Logistics and SCM
Chapter 1 Introduction to operations management
1.1 Introduction
- Operations is what businesses do, they are processes that either provide services or create goods.
Operations are the core of what a business organization does. Basic functions of business
organizations:
Finance
Operations
Marketing
- Operations management is the planning, scheduling and control of the activities that transform
inputs into finished goods and services.
Operations management is the management of systems or processes that create goods
and/or provide services.
- Operations and supply chains are linked and no business organization could exist without both.
A supply chain is the sequence of activities and organizations involved in producing and
delivering a good or service. The sequence begins with basic suppliers of raw materials and
extends all the way to the final customer.
- The creation of goods or services involves transforming or converting inputs into outputs. Various
inputs (capital, labor and information) are used to create goods/services using one or more
transformation processes.
- Value added = term used to
describe the difference between
the cost of inputs and the price of
outputs. Value can also be logical,
such as branding.
=> To ensure that the desired outputs are obtained, there is feedback whether to
determine corrective action is needed (control).
Typical material processors
= Mining and extraction, food production, assembly, machine construction,…
Typical information processors
= Accountants, bank back offices, market research organization,…
Typical people processors
, = Hairdressers, hotels, hospitals,…
- In non-profit organizations, the value of outputs is their value to society. In profit organizations,
the value of outputs is measured by the prices that customers are willing to pay. Firms use the
money for research and development, investment and profits.
1.2 Production of goods versus delivery of services
Goods are physical items that include raw materials, parts, subassemblies and final products.
The production of goods results in a tangible output, anything that we can see or touch.
Services are activities that provide some combination of time, location, form or psychological
value. Delivery of service generally implies an act.
=> Goods and services often occur jointly but there are some differences that impact the
management of the goods versus management of the services.
Having the oil changed in your car is a service, but the oil that is delivered is a good.
= Occur jointly, but different.
Decision horizon
- Operation management ranges from strategic to tactical and operational levels:
Strategic issues
= Determining the size and location of manufacturing plants, deciding the structure of
service or telecommunications networks and designing technology supply chains.
Tactical issues
= Plant layout and structure, project management methods and equipment selection and
replacement.
Operational issues
= Production scheduling and control, inventory management, quality control and inspection,
traffic and materials handling and equipment maintenance policies.
1.3 Why learn about operations management?
- Finance and operations management personnel cooperate by exchanging
information and expertise in such activities as the following:
*Budgeting
*Economic analysis of investment proposals
*Provision of funds
- Marketing’s focus is on selling and/or promoting the goods or services of
an organization. It’s also responsible for assessing customer wants and
needs and communicating those to operations/design people.
,- One important piece of information marketing needs from operations is the manufacturing or
service lead time in order to give customers realistic estimates of how long it will take to fill their
orders.
Lead time is the time between ordering a good/service and receiving it.
- Operations also interacts with other functional areas of the organization:
- Legal department must be consulted on contracts with
employees, customers, suppliers and transporters as well as on
liability and environmental issues.
- Accounting supplies information to management on costs of
labor, materials, overhead and provide reports on scrap,
downtime and inventories.
- Management information systems is concerned with providing
management with the information it needs to effectively
damage.
- Personnel/human resources is concerned with recruitment
and training of personnel, labor relations,…
- Public relations responsible for building and maintaining a positive public image of the organization.
Chapter 2 Competitiveness, strategy and productivity
2.2 Competitiveness
- Competitiveness is an important factor in determining whether a company prospers, barely gets by
or fails. Business organizations compete through some combination of price, delivery time and
product/service differentiation.
Marketing influences competitiveness in several ways:
*Identifying consumer wants/needs is a basic input in an organization’s decision-
making process and central to competitiveness.
*Price and quality are key factors in consumer buying decisions.
*Advertising and promotion are ways organizations can inform potential customers
about features.
