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Operations and supply chain management (OSCM)

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The design, operation, and improvement of the systems that create and deliver the firm's primary products and services

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Operations

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Manufacturing and service processes that are used to transform the resources employed by a firm into products desired by customers

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Supply chain

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

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Processes

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One or more activities that transform inputs into outputs

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Categorization of processes

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1. Planning 2. Sourcing 3. Making 4. Delivering 5. Returning

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Planning

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Operating an existing supply chain strategically How anticipated demand will be met with available resources

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Sourcing

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Selection of suppliers that will deliver the goods and services needed to create the firm's product

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Making

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Where the major product is produced or the service provided

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Delivering

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Logistics - Carriers are picked to move products to warehouses and customers

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Returning

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Processes for receiving worn-out, defective, and excess products back from customers and support for customers who have problems with products

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Differences between services and goods

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1. Services are intangible 2. Services require interaction with customer 3. Services are heterogenous - they vary 4. Services are perishable and time dependent 5. Services evaluated as a package of features

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Package of features

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1. Supporting facility 2. Facilitating goods 3. Explicit services 4. Implicit services

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Supporting facility

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Location, decoration, layout, architectural appropriateness, supporting equipment

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Facilitating goods

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Variety, consistency, quantity of the physical goods that go with service

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Explicit services

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Training of service personnel, consistency of service performance availability and access to the service, and comprehensiveness of the service

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Implicit services

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Attitude of the servers, atmosphere, waiting time, status, privacy and security, convenience

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Examples of pure goods

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Food products Chemicals Book publishing

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Examples of core goods

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Appliances Data storage systems Automobiles

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Examples of core services

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Hotels Airlines Internet service providers

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Examples of pure services

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Teaching Medical advice Financial consulting

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Product-service bundling

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When a firm builds service activities into its product offerings to create additional value for the customer

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Careers in operations and supply chain management

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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

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Chief operating officer

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Works wit the CEO and company president to determine the company's competitive strategy

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Sustainability

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The ability to meet current resource needs without compromising the ability of future generations to meet their needs

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Shareholders

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Individuals or companies that legally own one or more shares of stock in the company

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Stakeholders

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Individuals or organizations that are influenced either directly or indirectly by the actions of the firm

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Triple bottom line

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Evaluating the firm against social, economic, and environmental criteria

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Social

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Fair and beneficial business practices toward labor, the community, and the region in which a firm conducts its business

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Economic

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Promote growth and long-term value in the form of profit

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Environmental

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Company should protect the environment as much as possible, or at least cause no harm

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Operations and supply chain strategy

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The setting of board policies and plans that will guide the use of the resources needed by the firm to implement its corporate strategy

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Operation effectiveness

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Performing activities in a manner that best implements strategic priorities at minimum cost

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Formulating an operations and supply chain strategy

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1. Develop/refine the strategy (yearly) - Define vision, mission, and objectives, - Conduct strategic analysis - Define strategic competitive priorities 2. Translate the strategy to operations and supply chain initiatives (quarterly) - Product design/revision initiatives - Sourcing/location of facilities initialization 3. Major focus points and projects - Major operations initiatives - Major logistics/distribution initiatives

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Competitive dimension

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1. Cost or price 2. Quality 3. Delivery speed 4. Delivery reliability 5. Coping with changes in demand 6. Flexibility and new-product introduction speed 7. Other product-specific criteria

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Special services provided to augment the sales of manufactured products

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1. Technical liaison and support 2. Meeting a launch date 3. Supplier after-sale support 4. Environmental impact 5. Other dimensions

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Straddling

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When a firm seeks to match what a competitor is doing by adding new features, services, or technologies to existing activities. This often creates problems if trade-offs need to be made

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Order winner

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A specific marketing-oriented dimension that clearly differentiates a product from competing products

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Order qualifier

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A dimension used to screen a product or service as a candidate for purchase

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Activity-system map

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Diagrams that show how a company's strategy is delivered through a set of supporting activities

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Supply chain risk

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The likelihood of a disruption that would impact the ability of a company to continuously supply products or services

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Risk management framework

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1. Identify the sources of potential disruptions 2. Assess the potential impact of the risk 3. Develop plans to mitigate the risk

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Productivity

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A measure of how well resources are used Productivity = Outputs/Inputs

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Partial productivity measure

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The ratio of some output to a single input Output/Labor Output/Capital Output/Materials Output/Energy

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Multifactor productivity measure

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The ratio of some output to a group of inputs Output/Labor+Capital+Energy Output/Labor+Capital+Materials

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Total factor measure of productivity

answer

The ratio of all outputs to all inputs Goods and services produced/All resources used

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Examples of partial measures of productivity

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Customers per labor hour Sales per square foot Lb. of meat per lb. of feed Kilowatt hours per ton of coal Tons of paper per cord of wood

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Lead time

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The time needed to respond to a customer order

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Customer order decoupling point

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Where inventory is positioned in the supply chain

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Make-to-stock

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Firms that serve customers from finished goods inventory

