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Operations Management and Supply Chain Management

Introduction

 The two disciplines are hopelessly interconnected  Your book talks about them separately but I’ll talk about them together

 Operations Management (transformation – making things)  Supply Chain Management  (movement of things)

Operations Management (Terms 2)

 Value-added - the term used to describe the difference between the cost of inputs and the value of outputs  Materials requirement planning (MRP) systems  Make sure raw materials are available for the manufacturing process  Supply chain – All parties and processes involved in procurement of raw materials and the distribution of finished goods

Operations Management (Terms 3)

 Transportation planning systems track and analyze the movement of goods (raw materials, work in progress, finished goods)  JC Penney

 Distribution management systems manage goods to distribution centers and to retail outlets

 These systems are tightly coupled

OM Business Tasks

 Forecasting

 Capacity planning

 Locating facilities

 Scheduling (and synchronizing)  Raw materials, production, distribution

 Managing inventory

 Quality assurance

SCM / OM Components (Steps)

 Plan  Source (we buy goods used in the means of production)  Make (we transform raw materials into finished goods)  And the time it takes to transform resources (production) or move resources (distribution)  Deliver (We get them where they are going)  Return (Defective / unwanted goods come back to us)

SCM Strategic Goals (Plan)

 The strategic portion of SCM

 Set up a system for managing the entire supply chain  Partners  SCM monitoring

 Wal-Mart and others  Location of distribution centers  UPS package flow systems  Minimize trucks and transportation distances  Refer to the Ford global supply chain initiative docsity.com

OM Strategic Goals (Plan)

 Lower costs for commoditized items

 Improve product or process quality

 MINI, Lays Example

 Optimize delivery speed

 Flexibility in process conversion  MINI example

 CRM

SCM Components (Make)

 Schedule production

 Just-in-time inventory management  We produce assemblies and finished goods  Account for production downtime

 Measure production output

 Account for production variances against expected values

SCM Components(Make)

SCM Components (Deliver)

 The logistics component

 Implementation of effective transportation and distribution systems  Outsource warehousing  Location of distribution centers

 Selection of transportation companies

 Discuss Wal-Mart video docsity.com

SCM Components (Return)

 We use the term reverse logistics

 The system whereby customer can return good they don’t want  Particularly important in the e- commerce world

SCM Success Metrics

Quality Systems

 Six sigma – reduce defects to 3. per million opportunities

 ISO 9000 – Quality assurance standards

 IS 14000 – Environmental best practices

 CMMI – develop best practices