Chapter 1+2 Supply Chain

Operations and Supply Chain Management (OSCM)

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

Operations

Manufacturing and service processes used to transform resources into products or services.

Supply Chain

Processes that move information and materials to and from the firm.

Planning

Processes needed to operate an existing supply chain.

Sourcing

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

Making

Producing the major product or service.

Delivering

Logistics processes such as selecting carriers, coordinating movement of goods and information, and collecting payments from customers.

Returning

Receiving worn-out, excess, and/or defective products back from customers.

Product Design

An OSCM specialist area concerned with designing products to meet customer needs.

Purchasing

An OSCM specialist area focused on obtaining goods and services from suppliers.

Manufacturing

The process of producing physical goods.

Service Operations

Processes used to provide services to customers.

Logistics

The movement and coordination of goods and information.

Distribution

The process of moving products to warehouses, retailers, or customers.

Good

A tangible output of a process that has physical dimensions.

Service

An intangible process that cannot be weighed or measured.

Major Difference Between Goods and Services

Goods are tangible, while services are intangible.

Service Customer Interaction

A service requires some degree of interaction with the customer.

Service Heterogeneity

Services can vary because of differences in customers and their needs.

Service Perishability

Services are time-dependent and generally cannot be stored.

Goods-Services Continuum

A range from pure goods to pure services, with many businesses providing a combination of goods and services.

Product-Service Bundling

When a company builds service activities into its product offerings.

OSCM Careers

Careers specializing in managing the planning, production, and distribution of goods and services.

Operations Manager

A manager who works with people to determine the best way to deliver a firm's goods and services.

Supply Chain Manager

A manager responsible for managing supply chain activities and the flow of materials and information.

Chief Operating Officer (COO)

Works with the CEO and president to determine competitive strategy and decisions involving location, facilities, vendors, and hiring policy implementation.

Manufacturing Strategy

Emphasizes how a factory's capabilities can be used strategically to gain advantage over competitors.

Just-in-Time (JIT)

An integrated set of activities designed to achieve high-volume production using minimal inventories of parts that arrive exactly when needed.

Total Quality Control (TQC)

A philosophy that aggressively seeks to eliminate causes of production defects.

Lean Manufacturing

A strategy focused on achieving high customer service with minimum levels of inventory investment.

Total Quality Management (TQM)

Managing the entire organization so it excels in all dimensions of products and services important to customers.

Business Process Reengineering (BPR)

An approach to improving business processes by making revolutionary changes rather than small evolutionary changes.

Six Sigma

A quality goal of no more than 3.4 defects per million units; also a quality improvement philosophy and program.

Mass Customization

The ability to produce a unique product exactly according to a particular customer's requirements.

Electronic Commerce

The use of the Internet as an essential element of business activity.

Sustainability

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

Triple Bottom Line

A business strategy that includes social, economic, and environmental criteria.

Business Analytics

The use of current business data to solve business problems using mathematical analysis.

Internet of Things (IoT)

The connection of billions of devices to the Internet so data can be collected and analyzed.

Efficiency

A ratio of actual output relative to a standard; being efficient also means doing something at the lowest possible cost.

Effectiveness

Doing the things that create the most value for the customer.

Value

The attractiveness of a product relative to its price; described in the summary as quality divided by price.

Benchmarking

The process in which one company studies another company's or industry's processes to identify best practices.

Transformation

Converting raw materials into finished goods that customers want.

Supply Chain Management

The management of the entire flow of materials from raw materials to finished goods.

Current OSCM Issue: Global Supply Chains

Companies face disruptions and uncertainty caused by the increasingly global and complex supply chain.

Current OSCM Issue: Tariffs and Regulations

Companies must understand changing global tariffs and regulations when competing in different markets.

Current OSCM Issue: Hiring and Retaining Employees

Companies must attract and retain employees in a competitive labor market.

Current OSCM Issue: Technology

Companies must balance the costs and benefits of adopting new technology and infrastructure.

Operations and Supply Chain Strategy

The setting of broad policies and plans that guide the use of resources needed to implement corporate strategy.

Corporate Strategy

Provides the overall direction of the organization and coordinates operational goals with the larger organization.