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Assemble-to-order

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Firms that combine a number of preassembled modules to meet a customer's specifications

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Make-to-order

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Firms the make the customer's product from raw materials, parts, and components

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Engineer-to-order

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Firms that will work with the customer to design the product, and then make it from purchased materials, parts, and components

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Lean manufacturing

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To achieve high customer service with minimum levels of inventory investment

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How manufacturing processes are organized

answer

1. Project 2. Workcenter 3. Manufacturing cell 4. Assembly line 5. Continuous process

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Project layout

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For large or massive products produced in a specific location, labor, material, and equipment are moved to the product rather than vice versa

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Workcenter

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A process with great flexibility to produce a variety of products, typically at lower volume levels

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Manufacturing cell

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Dedicated area where a group of similar products are produced

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Assembly line

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An item is produced through a fixed sequence of workstations, designed to achieve a specific production rate

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Continuous process

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A process that converts raw materials into finished product in one contiguous process

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Product-process matrix

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A framework depicting when the difference production process types are typically used depending on product volume and how standardized the product is

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Break-even analysis

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Presents alternative profits and losses due to the number of units produced or sold

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The service triangle

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The service strategy -> Employees -> Support systems -> All revolve around customer

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Service package

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A bundle of goods and services that is provided in some environment 1. Supporting facility 2. Facilitating goods 3. Information 4. Explicit services 5. Implicit services

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High and low degrees of customer contact

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The physical presence of the customer in the system and the percentage of time the customer must be in the system relative to the total time it takes to perform the service

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Degrees of customer/server contact

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1. Buffered core: physically separated from the customer 2. Permeable system: penetrable by the customer via phone or face-to-face contact 3. Reactive system: penetrable and reactive to the customer's requirements

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Operational uses of service-system design matrix

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1. Worker requirements 2. Focus of operations 3. Technological innovations

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Strategic uses of service-system design matrix

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1. Enabling systematic integration of operations and marketing strategy 2. Clarifying exactly which combination of service delivery the firm is in fact providing 3. Permitting comparison with how other firms deliver specific services 4. Indicating evolutionary changes that might be in order as the firm grows

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Categories of contact

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1. Pure virtual customer contact 2. Mixed virtual and actual customer contact

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Customer-introduced variability

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1. Arrival 2. Request 3. Capability 4. Effort 5. Subjective preference

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Basic accommodation strategies

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1. Classic accommodation: employees 2. Low-cost accommodation: labor, outsourcing, and self-service 3. Classic reduction: engage in more self-service, use reservation systems, or lower expectations 4. Uncompromised reduction: knowledge of customer develops procedures that enable good service

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Aspects of the service encounter

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1. The flow of the service experience 2. The flow of time 3. Judging of encounter performance

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Behaviorally based principles for service encounter design and management

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1. The front end and the back end of the encounter are not created equal 2. Segment the pleasure; combine the pain 3. Let the customer control the process 4. Pay attention to norms and rituals 5. People are easier to blame than systems 6. Let the punishment fit the crime in service recovery

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Service guarantees

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A promise of service satisfaction backed up by a set of actions that must be taken to fulfill the promise

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Service blueprint

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The flowchart of a service process, emphasizing what is visible and what is not visible to the customer

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Poka-yokes

answer

Procedures that prevent mistakes from becoming defects. They are commonly found in manufacturing but also can be used in service processes 1. Warning methods 2. Physical and visual contact methods 3. The three T's -Task to be done -Treatment according to customer -Tangible or environmental features of service facility

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Three contrasting service designs

answer

1. The production-line approach 2. The self-service approach 3. The personal-attention approach

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Characteristics of a well-designed service system

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1. Each element of the service system is consistent with the operating focus of the firm 2. It is user-friendly 3. It is robust 4. It is structured so that consistent performance by its people and systems is easily maintained 5. It provides effective links between the back office and the front office so that nothing falls between the cracks 6. It manages the evidence of service quality in such a way that customers see the value of the service provided 7. It is cost-effective

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Process

answer

Any set of activities performed by an organization that takes inputs and transforms them into outputs ideally of greater value to the organization than the original inputs

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Cycle time

answer

the average time between completions of successive units in a process

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Utilization

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The ratio of the time that a resource is actually activated relative to the time that it is available for use

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Flowchart symbols

answer

Rectangle: Tasks or operations Triangle: Storage areas or queues (waiting lines) Diamond: Decision points Line: Flows of material or customers

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Burffering

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A storage area between stages where the output of a stage is placed prior to being used in a downstream stage

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Blocking

answer

The activities in the stage must stop because there is no place to deposit the item just completed

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Starving

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The activities in a stage must stop because there is no work

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Bottleneck

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A resource that limits the capacity or maximum output of the process

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Hybrid

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Combines the features of both make-to-order and make-to-stock

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Pacing

answer

Movement of items through a process is coordinated through a timing mechanism

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Efficiency

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A ratio of the actual output of a process relative to some standard

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Run time

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The time required to produce a batch of parts

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Setup time

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The time required to prepare a machine to make a particular item

