Supply chain Management
summary:
Chapter 1: Operations and Supply chain
management
What is operations and supply chain management?
Operations and supply chain management (OSCM) is defined as the design, operations, and
improvement of the systems that create and deliver the firm’s primary products and services.
Think of the supply network as a pipeline through which material and information flow. They are key
locations in the pipeline where material and information are stored for future use.
Each part of the network is controlled by different companies.
Successes in today’s global markets requires a business strategy that matches the preferences of
customers with the realities imposed by complex supply networks. A sustainable strategy that meets
the needs of shareholders and employees and preserves the environment is critical.
Operations refers to manufacturing and service processes that are used to transform the resources
employed by a firm into products desired by customers.
Service processes would produce an intangible (immaterial/ ontastsbaar) product, such as a call
center that provides information to customer. Planning the use of these processes involves analyzing
capacity, labor, and material needs over time.
Supply chain refers to processes that move information and material to and from the manufacturing
and service processes of the firm. These include the logistics processes that position products for
quick delivery to the customer. providing products and service to plants and warehouses at the
input end and also to the supply of products and service to the customer on the output end of the
supply chain.
The field of operations and supply chain management is ever changing due to the dynamic nature of
competing in global business and the constant evolution of information technology.
Operations and supply chain processes
Operations and supply chain processes can be conveniently categorized, particularly from the view of
a producer of consumer products and services, as planning, sourcing, making, delivering, and
returning.
, Making
Planning: (connected to all) consists of the processes needed to
operate an existing supply chain strategically.
Sourcing: Involves the selection of suppliers that will deliver the
goods and services needed to create the firm’s product.
Sourcing Planning Delivering
Making Is where the major product is produced or the service is
provided.
Delivering referred to as a logistics process.
Returning
Returning involves processes for receiving worn-out, defective, and
excess products back from customers and support for customers who
have problems with delivered products.
It is important to consider the many different players that need to coordinate work in a typically
supply chain. The orchestration of all of these activities is critical to providing quality service at a
reasonable costs.
Differences between Services and Goods
5 differences between services and goods:
1. Service is an intangible process that cannot be weighted or measured Ontastbaar process
2. Service requires some degree of interaction with the customers for it to be a service.
3. Services are inherently Heterogeneous, they vary from day to day and even hour by hour as a
function of the attitudes of the customers and the servers. divers so unpredictable
outcomes
4. Service as a process are perishable and time dependent, and unlike goods, they can’t be
stored. example : you cannot “come back last week” for an air flight or a day on campus.
5. Specifications of a service are defined and evaluated as a package of features that affect the
five senses. Features related to the:
a. Location, decoration, and layout of the facility where the service is housed.
b. Training and attitude of employees
c. Consistency of service performance
d. Speed, privacy, and security
The goods- service continuum:
The continuum captures the main focus of the business and spans from firms that just produce
products to those that only provide services.
Pure goods low-margin commodity business, they are often adding some services.
Core goods provide a significant service component as part of their businesses.
Core services must integrate tangible goods.
Pure services may need little in the way of facilitating goods, but what they do use are critical to
their performance.
,Products- service bundling
Product-service bundling is when a firm builds service activities into its product offerings to create
additional value for the customer. Service include maintenance, spare part provisioning training, and
sometimes total systems design and R&D (Research and Development)
Firms that offer product-service bundles typically generate higher revenues, they tend to generate
lower profits as a percentage of revenue when compared to focused firms. This is because they are
often unable to generate revenues or margins high enough to cover the additional investment
required to cover service-related costs.
Efficiency, Effectiveness, and value:
Efficiency doing something at the lowest possible costs. Produce a good or provide a service by
using the smallest input of resources.
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 processes of another company to identify best
practices.
Cash conversion cycle or cash-to-cash cycle time buy raw materials on credit, converts these
materials into finished products, sells the products to customers on credit, gets paid by customers in
cash, and the reuses the cash to purchase more raw materials. (this circle repeats during doing
business) Quicker the cycle, the better for the company
Days sales outstanding is the number of days that it take for a company to collect cash form
customers (Toyota best in this example)
Days inventory is the number of days’ worth of inventory the company hold in operation and
supply chain process. This includes raw material, work-in-progress, and finished goods inventory
Payables period measure indicates how quickly suppliers are paid by a company.
Cash conversion cycle = Days sales outstanding + days inventory – payable period
, 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.
Large payable period might not make the firm very attractive to suppliers.
Receivables turnover measures the number of times receivables are collected, on average, during the
fiscal year. The ratio from receivables turnover, measures a company’s efficiency In collecting its
sales on credit.
Ratio higher, implies either that the company operates on a cash basis or that its extensions of credit
and collection methods are efficient.
Lower the ratio, the longer receivables are being held and the higher the risk of them not being
collected.
Receivables turnover ratio = Annual credit sales : average accounts receivable.
Another efficiency ratio is inventory turnover. Inventory turnover measures the average number of
times inventory is sold and replaced during the fiscal year.
Inventory turnover ratio = Cost of goods sold : Average inventory value
Inventory turnover ratio measures the company’s efficiency in turning its inventory into sales. Its
purpose is to measure the liquidity or speed of inventory usage. A low ratio, is a signal of inefficiency.
Factors such as order lead times, purchasing practices, the number of items being stocked, and
production and order quantities have a direct impact on the ratio.
The final efficiency ratio considered here is asset turnover. This is the amount of sales generated for
every dollar’s worth of assets.
Asset turnover= Revenue (or sales) : total assets
Asset turnover measures a firms’ efficiency at using its assets in generating sales revue. The higher
the number, the better. Asset turnover is more general and includes the plants, warehouses,
equipment, and other assets owned by the firm.
Careers in operations and supply chain management:
Specialize in managing the planning, production, and distribution of goods and services. The
operations and supply chain manager is out working with people to figure out the best way to deliver
the goods and services of the firm.
Chief operating officer (COO)
COO highest rank. Chief operating officer works with the chief executive officer (CEO) and company
president to determine the company’s competitive strategy. Managing the supply chain, service, and
support are particularly challenging aspects of a chief operating officer’s job.
Historical development of operations and supply chain
management.
