Samenvatting OML
Chapter 1: Strategy, products and capacity
Introduction – the elements of OSCM
Three elements that require integration to be successful in OSCM:
1) Strategy
2) Processes
3) Analytics
Operations and supply chain management (OSCM) = the design, operation and
improvement of the systems that create and deliver the firm’s primary products and services.
It involves specialists in product design, purchasing, manufacturing, service operations,
logistics and distribution. These specialists are mixed and matched in many different ways
depending on the product or service
A good starting point for understanding a supply chain is to sketch out the network from start
to finish. Typically, each part of the network is controlled by a different companies
Operations = conversion of inputs (resources) into outputs (products). Manufacturing and
service processes used to transform the resources employed by a firm into products desired
by customers
Manufacturing process physical product
Service process intangible product
Supply chain = processes that move information and material to and from the manufacturing
and service process of the firm
Logistics processes physically move products and the warehousing
Storage processes position products for quick delivery to the customer
Firm’s value chain (Porter) add value for the customer
Functional-based workflow (batch-based) vs product-based workflow
Process = one or more activities that transform inputs into outputs
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,Key idea: companies are positioned in different places in the supply chain. Within the context
of their position, they all require planning, sourcing, making, delivering and returning
processes
Supply chain process:
1) Planning = processes needed to operate an
existing supply chain strategically. Metrics to
monitor supply chain efficient, high quality and
value for customers
2) Sourcing = selection of suppliers that will deliver
the goods and services needed to create the
firm’s product. Pricing, delivery and payment
processes. Metrics monitoring and improving
relationships between partners of the firm
3) Making = where the major product is produced or the service provided. Scheduling
processes for workers and coordination material/other critical resources. Metrics that
measure speed, quality and worker productivity
4) Delivering = logistics processes. Move products to warehouses and customers
5) Returning = processes for receiving worn-out, defective and excess products back
from customers. Support for customers who have problems with delivered products
Differences between services and goods
1) Service is an intangible process that cannot be weighed or measured
Good is a tangible output of process that has physical dimensions
2) Service requires degree of interaction with the customer for it to be a service
Goods produced in facility seperate from customer
3) Services (expect hard technologies such as ATMs and information technologies such
as answering machines) are heterogeneous they vary as a function of attitudes
Goods can be produced to meet very tight specifications day-in and day-out with zero
variability
4) Services as a process are perishable and time dependent, they can’t be stored
Goods can be stored
5) Specifications of services are defined and evaluated as a packet of features that
affect the five senses
A service innovation cannot be patented
Problem: service intangibility customers cannot try it out and test it before purchase
Key idea: the things produced by a service are intangible. Service processes tend to be
highly variable and time dependent compared to goods-producing processes
Features service specifications:
1. Supporting facility (location, decoration, layout, architectural appropriateness)
2. Facilitating goods (variety, consistency, quantity of physical goods that go with it)
3. Explicit services (training of service personnel, consistency of service performance,
availability/access to service, comprehensiveness of service)
4. Implicit services (attitude of servers, atmosphere, waiting time, status,
privacy/security, convenience)
4 main types service businesses:
1) Businesses that impact human bodies
2) Businesses that are directed at physical products
3) Businesses that are directed at people’s minds
4) Businesses directed at risk and money management
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,Goods-services continuum:
Pure goods (low-margin, adding some services)
Core goods (already provide a significant service
component)
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)
Product-service bundling = when a firm builds service activities into its products offerings
to create additional value for the customer. Includes maintenance, training etc.
While firms that offer product-service bundling generate higher revenues, they tend to
generate lower profits as a percent of revenues when compared to focused firms (unable to
generate revenues/margins high enough to cover additional investment needed)
Careers in OSCM
Careers in OSCM specialize in managing planning, production and distribution of
goods/services
Marketing entry-level jobs focus on actually selling the goods
Finance entry-level jobs working at auditing transactions to ensure accuracy
Key idea: OSCM jobs focus on delivering goods on-time and at low cost. They are
interesting, people-oriented jobs
Typical jobs in OSCM:
Plant manager = oversees the workforce and physical resources (inventory,
equipment and information technology) required to produce the organizations’s
product
Hospital administrator = oversees human resource management, staffing, supplies
and finances at a health care facility
Supply chain manager = negotiates contracts with vendors and coordinates the flow
of material inputs to the production process and the shipping of finished products to
customers
Purchasing manager = manages the day-to-day aspects of purchasing, such as
invoicing and follow-up
Logistics manager = oversees the movement of goods throughout the supply chain
Warehouse/distribution manager = oversees all aspects of running a warehouse,
including replenishment, customer order fulfillment and staffing
Business process improvement analyst = applies the tools of lean production to
reduce cycle time and eliminate waste in a process
Project manager = plans and coordinates staff activities, such as new-product
development, new-technology deployment and new-facility location
Chief operating officer (COO) = works with the CEO and company president to determine
the company’s competitive strategy. Ideas are filtered down through the rest of the company.
