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Summary / Samenvatting Operations and Supply Chain Management The Core (5th edition)
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Operations and Supply ChainManagement Summary
Fifth edition
Pre Master Supply Chain Management
20-21
,Chapter one: Operations & Supply Chain Management
The book is about doing this at a low cost while meeting the requirements of the demanding
customers. Success involves the clever integration of a great operational-related strategy.
What is operations and supply chain management (OSCM)?
OSCM is defined as: the design, operation and improvement of the systems that create and
deliver the firm’ s primary products and services.
The network of supply for a company can be seen as a pipeline through which material and
information flow. Within the pipeline are some key locations for storage of information and
materials. For example: The warehouse usually stores a lot of information as well as
materials.
Operations: refers to the manufacturing and services process that are used to transform
resources employed by a firm into products desired by customers.
Supply Chain: the process that moves information and material to and from the
manufacturing and service processes of the firm.
Operation and Supply Chain Processes
The supply chain process can easily be divided in different parts:
1. Planning: consists of the processes needed to operate an existing supply chain
strategically. A firm must determine how anticipated demand will be met with the
available resources.
2. Sourcing: the selection of suppliers that will deliver the goods and services needed to
create the firm’s product. Pricing, delivery and payment processes are needed
together to establish and create relationships between the firm and partners.
3. Making: is where the major product is produced or the service is provided. This step
requires a good coordination of the planning, material and other critical resources to
provide the good or service. Speed, quality and worker productivity are used to
monitor this process.
4. Delivering: Also known as the logistics process. Carriers are picked to move the
product from A to B.
5. Returning: involves processes for receiving worn-out, defective and excess products
back from customers. For the service: in this case it would require all the follow-up
activities necessary.
The differences between services and goods
There are five differences between a service and a good:
1. Service is an intangible process that cannot be weighed or measured.
2. Service require some degree of interaction with the customer for it to be a service.
Goods are usually made in a facility separate from the customer.
3. Services are inherently heterogeneous, they vary from day-to-day, minute-to-minute.
Exception of ATM’s.
4. Services as a process are perishable and time dependend. They can’t be stored.
5. The specifications of a service are defined and evaluated as a package of features.
,Product-service bundling: When a firm builds service activities into its product offerings to
create additional value to the customer.
Efficiency: Doing something at the lowest possible cost.
Effectiveness: Doing the right things to create the most value for the customer.
Value: The attractiveness of a product relative to its price.
Benchmarking: When one company studies the process of another company to identify best
practices.
To optimize efficiency, effectiveness and value: a typical company would buy raw materials
on credit → convert it to finished products → sell the product on credit to customer → gets
paid in cash by customer → purchase more raw materials. This cycle is called cash
conversion cycle.
The days sales outstanding is the number of days that it takes to collect cash from the
customer.
Days inventory is the number of days’ worth of inventory the company holds in operation
and supply chain process.
The payables period measure indicates how quickly suppliers are paid by a company.
The cash conversion cycle = days sales outstanding + days invertory – payable period.
Receivables turnover measures the number of times receivables are collected, on average
during the fiscal year.
Receivables turnover = Annual credit sales / average accounts receivables
Inventory turnover = costs of goods sold / average inventory value
The amount of sales generated for every dollars’ worth of assets:
Asset turnover = revenue (sales) / total assets
Current issues in OSCM:
1. Coordinating the relationships between mutually supportive but separate
organizations
2. Optimizing global supplier, production and distribution networks
3. Managing customer touch points (managing support personnel, usually lack of
training)
4. Raising senior management awareness of OSCM as a significant competitive weapon.
, Chapter two: Strategy and Sustainability
Sustainability: The ability to meet current resource needs without compromising the ability
of future generations to meet their needs.
To expand the view of sustainability, the phrase Triple bottom line has been created. The
triple bottom line framework exists of three parts:
1. Social responsibility: The company seeks to benefit the employees, the community
and other social entities. Paying fair salaries to its workers, safe working environment
with normal working hours is part of the social responsibility of the company.
2. Economic prosperity: The company is obligated to compensate the shareholders.
Company strategies should promote growth.
3. Environmental stewardship: refers to the impact on the environment. A company
should always minimize the impact on the environment. The ecological footprint
should be reduced.
What is OSCM strategy?
OSCM strategy is concerned with setting broad policies and plans for using resources of a
firm. This must be integrated with the corporate strategy.
Operations effectiveness is performing activities in a manner that best implements
strategic priorities at minimum costs.
The different competitive dimensions:
Cost or price: “make the product or deliver the service cheap”: This won’t always guarantee
success and profitability. These products are usually commodity like. This means that
customers cannot distinguish the product or service from one company or another.
Competition in this segment is high and the failure rate is also high.
Quality: “Make a great product or deliver a great service”: Two characteristics of a product
or service and process quality:
1. Design quality (different bicycles for different sports; mbt and tdf)
2. Process quality (directly relates to the reliability of the service or product)
Delivery reliability: “deliver it when promised”: For example: postal companies like UPS,
FEDEX and PostNL need to deliver it when promised in order to be reliable.
Coping with changes in demand “Change its Volume”: When the demand drops, the volume
output should also drop. It should be manageable long term instead of short term.
Flexibility and New-Product introduction speed “change it”: the ability of a company to offer
a wide variety of products to its customers. An important element of this ability to offer
different products is the time required for a company to develop a new product.
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