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Preparatory Session on

Operations & Supply Chain

By Opera : The Operations Club of SJMSOM, IIT Bombay

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What is Operations Management?

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Operations Management

• Operations management refers to the administration of business practices to

create the highest level of efficiency possible within an organization. It is
concerned with converting materials and labor into goods and services as
efficiently as possible to maximize the profit of an organization
• Operations management is chiefly concerned with planning, organizing and
supervising in the contexts of production, manufacturing or the provision of
services. As such, it is delivery-focused, ensuring that an organization successfully
turns inputs to outputs in an efficient manner. The inputs themselves could
represent anything from materials, equipment and technology to human
resources such as staff or workers.

Understood? Lets Make it Simple

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Operations Management

Management of Processes that transform Inputs into Goods and Services that add Value to the Customer

Customer Supplier Competitors
Regulations Economy Technology
Capital Outputs
Materials Goods Services
Facilities Manufacturing/Transformation System
Knowledge Action Data
Action Data
Monitoring and Control

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Four Vs of Operations
Low High

Aerospace Industry, Heart

Television Factory, Fast Food
Surgery Volume Restaurant

Financial Audits, University

Variety University Courses,
Department store

Bakery, Trucking Operations Metro Service, Electricity

Variation in Demand

Manufacturing Companies
Visibility Restaurant, Health Care

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Types of Manufacturing System

Construction Projects, Developing

Project Process a software package

Specialty machine shop, Guitar

Job shop Process manufacturing

Batch Process Production of electronic instruments

Car Production,

Flow Process Steel, beer bottling plant

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Mass/Line Process
Job shop Process

Batch Process
Project Process

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What is Facility Layout ?

•Location or arrangement of everything within & around buildings.

•Planning for the physical arrangement of transforming resources

of the operation,
i.e., location of
-Machines-utilities -internal walls
-employee workstations -aisles -restrooms Basic Layout Types
-customer service areas -lunchrooms -offices 1. Fixed Position
-material storage areas -computer rooms 2. Product
etc. within the building. 3. Process
4. Cellular

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Demand Forecasting

What is Forecasting?
Process of predicting a future event based on historical data
Educated Guessing
Underlying basis of
all business decisions

A demand forecast is the prediction of what will happen to your company's existing product sales. It would be
best to determine the demand forecast using a multi-functional approach. The inputs from sales and
marketing, finance, and production should be considered.

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Strategies to respond to
Demand -
MTS (Make to Stock)
ATO (Assemble to
MTO (Make to Order)
ETO (Engineer to Order)
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Production Planning
Why Plan?

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• Plans are generally based on forecasts
• Extent of reliance on forecasts depends on the planning & control system:

Broad Philosophy of Just-in-Time(JIT) : Be independent of Forecast or avoid stock out or excess stock/Inventory
(Man, Material etc) situation

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Inventory at Successive Stocking Points

Supplier Manufacturing plant Distribution center Retailer

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“Inventory is an idle resource which is usable and has value”

• Stock of items held to meet future demand
• Those stocks or items used to support production ,
supporting activities and customer service

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Bullwhip Effect

The bullwhip effect is a phenomenon observed in

supply chains where the demand variability
increases as one moves up the supply chain from
customers towards to distributors to manufacturers.

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Types of Inventory

Inventory Patterns
• Cycle Inventory
• Safety Inventory
• Seasonal Inventory
• Pipeline Inventory

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Reasons to Hold Inventory….
• Meet random variations in customer demand
• Meet unexpected demand
• Smooth seasonal or cyclical demand
• Take advantage of price discounts
• Protect against price increases

Reasons to Reduce Inventory

• Financial costs to carrying excess inventory
• Risk of damage
• Risk of obsolescence and depreciation
• Large inventories hide operational problems

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Inventory Management

SFN: Movement
a. Slow
b. Fast
c. Non Moving

VED: Criticality
a. Vital
b. Essential
c. Desirable

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Manufacturing (Important Terms)
Cycle Time : Is the average successive time between completions of successive units

Throughput Time: Average time for a unit to move through the (manufacturing process)
Example : 1,000-piece production run takes 5,000 minutes to complete, including set-up
What will be the throughput time?

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Takt Time : The rate at which we need to produce our product in order to satisfy
customer demand

Example : So, if our customer wants 240 toaster ovens and we have 480 minutes to
produce these toaster ovens.
Takt time is 2 minutes per toaster oven (480/240)

Lead Time : A lead time is the latency (delay) between the initiation and execution
of a process.


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Key Terms (Warehousing)

Stock Keeping Units (SKUs): A number or code used to identify each unique product or item
for sale in a store or other business and which can be sold separately from anything else Example
– Two shirts of same brand with same size but different color forms 2 SKUs (WR-SH-SL-GN, WR-

Pallets: Piece of equipment that facilitates mechanical handling of stacked (palletized) goods for
fork-lift trucks

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What is 5S?

