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Summary - Fundamentals of Supply Chain Management
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Chapter 1: introduction to managing operations across the supply chainOperations management: the management of processes used to design, supply,
produce, and deliver valuable goods and services to customers. Operations management
thus spans the boundaries of any single firm, bringing together the activities of internal
operations with the operations of customers, suppliers, and other partners around the
world.
Supply chain: the global network of organizations and activities involved in:
• Designing a set of goods and services and their related processes
• Transforming inputs into goods and services
• Consuming these goods and services
• Disposing of these goods and services
Supply chain include demand chain, extended enterprise, supply network, or supply web.
All these terms reflect the idea that a supply chain involves connections and relationships
among organizations that play various roles for a given set of products.
Operations management activities located throughout a supply chain create and enhance
the value of goods and services by increasing their economic value, functional value, and
psychosocial value.
Operations management:
• Is mainly concerned with how resources will be developed and used to accomplish
business goals.
• Is about designing executing and improving business processes.
• Deals with processes that transform inputs, including materials, information,
energy, money, and even people, into goods and services.
• Within a supply chain context, operations management brings together four
major sets of players: the firm, customers, suppliers, and stakeholders.
• To be effective, operations management must be consistent with the strategic
goals of the firm.
• Is dynamic because of the changes in customers’ demands, resources,
competition, and technologies.
Structural decisions affect physical resources such as capacity, facilities, technology, and
the supply chain network. Once made, decisions in these areas determine what the
operations management system can and cannot do well. Altering these decisions often
requires significant investments and lots of time – often years.
Infrastructural decisions affect the workforce, production planning and control, process
innovation, and organization. decisions in these areas determine what is done, when it is
done, and who does it. Decisions in all of these areas are interrelated, making operations
management a complex, cross-functional activity.
Operational activities exist in order to produce both tangible goods and intangible
services. Services like health care, banking, and entertainment are largely experiential or
informational.
Fundamentals of supply chain management
,Dematerialization: the process of transforming a tangible good into an intangible
product of service, through digitization or direct service replacement.
Total product experience: all the goods and services that are combined to define a
customer’s complete consumption experience.
Operations management is a process-oriented discipline.
Process: a system of activities that transform inputs into valuable outputs. Processes
use resources to transform inputs into outputs. Processes can also transform
information, or even people (customers), from one condition to another.
Every organization can be described as a bundle of processes that connect different
organizational groups. Companies use design processes to develop new goods and
services and strategic planning processes to determine how the firm should compete.
They use production processes to plan and execute the supply, manufacture, and
delivery of goods and services. Finally, companies use evaluation processes to measure
and report how well they are meeting their goals or using their resources.
It is valuable to think about operations as sets of processes and subprocesses with many
interrelationships and linkages.
Lean operation: an operation that produces maximum levels of efficiency and
effectiveness using a minimal amount of resources.
Fundamentals of supply chain management
,Core capability: a unique set of skills that confers competitive advantages to a firm,
because rival firms cannot easily duplicate them.
Supply chain management: the design and execution of relationships and flows that
connect the parties and processes across a supply chain.
Operations management focuses on managing processes (design, supply, production,
delivery)
Supply chain management focuses on managing relationships and flows (flows of
information, materials, energy, money, and people). Supply chain management is a way
of viewing operations management or as a network of organizations in which operations
are conducted.
Operations managers interact with three important groups that are external to the firm:
• Customers: parties that use or consume the products of operations management
processes. Types of customers: internal, intermediate, and final customers. Key
customers have the greatest impact on product designs, sales, and future growth
opportunities.
• Suppliers: parties that provide inputs to operational processes. Types of
suppliers:
- Upstream product suppliers: typically provide raw materials, components, and
services directly related to manufacturing or service production processes.
- Downstream product suppliers: typically provide enhancements to finished
goods such as assembly, packaging, storage, and transportation services.
- Resource and technology suppliers: provide equipment, labor, product and
process designs, and other resources needed to support a firm’s processes.
- Aftermarket suppliers: provide product service and support such as
maintenance, disposal, or recycling.
• Stakeholders: groups of people who have a financial or other interest in the
well-being of an operation. Include: employees and unions, the local community,
social groups, government and financial investors.
Managers making any operating decision should consider the decision’s effects on other
functions, including engineering, finance, marketing, human resources, and others.
Customer management: the management of the customer interface, including all
aspects of order processing and fulfillment. Functional groups directly concerned with
customer management have names such as distribution, sales, order fulfillment, and
customer service. Mangers in these functions are always thinking about ways to improve
customer satisfaction in efficient ways.
Supply management: the identification, acquisition, positioning, and management of
resources and capabilities that a firm needs to attain its strategic objectives. Related
functional groups are called by names such as purchasing, sourcing, and procurement.
Managers in these functions are always thinking about insourcing and outsourcing
opportunities and ways to improve supply transactions and relationships.
Logistics management: the management of the movement and storage of materials at
lowest cost while still meeting customers’ requirements. Logistics functions go by names
including transportation/traffic management, warehousing, materials managers, and so
on. Managers in these functions are always thinking about ways to optimize these flows
through better scheduling and the use of alternative transportation, storage, and
information technologies.
Fundamentals of supply chain management
, Tier: an upstream stage of supply.
The tier number refers to how directly the supplier works with the firm.
A first-tier supplier provides goods and services directly to the firm.
A second-tier supplier provides inputs to the first-tier supplier, and so on.
Each tier of the upstream supply chain could involve multiple suppliers for the same
items or services. Also, a single supplier might provide inputs for multiple tiers of the
supply chain.
Product supply chain: ← (𝑡𝑖𝑒𝑟𝑠) 𝒖𝒑𝒔𝒕𝒓𝒆𝒂𝒎 ← 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 (𝑖𝑛𝑡𝑒𝑟𝑛𝑎𝑙) → 𝒅𝒐𝒘𝒏𝒔𝒕𝒓𝒆𝒂𝒎(𝑒𝑐ℎ𝑒𝑙𝑜𝑛) →
Echelon: a downstream stage of supply or consumption. A single echelon might contain
partners in locations all over the world.
Strategic planning: a type of planning that addresses long-term decisions that define
the operations objectives and capabilities for the firm and its partners.
Tactical planning: a type of planning that addresses intermediate-term decisions to
target aggregate product demands and to establish how operational capacities will be
used to meet them.
Operational planning: a type of planning that establishes short-term priorities to
schedules to guide operational allocations.
Fundamentals of supply chain management
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