Operations Management and Logistics
Lecture one: chapter 1 & 2
Chapter one: Introduction
- Operations: the transformation of inputs (resources) into outputs (products)
- Involves the workflow ordering of activities to produce the product
- Logistics: the need for materials and products to be physically moved, warehoused and stored
- Supply chain: the processes that move information and material to and from firms, ranging
from raw materials to consumers (there are different chain paths, broader than logistics))
- Operations and logistics: considered primary (production process) activities as part
of a value chain within an organization
- Firms are here for delivering value to customers
The success of producing at low costs while meeting (mass) customer demand depends on:
- Clever integration of a great operations-related strategy
- The processes to produce and deliver products and services (at low costs)
- Determine process that realises the chosen strategy
- Analytics to support the decisions needed to manage the firm, make sure operations go smoothly
Basic principles guide the design of transformation processes: help to understand the design of the processes
1. How different types of processes are organized
2. How to determine the capacity of a process
3. How long it should take to make a unit
4. How the quality of a process is monitored
5. How information is used to make decisions
OSCM: also about improvement of systems that create and deliver the firm’s primary products and services
- Change of OSC strategies
- New production technologies and modes of transport: airport transport improved
- Optimizing the processes of production and logistics activities: making sure things are smooth and
improve them to make it more efficient
- Improvements in data analytics and how to use them in decision making: about innovation
Designing/improving operations requires changes in workflow ordering and organizational structure:
- Functional-based workflow: product B after A and the other way around (batch-based) (one line)
- Product-based workflow: product A and B simultaneously, faster than functional-based (two lines)
1
,Current Issues in operations and supply chain management
- Coordinating the relationships between mutually supportive but separate organizations
- Optimizing global supplier, production, and distribution networks
- Managing customer touchpoints
- Raising senior management awareness of OSCM 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
Evaluating operations and supply chain process on efficiency, effectiveness, and value:
- Efficiency: doing something at the lowest possible cost (is doing things right)
- Effectiveness: doing the right things to create the most value for the company
- Value: quality divided by price, attractiveness of the product
- Value from a marketing point of view: value is the benefits perceived by the
customer minus the costs of acquisition and use of a product
- Quality: the attractiveness of the product, considering its features and durability
Benchmarking based on management efficiency ratios (the higher, the better:
Summary of Chapter 1:
- Various processes are associated with OSCM and used to implement the strategy of the firm
- Analytics are used to support the ongoing decisions needed to manage the firm
- OSCM hands-on people specialize in managing the production and delivery of goods and services
- Firms face increasing pressure on mass customization and quality in combination with efficiency and
speed that is reflected in OSCM
- Supply chain control, servitization, sustainability and Industry 4.0 are of paramount importance
- Efficiency ratio’s help benchmarking firm practices to meet goals
Chapter two: Sustainable operations and supply strategy
Sustainable strategy: aimed at pleasing not only shareholders but also other stakeholders
- Firm’s strategy: describes how it will create and sustain value for its current shareholders
- Shareholders: individuals or companies that legally own one or more shares of stock in the
company
- Stakeholders: individuals or organizations who are directly or indirectly influenced by the
actions of the firm
2
, - Adding a sustainability requirement: meeting value goals without compromising the ability of
future generations to meet their own needs
- It might even be the case that pleasing other stakeholders might in the end also please shareholders
- Triple bottom line: evaluating the firm against social, economic, and environmental criteria
OSC managers: face the dilemma of using less energy vs renewable energy
- Also: face the dilemma of using fewer materials vs biodegradable vs recycling processes
Recycling processes differ across industries:
- Techno-recycling in carpet industry: full circle → fully decomposed → reused for other ends
- Techno-recycling in clothing industry: not always a full circle if different fabrics are used
Operations and supply chain strategy: focused on operations effectiveness
- Operations and supply chain strategy: setting broad policies and plans for using the resources of a
firm, should be developed and refined at least yearly
- OSC strategy must be integrated with corporate strategy
- Corporate strategy: provides overall direction and coordinates operational goals with those of
the larger organization
- Operations effectiveness: performing activities in a manner that best implements strategic priorities at
a minimum cost
The business strategy reflects competitive dimensions:
- Price: make the product or deliver the service cheap, lower price means lower quality
