Operations Management & Logistics
Chapter 1 | Introduction
Operations and supply chain management (OSCM) is defined as the design, operation, and
improvement of the systems that create and deliver a company's primary products and
services. OSCM is involved in the management of the entire system that produces a product
or provides a service. It controls all individual processes (the stuff needed for the product, the
production of the product, the delivery of the product) as effectively as possible.
Operations refer to the transformation of inputs like resources, materials, and people, into
outputs (which is the final product). It is very much about physical products and not about
services.
Operations involve the workflow ordering of activities to
produce the product. Therefore, we have a function-based
workflow model, where you have input that goes through
3 stages and then forms the output. In the model you need
to manage and organize, that requires a social system.
Because we are more focused on addressing the processes
that are involved and thinking about what information is
needed to manage all these processes. The operations
involve the workflow ordering of activities to produce
the product.
It is not only about producing but also about moving the goods. They need to be moved to the
different workstations. If you have produced a beer, it needs to be stalled and then shipped to
the local dealers and supermarkets. That is logistics; the products need to be physically
moved, warehoused, and stored.
Supply chain refers to the processes that move information and material to and from firms,
ranging from raw materials to consumers. It is also information about when the items are
shipped. Supply chain refers to a broader process than the logistic process. A supply chain
may consist of multiple value chains.
Operations and logistics are considered primary (production process) activities as part
of a value chain within an organization.
Understanding what firms are here for is to
deliver value for customers. You have the
primary elements with the service at the
end. The process operates from the left to
the right. Operations are part of primary
activities, but the technology development
influences the operations. Just as the
human resource management influences
the capacity of the operations. And the
procurement influences the inbound
logistics. This shows the influence of the
one on the other.
,Success of producing at low costs
Success of producing at low costs while meeting customer demands depends on clever
integration of:
- Your operation-related strategy with your corporate strategy.
- The processes need to be integrated, the processes within the primary chain and
secondary chain.
- In order to optimize, you need information, that comes from data. You need to develop
the analytics, to make the correct decisions.
First, you determine the strategy of the firm, to see what kind of products will meet the
customers’ needs. You need to determine the processes so that you can realize the strategy. If
you want a low-cost product, you get a mass product, and you need to make a strategy that fits
this. This is different than a luxury product. The analytics are monitoring constantly, to save
on costs and on transportation. The main focus is on the integration between these
three: strategy → processes → analytics.
The operation strategy balances production rate, workforce level and inventory on hand.
- Producing to deliver and/or stock in inventory.
- Selling from inventory.
- Let employees work overtime.
- Hiring and firing employees.
- Subcontracting production to suppliers.
- Selling “no” (not yet) to customers.
Basic principles guide the design of transformation processes:
- How different types of processes are organized;
- How to determine the capacity of a process;
- How long it should take to make a unit;
- How the quality of a process is monitored;
- How information is used to make decisions.
These design principles help to understand the design of the processes.
OSCM is about optimization of the processes and improving the systems that create and
deliver the firm’s primary products and services (OSCM = operations and supply chain
management).
It is also about the integration of strategy, analytics & process. What if the environment
changes? A change in the environment would cause a change in the strategy:
- Change of OSC strategies, from low cost to high cost;
- You need to put more effort into optimization;
- New production technologies and modes of transport;
- Optimize the new processes again, you need to fine-tune it, to increase efficiency;
- Improve data analytics and how to use them in decision making.
,Designing and improving operations often requires changes in workflow ordering and
organizational structure. There are 2 different production processes: the batch-based and the
simultaneous process.
- Batch-based or the functional-based workflow means that you switch between the
making of product A and B. For example, you start making product A, then you
switch to product B, and eventually you switch again to the making of product A.
- Simultaneous or product-based workflow means that product A and B are made at
the same time.
Operations and supply chain processes
One or more activities that transform inputs into outputs. This can be categorized into 5 types
of processes:
- Planning: the processes needed to strategically serve an existing supply chain. To
monitor this process, metrics are used that measure efficiency and quality.
- Sourcing: relates to the selection of suppliers that provide the product and/or services
that the organization needs in order to be able to make its product. The price, delivery,
payment process and the relationship with the other party must be monitored.
- Making: the process in which the product is produced, or the service provided. Speed,
quality, and productivity must be measured in order to monitor the process.
- Delivering (also called logistic
processes): bringing the products and/or
services to the customers.
- Returning: process of receiving
defective and worn-out products from
the customer back to the organization
and properly supporting the customers
within this process.
Operations and supply chain processes are
linked, so you need metrics to steer the processes.
