Operation and Supply Chain
Management
Chapter 1
Chapter 1
Definition of operation and supply chain management
Importance of operation and supply chain management for business success
Supply chain processes
Five major differences between services and goods
The Goods-Services Continuum
Product-service bundling
Efficiency, effectiveness, and value
Wall Street analysis of a company
Concepts related to business processes
Effective operation and supply chain management involves the management of the
entire system that produces the primary product or delivers a service, including logistics,
procurement, inventory, and transportation. By optimizing these processes, businesses
can increase efficiency, reduce costs, improve customer satisfaction, and increase
profits, making it a key factor for business success.
Supply chain refers to processes that move information and material to and from the
manufacturing and service processes of the firm.
1. Planning: How to use existing resources to meet expected demand.
Operation and Supply Chain Management 1
, 2. Sourcing: Choosing suppliers to provide goods and services needed to create
company products.
3. Making: The key link in production or service delivery. It requires managing
processes, allocating materials, and critical resources (such as production or
service delivery equipment) to ensure worker productivity.
4. Delivering
5. Returning
Differences between Services and Goods
There are five major differences between services and goods:
1. Services are intangible, while products are tangible.
2. Services require some degree of interaction with the customer to be considered a
service.
3. Services are inherently heterogeneous.
4. Services are perishable and time-dependent. Unlike goods, they cannot be stored.
5. The specifications of a service are defined and evaluated as a package of features
that affect the five senses.
The Goods-Services Continuum
Pure Goods: Food products, chemicals, mining
Core Goods: Appliances, automobiles, data storage systems
Core Services: Hotels, airlines, internet service providers
Pure Services: University, medical, investment
Product-service bundling is a marketing strategy where a company offers a package
that includes both a physical product and a service, often at a discounted price
compared to buying the two separately.
EFFICIENCY, EFFECTIVENESS, AND VALUE
Efficiency
Efficiency means doing something at the lowest possible cost.
Operation and Supply Chain Management 2
, Effectiveness
Effectiveness means doing the right things to create the most value for the customer.
Value
Value refers to the attractiveness of a product relative to its price.
Efficient companies typically shine when demand drops during an economic recession,
as they can often continue to generate profits through a low-cost structure.
How Wall Street Analyzes a Company
Benchmarking is a process in which one company studies the processes of another
company (or industry) to identify best practices. There are several ratios that can be
used to evaluate a company's performance:
The cash conversion cycle, calculated by adding days sales outstanding and days
inventory and subtracting the payable period
Receivables turnover
Inventory turnover
Assets turnover
These ratios represent a company's operating efficiency and its profitability.
Operation and Supply Chain Management 3
, There are several concepts related to business processes that are used in Wall Street
analysis:
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.
Total quality control (TQC): Aggressively seeks to eliminate causes of production
defects.
Lean manufacturing: A term used to refer to the set of concepts relating to JIT and
TQC.
Total quality management (TQM): Managing the entire organization so that it excels
on all dimensions of products and services that are important to the customer.
Business process reengineering (BPR): An approach to improving business
processes that seeks to make revolutionary changes as opposed to evolutionary
(small) changes.
Six Sigma: A statistical term to describe the quality goal of no more than 3.4 defects
out of every million units. It also refers to a quality improvement philosophy and
program.
Mass customization: The ability to produce a unique product exactly to a particular
customer's requirements.
Electronic commerce: The use of the Internet as an essential element of business
activity.
Sustainability: 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.
Operation and Supply Chain Management 4
Management
Chapter 1
Chapter 1
Definition of operation and supply chain management
Importance of operation and supply chain management for business success
Supply chain processes
Five major differences between services and goods
The Goods-Services Continuum
Product-service bundling
Efficiency, effectiveness, and value
Wall Street analysis of a company
Concepts related to business processes
Effective operation and supply chain management involves the management of the
entire system that produces the primary product or delivers a service, including logistics,
procurement, inventory, and transportation. By optimizing these processes, businesses
can increase efficiency, reduce costs, improve customer satisfaction, and increase
profits, making it a key factor for business success.
Supply chain refers to processes that move information and material to and from the
manufacturing and service processes of the firm.
1. Planning: How to use existing resources to meet expected demand.
Operation and Supply Chain Management 1
, 2. Sourcing: Choosing suppliers to provide goods and services needed to create
company products.
3. Making: The key link in production or service delivery. It requires managing
processes, allocating materials, and critical resources (such as production or
service delivery equipment) to ensure worker productivity.
4. Delivering
5. Returning
Differences between Services and Goods
There are five major differences between services and goods:
1. Services are intangible, while products are tangible.
2. Services require some degree of interaction with the customer to be considered a
service.
3. Services are inherently heterogeneous.
4. Services are perishable and time-dependent. Unlike goods, they cannot be stored.
5. The specifications of a service are defined and evaluated as a package of features
that affect the five senses.
The Goods-Services Continuum
Pure Goods: Food products, chemicals, mining
Core Goods: Appliances, automobiles, data storage systems
Core Services: Hotels, airlines, internet service providers
Pure Services: University, medical, investment
Product-service bundling is a marketing strategy where a company offers a package
that includes both a physical product and a service, often at a discounted price
compared to buying the two separately.
EFFICIENCY, EFFECTIVENESS, AND VALUE
Efficiency
Efficiency means doing something at the lowest possible cost.
Operation and Supply Chain Management 2
, Effectiveness
Effectiveness means doing the right things to create the most value for the customer.
Value
Value refers to the attractiveness of a product relative to its price.
Efficient companies typically shine when demand drops during an economic recession,
as they can often continue to generate profits through a low-cost structure.
How Wall Street Analyzes a Company
Benchmarking is a process in which one company studies the processes of another
company (or industry) to identify best practices. There are several ratios that can be
used to evaluate a company's performance:
The cash conversion cycle, calculated by adding days sales outstanding and days
inventory and subtracting the payable period
Receivables turnover
Inventory turnover
Assets turnover
These ratios represent a company's operating efficiency and its profitability.
Operation and Supply Chain Management 3
, There are several concepts related to business processes that are used in Wall Street
analysis:
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.
Total quality control (TQC): Aggressively seeks to eliminate causes of production
defects.
Lean manufacturing: A term used to refer to the set of concepts relating to JIT and
TQC.
Total quality management (TQM): Managing the entire organization so that it excels
on all dimensions of products and services that are important to the customer.
Business process reengineering (BPR): An approach to improving business
processes that seeks to make revolutionary changes as opposed to evolutionary
(small) changes.
Six Sigma: A statistical term to describe the quality goal of no more than 3.4 defects
out of every million units. It also refers to a quality improvement philosophy and
program.
Mass customization: The ability to produce a unique product exactly to a particular
customer's requirements.
Electronic commerce: The use of the Internet as an essential element of business
activity.
Sustainability: 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.
Operation and Supply Chain Management 4