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Operation time

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The sum of the setup time and run time for a batch of parts that are run on a machine

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Flow time

answer

The average time that it takes a unit to move through an entire process

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Throughput rate

answer

The output rate that the process is expected to produce over a period of time

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Process velocity (throughput ratio)

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The ratio of the value-added time to the flow time

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Value-added time

answer

The time in which useful work is actually being done on the unit

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Total average value of inventory

answer

The total average investment in raw material, work-in-process, and finished goods inventory

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Inventory turn

answer

The cost of goods sold divided by the total average value of inventory

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Days-of-supply

answer

The number of days of inventory of an item

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Little's law

answer

States a mathematical relationship between throughput rate, flow time, and the amount of work-in-process inventory Inventory = Throughput rate X Flow time

question

Job design

answer

Specification of work activities of an individual or group

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Specialization of labor

answer

Simple, repetitive jobs are assigned to each worker

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Job enrichment

answer

Specialized work is made more interesting by giving the worker a greater variety of tasks

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Work measurement

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Setting time standards for jobs

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Time standards are necessary

answer

1. To schedule work and allocate capacity 2. To provide an objective basis for motivating the workforce and measuring workers' performance 3. To bid for new contracts and to evaluate performance on existing ones 4. To provide benchmarks for improvement

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Options to reduce flow time

answer

1. Perform activities in parallel 2. Change the sequence of activities 3. Reduce interruptions

question

Capacity planning

answer

Long range - greater than one year, requires top management, (buildings, equipment, facilities) Intermediate range -monthly or quarterly plans, (hiring, layoffs, new tools, minor equipment, purchases, subcontracting( Short range -less than one month (overtime, personnel transfers, alternative production routings)

question

Capacity

answer

The amount of resource inputs available relative to output requirements over a particular period of time The output that a system is capable of achieving over a period of time

question

Strategic capacity planning

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Finding the overall capacity level of capital-intensive resources to best support the firm's long-term strategy

question

Best operating level

answer

Output level where average unit cost is minimized

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Capacity utilization rate

answer

Measure of how close the firm's current output rate is to its best operating level Capacity used/Best operating level

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Economies of scale

answer

Idea that as the plant gets larger and volume increases, the average cost per unit drops. At some point, the plant gets too large and cost per unit increases

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Focused factory

answer

A facility designed around a limited set of production objective. Typically the focus would relate to a specific product or product group

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Plant within a plant (PWP)

answer

An area in a larger facility that is dedicated to a specific production objective (for example, product group). This can be used to operationalize the focused factory concept

question

Economies of scope

answer

When multiple products can be produced at lower cost in combination than they can be separately

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Issues to be considered when adding or decreasing capacity

answer

Maintaining system balance Frequency of capacity additions or reductions External sources of operations and supply capacity

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Determining capacity requirements

answer

1. Use forecasting techniques 2. Calculate equipment and labor requirements to meet product line forecasts 3. Project labor and equipment availabilities over the planning horizon

question

Capacity cushion

answer

Capacity in excess of expected demand

question

Goldratt's Theory of Constraints

answer

1. Identify the system constraints 2. Decide how to exploit the system constraints 3. Subordinate everything else to that decision 4. Elevate the system constraints 5. If, in the previous steps, the constraints have been broken, go back to step 1, but do not let inertia become the system constraint

question

Synchronous manufacturing

answer

A production process coordinated to work in harmony to achieve the goals of the firm

question

Goal of the firm

answer

To make money

question

Performance measures

answer

1. Financial measurements 2. Operational measurements

question

Financial measurements

answer

1. Net profit (absolute measurement in dollars) 2. Return on investment (relative measure based on investment) 3. Cash flow (survival measurement)

question

Operational measurements

answer

1. Throughput (the rate at which money is generated by the system through sales) 2. Inventory (all the money that the system has invest in purchasing things it intends to sell) 3. Operating expenses (all the money that the system spends to turn inventory into throughput)

question

Goal of firm from operations standpoint

answer

Increase throughput while simultaneously reducing inventory and reducing operating expense

question

Goldratt's definition of productivity

answer

All the actions that bring a company closer to its goals

question

Rather than capacities being balanced...

answer

The flow of product through the system should be balanced

question

Queues

answer

A line of waiting persons, jobs, things, or the like

question

Managing queues

answer

Segment the customers Train your servers to be friendly Inform your customers of what to expect Try to divert the customer's attention when waiting Encourage to come during slack periods

question

The queuing system

answer

A process where customers wait in line for service 1. the source population and the way customers arrive at the system 2. the servicing system 3. the condition of the customers exiting the system

question

Arrival rate

answer

The expected number of customers that arrive each period

question

Exponential distribution

answer

A probability distribution associated with the time between arrivals

question

Poisson distribution

answer

Probability distribution for the number of arrivals during each time period

question

Service rate

answer

The number of customers a server can handle during a given time period

question

Line structures

answer

1. Single channel, single phase 2. Single channel, multiphase 3. Multichannel, single phase 4. Multichannel, multiphase 5. Mixed

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