Supply Chain Management: Chapter 1 - Introduction
Product-service bundling
When a firm builds service activities into its product offerings to create additional value for the customer
Benchmarking
When one company studies the processes of another company to identify best practices
Typical jobs in OSCM
-Plant manager -Hospital administrator -Branch manager (bank) -Department store manager -Call center manager -Supply chain manager -Purchasing manager -Logistics manager -Warehouse/distribution manager -Business process improvement analyst -Quality control manager -Lean improvement manager -Project manager -Production control analyst -Facilities manager
Current Issues in Operations and Supply Chain Management
1. Coordinating the relationships between mutually supportive but separate organizations. 2. Optimizing global supplier, production, and distribution networks. 3. Managing customer touch points 4. Raising senior management awareness of OSCM as a significant competitive weapon.
Categorizing Operations and Supply Chain Processes
1. Planning 2. Sourcing 3. Making 4. Delivering 5. Returning
Triple Bottom Line
A business strategy that includes social, economic, and environmental criteria
Total Quality Management (TQM)
A major development in the late 1980s and 1990s. Helping the quality movement along was the Baldrige National Quality Award, started in 1987 under the direction of the National Institute of Standards and Technology. The Baldrige Award recognizes companies each year for outstanding quality management systems. The ISO 9000 certification standards, created by the International Organization for Standardization, now play a major role in setting quality standards for global manufacturers.
Supply Network
A pipeline through which material and information flow
Efficiency
A ratio of the actual output of a process relative to some standard. Also, being "efficient" means doing something at the lowest possible cost
Six sigma
A statistical term to describe the quality goal of no more than 3.4 defects out of every million units. Also refers to a quality improvement philosophy and program
Total Quality Control (TQC)
Aggressively seeks to eliminate causes of product defects
Goods-services Continuum
Almost any product offering is a combination of goods and services. Pure goods industries have become low-margin commodity businesses, and in order to differentiate, they are often adding some services.
Business Process Reengineering (BPR)
An approach to improving business processes that seeks to make revolutionary changes as opposed to evolutionary (small) changes
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
Receivable turnover
Annual Credit Sales / Average Account Receivable Measures a company's efficiency in collecting its sales on credit.
Managing customer touch points
As companies strive to cut costs, they often scrimp on the customer support personnel (and training) required to effectively staff service departments, help lines, and checkout counters. This leads to the frustrations we have all experienced, such as being placed in call center limbo seemingly for hours, getting bad advice when finally interacting with a company rep, and so on. The issue here is to recognize that making resource utilization decisions must capture the implicit costs of lost customers as well as the direct costs of staffing.
Implicit services
Attitude of the servers, atmosphere, waiting time, status, privacy and security, and convenience
Operations and Supply Chain Management
Concerned with the management of the entire system that produces a product or delivers a service. Involves specialists in product design, purchasing, manufacturing, service operations, logistics, and distribution.
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 is is efficient and delivers high quality and value to customers
Inventory Turnover
Cost of goods sold / Average Inventory Value Measures the average number of times inventory is sold and replaced during the fiscal year.
Effectiveness
Doing the things that will create the most value for the customer
Triple Bottom Line
Economically, the firm must be profitable. Employee job security, positive working conditions, and development opportunities are essential. The need for nonpolluting and non-resource-depleting products and processes presents new challenges to operations and supply managers
Manufacturing Strategy
Emphasizes how a factory's capabilities could be used strategically to gain advantage over a competing company.
Differences between services and goods
Five essential differences between services and goods: 1. 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 2. Service requires some degree of interaction with the customer for it to be a service. It may be brief, but it must exist for the service to be complete 3. Services and information technologies are inherently heterogeneous—they vary from day to day and even hour to hour as a function of the attitudes of the customers and the servers. 4. 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 day on campus 5. The specifications of a service are defined and evaluated as a package of features that affect the five senses. These four features are: -Supporting facility -Facilitating goods -Explicit services -Implicit services
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 required for after-sales support
Sourcing
Involves the selection of suppliers that will deliver the goods and services needed to create the firm's products. A set of pricing, delivery, and payment processes are needed, along with metrics for monitoring and improving the relationships between partners of the firm. These processes include receiving shipment, verifying them, transferring them to manufacturing facilities, and authorizing supplier payments.