Operations Effectiveness

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

Initiatives

The major steps, projects, or plans needed to drive success in a firm.

Strategic Analysis

The part of strategy development that examines the firm's vision, mission, objectives, customers, competitors, technology, demographics, and other factors.

Strategic Competitive Priorities

The characteristics a company chooses to emphasize when competing in its market.

Implementation Projects

Specific projects created to put an operations and supply chain strategy into action.

Competitive Dimensions

The characteristics on which companies compete, including price, quality, delivery speed, delivery reliability, volume changes, flexibility/new-product introduction speed, and product support.

Price

Competing by making the product or delivering the service cheaply.

Quality

Competing by making a great product or delivering a great service.

Design Quality

Products must meet customer requirements through the appropriate balance of features and cost while considering safety and reliability.

Process Quality

The defect-free delivery or assembly of products according to established requirements and specifications.

Delivery Speed

Competing by making a product or providing a service quickly.

Delivery Reliability

Delivering a product or service when promised.

Coping With Changes in Demand

The ability to change the volume of products or services produced.

Flexibility and New-Product Introduction Speed

The ability to switch between products and introduce new or revised products quickly.

Product Support

Providing technical assistance, timely delivery, and customer service after the sale.

Trade-Offs

The idea that management must decide which performance characteristics are most important and concentrate resources on them.

Straddling

Seeking to match a successful competitor while maintaining an existing strategic position.

Why Straddling Can Be Risky

It attempts to maintain an existing business model while adopting another strategy, which can create conflicting requirements.

Order Qualifier

A minimum characteristic or requirement that a product must have to be considered for purchase.

Order Winner

A characteristic that differentiates a firm's product or service from competitors and helps determine the customer's final purchase.

Activity-System Map

A diagram showing how a company's strategy is delivered through a set of supporting activities.

IKEA Strategy

Targets young, lower-income customers with low-cost, modular, ready-to-assemble furniture and uses activities such as self-service, flat packaging, in-store childcare, and extended hours.

Supply Chain Risk

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

Supply Chain Coordination Risk

Risk associated with the day-to-day management and coordination of the supply chain.

Disruption Risk

Risk caused by natural or human-made disasters such as earthquakes, hurricanes, terrorism, pandemics, and other major disruptions.

Risk Management Framework — Step 1

Identify sources of potential disruptions.

Risk Management Framework — Step 2

Assess the potential impact of the risk, including financial, environmental, operational, reputation, and human impacts.

Risk Management Framework — Step 3

Develop plans to mitigate or minimize the impact of the risk.

Natural Disaster Risk Mitigation

Use contingency planning, alternate sites, and insurance.

Country Risk Mitigation

Hedge currency risk and produce or source locally.

Supplier Failure Risk Mitigation

Use multiple suppliers.

Network Provider Failure Risk Mitigation

Support redundant digital networks.

Regulatory Risk Mitigation

Conduct upfront and continuing research, obtain good legal advice, and maintain compliance.

Commodity Price Risk Mitigation

Use multiple sources and commodity hedging.

Logistics Failure Risk Mitigation

Use safety stock, detailed tracking, and alternate suppliers.

Inventory Risk Mitigation

Pool inventory and use safety stock.

Major Quality Failure Risk Mitigation

Carefully select and monitor suppliers.

Loss of Customers Risk Mitigation

Use service and product innovation.

Theft and Vandalism Risk Mitigation

Use insurance, security precautions, knowledge of likely risks, and patent protection.

Productivity

A measure of how well resources are used.

Productivity Formula

Output divided by input.

Partial Productivity

A productivity measure that compares output to a single input.

Multifactor Productivity

A productivity measure that compares output to a group of inputs.

Total Productivity

A productivity measure that compares output to all inputs.

Why Productivity Is Relative

Productivity must be compared with something else to be meaningful, such as another operation, another company, or the same company over time.

Sustainable Business Strategy

A strategy that creates value while meeting current needs without compromising the ability of future generations to meet their needs.

Shareholders

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

Stakeholders

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

Triple Bottom Line — Social Responsibility

Fair and beneficial business practices toward labor, the community, and the region where the firm operates.