Chapter 8 Operations Management and Supply Chain Management

CHAPTER 8 OPERATIONS MANAGEMENT AND SUPPLY CHAIN MANAGEMENT

1. Define the term operations management?
Operations management is the management of systems or processes that transform or process that convert or transform resources (including human resources) into goods and services. Operations management is responsible for managing the core processes used to manufacture goods and produce services. Essentially, the creation of goods or services involves transforming or converting inputs into outputs. Various inputs such as capital, labour and information are used to create goods or services using one or more transformation processes (e.g. sorting, transporting and cutting).

2. Explain operations management’s role in business?
The scope of OM ranges across the organization and includes many interrelated activities, such as forecasting, capacity, planning, scheduling, managing inventories, assuring quality, motivating employees, deciding where to locate facilities and more. Operations management focuses on carefully managing the processes to produce and distribute products and services. Usually, small businesses don't talk about "operations management", but they carry out the activities that management schools typically associate with the phrase "operations management."
Major, overall activities often include product creation, development, production and distribution. (These activities are also associated with Product and Service Management. However product management is usually in regard to one or more closely related product -- that is, a product line. Operations management is in regard to all operations within the organization.) Related activities include managing purchases, inventory control, quality control, storage, logistics and evaluations. A great deal of focus is on efficiency and effectiveness of processes. Therefore, operations management often includes substantial measurement and analysis of internal processes. Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization, for example, retail, manufacturing, wholesale, etc.
Operations management is about how organizations produce or deliver the goods and services that provide the reason for their existence. Operations can be seen as one of the many functions. The operations function can be described as that part of the organization devoted to the production or delivery of goods and services. Not every organization will have a functional department called ‘operations’ but they will all undertake operations activities because every organization produces good and/or services. The operations role participates in a wide variety of decision areas in the organization, example:
• Business planning: What strategy should be followed?
• Product Design: What product/service should the organization provide?
• Resource Planning: What labour, materials and plant are required?
• Location and layout: Where and how do we operate?
• Job design: How do people and technology work together?
• Quality control: Are standards being met?



3. Describe the correlation between operations management and information technology?
Managers can use IT to heavily influence OM decisions including productivity, costs, flexibility, quality, and customer satisfaction. One of the greatest benefits of IT on OM is in making operational decisions because OM exerts considerable influence over the degree to which the goals and objectives of the organization are realized. Most OM decisions involve many possible alternatives that can have varying impacts on revenues and exepenses. Om information systems are critical for managers to be able to make well informed decisions.
Decision support systems and executive information systems can help ann organization perform what-if analysis, sensitivity analysis, drill-dwon and consolidation, Numerous managerial and strategic key decisions are based on OM information systems that affect the entire organisastion, including:
• What: What resources will be needed and in what amounts?
• When: When will each resource be needed? When should the woerl be scheduled? When should materials and other supplies be ordered? When is corrective action needed?
• Where: Where will the work be performed?
• How: How will the product or service be designed? How will the work be done (organization, methods, equipment)? How will resources be allocated?
• Who: Who will perform the work?


4. Explain supply chain management and its role in a business?
A supply chain consists of all parties involved, directly or indirectly, in the procurement of a product or raw material. Supply chain management (SCM) involves the management of information flows between and among stage4s in a supply chain to maximize toal supply chain effectiveness and profitability. The five basic components of supply chain management are:
• Plan
• Source
• Make
• Deliver
• Return
Dozens of steps are required to achieve and carry out each of the above components SCM software can enable an organization to generate efficiencies within these steps by automating and improving the information flows throughout and among the different supply chain components. Effective and efficient supply chain management systems can enable an organization to:
• Decrease the power of it’s buyers
• Increase it’s own supplier power
• Increase switching costs to reduce the threat of substitute products or services
• Create entry barriers thereby reducing the threat of new entrants
• Increase efficiencies while seeking a competitive advantage through cost leadership
• Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximise total supply chain effectiveness and profitability
• Visibility - knowing immediately what is transacting at the customer end of the supply chain, instead of waiting days or weeks for this information to flow upstream, allows the organisation to react immediately.
• A supply chain is a network of organizations and facilities that transforms raw materials into products delivered to customers.
• Customers order from retailers, who in turn order from distributors, who in turn order from manufacturers, who in turn order from suppliers.
• The supply chain also includes transportation companies, warehouses, and inventories and some means for transmitting messages and information among the organizations involved.






5. List and describe the five components of a typical supply chain?
• Plan: This is the strategic portion of supply chain management. A company must have a plan for managing all the resources that go toward meeting customer demand for products or services. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, cost less, and delivers high quality and value to customers.
• Source: Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. Companies must also develop a set of pricing, delivery, and payment processes with suppliers and create metrics for monitoring and improving the relationships.
• Make: This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging and preparing for delivery. This is by far the most metric- intensive portion of the supply chain, measuring quality of levels, production output and worker productivity.
• Deliver: This step is commonly referred to as logistics. Logistics is the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments.
• Return: This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products.


6. Define the relationship between information technology and the supply chain?
As companies evolve into extended organizations, the roles of supply chain participants are changing. It is now common for suppliers to be involved in product development and distributors to act as consultants in brand marketing. The notion of virtually seamless information links within and between organizations is an essential element of integrated supply chains. Information technology’s primary role in SC is creating the integrations or tight process and information linkages between functions and within a firm- such as marketing, sales, finance, manufacturing and distribution- and between firms, which allow the smooth, synchronized flow of both information and product between customers, suppliers and transportation providers across the supply chain. Information technology integrates planning, decision making processes, business operating processes and information sharing for business performance management. Considerable evidence shows that this type of supply chain integration results in superior supply chain capabilities and profits.
Adaptec, Inc. manufactures semiconductors and markets them to the world’s leading PC, server and end-user markets through more than 115 distributors and thousands of value-added resellers worldwide. Adaptec designs and manufactures products at various third-party locations around the world. The company uses supply chain integration software over the Internet to synchronize planning. Adaptec personnel at the company’s geographically dispersed locations communicate in real time and exchange designs, test results and production and shipment information. Internet-based supply chains collaboration software helped the company reduce inventory levels and lead times.
Although people have been talking about the integrated supply chain for along time, it has been recently that advances in information technology have made it possible to bring the idea to life and truly integrate the supply chain. Visibility, consumer behavior, competition and speed are a few of the changes resulting from advances in information technology that are driving supply chains.
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