Operations & Supply Chain Management
Week 1 - Demand & Procurement
12.1 Why Study Operations And Supply Chain Management?
1. Every organization produces value:
Organizations exist to provide products or services that someone values.Operations are
the people, technology, and systems responsible for delivering these products or
services.Applies to both profit and non-profit organizations (e.g., manufacturers, software
firms, charities, government agencies).
2. Organizations are part of larger supply chains:
A supply chain is a network of manufacturers and service providers working together to
deliver products or services to end users.
Supply chains involve: Physical flows: movement of goods. Information flows: orders,
forecasts, tracking. Monetary flows: payments and financial transactions
3. Effective operations and supply chain management are critical to survival:
Decisions in operations include production quantity, equipment, skills, plant location.
Supply chain decisions include supplier selection, transportation, and delivery.
Right decisions → higher profits and market share; wrong decisions → losses or failure.
Operations Management = Planning, scheduling, and controlling activities that transform
inputs into outputs (goods/services).
Supply Chain Management (SCM) = Active management of supply chain activities and
relationships to maximize customer value and achieve a sustainable competitive advantage.
Managing the entire chain from raw materials to customer delivery.
SCM extends beyond a single company to include suppliers, distributors, and customers.
Upstream: activities or firms earlier in the supply chain (e.g., raw material suppliers)
Downstream: activities or firms later in the supply chain (e.g., distributors, retailers_
First-tier supplier: directly supplies to the company
Second-tier supplier: supplies to the first-tier supplier
SCOR Model (Supply Chain Operations Reference): SCM activities are divided into five
areas:
1. Plan: balance demand with resources and communicate plans
2. Source: identify and manage suppliers
3. Make: production of goods/services
4. Deliver: order fulfillment, storage, and transportation
5. Return: manage defective or excess products
,13.1 Elements of the business
Structural element =One of two major decision categories addressed by a strategy. Includes
tangible resources, such as buildings, equipment, and computer systems.
Infrastructural element = One of two major decision categories addressed by a strategy.
Includes the policies, people, decision rules, and organizational structure choices made by a
firm.
13.2 Strategy
Strategy = A mechanism by which a business coordinates its decisions regarding structural and
infrastructural elements.
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.
Business strategy = The strategy that identifies a firm’s targeted customers and sets time
frames and performance objectives for the business.
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. Functional strategies should
align with the overall business strategy and with each other.
13.3 Operations And Supply Chain Strategies
Operations and supply chain strategy = A functional strategy that indicates how structural
and infrastructural elements within the operations and supply chain areas will be acquired and
developed to support the overall business strategy.
17.1 Forecast types
Demand and planning
Demand
The quantity demand refers to the quantity of a good or service that households are willing and
able to purchase at a particular price. = Demand is the amount of a product or service that
customers want to buy at a certain time.
Planning activities
Planning activities are the tasks a company performs to prepare for future demand and make
sure it has the right products at the right time.
They include:
Demand planning – predicting future customer demand
Supply planning – deciding how to produce or buy what is needed
,A forecast is a prediction of future demand based on: past sales data, Market trends,
Seasonality, Promotions, Customer behavior, Economic factors
Supply Forecasts = Predicts availability of inputs needed for production.
Price Forecasts = Estimate future costs of materials or services to plan purchasing strategies.
Demand forecast
A demand forecast estimates how much of a product customers will want during a specific
period. Market-level demand: Total demand in the market Firm-level demand: Portion of
market demand the company expects to capture plus internal demand
Accuracy matters because of:
Inventory Management
Too much stock → high costs, waste/expiration, storage problems
Too little stock → stockouts, lost sales, unhappy customers
Production Scheduling
Accurate forecasts help plan manufacturing capacity efficiently
Financial Planning
Better forecasts = more accurate budgets, cost control, and revenue planning.
Customer Satisfaction
Right products available at the right time → happier customers
Supply Chain Efficiency
Reduces disruptions and improves coordination with suppliers and warehouses.