- Quality: make a great product or delivery a great service
- Delivery speed: make the product or deliver the service quickly
- Delivery reliability: deliver it when promised
- Coping with changes in demand: change its volume
- Flexibility and new-product introduction speed: change it
Other product-specific criteria are supportive:
- Technical liaison and support: supplier may be expected to provide technical assistance for product
development
- Meeting a launch date: a firm may be required to coordinate with other firms on a complex project
- Supplier after-sale support: an important competitive dimension may be the ability of a firm to
support its product after the sale
- Environmental impact: this dimension is related to environmental/green criteria
- Other dimensions: these typically include such factors as colors available, size, weight, location of the
fabrication site, customization available, and product mix options
- Competitive dimension: product attributes that attract certain customers, used to form the
competitive position of a firm
- Main competitive dimensions related to product delivery: delivery speed and delivery
reliability
- Characteristics of a product or service that define quality: design quality and process quality
3
, Managers face trade-offs:
- Management must decide which parameters of performance are critical and concentrate resources on
those characteristics
- Low-cost production may not match quickly improving the product quality or producing in a
sustainable way
- Straddling is an alternative: seeking to match a successful competitor while maintaining its existing
position
- It adds features, services, or technology to existing activities, often a risky strategy
Trade-offs require a focus on order qualifiers and order winners:
- Order qualifiers: those dimensions that are necessary for a firm’s products to be considered for
purchase by customers, minimal sets needed
- The features that customers will not forego: determine what product the customer will buy
- Order winners: criteria used by customers to differentiate the products and services of one firm from
those of other firms
- Features that customers use to compare which product to ultimately purchase
Use risk mitigation strategies to confine the impact of disruptive events:
- Activity-system map: the diagram that shows how a company’s strategy is delivered by a set of
supporting activities
- Supply chain risk: the likelihood of disruption that would impact the ability of a company to
continuously supply products or services
- Risk mapping: the assessment of the probability of a negative event against the aggregate severity of
the related loss
- Disruption risks: risks caused by natural or manmade disasters, which are impossible to reliably
predict
4
Lecture one: chapter 1 & 2
Chapter one: Introduction
- Operations: the transformation of inputs (resources) into outputs (products)
- Involves the workflow ordering of activities to produce the product
- Logistics: the need for materials and products to be physically moved, warehoused and stored
- Supply chain: the processes that move information and material to and from firms, ranging
from raw materials to consumers (there are different chain paths, broader than logistics))
- Operations and logistics: considered primary (production process) activities as part
of a value chain within an organization
- Firms are here for delivering value to customers
The success of producing at low costs while meeting (mass) customer demand depends on:
- Clever integration of a great operations-related strategy
- The processes to produce and deliver products and services (at low costs)
- Determine process that realises the chosen strategy
- Analytics to support the decisions needed to manage the firm, make sure operations go smoothly
Basic principles guide the design of transformation processes: help to understand the design of the processes
1. How different types of processes are organized
2. How to determine the capacity of a process
3. How long it should take to make a unit
4. How the quality of a process is monitored
5. How information is used to make decisions
OSCM: also about improvement of systems that create and deliver the firm’s primary products and services
- Change of OSC strategies
- New production technologies and modes of transport: airport transport improved
- Optimizing the processes of production and logistics activities: making sure things are smooth and
improve them to make it more efficient
- Improvements in data analytics and how to use them in decision making: about innovation
Designing/improving operations requires changes in workflow ordering and organizational structure:
- Functional-based workflow: product B after A and the other way around (batch-based) (one line)
- Product-based workflow: product A and B simultaneously, faster than functional-based (two lines)
1
,Current Issues in operations and supply chain management
- Coordinating the relationships between mutually supportive but separate organizations
- Optimizing global supplier, production, and distribution networks
- Managing customer touchpoints
- Raising senior management awareness of OSCM 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
Evaluating operations and supply chain process on efficiency, effectiveness, and value:
- Efficiency: doing something at the lowest possible cost (is doing things right)
- Effectiveness: doing the right things to create the most value for the company
- Value: quality divided by price, attractiveness of the product
