Operations Management

Operations: Part of a business organization responsible for producing goods/services

Goods: Physical items produced by business organizations

Services: Activities that provide some combination of time, location, form, and psychological value

Three Basic Functions of business includes operations, as well as finance and marketing

Operations Management: Management of systems or processes that create goods/services

Supply Chain: Sequence of organizations, including facilities, functions, and activities, that are involved in producing and delivering a product/service

Supply Chain Management: Management of sequence of internal and external facilities, functions, and activities that are involved in producing and delivering a product/service

Value-added: The difference between the cost of inputs and the value or price of outputs

Lead time: Time between ordering a good or service and receiving it

Process: One or more actions that transform inputs into outputs

  • Upper-management Processes: Govern the operation of the entire organization

  • Operational Processes: Core processes that make up the value stream

  • Supporting Processes: Support the core processes

Process Variation

  • Variety of goods and services offered

  • Structural variation in demand

  • Random variation

  • Assignable variation

Models: Abstraction of reality or simplified representation of something

Analytics: Collections, analysis, and presentation of data using stats, math, and computers for use in decision making

Descriptive analytics: Summarizing data

System: Set of interrelated parts that work together

Pareto Phenomenon: A few factors account for a high percentage of the occurrence of some events

Craft production: System in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods

Mass production: System in which low-skilled workers use specialized machinery to produce high volumes of standardized goods

Interchangeable Parts: Parts of a product made to such precision that they do not have to be custom fitted

Division of Labor: The breaking up of a production process into small tasks, so that each worker performs a small portion of the overall job

E-business: Use of electronic technology to facilitate business transactions

E-commerce: Consumer-to-business transactions

Technology: Application of scientific discoveries to the development and improvement of products and services and operations processes

  • Product and service technology: Discovery and development of new products and services

  • Process technology: Methods, procedures, and equipment used to produce goods and provide services

  • Information technology: Science and use of computers and other electronic equipment to store, process, and send information

Six Sigma: Process for reducing costs, improving quality, and increasing customer satisfaction

Agility: The ability of an organization to respond to demands or opportunities in a quality manner

Lean Systems: System that uses minimal amounts of resources to produce a high volume of high-quality goods with some variety

Issues

  • Environmental Concerns

    • Sustainability: Using resources in ways that do not harm ecological systems that support human existence

  • Ethics: Standard of behavior that guides how one should act in various situations

    • Utilitarian Principle: Good done by an action or inaction should outweigh any harm it may cause

    • Rights Principle: Actions should respect and protect the moral rights of others

    • Fairness Principle: Equals should be held to or evaluated by the same standards

    • Common Good Principle: Actions should contribute to the common good of the community

    • Virtue Principle: Actions should be consistent with certain ideal virtues

    • Ethical Framework: Sequence of steps intended to guide thinking and subsequent decision or action

  • Need to Manage Supply Chains

    • Need to improve operations

    • Increasing levels of outsourcing

      • Outsourcing: Buying goods or services instead of producing in-house

    • Increasing transportation costs

    • Competitive pressures

    • Increasing globalization

    • Increasing importance of e-business

    • Complexity of supply chains

    • Need to manage inventories

    • Need to deal with trade wars

    • Need for data

Supply Chain: Sequence of organizations, facilities, functions, and activities that are involved in producing and delivering a product or service

Supply Chain Management: Management of the sequence of internal and external facilities, functions, and activities that are involved in producing and delivering a product or service

Supply Chain Integration: Strategic coordination of business functions within a business organization and throughout its supply chain for the purpose of integrating supply and demand management

Procurement: Process of purchasing products and services for an organization

Logistics: Movement of goods, services, cash, and information in a supply chain

Demand Chain: Distribution portion of the value chain

Trends in supply chain integration

  • Measuring supply chain ROI

  • Greening the supply chain: Generating interest in environmental issues

  • Reevaluating outsourcing

  • Integrating IT

  • Managing risks

  • Adopting lean principles

  • Being agile

  • Adopting blockchain

  • Establishing transparency

  • Adopting new delivery modes

Risk Management

  • Knowing suppliers

  • Supply chain visibility: Major trading partner can connect to any part of its supply chain to access data in real time

  • Event Response Capability: Ability to detect and respond to unplanned events

Resiliency: Ability of a business to recover from an event that negatively impacts the supply chain

Supplier Management

Vendor Analysis: Evaluating the sources of supply in terms of price, quality, reputation, and service

Strategic Partnering: Two or more business organizations that have complementary products or services join so that each may realize a strategic benefit

Inventory Management

Inventory Velocity: Speed at which goods move through a supply chain

Bullwhip Effect: Inventory oscillations become progressively larger looking backward through the supply chain

Vendor Managed Inventory: Vendors monitor goods and replenish retail inventories when supplies are low

Strategic Sourcing: Analyzing procurement process to lower costs by reducing waste and non-value added activities, increase profits, reduce risks, and improve supplier performance

Effective supply chains: plan, source, make, deliver, manage returns

  • Effective communication: Effective supply chain communication requires integrated technology and standardized ways and means of communicating among partners

  • Information velocity: Speed at which information is communicated in a supply chain

  • Performance metrics

    • Fill rate: Percentage of demand filled from stock on hand

Reverse logistics: Process of transporting returned items

Gatekeeping: Screening returned goods to prevent incorrect acceptance of goods

Avoidance: Finding ways to minimize the number of items that are returned

Closed-loop supply chain: Manufacturer controls both forward and reverse shipment

Cross-docking: Technique where goods arriving at a warehouse from a supplier are unloaded from the supplier’s truck and loaded onto outbound trucks, thereby avoiding warehouse storage

Delayed differentiation: Production of standard components and subassemblies, which are held until late in the process to add differentiating features

Disintermediation: Reducing one or more steps in a supply chain by cutting out one or more intermediaries