CHAPTER 1

OPERATIONS AND SUPPLY

CHAIN MANAGEMENT

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 Learning Objectives

1. Identify the elements of operations and supply

chain management (OCSM)
2. Evaluate the efficiency of the firm
3. Know the potential career opportunities in
operations and supply chain management
4. Recognize the major concepts the define the
operations and supply chain management field

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 Strategy, Processes, and Analytics
(1 of 2)
• Operations and supply chain management
involves
– Product design
– Purchasing
– Manufacturing
– Service operations
– Logistics
– Distribution
• Success depends upon
– Strategy
– Processes to deliver products and services
– Analytics to support the decisions needed to
manage the firm
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 Strategy, Processes, and Analytics
(2 of 2)

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 What is Operations and Supply Chain
Management ?
• The design, operation, and improvement of the
systems that create and deliver the firm’s
primary products and services
• Operations and Supply Chain Management
(OSCM) is concerned with the management of
the entire production/delivery system
• One of the functional fields of business
– Operations and Supply Chain Management
– Marketing
– Finance
– Sales

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 Operations and Supply Chain
Processes (1 of 2)
Operations
• Manufacturing and service processes used to
transform resources into products
– Manufacturing produces physical products
– Services produce intangible products
Supply Chain
• Processes that move information and material to
and from the firm
– Logistics processes move products
– Warehousing processes store products
– Information makes the process more efficient

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 Operations and Supply Chain
Processes (2 of 2)

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 OSCM Process Activities (1 of 2)

• Planning –processes needed to operate an

existing supply chain
• Sourcing – 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 the movement of goods
and information, and collecting payments from
customers
• Returning – receiving worn-out, excess, and/or
defective products back from customers

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 OSCM Process Activities (2 of 2)

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 Goods versus Services

• Goods
– Pure Goods
– Core Goods
 Tangible Less interaction with customers Often
homogeneous Not perishable – can be
inventoried
• Services
– Core Services
– Pure Services
 Intangible Interaction with customer required
Inherently heterogeneous Perishable/time
dependent Defined and evaluated as a package
of features
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 Product / Service Bundling

• Many firms offer a combination of goods and

services
– Products are supported by services such as
warranties and training
– Services are enhanced through the inclusion of
products
• Product/service bundling refers to the practice
of building service activities into products to
create additional value for the customer

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 Efficiency, Effectiveness, and Value

• Efficiency
– Doing something at the lowest possible cost
• Effectiveness
– Doing the right things to create the most
value for your customer
• Value
– The attractiveness of a product relative to its
cost

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 Evaluating Efficiency (1 of 2)

• Comparison of firms (benchmarking) is

important to investors
– From an operations and supply chain
perspective, the relative cost of providing a
good or service is closely related to earnings
growth

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 Evaluating Efficiency (2 of 2)

• Management efficiency ratios

– Labor productivity
 Net income per employee
 Revenue (or sales) per employee
– Asset productivity
 Receivables turnover ratio
 Inventory turnover
 Asset turnover
Annual credit sales
Receivable turnover 
Average accounts receivable
Cost of goods sold
Inventory turnover 
Average inventory value
Revenue or Sales
Asset turnover 
Total assets
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 Careers in Operations and Supply
Chain Management
• Plant manager
– Call center manager
 Business process improvement analyst
• Hospital administrator
– Supply chain manager
 Lean improvement manager
o Facilities manager
• Branch manager
– Purchasing manager
 Project manager
o Chief operating officer
• Department store manager
– Quality control manager
 Production control analyst
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 Historical Development of Operations
and Supply Chain Management

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 Current Issues in OSCM (1 of 2)

• Coordinating relationships between

organizations
– Managing the companies that produce
components and supply major business
functions for the firm
• Optimizing global supplier, production and
distribution networks
– Leveraging the information available to the
firm to make decisions concerning inventory,
transportation and production

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 Current Issues in OSCM (2 of 2)

• Managing customer touch points

– Recognize that resource utilization decisions
must consider both the cost of staffing and the
costs associated with lost customers
• Raising awareness of the competitive
advantages of OSCM
– Many companies have created significant
advantages through OSCM

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