Summary
Why Study Operations and Supply Chain Management?
Every organization must make a product or provide a service that someone values.
Most organizations function as part of larger supply chains.
Organizations must carefully manage their operations and supply chains in order to prosper
and, indeed, survive.
Operations Management = The planning, scheduling, and control of the activities that transform
inputs into finished goods and services.
Supply Chain Management = The active management of supply chain activities and relationships in
order to maximize customer value and achieve a sustainable competitive advantage.
Supply Chain = A network of manufacturers and service providers that work together to
create products or services needed by end users. These manufacturers and service providers
are linked together through physical flows, information flows, and monetary flows.
Supply Chain Terminology
Upstream = Activities or firms positioned earlier in the supply chain.
Downstream = Activities or firms positioned later in the supply chain.
First-tier supplier = A supplier that provides products or services directly to a firm.
Second-tier supplier = A supplier that provides products or services to a firm’s first-tier
supplier.
,Supply Chain Operations Reference (SCOR) Model
The SCOR model is a comprehensive model of high-level business processes and detailed individual
processes that together define the scope of supply chain management activity.
Advantages
Gives individuals a common language for discussing and comparing supply chain business
processes.
Provides a template to guide the design and implementation of an organization’s own supply
chain processes.
Seeing the processes laid out in a single, comprehensive model helps some managers better
understand what supply chain is all about.
3 levels of SCOR. Level 1 of the views SCM activities as being structured around five core
management processes:
Plan activities, which seek to balance demand requirements against resources and
communicate these plans to the various participants.
Source activities, which include identifying, developing, and contracting with suppliers and
scheduling the delivery of incoming goods and services. Processes that procure goods and
services to meet planned or actual demand.
Make, or production, activities, which cover the actual production of a good or service.
Processes that transform product to a finished state to meet planned or actual demand.
Deliver, Processes that provide finished goods and services to meet planned or actual
demand. These processes include order management as well as logistics and distribution
activities.
Return, Processes associated with returning or receiving returned products for any reason.
Level 2 break down level 1 activities into more detail.
Level 3 describes in detail the actual steps required to execute level 2 processes.
Different terms
Supply Chain: The overall topic area of transforming and delivering goods OR SERVICES to the
customer. Covers the strategic and day to day levels
Logistics: Transport and storage solutions. Part of the Supply chain
Operations: Similar to Supply Chain Has a sense of immediacy (day-to-day) Often used in job
titles (operations manager, operations director, …)
,A top-down model of strategy
Definitions:
Mission Statement = A statement that explains why an organization exists. It describes what
is important to the organization, called its core values, and identifies the organization’s
domain.
Strategy = A mechanism by which a business’s coordinates its decisions regarding structural
and infrastructural elements.
Strategy:
Business Strategy = The strategy that identifies a firm’s targeted customers and sets time
frames and performance objectives for the business.
o Clearly identify the firm’s targeted customers and broadly indicate what the
operations and supply chain functions need to do to provide value to these
customers.
o Set time frames and performance objectives that managers can use to track the
firm’s progress toward fulfilling its business strategy.
o Identify and support the development of core competencies in the operations and
supply chain areas.
Core Competency = An organizational strength or ability, developed over a long period, that
customers find valuable and competitors find difficult or even impossible to copy.
Functional Strategy = A strategy that translates a business strategy into specific actions for
functional areas such as marketing, human resources, and finance.
, Elements of the business
Structural decision categories / structural elements = tangible resources, such as buildings,
equipment, and computer systems.
Capacity Amount, Type, Timing of capacity changes
Facilities Services/Manufacturing, Warehouses, Distribution hubs
Size, location, degree of specialization
Technology Services/Manufacturing processes, Material handling equipment,
Transportation equipment, Information systems
Infrastructural decision categories / infrastructural elements = include the policies, people, decision
rules, and organizational structure choices made by a firm.
Organization Structure, Control/reward systems, Workforce decisions
Sourcing decisions and purchasing process Sourcing strategies, Supplier selection, Supplier
performance measurement
Planning and control Forecasting, Tactical planning, Inventory management, Production
planning and control
Three primary objectives:
Help management choose the right mix of structural and infrastructural elements based on a
clear understanding of the performance dimensions valued by customers and the trade-offs
involved.
Ensure that the firm’s structural and infrastructural choices are strategically aligned with the
firm’s business strategy.
Support the development of core competencies in the firm’s operations and supply chains.
Four performance dimensions
Quality = the characteristics of a product or service that bear on its ability to satisfy stated or
implied needs.
o Performance Quality – Addresses the basic operating characteristics of a product or
service.
o Conformance Quality – Addresses whether a product was made or a service
performed to specifications.
o Reliability Quality – Addresses whether a product will work for a long time without
failing or requiring maintenance.
Time
o Delivery Speed – How quickly the operations or supply chain function can fulfil a
need once it has been identified.
o Delivery Reliability – The ability to deliver products or services when promised.
Delivery window – The acceptable time range in which deliveries can be
made
Flexibility = considers how quickly operations and supply chains can respond to the unique
needs of customers.
