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Business Process Management 3 Lecture Notes
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Lecture 1 .Every organization must have a product or provide a service that someone values. Most organizations
function as part of a larger supply chain. Organizations must carefully manage their operations and
supply chain in order to prosper and, indeed, survive.
Operations Management = the planning, scheduling, and control of activities that transform inputs into
finished goods and services.
Supply Chain Management
The active management of supply chain activities and relationships in order to maximize customer
value and achieve a sustainable competitive advantage, this advantage is hard to keep over a period
of time.
Supply Chain
→ a network of manufacturers and service providers that work together to create products or services
needed by end-users. These manufacturers and service providers are linked together through
physical flows, information flows, and monetary flows.
Upstream
→ Activities or firms positioned earlier in the supply chain
Downstream
→ Activities and firms positioned later in the supply chain
First-tier supplier
→ a supplier that provides products or services directly to a firm
Second-tier supplier
→ A supplier that provides products or services to a firm’s first-tier supplier.
Supply Chain Operations Reference (SCOR) model
Planning activities, which seek to balance demand requirements against resources and communicate
these plans to the various participants
Sourcing activities, which include identifying, developing, and contracting with suppliers and
scheduling the delivery of incoming goods and services.
“Make” or production activities, here the activities cover the actual production of a good or service.
Delivery activities, these include everything from entering customer orders and determining delivery
dates to storing and moving goods to their final destination.
Return activities, which include the activities necessary to return and process defective or excess
products or materials.
Parts of SCOR
→ planning activities
→ sourcing activities
→ make or production
→ delivery activities
→ return activities
Supply Chain
→ the overall topic area of transforming and delivering goods
or services to the customer covers the strategic and
day-to-day levels.
Logistics
→ transport and storage solutions, part of supply chain
Operations
→ similar to supply chain, has a sense of immediacy, often
used in job titles.
Mission Statement
→ A statement that explains why an organization exists. It
describes what is important to the organization, called its core
values, and identifies the organization’s domain
Strategy
→ A mechanism by which a business coordinates its
decisions regarding structural and infrastructural elements.
,Different types of strategies
Business Strategy → the strategy that identifies a firm’s targeted customers and sets time frames and
performance objectives for the business
Core Competency → an organizational strength or ability, developed over a long period, that
customers find valuable and competitors find difficult or even impossible to copy
Functional Strategy → a strategy that translates a business strategy into specific actions for functional
areas such as marketing, human resources, and finance.
Structural Decision Categories
Capacity → amount, type, the timing of capacity changes
Facilities → Services/manufacturing, warehouses, distribution hubs, size, location, degree of
specialization
Technology → services/manufacturing processes, material handling equipment, transportation
equipment, information systems.
Infrastructural Decision Categories
Organization → structure, control/reward systems, workforce decisions
Sourcing decisions and purchasing process → sourcing strategies, supplier selection, supplier
performance measurement
Planning and control → forecasting, tactical planning, inventory management, production planning
and control.
Three Primary Objectives
● Helps management choose the right mix of structural and infrastructural elements based on a
clear understanding of the performance dimension valued by customers and the trade-offs
involved.
● Ensure that the firm’s structural and infrastructural choices are strategically aligned with the
firm’s business strategy
● Support the development of core competencies in the firm’s operations and supply chains
Four performance dimension
Quality
→ performance quality: addresses the basic operating characteristics of a product or service
→ conformance quality: addresses whether a product was made or a service performed to
specifications
→ reliability quality: addresses whether a product will work for a long time without failing or requiring
maintenance
Time
→ delivery speed: how quickly the operations or supply chain function can fulfill a need once it has
been identified
→ delivery reliability: the ability to deliver products or services when promised
→ delivery window: the acceptable time range in which deliveries can be made
→ lead time: the time between the initiation and completion of a production process.
Flexibility
→ Mix flexibility: the ability to produce a wide range of products or services
→ Changeover flexibility: the ability to produce a new product with minimal delay
→ Volume flexibility: the ability to produce whatever volume the customer needs
Cost
→ Labor costs
→ Material costs
→ Engineering costs
→ Quality-related costs
, Lecture 2 .
The activities of planning and control
Scheduling → When to do things?
Loading → How much to do?
Sequencing → In what order to do things?
Monitoring and control → Are activities going to plan?
Sales and Operations Planning (S&OP)
→ A multidiscipline process where all critical functions
will agree on an action plan to fulfill the strategic
goals(s) of the company
Functions:
● Sales & Marketing
● Production or Operations
● SC Management
● Planning
● Finance
● Human Resource
● Top Management
Controlling Lead Time and Cost
Lead Time → A span of time required to perform a process
Cumulative Lead Time → Longest planned length of time to accomplish the activity in question
Delivery Lead Time → The time from the receipt of a customer order to the delivery of the product
(service)
You plan to satisfy customer demand and to ensure the
availability of resources.
What do you plan?
→ Material (Inventory/Stock)
→ Capacity (the means of production)
Who does what….
Sales Forecast → Account Managers
Order Forecast → Operations Manager
Supply Schedule + Order Schedule = Master Schedule
Investment & Hiring Decision → Upper Management
Annual → Strategic Business Plan
Quarterly/Monthly → Marketing Plan, Production Plan
Weekly → Detailed Sales Plan, Master Production
Schedule
Sales and Operations Planning (S&OP)
→ Establishes overall production, workforce, and inventory levels (tactical capacity planning)
Master Scheduling
→ Determines when specific products will be made, when specific customer orders will be filled, and
what products/capacities are still available to meet new demand
Material requirements planning (MRP)
→ Calculates the timing and quantities of material orders needed to support the master schedule
Production Activity Control (PAC)
→ Ensures that in-house manufacturing takes place according to plan; also helps manufacturing
managers identify potential problems and take corrective actions
Vendor order management
→ Ensures that materials ordered from supply chain partners are received when needed; also helps
purchasing managers identify potential problems and take corrective actions.
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