Demand planning fails
If demand planning is inaccurate, a company can face serious problems across the entire
supply chain:
Inventory problems:
Overstock: Too much inventory → high storage costs, risk of expiration
Stockouts: Not enough inventory → lost sales and missed opportunities
Production Issues
Factories may be overloaded or underutilized
Emergency production may be needed → more expensive
Financial Impact
Higher costs for storage, rush shipping, and last-minute purchasing
Cash flow problems because money is stuck in unsold goods
Worse overall financial performance
, Customer Impact
Poor service levels, Late deliveries, Unhappy customers, Lost market share
Supply Chain Problems
Suppliers cannot adjust in time, Disruptions in material flow, Higher procurement costs due to
urgent orders
Bad demand planning = higher costs, lower profits, unhappy customers, and a weaker supply
chain.
17.3 Selecting A Forecasting Method
Qualitative forecasting techniques = Forecasting techniques based on intuition or informed
opinion. These techniques are used when data are scarce, not available, or irrelevant.
Quantitative forecasting models = forecasting models that use measurable, historical data to
generate forecasts.
Market survey = A structured questionnaire submitted to potential customers, often to gauge
potential demand.
17.4 Qualitative Forecasting Methods
Panel consensus forecasting = A qualitative forecasting technique that brings experts
together to discuss and develop a forecast.
Delphi method = A qualitative forecasting technique in which experts work individually to
develop forecasts. The individual forecasts are shared among the group, and then each
participant is allowed to modify his or her forecast based on information from the other experts.
This process is repeated until consensus is reached.
Life cycle analogy method = A qualitative forecasting technique that attempts to identify the
time frames and demand levels for the introduction, growth, maturity, and decline life cycle
stages of a new product or service.
Build-up forecast = A qualitative forecasting technique in which individuals familiar with
specific market segments estimate the demand within these segments. These individual
forecasts are then added up to get an overall forecast.
17.6 Causal Forecasting Models
Causal forecasting model = A class of quantitative forecasting models in which the forecast is
modeled as a function of something other than time.
Week 1 - Demand & Procurement
12.1 Why Study Operations And Supply Chain Management?
1. Every organization produces value:
Organizations exist to provide products or services that someone values.Operations are
the people, technology, and systems responsible for delivering these products or
services.Applies to both profit and non-profit organizations (e.g., manufacturers, software
firms, charities, government agencies).
2. Organizations are part of larger supply chains:
A supply chain is a network of manufacturers and service providers working together to
deliver products or services to end users.
Supply chains involve: Physical flows: movement of goods. Information flows: orders,
forecasts, tracking. Monetary flows: payments and financial transactions
3. Effective operations and supply chain management are critical to survival:
Decisions in operations include production quantity, equipment, skills, plant location.
Supply chain decisions include supplier selection, transportation, and delivery.
Right decisions → higher profits and market share; wrong decisions → losses or failure.
Operations Management = Planning, scheduling, and controlling activities that transform
inputs into outputs (goods/services).
Supply Chain Management (SCM) = Active management of supply chain activities and
relationships to maximize customer value and achieve a sustainable competitive advantage.
Managing the entire chain from raw materials to customer delivery.
SCM extends beyond a single company to include suppliers, distributors, and customers.
Upstream: activities or firms earlier in the supply chain (e.g., raw material suppliers)
Downstream: activities or firms later in the supply chain (e.g., distributors, retailers_
First-tier supplier: directly supplies to the company
Second-tier supplier: supplies to the first-tier supplier
SCOR Model (Supply Chain Operations Reference): SCM activities are divided into five
areas:
1. Plan: balance demand with resources and communicate plans
2. Source: identify and manage suppliers
3. Make: production of goods/services
4. Deliver: order fulfillment, storage, and transportation
5. Return: manage defective or excess products
,13.1 Elements of the business
Structural element =One of two major decision categories addressed by a strategy. Includes
tangible resources, such as buildings, equipment, and computer systems.
Infrastructural element = One of two major decision categories addressed by a strategy.