Why Study Operations and Supply Chain Management?
Every organization must make a product or provide a service that someone values.
Most organizations function as part of larger supply chains.
Organizations must carefully manage their operations and supply chains in order to prosper
and, indeed, survive.
Operations Management = The planning, scheduling, and control of the activities that transform
inputs into finished goods and services.
Supply Chain Management = The active management of supply chain activities and relationships in
order to maximize customer value and achieve a sustainable competitive advantage.
Supply Chain = A network of manufacturers and service providers that work together to
create products or services needed by end users. These manufacturers and service providers
are linked together through physical flows, information flows, and monetary flows.
Supply Chain Terminology
Upstream = Activities or firms positioned earlier in the supply chain.
Downstream = Activities or firms positioned later in the supply chain.
First-tier supplier = A supplier that provides products or services directly to a firm.
Second-tier supplier = A supplier that provides products or services to a firm’s first-tier
supplier.
,Supply Chain Operations Reference (SCOR) Model
The SCOR model is a comprehensive model of high-level business processes and detailed individual
processes that together define the scope of supply chain management activity.
Advantages
Gives individuals a common language for discussing and comparing supply chain business
processes.
Provides a template to guide the design and implementation of an organization’s own supply
chain processes.
Seeing the processes laid out in a single, comprehensive model helps some managers better
understand what supply chain is all about.
3 levels of SCOR. Level 1 of the views SCM activities as being structured around five core
management processes:
Plan activities, which seek to balance demand requirements against resources and
communicate these plans to the various participants.
Source activities, which include identifying, developing, and contracting with suppliers and
scheduling the delivery of incoming goods and services. Processes that procure goods and
services to meet planned or actual demand.
Make, or production, activities, which cover the actual production of a good or service.
Processes that transform product to a finished state to meet planned or actual demand.
Deliver, Processes that provide finished goods and services to meet planned or actual
demand. These processes include order management as well as logistics and distribution
activities.
Return, Processes associated with returning or receiving returned products for any reason.
Level 2 break down level 1 activities into more detail.
Level 3 describes in detail the actual steps required to execute level 2 processes.
Different terms
Supply Chain: The overall topic area of transforming and delivering goods OR SERVICES to the
customer. Covers the strategic and day to day levels
Logistics: Transport and storage solutions. Part of the Supply chain
Operations: Similar to Supply Chain Has a sense of immediacy (day-to-day) Often used in job
titles (operations manager, operations director, …)
,A top-down model of strategy
Definitions:
Mission Statement = A statement that explains why an organization exists. It describes what
is important to the organization, called its core values, and identifies the organization’s
domain.
Strategy = A mechanism by which a business’s coordinates its decisions regarding structural
and infrastructural elements.
Strategy:
Business Strategy = The strategy that identifies a firm’s targeted customers and sets time
frames and performance objectives for the business.
o Clearly identify the firm’s targeted customers and broadly indicate what the
operations and supply chain functions need to do to provide value to these
customers.
o Set time frames and performance objectives that managers can use to track the
firm’s progress toward fulfilling its business strategy.
o Identify and support the development of core competencies in the operations and
supply chain areas.
Core Competency = An organizational strength or ability, developed over a long period, that
customers find valuable and competitors find difficult or even impossible to copy.
Functional Strategy = A strategy that translates a business strategy into specific actions for
functional areas such as marketing, human resources, and finance.
, Elements of the business
Structural decision categories / structural elements = tangible resources, such as buildings,
equipment, and computer systems.
Capacity Amount, Type, Timing of capacity changes
Facilities Services/Manufacturing, Warehouses, Distribution hubs
Size, location, degree of specialization
Technology Services/Manufacturing processes, Material handling equipment,
Transportation equipment, Information systems
Infrastructural decision categories / infrastructural elements = include the policies, people, decision
rules, and organizational structure choices made by a firm.
Organization Structure, Control/reward systems, Workforce decisions
Sourcing decisions and purchasing process Sourcing strategies, Supplier selection, Supplier
performance measurement
Planning and control Forecasting, Tactical planning, Inventory management, Production
planning and control
Three primary objectives:
Help management choose the right mix of structural and infrastructural elements based on a
clear understanding of the performance dimensions valued by customers and the trade-offs
involved.
Ensure that the firm’s structural and infrastructural choices are strategically aligned with the
firm’s business strategy.
Support the development of core competencies in the firm’s operations and supply chains.
Four performance dimensions
Quality = the characteristics of a product or service that bear on its ability to satisfy stated or
implied needs.
o Performance Quality – Addresses the basic operating characteristics of a product or
service.
o Conformance Quality – Addresses whether a product was made or a service
performed to specifications.
o Reliability Quality – Addresses whether a product will work for a long time without
failing or requiring maintenance.
Time
o Delivery Speed – How quickly the operations or supply chain function can fulfil a
need once it has been identified.
o Delivery Reliability – The ability to deliver products or services when promised.
Delivery window – The acceptable time range in which deliveries can be
made
Flexibility = considers how quickly operations and supply chains can respond to the unique
needs of customers.