COOs determine organization’s location, its facilities, which vendors to use, and how hiring
policy will be implemented
The major concepts that define the OSCM field
Time line depicting when major OSCM concepts became popular
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,Manufacturing strategy paradigm (late 1970s / early 1980s)
Manufacturing strategy emphasizes how a factory’s capabilities could be used
strategically to gain advantage over a competing company
Manufacturing trade-offs among performance measures as low cost, high quality and high
flexibility
Lean manufacturing, JIT and TQC (1980s)
Just-in-time (JIT) = an integrated set of activities designed to achieve high-volume
production using minimal inventories of parts that arrive exactly when they are needed.
Pioneered by the Japanese
Total quality control (TQC) = aggressively seeks to eliminate causes of production defects
Lean manufacturing = to achieve high customer service with minimum levels of inventory
investment
Henry Ford
Product, processes, materials, logistics and people were well integrated and balanced in the
design and operation of the plant
Service quality and productivity
= unique approach to quality and productivity pioneered by McDonald’s how to deliver
high-volume standardized services
Total quality management and quality certification
Total quality management (TQM) (late 1980s and 1990s) = managing the entire
organization so it excels in all dimensions of products and services important to the customer
Baldrige Award
ISO 9000 certification standards setting quality standards for global manufacturers
Business process reengineering (BPR) (1990s)
BPR = an approach to improving business processes that seeks to make revolutionary
changes as opposed to evolutionary (small) changes (common in TQM). Take fresh look and
eliminate non-value-added steps an computerizing remaining ones to achieve desired
outcome
Six sigma quality (developed 1980s as part of TQM, 1990s)
= a statistical term to describe the total quality goal of no more than 3.4 defects out of every
million units. Also refers to a quality improvement philosophy and program
Green and black belt programs
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,Supply chain management
apply a total system approach to managing the flow of information, materials and services
from raw material suppliers through factories and warehouses to the end customer
Outsourcing
Mass customization = the ability to produce a unique product exactly to a particular
customer’s requirements
Focus on optimizing core activities to maximize speed of response to changes in customer
expectations
Electronic commerce (late 1990s)
= the use of the Internet as an essential element of business activity
Internet, World Wide Web
Sustainability and triple bottom line
Sustainability = the ability to maintain balance in a system. The ability to meet current
resource needs without compromising the ability of future generations to meet their needs
Triple bottom line = a business strategy that includes social, economic and environmental
criteria
Business analytics
= the use of current business data to solve business problems using mathematical analysis
Data has always been used to solve business problems, but now more data captured and
available
Internet of things = term that refers to the billions of devices that are connected to the
Internet
Major challenges that managers will face in the future:
1) Uncertainty in global tariffs and regulations
until a new global balance emerges, OSCM managers are forced to think short
term, which makes being efficient difficult
2) Difficulty in hiring and keeping employees
shortages
management-level workers are unique and highly sought after
3) Adapting to change in business technology and infrastructure
constant barrage of change
Efficiency, effectiveness, and value
Innovations in operations are relatively reliable and low cost
Efficiency = a ratio of actual output of a process relative to some standard. Also, being
efficient means doing something at the lowest possible cost. Goal of an efficient process is
using the smallest input of resources (material, labor, equipment and facilities)
Effectiveness = doing the things that will create the most value for the customer
Maximizing effectiveness and efficiency at the same time creates conflict between the two
goals
Example check-out lines: being efficient means fewest people possible to ring up customers.
Being effective means minimizing waiting time in line for customers
Value = quality divided by price. The attractiveness of a product relative to its price
Quality attractiveness of the product, considering features and durability
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,Benchmarking based on management efficiency ratios (the higher, the better)
annual credit sales
Receivable turnover =
average accounts receivable
o Firms prefer cash over credits
cost of goods sold
Inventory turnover =
average inventory value
o Firms prefer low inventory costs
revenue(¿ sales)
Asset turnover =
total assets
o Firms prefer low asset value compared with revenues
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, Chapter 2: Strategy
What is operations and supply chain strategy?
Operations and supply chain strategy = the setting of broad policies and plans that will
guide the use of the resources needed by the firm to implement its corporate strategy. It is
part of a planning process coordinate operational goals with those of the larger
organization (goals larger can change, so anticipate future needs)
the major focus is operations effectiveness:
Operations effectiveness = performing activities in a manner that best implements strategic
priorities at minimum cost. It relates to the core business processes needed to run the
business, and span all the business functions. It is reflected directly in the costs associated
with doing business
Strategies operational effectiveness quick near-term results (12 to 24 months)
Operations and supply chain capabilities = a portfolio best suited to adapting to the
changing product/service needs of the firm’s customers
Planning strategy process, set of activities that are repeated at different intervals over time
Major activities typical strategic planning process
Strategic analysis at least yearly, overall strategy developed. Looking out and
forecasting how business conditions that impact the firm’s strategy are going to change in the
future
Overall strategy = define clear set of priorities to help guide the implementation of a plan.
When possible, define specific measures that relate to the objectives of the firm. Successful
strategy? anticipate change and formulate new initiatives in response
Corporate strategy = operationalized through a set of operations and supply chain initiatives
Initiatives = major steps that need to be taken to drive success in a firm. Many repeated
from year to year
New initiatives that innovatively respond to market dynamics company success
(future revenue growth)
Initiatives that reducs costs directly impact profitability of firm
Refined and updated four times a year (budget estimate)
Measures of performance (unbiased, objective)
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