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Introduction to

Operations and Supply


Chain Management
Chapter Objectives
Be able to:
Describe what the operations function is and why it is
critical to an organizations survival.
Describe what a supply chain is and how it relates to a
particular organizations operations function.
Discuss what is meant by operations management and
supply chain management.
Identify some of the major operations and supply chain
activities, as well as career opportunities in these areas.
Make a case for studying both operations management
and supply chain management.

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 2
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Introduction
Why study Operations and Supply Chain
Management?
Operations Management
Supply Chain Management
Important trends
LeapFrog case study

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 3
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Focus
Key issues surrounding the design
and ongoing management of these
areas
Common tools and techniques
Introduction to the SCOR model
Analytical skills (both qualitative and
quantitative)

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 4
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Why Study Operations and
Supply Chain Management?
Three Basic Truths

I. Pervasiveness

II. Interdependence

III. Profitability and Survival

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 6
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Pervasiveness

Every organization must make a product or


provide a service that someone
values.

Manufacturer.
Retailer.
Design firm.
University.
Health services.
2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 7
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Interdependence
Most organizations function as part of a
larger supply chain

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 8
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Supply Chains
Networks of manufacturers and service
providers that work together to move goods from
the raw material stage through to the end user

Linked through physical, information, and


monetary flows

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 9
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Profitability and Survival
Organizations must carefully manage their
operations and supply chains to prosper,
and indeed, survive!

Shoe manufacturer:
How many shoes should we make? What mix?
What resources do we need? What will we outsource?
Location?
Key performance criteria -- Cost? Quality? Speed?

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 10
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Operations Management

The planning, scheduling, and control


of the activities that transform inputs
into finished goods and services
Operations Function

The collection of people, technology, and


systems within a company ...

that has primary responsibility ...

for providing the organizations


products and/or services.

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 12
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Viewing Operations as a
Transformation Process
Transformation
Process
Manufacturing operations

Inputs Outputs
Materials Tangible goods
People Fulfilled requests
Equipment Service operations Information
Intangible needs Satisfied Customers
Information

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 13
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Manufacturing
Tangible product

Key decisions driven by physical


characteristics of the product:
How is the product made?
How do we store it?
How do we move it?
Etc.
2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 14
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Services
Intangible Product or Service
Location, Exchange, Storage,
Physiological, Information

Key decisions:
How much customer involvement?
How much customization?

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 15
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Cross-Functional Linkages
Finance MIS
Budgeting.
What IT solutions Human
to make it all work
Analysis.
together? Resources
Funds. Skills? Training?
# of Employees?
Design Operations and
Sustainability.
Quality.
Supply Chain
Manufacturability.
Marketing
What products?
Accounting What volumes?
Performance measurement systems. Costs? Quality?
Planning and control. Delivery?

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 16
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Supply Chain Management

Active management of supply chain


activities and relationships to maximize
customer value and achieve a sustainable
competitive advantage
Material Flows

Upstream Downstream

Second Tier First Tier


Supplier Supplier Distributo Retailer
r
Alcoa Ball Corp Anheuser-Busch M&M Meijer Final
customers

Transportation companies

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 18
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Supply Chain Issues
Length of the chain
Complexity
Stability
Physical, informational, and monetary
flows

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 19
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Supply-Chain Operations
Reference (SCOR)* Model
Consists of:
Planning activities
Sourcing activities
Make or production activities
Delivery activities
Return activities

* Supply-Chain Council, 2007. www.supply-chain.org


2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 20
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
SCOR Model

Supply-Chain Council, 2007

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 21
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Wal-Mart Early 1990s

Individual stores sent sales data daily


to Wal-Marts suppliers via satellite
Suppliers plan production and ship
based on this sales data
Wal-Mart used its own dedicated fleet
to ship from its warehouses to stores

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 22
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Panera Bread 2006
4th quarter revenues and
profits up 25% and 8%,
respectively, over 2005 4th
quarter*
>200 million pounds of
dough delivered by 110
trucks traveling 9.7 million
miles annually

*Panera Bread, 4th Quarter 2006 Earnings Report,


www.panera.com/about/investor/reports.php.

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 23
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Important Trends
Electronic commerce
Reduces the costs and time associated with
supply chain relationships
Increasing competition and globalization
Fewer industries protected by geography
Relationship management
Competition between chains, not individual firms
Trust and coordination

2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 24
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Operations and Supply Chain
Management and You
Some of the many career positions
Analyst Sourcing Analyst
Commodity Manager Logistics and Material
Customer Service Planner
Manager Systems Support
International Logistics Manager (MIS)
Manager Transportation Manager
Logistics Services Process Analyst
Salesperson Scheduler
Production Manager Purchasing Agent
2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 25
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Operations and Supply Chain
Activities
Process selection, design, and improvement
Forecasting for decision making
Capacity planning for capital investment and
resource levels
Inventory management for amount and location
Planning and control for work scheduling and
meeting demand
Purchasing, managing supplier relationships
Logistics or acquisition and distribution
2008 Pearson Prentice Hall --- Introduction to Operations and Supply Chapter 1, Slide 26
Chain Management, 2/e --- Bozarth and Handfield, ISBN: 0131791036
Case Study Introducing
Operations and Supply Chain
Management

LeapFrog