Producing and delivering goods is different
compared with services.
Product service bundling refers to a situation
in which an organization builds service
activities into its product range in order to
create extra value for the customer. Examples
include maintenance, spare parts supply, and
training.
What makes a service different from a product?
You cannot stock a service. Service is about people and employees that provide additions to a
product.
The difference between producing and delivering goods and services is mostly the different
logistical system. In addition to that, you have three kinds of services:
, - Product-related services: this is about adding services like maintenance, after-sales
services, support, etc., in addition to the product itself.
- System of services and products: this is the combination of physical and intangible
elements. Or it is about the system of services that require a set of important products.
From product-oriented to service-oriented.
- Service-related products: with this one, the products come with it as an extra, so the
service is the main thing
The various OSC processes reflect different job positions and career perspectives.
Various OSCM concepts have become popular over time: across the years it changed in focus
and priority. In 80’s strong focus on lean manufacturing and now with the internet and
digitalization is much different.
Current Issues in operations and supply chain management
- Coordinating the relationships between mutually supportive bet separate organizations
- Optimizing global supplier, production, and distribution networks;
- Managing customer points;
- Raising senior management awereness as a significant competitive weapon;
- Uncertainty in global tariffs and regulations;
- Difficulty in hiring and keeping employees;
- Adapting to change in business technology and infrastructure;
- Sustainability and the triple bottom line (Life cycle analysis);
- Digitalization, BIG data, Artificial Intelligence (Industry 4.0).
This shows that various conditions may influence the operations and supply chain.
Evaluating operations and supply chain process
Evaluating operations and supply chain process on efficiency, effectiveness, and value.
- Efficiency: doing something at the lowest possible cost.
- Effectiveness: doing the right things to create the most value for the company.
- Value: quality divided by the price.
o Quality: the attractiveness of the product, considering its features and
durability.
o Price: costs plus margin.
From a marketing point of view, value is the benefits perceived by the customer minus the
costs of acquisition and use of a product. You also want to take these kinds of issues into
account. How effective is your company? For the company and for the customer. You want to
do that at the lowest possible costs. You use metrics to calculate the efficiency of the firm in
relation to other supply chain stages.
There are five essential differences between services and products:
- Service is an intangible process (untouchable) while products are tangible and can
therefore be measured.
Chapter 1 | Introduction
Operations and supply chain management (OSCM) is defined as the design, operation, and
improvement of the systems that create and deliver a company's primary products and
services. OSCM is involved in the management of the entire system that produces a product
or provides a service. It controls all individual processes (the stuff needed for the product, the
production of the product, the delivery of the product) as effectively as possible.
Operations refer to the transformation of inputs like resources, materials, and people, into
outputs (which is the final product). It is very much about physical products and not about
services.
Operations involve the workflow ordering of activities to
produce the product. Therefore, we have a function-based
workflow model, where you have input that goes through
3 stages and then forms the output. In the model you need
to manage and organize, that requires a social system.
Because we are more focused on addressing the processes
that are involved and thinking about what information is
needed to manage all these processes. The operations
involve the workflow ordering of activities to produce
the product.
It is not only about producing but also about moving the goods. They need to be moved to the
different workstations. If you have produced a beer, it needs to be stalled and then shipped to
the local dealers and supermarkets. That is logistics; the products need to be physically
moved, warehoused, and stored.
Supply chain refers to the processes that move information and material to and from firms,
ranging from raw materials to consumers. It is also information about when the items are
shipped. Supply chain refers to a broader process than the logistic process. A supply chain
may consist of multiple value chains.
Operations and logistics are considered primary (production process) activities as part
of a value chain within an organization.
Understanding what firms are here for is to
deliver value for customers. You have the
primary elements with the service at the
end. The process operates from the left to
the right. Operations are part of primary
activities, but the technology development
influences the operations. Just as the
human resource management influences
the capacity of the operations. And the
procurement influences the inbound
logistics. This shows the influence of the
one on the other.
,Success of producing at low costs
Success of producing at low costs while meeting customer demands depends on clever
integration of:
- Your operation-related strategy with your corporate strategy.
- The processes need to be integrated, the processes within the primary chain and
secondary chain.
- In order to optimize, you need information, that comes from data. You need to develop
the analytics, to make the correct decisions.
First, you determine the strategy of the firm, to see what kind of products will meet the
customers’ needs. You need to determine the processes so that you can realize the strategy. If
you want a low-cost product, you get a mass product, and you need to make a strategy that fits
this. This is different than a luxury product. The analytics are monitoring constantly, to save
on costs and on transportation. The main focus is on the integration between these
three: strategy → processes → analytics.
