Oscm ch.1

Asset Turnover

revenue (or sales)/ total assets

Cash conversion cycle

Days sales outstanding + Days inventory? Payable period

Effectiveness

Doing the right things to create the most value for the customers

Value

The attractiveness of a product relative to its price.

5 differences between services and goods

There are five essential differences between services and goods. The first is that a service is an intangible process that cannot be weighed or measured, whereas a good is a tangible output of a process that has physical dimensions. This distinction has important business implications since a service innovation, unlike a product innovation, cannot be patented. Thus, a company with a new concept must expand rapidly before competitors copy its procedures. Service intangibility also presents a problem for customers since, unlike with a physical product, customers cannot try it out and test it before purchase. page 8 The second is that a service requires some degree of interaction with the customer for it to be a service. The interaction may be brief, but it must exist for the service to be complete. Where face-to-face service is required, the service facility must be designed to handle the customer's presence. Goods, on the other hand, are generally produced in a facility separate from the customer. They can be made according to a production schedule that is efficient for the company. The third is that services, with the big exception of hard technologies such as automated teller machines (ATMs) and information technologies such as answering machines and automated Internet exchanges, are inherently heterogeneous—they vary from day to day and even hour by hour as a function of the attitudes of the customers and the servers. Thus, even highly scripted work, such as found in call centers, can produce unpredictable outcomes. Goods, in contrast, can be produced to meet very tight specifications day-in and day-out with essentially zero variability. In those cases where a defective good is produced, it can be reworked or scrapped. The fourth is that services as a process are perishable and time dependent, and unlike goods, they can't be stored. You cannot "come back last week" for an air flight or a day on campus. And fifth, the specifications of a service are defined and evaluated as a package of features that affect the five senses. These features relate to the location, decoration, and layout of the facility where the service is housed, for example. Other features are the training and attitude of employees, and the consistency of service performance. Such attributes as speed, privacy, and security are other features that define a service.

Product-servicing bundling

When a firm builds service activities into its product offerings to create additional value for the customer.

delivering

also referred to as a logistics process. Carriers are picked to move products to warehouses and customers, coordinate and schedule the movement of goods and information through the supply network, develop and operate a network of warehouses, and run the information systems that manage the receipt of orders from customers and the invoicing systems that collect payments from customers.

Receivables Turnover

annual credit sales / average accounts receivable

Cash conversion cycle

can be interpreted as the time it takes a company to convert the money that it spends for raw materials into the profit that it receives for the products that are sold and use those raw materials. The smaller the better for this number of days, but with a caution since having a large payable period might not make the firm very attractive to suppliers. Just like a firm needs to be paid quickly for its products, suppliers desire to be paid as well.

Planning

consists of the processes needed to operate an existing supply chain strategically. Here, a firm must determine how anticipated demand will be met with available resources. A major aspect of planning is developing a set of metrics to monitor the supply chain so that it is efficient and delivers high quality and value to customers.

Inventory Turnover

cost of goods sold/average inventory value

Efficency

doing something at the lowest possible cost

Returning

involves processes for receiving worn-out, defective, and excess products back from customers and support for customers who have problems with delivered products. In the case of services, this may involve all types of follow-up activities that are required for after-sales support.

Sourcing

involves the selection of suppliers that will deliver the goods and services needed to create the firm's product. A set of pricing, delivery, and payment processes are needed together with metrics for monitoring and improving the relationships between partners of the firm. These processes include receiving shipments, verifying them, transferring them to manufacturing facilities, and authorizing supplier payments.

Days Sales Outstanding

is the number of days that it takes for a company to collect cash from customers.

making

is where the major product is produced or the service is provided. The step requires scheduling processes for workers and coordinating material and other critical resources such as the equipment to support producing or providing the service. Metrics that measure speed, quality, and worker productivity are used to monitor these processes.

Payables Period

measure indicates how quickly suppliers are paid by a company.

process

one or more activities that transform inputs into outputs

supply chain

processes that move information and material to and from the manufacturing and service processes of the firm

OSCM

the design, operation, and improvement of the systems that create and deliver the firm's primary products and services

Days inventory

the number of days' worth of inventory the company holds in operation and supply chain processes. This includes raw material, work-in-process, and finished goods inventory.

Benchmarking

when one company studies the processes of another company to identify best practices