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Chapter 5

Chapter 5 - SCM.docx

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Information Technology Management
Course Code
ITM 100
Ron Babin

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Operations Management and Supply Chain Management  Production is the creation of goods and services using the factors of production: land, labour, capital, entrepreneurship and knowledge. Operations Management = OM  Running the process that takes inputs and creates output (example is a factory) Supply Chain management = SCM  Supply Chain Fundamentals  Is mostly about MOVING STUFF (Example: Train)  Information systems’ role in the supply chain  SCM Success factors  Future supply chain trends  The best SCM is run by IS Businesses and Types  Production management describes all the activities managers do to help companies create goods  Operation Management (OM) is the management of systems or processes that convert or transform resources (including human resources) into goods and services  A transformation process is often referred to as the technical core, especially in manufacturing organizations, and is the actual conversion of inputs into outputs. Example: Restaurant inputs include hungry customers, food, wait staff. The transformation is well prepared food, well served and an agreeable environment. The outputs are satisfied customers  Value-Added is the term used to describe the difference between the cost of inputs and the price value of outputs Automobile inputs include sheet steel, engine parts, and tires. The transformation is the fabrication and assembly of cars. The output is high-quality cars. Hospital inputs include patients, medical supplies, doctors, nurses. The transformation is health care. The output is healthy individuals OM In Business The scope of OM ranges across the organization and includes many interrelated activities. In the examples below a hypothetical airline company is used. Typical activities include:  Forecasting: Estimating seat demand for flights, weather and landing conditions, growth or reduction in air travel  Capacity Planning: Essential metric to maintain cash flow, underestimating or overestimating flights will hurt profits  Scheduling: Tight schedule must be maintained including flights, pilots, attendants, ground crew, maintenance, etc.  Managing Inventory: Food, beverages, in-flight items, etc is essential for the airline  Assuring Quality: Today’s travellers expect high-quality customer service during ticketing, check- in, curb service, and other issues where emphasis is on efficiency and courtesy  Motivating and Training Employees: Self explanatory  Locating Facilities: Key questions include in which cities to offer services, where to host maintenance facilities, where to locate major and minor hubs, etc. Information Systems’ Role in OM  Concerned with developing a long-term plan for how best to use the company’s resources to ensure compatibility between resources and the long-term corporate strategy.  IS support for operations strategy depends on: o Level of available technology o Skill level of workers o Degree to vertical integration, or to what degree the suppliers are owned (or partnered) with the company o Extent to which outside suppliers are used  SBU Strategic Business Unit – is a stand-alone business under a corporate umbrella o Example, Sport Check and the company who owns it is an SBU, because the company is owned by Canadian tire but is still operating separately.  They have their own SYSTEMS (Supply chain, ERP system) standalone from Canadian Tire o It is best to think of these really large companies as being made up of these smaller companies. At the SBU level, strategic planning is used and some other forms:  Strategic Planning – Focuses on long-range planning such as plant size, location and type of process to be used.  Material Requirements Planning (MRP) Systems – use sales forecast to make sure parts and materials are available at the right time and place in a specific company  Tactical Planning – focuses on producing goods and services as efficiently as possible within the strategic plan  Global Inventory Management Systems (GIMS) – locate, track and predict materials and components by installing GPS in transportation vehicles  Operational Planning and Control (OP&C) – deals with day-to-day procedures for performing work, including scheduling, inventory and process management. Consist of a number of systems such as:  Inventory Management and control systems provide control and visibility to the status of individual items maintained in inventory. Provides information from a variety of sources including: Current inventory and order status, cost accounting, sales forecasts and customer orders, manufacturing capacity, new-product introductions.  Transportation Planning Systems track and analyze the movement of materials and products to ensure the delivery of materials and finished goods at the right time, to the right place, and at the lowest cost  Distribution Management Systems coordinate the process of transporting materials from a manufacturer to distribution centres to the final customer. Helps decide if the company wants to use an effectiveness route and ship directly to customer, or an efficiency route and ship its products to a distributor who ships to the customer. Competitive OM Strategy Five key competitive priorities that can add value for customers: 1. Cost 2. Quality – Product quality and process quality. This includes the research and development put into the product (product quality) as well as making sure that the final product has no defects (process quality). There are many quality control standards such as: a. Six Sigma Quality – No more than 3.4 defects per million opportunities b. ISO 9000 standard c. CMMI – Capability Maturity Model Integration is a framework of best practices. It describes the best practices in managing, measuring, and monitoring software development procceses 3. Delivery – how do we get things out from the supply chain to the customers? Speed is critical 4. Flexibility – The ability of a company to offer a wide variety of products to its customers. Flexibility is also a measure of how fast a company can convert processes from making an old line of products to making a new line of products. 5. Service – With shortened product life cycles products tend to be very similar or follow the same standard. For this reason many companies place emphasis on high-quality customer service as a primary differentiator. OM and the Supply Chain  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 stages in a supply chain to maximize the total effectiveness and profitability  The four basic components of SCM are:  Supply chain strategy – the strategy for managing all the resources required to meet customer demand for all pr
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