Summary of all the relevant chapters in the book Operations and supply management: The core. Including calculation examples of the tutorials, lessons, and the book. Also including guest lectures.
The summary is made for the semester Fall 2020, but if the chapters remain the same, this summary i...
,Chapter 1
What is operations and supply chain management?
Operations and supply chain management (OSCM) is defined as the design, operation and
improvement of the systems that create and deliver the firm’s primary products and services. Like
marketing and finance, OSCM is a functional field of business with clear line management
responsibilities. OSCM is concerned with the management of the entire system that produces a
product or delivers a service.
The supply network is a pipeline through which material and information flow. The terms operations
and supply chain management take on a special meaning. Operation refers to manufacturing and
service processes that are used to transform the recourses employed by a firm into products desired
by customers. Supply chain refers to processes that move information and material to and from the
manufacturing and service processes of the firm.
Operations and supply chain processes can be conveniently categorized:
1. Planning: consists of the processes needed to operate an existing supply chain strategically.
A major aspect of planning is developing a set of metrics to monitor the supply chain so that
it is efficient and delivers high quality and value to customers.
2. Sourcing: Involves the selection of suppliers that will deliver the goods and services needed
to create the firm’s product.
3. Making: is where the major product is produced or the service is provided.
4. Delivering: is also referred to as a logistics process.
5. Returning: involves processes for receiving worn-out, defective and excess products back
from customers and support for customers who have problems with delivered products.
Differences between services and goods:
1. A service is an intangible process that cannot be weighed or measured.
2. A service requires some degree of interaction with the customer for it to be service.
3. Services, with the big exception of hard technologies such as automated teller machines
(ATM) and information technologies such as answering machines, are inherently
heterogeneous.
4. Services as a process are perishable (beperkt houdbaar) and time independent and can’t be
stored.
5. The specifications of a service are defined and evaluated as a package of features that affect
the fifth sense. These features relate to the location, decoration and layout of the facility
where the service is housed.
The goods-services continuum:
,Almost any product is a combination of goods and services:
1. Pure goods: pure goods industries have become low-margin commodity businesses, and in
order to differentiate, they are often adding some services.
2. Core goods: core goods providers already provide a significant service component as part of
their businesses (automobile manufacturers provide spare parts distribution services to
support repair centers at dealers)
3. Core services: core services providers must integrate tangible goods (cable tv company must
provide cable hookup and repair services but also cable boxes).
4. Pure services: pure services such as those offered by a financial consulting firm, may need
little in the way of facilitating goods, but what they do use (textbooks, references,
spreadsheets) are critical to their performance.
Product-service bundling refers to a company building service activities into its product offering for
its customers. Such service include maintenance, spare part provisioning and training (when a firm
builds service activities into its product offerings to create additional value for the customer). Firms
that do this typically generate higher revenues, they tend to generate lower profits as a percentage
of revenues when compared to focuses firms.
Efficiency, Effectiveness and Value
Efficiency means doing something at the lowest possible costs. The goal of an efficient process is to
produce a good or provide a service by using the smallest input of recourses.
Effectiveness means doing the right things to create the most value for the costumer.
Value is quality divided by price.
How does wall street evaluate efficiency?
A common set of financial indicators that Wall Street tracks to benchmark companies are called
management efficiency ratios. Benchmarking is a process in which one company studies the
processes of another company or industry to identify best practices.
, Cash conversion cycle = days sales outstanding + days inventory – payable period
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 sales outstanding is the number of days that it takes for a company to collect cash from
customers. Days inventory is the number of days’ worth of inventory the company holds in operation
and supply chain processes. Payable period measure indicates how quickly suppliers are paid by a
company.
𝐴𝑛𝑛𝑢𝑎𝑙 𝑐𝑟𝑒𝑑𝑖𝑡 𝑠𝑎𝑙𝑒𝑠
Receivables turnover = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒
Receivables turnover measures the number of times receivables are collected, on average, during a
fiscal year. The lower the ratio, the longer the receivables are being held and the higher the risk of
them not being collected. If the ratio is going up, either collection efforts are improving, sales are
rising, or receivables are being reduced.
𝐶𝑜𝑠𝑡𝑠 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑
Inventory turnover = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑣𝑎𝑙𝑢𝑒
Inventory turnover measures the average number of times inventory is sold and replaced during a
fiscal year. A low turnover ratio is a signal is inefficiency, since inventory ties up capital that could be
used for other purposes. A low turnover ratio can indicate poor liquidity, possible overstocking and
obsolescence.
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 (𝑜𝑟 𝑠𝑎𝑙𝑒𝑠)
Asset turnover = 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
This is the amount of sales generated for every dollar worth of assets.
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