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Chapter 1


Learning Objectives
1. Operations and supply chain management (OSCM) Definition. 2. Transformation process. 3. Type of operations. 4. Services vs. goods. 5. Career opportunities in supply chain management. 6. Historical development of OSCM over time.

Operations and Supply Chain Management (OSCM) Definition

Operations Management is the management of systems or processes that create goods and/or provide services (STC, 2010)
OSCM is defined as the design, operation, and improvement of the systems that create and deliver the firms primary products and services (JCL, 2011)

Transformation Process
The operations function involves the conversion of inputs into outputs

Value added

Land Labor Capital

5Ps: 1. People (labor) 2. Plants 3. Parts (materials) 4. Processes 5. Planning and Control

Transformation/ conversion process

Goods Services


Feedback Feedback

Types of Operations
Goods Producing

Farming, mining, construction, manufacturing, power generation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Retailing, wholesaling, financial advising, renting or leasing Films, radio and television, music concerts, recording Newspapers, radio and TV newscasts, telephone, satellites


Exchange Entertainment Communication

Process Steps for Mens Nylon Supplex Parka

Understanding the Global Supply Chain

Success in todays global markets requires a business strategy that matches the preferences of customers with the realities of supply networks A sustainable strategy is critical Meets the needs of shareholders and employees Preserves the environment

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

Supply Chain Processes

Work Involved in Each Type of Process

Planning: the processes needed to operate an existing supply chain strategically Sourcing: the selection of suppliers that will deliver the goods and services needed to create the firms product Making: where the major product is produced or the service provided Delivering: carriers are picked to move products to warehouses and customers Returning: the processes for receiving worn-out, defective, and excess products back from customers

Services vs. Goods

1. Services are intangible 2. Services requires more interaction with the customer 3. Services are inherently heterogeneous 4. Services are perishable and time dependent 5. Services are defined and evaluated as a package of features 6. Services cant be stored

Goods vs. Service Continued

Characteristic Customer contact Goods Low Service High

Uniformity of input Labor content Uniformity of output

Output Measurement of productivity Opportunity to correct problems

High Low High

Tangible Easy High

Low High Low

Intangible Difficult Low

Inventory Evaluation Patentable

Much Easier Usually

Little Difficult Not usually

The Goods-Services Continuum

The GoodsService Continuum Continued

Goods Service

Surgery, teaching Song writing, software development Computer repair, restaurant meal Automobile repair, fast food Home remodeling, retail sales Automobile assembly, steel making

Servitization Strategies

Servitization refers to a company building service activities into its product offerings for its current users
Maintenance, spare parts, training, and so on

Success starts by drawing together the service aspects of the business under one roof Servitization may not be the best approach for all companies

International Growth in Services

Efficiency, Effectiveness, and Value

Efficiency: Doing something at the lowest possible cost Effectiveness: Doing the right things to create the most value for the company Value: quality divided by price

U.S. Manufacturing vs. Service Employment

Year Mfg. Service 45 79 21 90 Mfg. 50 72 28 80 Service 55 72 28 70 60 68 32 60 65 64 36 50 70 64 36 40 75 58 42 30 80 44 46 20 85 43 57 10 90 35 65 0 95 25 75 45 50 55 60 65 70 75 80 85 90 95 00 02 05 00 30 70 Year 02 25 75

Singapore Manufacturing vs. Service Employment

90 80 70 60 50 40 30 20 10 0 97 98 99 00 01 02 03 04 05 06 07 Services Manufacturing

Careers in Operations and Supply Management

Plant manager Hospital administrator Branch manager Call center manager Supply chain manager Purchasing manager Director of Operations / Manufacturing / Production Chief Operations Officer (COO)

Business process improvement analyst Quality control manager Lean improvement manager Project manager Production control analyst Facilities manager

Historical Development of Operations and Supply Management

Lean manufacturing, JIT, and TQC Manufacturing strategy paradigm Service quality and productivity Total quality management (TQM) and quality certifications Business process reengineering Six-sigma quality Supply chain management Electronic commerce Service science

Current Issues in Operations and Supply Management

1. Coordinating the relationship between mutually supportive but separate organizations 2. Optimizing global suppliers, production, and distribution networks 3. Managing customer touch points 4. Raising senior management awareness of operations as a significant competitive weapon 5. Sustainability and the triple bottom line

Plan of this Course: The Integration of Strategy, Processes and Planning