lean manufacturing
Just-in-time (JIT) and total quality control (TQC) coupled together are now a cornerstone in many manufacturers' production practices, and the term _________ is used to refer to the set of concepts
Supporting facility
Location, decoration, layout, architectural appropriateness, supporting equipment
Total Quality Management (TQM)
Managing the entire organization so it excels in all dimensions of products and services important to the customer
Raising senior management awareness of OSCM as a signification competitive weapon
Many senior executives entered the organization through finance, strategy, or marketing, built their reputations on work in these areas, and as a result often take OSCM for granted. This can be a critical mistake when we realize how profitable companies such as Amazon, Apple, Taco Bell, and Southwest Airlines are. These are companies where executives have creatively used OSCM for competitive advantage
Process
One or more activities that transform inputs into outputs
Distinguishing Operations versus Supply Chain Process
Operations refers to manufacturing and service processes used to transform the resources employed by a firm into products desired by customers. Supply Chain refers to processes that move information and material to and from the manufacturing and service process of the firm. These include logistics processes that physically move product and the warehousing and storage processes that position products for quick delivery to the customer.
Six Sigma Quality
Originally developed in the 1980s as part of total quality management, ___________ in the 1990s saw a dramatic expansion as an extensive set of diagnostic tools was developed. These tools have been taught to managers as part of "Green and Black Belt Programs" at many corporations. The tools are now applied not only to the well-known manufacturing applications, but also to non-manufacturing processes such as accounts receivable, sales, and research and development.
Just-in-time (JIT)
Pioneered by the Japanese, this integrated set of activities was designed to achieve high-volume production using minimal inventories of parts that arrive exactly when they are needed
Coordinating the relationships between mutually supportive but separate organizations
Recently, there has been a dramatic surge in the outsourcing of parts and services as companies seek to minimize costs. Many companies now even outsource major corporate functions, such as information systems, product development and design, engineering services, and distribution. The ability to coordinate these activities is a significant challenge for today's operations and supply chain manager
Delivering
Referred to as logistics processes. 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.
Supply Chain
Refers to providing products and service to plants and warehouses at the input end and also the supply of products and service to the customer on the output end of the supply chain.
"New" Analytics Movement
Takes decision-making to a new level using statistical analysis, forecasting to extrapolate what to expect in the future, and even optimization, possibly in real time, to support decisions
Sustainability
The ability to meet current resource needs without compromising the ability of future generations to meet their needs
Mass customization
The ability to produce a unique product exactly to a particular customer's requirements.
Business Analytics
The analysis of data to better solve business problems. Data has always been used to solve business problems. What is new is the reality that so much more data is now captured and available for decision-making analysis than was available in the past. In addition, mathematical tools are now readily available that can be used to support the decision-making process
Value
The attractiveness of a product relative to its price
What is operations and supply chain management?
The design, operation, and improvement of the systems that create and deliver the firm's primary products and services.
Optimizing global supplier, production, and distribution networks
The implementation of global enterprise resource planning systems, now common in large companies, has challenged managers to use all of this information. Operations and supply chain analytics involves leveraging this information for making decisions related to resources such as inventory, transportation, and production
Business Process Reengineering (BPR)
The need to become lean to remain competitive in the global economic recession in the 1990s pushed companies to seek innovations in the processes by which they run their operations. _____________ does this by taking a fresh look at what the organization is trying to do in all its business processes, and then eliminating non-value-added steps and computerizing the remaining ones to achieve the desired outcome.
Electronic Commerce
The use of Web pages, forms, and interactive search engines has changed the way people collect information, shop, and communicate. It has changed the way operations managers coordinate and execute production and distribution functions.
Business Analytics
The use of current business data to solve business problems using mathematical analysis
Electronic commerce
The use of the Internet as an essential element of business activity
Lean manufacturing
To achieve high customer service with minimum levels of inventory investment
Goal of an efficient process
To produce a good or provide a service by using the smallest input of resources. In general, these resources are the material, labor, equipment, and facilities used in the OSCM processes
Explicit services
Training of service personnel, consistency of service performance, availability and access to the service, and comprehensiveness of the service
Facilitating goods
Variety, consistency, quantity of the physical goods that go with the service; for example, the food items that accompany a meal service
Making
Where the major product is produced or the service provided. The step requires scheduling processes for workers and the coordination of material and other critical resources such as equipment to support producing or providing the service. Metrics that measure speed, quality, and work productivity are used to monitor these processes.
Chief Operating Officer (COO)
Works with the CEO and company president to determine the company's competitive strategy. The COO's ideas are filtered down through the rest of the company. COO's determine an organization's location, its facilities, which vendors to use, and the implementation of the hiring policy.
Asset Turnover
[Revenue (or Sales)] / Total Assets Measures a firm's efficiency at using its assets in generating sales revenue—the higher the number, the better.