Includes the policies, people, decision rules, and organizational structure choices made by a
firm.
13.2 Strategy
Strategy = A mechanism by which a business coordinates its decisions regarding structural and
infrastructural elements.
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.
Business strategy = The strategy that identifies a firm’s targeted customers and sets time
frames and performance objectives for the business.
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. Functional strategies should
align with the overall business strategy and with each other.
13.3 Operations And Supply Chain Strategies
Operations and supply chain strategy = A functional strategy that indicates how structural
and infrastructural elements within the operations and supply chain areas will be acquired and
developed to support the overall business strategy.
17.1 Forecast types
Demand and planning
Demand
The quantity demand refers to the quantity of a good or service that households are willing and
able to purchase at a particular price. = Demand is the amount of a product or service that
customers want to buy at a certain time.
Planning activities
Planning activities are the tasks a company performs to prepare for future demand and make
sure it has the right products at the right time.
They include:
Demand planning – predicting future customer demand
Supply planning – deciding how to produce or buy what is needed
,A forecast is a prediction of future demand based on: past sales data, Market trends,
Seasonality, Promotions, Customer behavior, Economic factors
Supply Forecasts = Predicts availability of inputs needed for production.
Price Forecasts = Estimate future costs of materials or services to plan purchasing strategies.
Demand forecast
A demand forecast estimates how much of a product customers will want during a specific
period. Market-level demand: Total demand in the market Firm-level demand: Portion of
market demand the company expects to capture plus internal demand
Accuracy matters because of:
Inventory Management
Too much stock → high costs, waste/expiration, storage problems
Too little stock → stockouts, lost sales, unhappy customers
Production Scheduling
Accurate forecasts help plan manufacturing capacity efficiently
Financial Planning
Better forecasts = more accurate budgets, cost control, and revenue planning.
Customer Satisfaction
Right products available at the right time → happier customers
Supply Chain Efficiency
Reduces disruptions and improves coordination with suppliers and warehouses.
Demand planning fails
If demand planning is inaccurate, a company can face serious problems across the entire
supply chain:
Inventory problems:
Overstock: Too much inventory → high storage costs, risk of expiration
Stockouts: Not enough inventory → lost sales and missed opportunities
Production Issues
Factories may be overloaded or underutilized
Emergency production may be needed → more expensive
Financial Impact
Higher costs for storage, rush shipping, and last-minute purchasing
Cash flow problems because money is stuck in unsold goods
Worse overall financial performance
, Customer Impact
Poor service levels, Late deliveries, Unhappy customers, Lost market share
Supply Chain Problems
Suppliers cannot adjust in time, Disruptions in material flow, Higher procurement costs due to
urgent orders
Bad demand planning = higher costs, lower profits, unhappy customers, and a weaker supply
chain.
17.3 Selecting A Forecasting Method
Qualitative forecasting techniques = Forecasting techniques based on intuition or informed
opinion. These techniques are used when data are scarce, not available, or irrelevant.
Quantitative forecasting models = forecasting models that use measurable, historical data to
generate forecasts.
Market survey = A structured questionnaire submitted to potential customers, often to gauge
potential demand.
17.4 Qualitative Forecasting Methods
Panel consensus forecasting = A qualitative forecasting technique that brings experts
together to discuss and develop a forecast.
Delphi method = A qualitative forecasting technique in which experts work individually to
develop forecasts. The individual forecasts are shared among the group, and then each
participant is allowed to modify his or her forecast based on information from the other experts.
This process is repeated until consensus is reached.
Life cycle analogy method = A qualitative forecasting technique that attempts to identify the
time frames and demand levels for the introduction, growth, maturity, and decline life cycle
stages of a new product or service.
Build-up forecast = A qualitative forecasting technique in which individuals familiar with
specific market segments estimate the demand within these segments. These individual
forecasts are then added up to get an overall forecast.
17.6 Causal Forecasting Models
Causal forecasting model = A class of quantitative forecasting models in which the forecast is
modeled as a function of something other than time.