Seiri Seiton Seisou Sieketsu Shitsuke

5 S is a workplace organization technique that comprises of 5 steps

1.Sort - the first step in making things cleaned up and organized
2.Set In Order - organize, identify and arrange everything in a work area
3.Shine - regular cleaning and maintenance
4.Standardize - make it easy to maintain - simplify and standardize
5.Sustain -maintaining what has been accomplished

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What is Lean?

Lean - Lean is the systematic approach to identify and eliminate waste, through a
process of continuous improvement, Lean also means Speed
MUDA - Waste
MURA – Variation MURI – Overburden

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What are 7 types of Wastages ?

1. Transportation
2. Inventory
3. Motion
4. Waiting
5. Overproduction
6. Over processing
7. Defects/Rework

Remember: TIM
WOOD is waste
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Six Sigma
(3.4 defects per million)

Six Sigma is a set of tools and techniques/strategies for process improvement originally developed by
Motorola in 1985

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Lets Simplify the Jargons
- Kai: Change, Zen: Good
- Continuous Improvement

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Lets Simplify the Jargons
- Pull Signals
- Two bin system

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Lets Simplify the Jargons
Poka Yoke

Error Proofing

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Lets Simplify the Jargons
Cross Docking

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Lets Simplify the Jargons
Jidoka is one of the two pillars of the Toyota Production
System along with just-in-time.

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Lets Simplify the Jargons
Heijunka (hi-JUNE-kuh) is a Japanese word for leveling. It
is part of the lean methodology of process improvement
that helps organizations match unpredictable customer
demand patterns and eliminate manufacturing waste by
leveling the type and quantity of production output over a
fixed period of time.

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Too many Jargons ?

Lets learn something else ……

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Supply Chain Management
Supply chain management (SCM) is the oversight of materials, information, and finances as
they move in a process from supplier to manufacturer to wholesaler to retailer to consumer.

Operations Management Supply Chain Management

Internal Focus External Focus
Forecasting Sales Sourcing of Raw Materials
Improving Productivity Transporting Materials
Meeting Customer’s Demand Warehousing
Maintaining Quality Standards Delivery at right time
Ensures Products are manufactured according to Control Costs and ensure efficiency from the point of origin
specifications to delivery

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Push Pull Supply Chain
With a Push-based Supply Chain, products are pushed through the channel, from the production side up to the
retailer. The manufacturer sets production at a level in accord with historical ordering patterns from retailers.
•It takes longer for a push-based supply chain to respond to changes in demand, which can result in overstocking
or bottlenecks and delays, unacceptable service levels and product obsolescence.

•In a pull-based supply chain, procurement, production and distribution are demand-driven rather than to
•Demand Pull is the triggering of material movement to a work center only when that work center is ready to
begin the next job. In effect, it shortens or eliminates the queue from in front of a work center.
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Lean Vs Agile Supply Chain

• Efficient supply chains focus on optimization and low cost by

minimizing inventory and maximizing efficiencies in process flow. (Lean)

• Responsive supply chains focus on flexibility and responsive service and

are able to react quickly to changing market demand and requirements.

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Supply Chain in E commerce

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Logistics is the overall management of the way resources are obtained, stored and moved to the locations where they
are required.

Inbound Logistics: Inbound logistics refers to the

Outbound Logistics: Outbound logistics refers to the
transport, storage and delivery of goods coming into a
transport, storage and delivery of goods going out of a
•Scope of Inbound Logistics covers transportation
•Activities of shipment, distribution performance cycle
during procurement operation, storage, handling if
come under the scope of Outbound Logistics.
any and overall management of inventory of inputs.
•The activities include order management,
•The activities include sourcing, order placement, transportation, warehousing, packaging.
transportation, receiving and storage. Overall,
procurement operations are called inbound logistics.
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Logistics Provider
• A first-party logistics provider (1PL) is a firm or an individual that needs to have cargo to transport goods
from a point A to a point B. The term first-party logistics provider stands both for the cargo sender and for
the cargo receiver. Example: Company A needs its product to be transported to the company B. They are
both 1PL.
• A second-party logistics provider (2PL) is an asset-based carrier, which actually owns the means of
transportation. Typical 2PLs would be shipping lines which own, lease or charter their ships; airlines which
own, lease or charter their planes and truck companies which own or lease their trucks. Example: Company
C delivers company A’s merchandise with its own means of transportation, Company C is a 2PL.

• Third party Logistics Provider (3PL) performs logistics services on behalf of another company. 3PLs provide
the management skills along with the physical assets, labour, and systems technology to provide
professional logistics services, relieving companies of the responsibility of performing these services
themselves. 3PL's typically can provide transportation, warehousing,, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost evaluations, and
contract management services. Example: Company A outsources part or all its logistics to a Company D
which takes care of the whole process. CEVA & NYK Logistics are 3PL.

• Fourth-party logistics (4PL) provider doesn´t necessarily provides logistics services itself but rather gives
advice and solutions to other companies regarding their logistics. This service might include the use of
multiple 2PL and 3PL providers to build and run the most successful supply chain solutions Example:
Company E advises Company A to use Company C/D for their supply chain and logistics needs, Company E is
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Ready for quiz?

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