decisions concerning producing and item in-house or buying it from an
outside supplier
Distributor
➢ Distribution of products from manufacturers to retailers and customers
➢ Activities are e.g.
a. Temporary storage of products in warehouse to balance fluctuations in
production and demand
b. Transportation of products by, for example, trucks, trains, airplanes, ships or
Pipelines
Retailer
➢ Sell products and services to customers
➢ Perform marketing activities
Customer
➢ Buys products and services
➢ They are the only source of revenue
Supply chain management
Effective supply chain management – is the management of flows between and among
supply chain stages to maximize total supply chain surplus
Supply chain surplus= customer value – supply chain cost
TO MAXIMIZE TOTAL SUPPLY CHAIN SURPLUS : 4 performance dimensions
➢ Quality
1. Performance quality- Addresses the basic operating characteristics of a
product or service
, 2. Conformance quality- addresses whether the product was made or a service
performed to specifications.
3. Reliability quality- addresses whether a product will work for a long time
without failing or requiring maintenance
➢ Delivery
1. Delivery speed- how quickly the operations or supply chain function can
fulfill a need once it has been identified
2. Deliver reliability- the ability to deliver products or services when promised.
➢ Flexibility
1. Mix flexibility- the ability to produce a wide range of products and services
2. Changeover flexibility- the ability to produce a new product with minimal
delay
3. Volume flexibility- the ability to produce whatever volume the customer
needs
➢ Cost
Labor / Material / Engineering / Quality-related
Generally, very difficult to excel at all 4 performance dimensions
Cost vs. quality Cost vs. flexibility delivery reliability vs. flexibility
conformance quality vs. product flexibility
Matching Supply and demand
• Supply (stock) need to be prepared in advance to satisfy the uncertain demand
• Actual customer demand can be higher or lower than the prepared stocks.
• Little chance that realized demand is equal to available supply
Happens to both manufacturing and service sectors
To managers, excess demands means lost revenue
Excess supply means wasted revenue
Mis-Matched supply & demand in service
A customer calling into a call centre may wait for several minutes to get a
representative demand>supply
In the same call centre, at another time, it’s likely to have representatives waiting
unproductively for customers to call. Demand<supply
DEFINITION OF OSM (Operation supply chain management)
The design, operation, and improvement of the system that creates and delivers
the firm’s primary products and services
How do I allocate my resource?
Process analysis & project management
› How do I process the customer orders?
Scheduling
› How do I produce high-quality products?
Quality management
› How much inventory do I prepare?
Inventory control/management
› How to distribute my products in an efficient way (low cost and high reliability)?
,Logistics and supply chain management
Process view of organizations
Input ( raw materials, workers, facilities ect.) → transformation process → Outputs (goods)
OSM is the management of the transformation processes to create value for the company.
Management of work and flow OSM resides at the technological core of the firm
SUPPLY CHAIN
Supplier
➢ Supplies raw materials, semi-finished products and finished products to downstream
customers ( any thing you are delivering to your customers and flowing perhaps to
their own customers is part of your downstream network.)
Two key strategies:
1. Suppling demand at the lowest possible cost
2. Responding quickly to changing requirements and to demand to minimize stockouts
,Manufacturer
➢ Make-or-buy decisions concerning producing and item in-house or buying it from an
outside supplier
Distributor
➢ Distribution of products from manufacturers to retailers and customers
➢ Activities are e.g.
a. Temporary storage of products in warehouse to balance fluctuations in
production and demand
b. Transportation of products by, for example, trucks, trains, airplanes, ships or
Pipelines
Retailer
➢ Sell products and services to customers
➢ Perform marketing activities
Customer
➢ Buys products and services
➢ They are the only source of revenue
Supply chain management
Effective supply chain management – is the management of flows between and among
supply chain stages to maximize total supply chain surplus
Supply chain surplus= customer value – supply chain cost
TO MAXIMIZE TOTAL SUPPLY CHAIN SURPLUS : 4 performance dimensions
➢ Quality
1. Performance quality- Addresses the basic operating characteristics of a
product or service
, 2. Conformance quality- addresses whether the product was made or a service
performed to specifications.
3. Reliability quality- addresses whether a product will work for a long time
without failing or requiring maintenance
➢ Delivery
1. Delivery speed- how quickly the operations or supply chain function can
fulfill a need once it has been identified
2. Deliver reliability- the ability to deliver products or services when promised.
➢ Flexibility
1. Mix flexibility- the ability to produce a wide range of products and services
2. Changeover flexibility- the ability to produce a new product with minimal
delay
3. Volume flexibility- the ability to produce whatever volume the customer
needs
➢ Cost
Labor / Material / Engineering / Quality-related
Generally, very difficult to excel at all 4 performance dimensions
Cost vs. quality Cost vs. flexibility delivery reliability vs. flexibility
conformance quality vs. product flexibility