The operation strategy balances production rate, workforce level and inventory on hand.
- Producing to deliver and/or stock in inventory.
- Selling from inventory.
- Let employees work overtime.
- Hiring and firing employees.
- Subcontracting production to suppliers.
- Selling “no” (not yet) to customers.
Basic principles guide the design of transformation processes:
- How different types of processes are organized;
- How to determine the capacity of a process;
- How long it should take to make a unit;
- How the quality of a process is monitored;
- How information is used to make decisions.
These design principles help to understand the design of the processes.
OSCM is about optimization of the processes and improving the systems that create and
deliver the firm’s primary products and services (OSCM = operations and supply chain
management).
It is also about the integration of strategy, analytics & process. What if the environment
changes? A change in the environment would cause a change in the strategy:
- Change of OSC strategies, from low cost to high cost;
- You need to put more effort into optimization;
- New production technologies and modes of transport;
- Optimize the new processes again, you need to fine-tune it, to increase efficiency;
- Improve data analytics and how to use them in decision making.
,Designing and improving operations often requires changes in workflow ordering and
organizational structure. There are 2 different production processes: the batch-based and the
simultaneous process.
- Batch-based or the functional-based workflow means that you switch between the
making of product A and B. For example, you start making product A, then you
switch to product B, and eventually you switch again to the making of product A.
- Simultaneous or product-based workflow means that product A and B are made at
the same time.
Operations and supply chain processes
One or more activities that transform inputs into outputs. This can be categorized into 5 types
of processes:
- Planning: the processes needed to strategically serve an existing supply chain. To
monitor this process, metrics are used that measure efficiency and quality.
- Sourcing: relates to the selection of suppliers that provide the product and/or services
that the organization needs in order to be able to make its product. The price, delivery,
payment process and the relationship with the other party must be monitored.
- Making: the process in which the product is produced, or the service provided. Speed,
quality, and productivity must be measured in order to monitor the process.
- Delivering (also called logistic
processes): bringing the products and/or
services to the customers.
- Returning: process of receiving
defective and worn-out products from
the customer back to the organization
and properly supporting the customers
within this process.
Operations and supply chain processes are
linked, so you need metrics to steer the processes.
Producing and delivering goods is different
compared with services.
Product service bundling refers to a situation
in which an organization builds service
activities into its product range in order to
create extra value for the customer. Examples
include maintenance, spare parts supply, and
training.
What makes a service different from a product?
You cannot stock a service. Service is about people and employees that provide additions to a
product.
The difference between producing and delivering goods and services is mostly the different
logistical system. In addition to that, you have three kinds of services:
, - Product-related services: this is about adding services like maintenance, after-sales
services, support, etc., in addition to the product itself.
- System of services and products: this is the combination of physical and intangible
elements. Or it is about the system of services that require a set of important products.
From product-oriented to service-oriented.
- Service-related products: with this one, the products come with it as an extra, so the
service is the main thing
The various OSC processes reflect different job positions and career perspectives.
Various OSCM concepts have become popular over time: across the years it changed in focus
and priority. In 80’s strong focus on lean manufacturing and now with the internet and
digitalization is much different.
Current Issues in operations and supply chain management
- Coordinating the relationships between mutually supportive bet separate organizations
- Optimizing global supplier, production, and distribution networks;
- Managing customer points;
- Raising senior management awereness as a significant competitive weapon;
- Uncertainty in global tariffs and regulations;
- Difficulty in hiring and keeping employees;
- Adapting to change in business technology and infrastructure;
- Sustainability and the triple bottom line (Life cycle analysis);
- Digitalization, BIG data, Artificial Intelligence (Industry 4.0).
This shows that various conditions may influence the operations and supply chain.
Evaluating operations and supply chain process
Evaluating operations and supply chain process on efficiency, effectiveness, and value.
- Efficiency: doing something at the lowest possible cost.
- Effectiveness: doing the right things to create the most value for the company.
- Value: quality divided by the price.
o Quality: the attractiveness of the product, considering its features and
durability.
o Price: costs plus margin.
From a marketing point of view, value is the benefits perceived by the customer minus the
costs of acquisition and use of a product. You also want to take these kinds of issues into
account. How effective is your company? For the company and for the customer. You want to
do that at the lowest possible costs. You use metrics to calculate the efficiency of the firm in
relation to other supply chain stages.
There are five essential differences between services and products:
- Service is an intangible process (untouchable) while products are tangible and can
therefore be measured.
