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Introduction to

ManagingOperations

Across the

Supply Chain

CHAPTER ONE

McGraw-Hill/Irwin Copyri ght 2011 by the McGraw-H il l Companies, Inc. Al l r ights reserved.

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1. Explain operations management and its role inbusinesses and society

2. Describe operations decisions managers must make

3. Explain the role of processes and process thinking

4. Explain supply chain and viewing operations from a

supply chain perspective

5. Identify operations management partners and groupsthat work together

6. Define operational activities across the supply chain

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Objectives

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Definitions

Operation s Management (OM):is the managementof processes used to design, supply, produce, and

deliver valuable goods and services to customers

Supply Chain (SC):the global network oforganizations and activities involved in designing,

transforming, consuming and disposing of goods

and services.

Supply Chain Management (SCM):is management

of the processes and relationships in a supply chain

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Why study OM and SCM?

OM involves using resources and managingorganizational relationships

When done well, effective OM and SCM can:

Use resources more efficiently

Improve business processes effectiveness

Improve relationships between business entities

Help meet strategic goals

Increase customer service

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SCM Decisions

Whatneeds to be done to give customers whatthey want?

Howare we going to do what we need to do,

and measure our performance?

Whenshould activities be carried out?

Whereshould activities occur?

Whoshould do the activities?

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Characteristics of Goods and Services

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Tangible

Can be inventoried

Little customer contact

Long lead time

Often capital-intensive

Quality easily assured

Material is transformed

Intangible

Cannot be inventoried

Extensive customer contact

Short lead time

Often labor intensive

Quality harder to assess

Information or customer is

transformed

Goods Services

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OM is a process oriented discipline

Aprocess

is a system of activities that transformsinputs into valuable outputs.

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Inputs Transformation Outputs

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From OM to SCM

Changes in the following have moved usfrom an OM to a SCM focus:

Technology and Infrastructure:especially in

communications and transportation

Barr iers to trade: shifting economies, governmental

control and societal expectations

Core capabil i t ies: organizations focusing on their

unique skills that create competitive advantage

Collabo rat ive netwo rks: greater influence of, and

reliance upon, business partners

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OM Partners

Customersuse or consume output

Suppl iersprovide inputs

Stakeholdershave an interest in organizationalwell being and performance

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SC Partners and Functional Activities

The Business Enterprise

Resource and

Technology Suppliers

Product and

Service

Suppliers

Customers

and

Partners

Internal

Operations

Mgmt

Customer

Mgmt

(Chapter 9)

Logistics Mgmt

(Chapter 11)

Supply

Mgmt

(Chapter 10) SupplyMgmt

Upstream

Supply Mgmt Finance

Logistics Mgmt

Warehousing/RM planning

Downstream

Marketing Sales & Distribution

Customer Service

Logistics Mgmt

Warehousing/FGI planning

Figure 1-2110

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OM Relationships

Customer Management: interfaces withcustomers and order processing and fulfillment

Supp ly Management: processes to identify,

acquire and administer inputs

Logis t ics Management: movement of materials

and information within, into and out of the firm

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Supply Chain Network Example

FinancialUnderwriters

Screen Writers

Talent

Agencies

Film Maker /

Producer

Costume

Supplier

Resources and Technology Supply Chain

Props

Supplier

Equipment

Supplier

Casting

Company

Director

Raw Materials

Suppliers

Chemical Dye

Manufacturer

Wood PulpSupplier

Cellulose AcetateManufacturer

Film

Manufacturer

Stock Film

Wholesaler

DVD

Sales/Rentals

Theaters

DistributorsProduction

Company

Product Supply Chain

Tier 4 Tier 3 Tier 2 Tier 1 Echelon 1 Echelon 2

Upstream Product Supply Chain Downstream Product Supply Chain

Figure 1-3

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Levels of Planning

Strategic Plann ing: long term decisionsdefining the objectives and capabilities

Tact ical Plann ing: intermediate term decisions

defining how capacity is used to meet demand

Operat ional Plann ing: short term priorities andschedules for resource allocation

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SC Planning Activities

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Supply Production Order/Service Fulfillment

Operational

Tactical

Strategic

Planning

Planning

Planning

Product/Process Innovation

(Chapter 4)

Operations and Supply Chain Strategy

(Chapter 2)

Aggregate Sales & Operations Planning (SOP)

(Chapter 13)

Independent Demand Inventory Management

(Chapter 14)

Materials and Resources Requirements Planning

(Chapter 4)

Materials Production/Capacity Distribution

Product/Process Innovation

(Chapter 4)

DemandPlanning

(Chapter12)

Figure 1-4

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1. Operations helps deliver superior products to a firm's

targeted customers.

2. Operations manages inputs through transformation

processes into outputs. OM systems include customer

relationship management, internal OM, supply

management and logistics.

3. OMs partners include customers, suppliers, stakeholders

and other business functions within the firm.

4. OM decisions determine firm capabilities and success5. OM is managing processes, SCM is managing flow and

relationships

6. OM is dynamic

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Introduction to Operations Management Summary