Operations and supply chain management
Different levels of understanding in the exam:
1. Reproduction
2. Understanding of concepts
3. Applying, learning techniques
4. Analyse, with your knowledge
5. Creation, 1 question with 4 points.
Formula sheet will be given. It’s already on canvas.
Lecture 1 – introduction, supply chain, operations management
Supply chain is a sequence of organizations – their facilities, functions, and activities – that
are involved in producing and delivering a product or service.
• The sequence: suppliers → …. → final customer
• Facilities: warehouses, factories, processing centres, offices, distribution centres, and
retail outlets.
• Functions and activities: forecasting, purchasing, inventory management,
information management, quality assurance, scheduling, production, distribution,
delivery, and customer service.
Behind every product or service is a supply chain.
Why do we need management for supply chain? → Needs to reassure that the product is at the
right time, right price, right place, right quality, etc.
What’s the impact of supply chain on the economy? → everybody is dependent on each other.
Every product or service has a supply chain. For example, computer chips, if there is a
shortage cars and computers cannot be created. Industries will be disrupted by a missing link
in the supply chain.
Netflix now owns the supply chain, it started at the end with ‘selling’ movies but nowadays
they also produce their own movies, series, documentaries.
If you have more control over the supply chain, you will have more power for pricing.
If you have more players in supply chain, price will get higher for consumer. Everybody adds
their margin. The more complex product, we expect a longer supply chain. Every company
has their own expertise.
Supply chain structure and its flows:
Supplier → manufacturer → wholesaler → retailer → end customer
[ upstream supply chain ] [ downstream distribution channel ]
,It’s not always upstream to downstream. You can return your products. Normally material
flows from up to down. Cash flows within a supply chain from consumers, money goes from
down to up. Information/ordering goes from down to up.
Echelon: Echelon is 1 layer of a company in a supply chain. Customer is not an echelon.
Distribution channel →upstream, or supply channel→ downstream
Types of customers:
• B2B
• B2C
• C2C (ebay, marktplaats)
First year tier supplier/customer, second year tier supplier/customer.
Operations is that part of a business organization that is responsible for producing what
customer wants. Supply chain is a system, it’s comprised of factors and links.
How we can make perfect match between supply and demand = Aim of supply chain. It’s not
possible to make this balance, because we have uncertainty.
Why is supply chain important? → because everyone new has huge impact on national and
global economy. We have many issues, disruptions: Ukraine/Russia war, shortage of (skilled)
labour, energy crisis. Pandemic, global warming, US-China trade war.
Sustainability is in all sectors more highlighted, it’s a long-term threat.
How can we handle all the issues in supply chain? Cooperation. But also, innovation.
Technology is a big part. Technology can create advantages.
Supply chain twins: big data, iot, blockchain, business analytics, AI.
The “input-transformation-output” model
Core business activities, where value adding activities are placed.
Operations: transformation mechanism, they are turning resource inputs into valuable. The
output can be products that are (in)tangible. For example, changing location with a train is
,value, that’s why you pay. Resources are train, platform. The output is service, no tangible
stuff.
Operations is a mechanism where you put inputs in a transformation mechanism that will
create something desirable, output.
You need a control loop. We try to check if everything is going correctly. Inputs as customer:
hospital, barber. The input in a hospital is patient, for transformation we need resources like
doctors, beds, space. Resources are things you must pay for. Make sure you are utilizing your
resources precisely. The output is service (sometimes with some goods, like medicine).
In most cases you get a combination of service and product as output.
We need management to manage the resources, that they are used precisely. Also, for
controlling, input and transformation process.
Tangible: production independent from customer. It can be stored.
Intangible: production in interaction with customer. Cannot be stored.
Operations is part of supply chain?
Input, transformation, output and control: elements operations.
All companies have operations, they should make income. What is the goal of any firm:
profit (or value).
Income – cost = profit
Q*p – c = profit
Lower C by profit rising, increase q (or p) for increasing profit.
Strategy is the way you want to reach your goals. Strategy is about the higher level of
plan/guidance that you can have to reach your goal. Then you need to break it down.
Executives make a strategy, normally. Then break down for employees, to help reaching the
goal. All businesses have resources, if you can harmonize them, all effort will be out in right
direction. Helps to not go bankrupt.
The impact of the competitive global market
• Increased pressure on organizations to reduce costs, improve efficiency, and innovate
to remain competitive.
• Increase the number of options available to customers, which can lead to increased
…..
• Bring opportunities for organizations, ……
The key to successfully compete in today’s global market: determining what customers want
and then directing efforts toward meeting (or even exceeding) customer expectations.
Business strategy is a long-term plan for an organization to achieve its strategic goals. A
strategy outlines the actions that an organization will take to reach its desired state, and it is
often based on a thorough analysis of the organization’s strengths, weaknesses, opportunities,
and threats.
, 3 levels of decisions:
• Strategic: long-term decision that shape the overall direction and strategy of the
organization and normally made by top executives or the board of directors.
• Tactical: mid-term decisions that support the implementation of the firm’s strategy and
normally made by middle managers.
• Operational: short-term decisions that are concerned with the day-to-day activities of
the firm and normally made by front-line managers or individual employees.
Operations strategy, key performance objectives for decision making:
• Cost (expenses associated with producing goods or services): cost of resources and
purchased items, capital employment
• Quality (the degree to which the output meets customer’s requirements and
expectations): quality products, innovative products, quality service
• Speed (the speed at which goods or services are produced and delivered to customers):
order lead times, time to market
• Dependability (consistently deliver goods or services as promised): reliability,
availability, deliver up-to-promise
• Flexibility (ability to adapt to changes in customer demand or market conditions):
volume flexibility, delivery flexibility, mix-flexibility, product flexibility
• Sustainability*: environmental, social, and economic impact of an organization’s
operations
*Sustainability:
The triple bottom line (TBL or 3BL) framework is often used as a base to assess the
sustainability of an organization’s operations:
• Economic (profit): the financial performance of an organization
• Social (people): the impact of an organization on people and communities
• Environmental (planet): impact that an organization has on the environment
Steps for operations strategy:
1. Prioritize your objectives, choose the most important one.
2. Create KPI’s for each objective, for the strategy. KPI’s should be:
- Measurable, not subjective, quantitative
- Specific, independent
How do cash and information flows move in the supply chain network, respectively? →
downstream to upstream – downstream to upstream
When a business company takes the ownership of another business firm with the same
functionality, it is called …? → horizontal integration.
Lecture 2 – demand forecasting, quantitative techniques
Why do we need forecasting, for businesses? Nothing is certain, we have uncertainty. We
don’t know what happens tomorrow. We need to prepare ourselves. Need to have a reliable
reference point, therefore we forecast. We are doing business in an uncertain environment.
Stochastic → know more than the uncertainty with forecasting.
How can we manage the balance between supply and demand?
- X