Operations has a major influence on competitiveness through:
*Product and service design
*Cost
*Location
*Quality
*Quick response
*Flexibility
*Inventory management
*Supply chain management
*Service
*Managers and workers
Business strategy sets the terms and goals for a company to follow = long term plan of
action.
Operations strategy = The means by which the firm deploys its resources to achieve its
competitive goals.
Operations management is concerned with implementing the operations strategy.
, Framework for operations strategy
- Strategic dimensions:
Cost
Product differentiation
Quality
Delivery speed
Delivery reliability
Flexibility
=> Operations management is concerned with implementing the operations strategy to achieve
leadership along one or some of these dimensions.
Strategy formulation
- To formulate an effective strategy, managers must take into account the core competencies of
organizations and they must scan the environment. They must determine what competitors are doing
or planning to do and take that into account.
SWOT analysis
= Strengths, weaknesses, opportunities and threats
*Strengths and weaknesses have an internal focus and are typically evaluated by
operations people.
*Threats and opportunities have an external focus and are typically evaluated by
marketing people.
An alternative to SWOT is the five forces model which takes into account the threat of new
competition, the threat of substitute products/services, the bargaining power of customers,
the bargaining power of suppliers and the intensity of competition.
- In formulating a successful strategy, organizations must take into account:
Order qualifiers
= Characteristics that potential customers perceive as minimum standards of acceptability for
a product to be considered for purchase.
Order winners
= Characteristics of an organization’s goods/services that cause them to be perceived as
better than the competition.
=> There are also characteristics that can be qualifiers and winners and a characteristic that was
once a winner may become a qualifier.
- Environmental scanning is the monitoring of events and trends that present either threats or
opportunities for the organization. Another key factor to consider when developing strategies is
technological change, which can present real opportunities and threats to an organization, key
external factors are:
Economic conditions and political conditions
Legal environment
Technology
Competition
Customers
Suppliers
Markets
- Key internal factors are:
Human resources
Facilities and equipment
Financial resources
Products and services
Technology
2.6 Transforming strategy into action: The balanced scorecard
Chapter 1 Introduction to operations management
1.1 Introduction
- Operations is what businesses do, they are processes that either provide services or create goods.
Operations are the core of what a business organization does. Basic functions of business
organizations:
Finance
Operations
Marketing
- Operations management is the planning, scheduling and control of the activities that transform
inputs into finished goods and services.
Operations management is the management of systems or processes that create goods
and/or provide services.
- Operations and supply chains are linked and no business organization could exist without both.
A supply chain is the sequence of activities and organizations involved in producing and
delivering a good or service. The sequence begins with basic suppliers of raw materials and
extends all the way to the final customer.
- The creation of goods or services involves transforming or converting inputs into outputs. Various
inputs (capital, labor and information) are used to create goods/services using one or more
transformation processes.
- Value added = term used to
describe the difference between
the cost of inputs and the price of
outputs. Value can also be logical,
such as branding.
=> To ensure that the desired outputs are obtained, there is feedback whether to
determine corrective action is needed (control).
Typical material processors
= Mining and extraction, food production, assembly, machine construction,…
Typical information processors
= Accountants, bank back offices, market research organization,…
Typical people processors
, = Hairdressers, hotels, hospitals,…
- In non-profit organizations, the value of outputs is their value to society. In profit organizations,
the value of outputs is measured by the prices that customers are willing to pay. Firms use the
money for research and development, investment and profits.
1.2 Production of goods versus delivery of services
Goods are physical items that include raw materials, parts, subassemblies and final products.
The production of goods results in a tangible output, anything that we can see or touch.
Services are activities that provide some combination of time, location, form or psychological
value. Delivery of service generally implies an act.
=> Goods and services often occur jointly but there are some differences that impact the
management of the goods versus management of the services.
Having the oil changed in your car is a service, but the oil that is delivered is a good.
= Occur jointly, but different.
Decision horizon
- Operation management ranges from strategic to tactical and operational levels:
Strategic issues
= Determining the size and location of manufacturing plants, deciding the structure of
service or telecommunications networks and designing technology supply chains.