- Value from a marketing point of view: value is the benefits perceived by the
customer minus the costs of acquisition and use of a product
- Quality: the attractiveness of the product, considering its features and durability
Benchmarking based on management efficiency ratios (the higher, the better:
Summary of Chapter 1:
- Various processes are associated with OSCM and used to implement the strategy of the firm
- Analytics are used to support the ongoing decisions needed to manage the firm
- OSCM hands-on people specialize in managing the production and delivery of goods and services
- Firms face increasing pressure on mass customization and quality in combination with efficiency and
speed that is reflected in OSCM
- Supply chain control, servitization, sustainability and Industry 4.0 are of paramount importance
- Efficiency ratio’s help benchmarking firm practices to meet goals
Chapter two: Sustainable operations and supply strategy
Sustainable strategy: aimed at pleasing not only shareholders but also other stakeholders
- Firm’s strategy: describes how it will create and sustain value for its current shareholders
- Shareholders: individuals or companies that legally own one or more shares of stock in the
company
- Stakeholders: individuals or organizations who are directly or indirectly influenced by the
actions of the firm
2
, - Adding a sustainability requirement: meeting value goals without compromising the ability of
future generations to meet their own needs
- It might even be the case that pleasing other stakeholders might in the end also please shareholders
- Triple bottom line: evaluating the firm against social, economic, and environmental criteria
OSC managers: face the dilemma of using less energy vs renewable energy
- Also: face the dilemma of using fewer materials vs biodegradable vs recycling processes
Recycling processes differ across industries:
- Techno-recycling in carpet industry: full circle → fully decomposed → reused for other ends
- Techno-recycling in clothing industry: not always a full circle if different fabrics are used
Operations and supply chain strategy: focused on operations effectiveness
- Operations and supply chain strategy: setting broad policies and plans for using the resources of a
firm, should be developed and refined at least yearly
- OSC strategy must be integrated with corporate strategy
- Corporate strategy: provides overall direction and coordinates operational goals with those of
the larger organization
- Operations effectiveness: performing activities in a manner that best implements strategic priorities at
a minimum cost
The business strategy reflects competitive dimensions:
- Price: make the product or deliver the service cheap, lower price means lower quality
- Quality: make a great product or delivery a great service
- Delivery speed: make the product or deliver the service quickly
- Delivery reliability: deliver it when promised
- Coping with changes in demand: change its volume
- Flexibility and new-product introduction speed: change it
Other product-specific criteria are supportive:
- Technical liaison and support: supplier may be expected to provide technical assistance for product
development
- Meeting a launch date: a firm may be required to coordinate with other firms on a complex project
- Supplier after-sale support: an important competitive dimension may be the ability of a firm to
support its product after the sale
- Environmental impact: this dimension is related to environmental/green criteria
- Other dimensions: these typically include such factors as colors available, size, weight, location of the
fabrication site, customization available, and product mix options
- Competitive dimension: product attributes that attract certain customers, used to form the
competitive position of a firm
- Main competitive dimensions related to product delivery: delivery speed and delivery
reliability
- Characteristics of a product or service that define quality: design quality and process quality
3
, Managers face trade-offs:
- Management must decide which parameters of performance are critical and concentrate resources on
those characteristics
- Low-cost production may not match quickly improving the product quality or producing in a
sustainable way
- Straddling is an alternative: seeking to match a successful competitor while maintaining its existing
position
- It adds features, services, or technology to existing activities, often a risky strategy
Trade-offs require a focus on order qualifiers and order winners:
- Order qualifiers: those dimensions that are necessary for a firm’s products to be considered for
purchase by customers, minimal sets needed
- The features that customers will not forego: determine what product the customer will buy
- Order winners: criteria used by customers to differentiate the products and services of one firm from
those of other firms
- Features that customers use to compare which product to ultimately purchase
Use risk mitigation strategies to confine the impact of disruptive events:
- Activity-system map: the diagram that shows how a company’s strategy is delivered by a set of
supporting activities
- Supply chain risk: the likelihood of disruption that would impact the ability of a company to
continuously supply products or services
- Risk mapping: the assessment of the probability of a negative event against the aggregate severity of
the related loss
- Disruption risks: risks caused by natural or manmade disasters, which are impossible to reliably
predict
4