Tactical issues
= Plant layout and structure, project management methods and equipment selection and
replacement.
Operational issues
= Production scheduling and control, inventory management, quality control and inspection,
traffic and materials handling and equipment maintenance policies.
1.3 Why learn about operations management?
- Finance and operations management personnel cooperate by exchanging
information and expertise in such activities as the following:
*Budgeting
*Economic analysis of investment proposals
*Provision of funds
- Marketing’s focus is on selling and/or promoting the goods or services of
an organization. It’s also responsible for assessing customer wants and
needs and communicating those to operations/design people.
,- One important piece of information marketing needs from operations is the manufacturing or
service lead time in order to give customers realistic estimates of how long it will take to fill their
orders.
Lead time is the time between ordering a good/service and receiving it.
- Operations also interacts with other functional areas of the organization:
- Legal department must be consulted on contracts with
employees, customers, suppliers and transporters as well as on
liability and environmental issues.
- Accounting supplies information to management on costs of
labor, materials, overhead and provide reports on scrap,
downtime and inventories.
- Management information systems is concerned with providing
management with the information it needs to effectively
damage.
- Personnel/human resources is concerned with recruitment
and training of personnel, labor relations,…
- Public relations responsible for building and maintaining a positive public image of the organization.
Chapter 2 Competitiveness, strategy and productivity
2.2 Competitiveness
- Competitiveness is an important factor in determining whether a company prospers, barely gets by
or fails. Business organizations compete through some combination of price, delivery time and
product/service differentiation.
Marketing influences competitiveness in several ways:
*Identifying consumer wants/needs is a basic input in an organization’s decision-
making process and central to competitiveness.
*Price and quality are key factors in consumer buying decisions.
*Advertising and promotion are ways organizations can inform potential customers
about features.
Operations has a major influence on competitiveness through:
*Product and service design
*Cost
*Location
*Quality
*Quick response
*Flexibility
*Inventory management
*Supply chain management
*Service
*Managers and workers
Business strategy sets the terms and goals for a company to follow = long term plan of
action.
Operations strategy = The means by which the firm deploys its resources to achieve its
competitive goals.
Operations management is concerned with implementing the operations strategy.
, Framework for operations strategy
- Strategic dimensions:
Cost
Product differentiation
Quality
Delivery speed
Delivery reliability
Flexibility
=> Operations management is concerned with implementing the operations strategy to achieve
leadership along one or some of these dimensions.
Strategy formulation
- To formulate an effective strategy, managers must take into account the core competencies of
organizations and they must scan the environment. They must determine what competitors are doing
or planning to do and take that into account.
SWOT analysis
= Strengths, weaknesses, opportunities and threats
*Strengths and weaknesses have an internal focus and are typically evaluated by
operations people.
*Threats and opportunities have an external focus and are typically evaluated by
marketing people.
An alternative to SWOT is the five forces model which takes into account the threat of new
competition, the threat of substitute products/services, the bargaining power of customers,
the bargaining power of suppliers and the intensity of competition.
- In formulating a successful strategy, organizations must take into account:
Order qualifiers
= Characteristics that potential customers perceive as minimum standards of acceptability for
a product to be considered for purchase.
Order winners
= Characteristics of an organization’s goods/services that cause them to be perceived as
better than the competition.
=> There are also characteristics that can be qualifiers and winners and a characteristic that was
once a winner may become a qualifier.
- Environmental scanning is the monitoring of events and trends that present either threats or
opportunities for the organization. Another key factor to consider when developing strategies is
technological change, which can present real opportunities and threats to an organization, key
external factors are:
Economic conditions and political conditions
Legal environment
Technology
Competition
Customers
Suppliers
Markets
- Key internal factors are:
Human resources
Facilities and equipment
Financial resources
Products and services
Technology
2.6 Transforming strategy into action: The balanced scorecard
