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Chapter 5

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Mirou Jaana

Chapter 5 – Operations Management and Supply Chain Management • OPERATIONS MANAGEMENT Operations Management Fundamentals Information Systems’ Role in OM OM and the Supply Chain • SUPPLY CHAIN FUNDAMENTALS Basics of Supply Chain Information Systems’ Role in the Supply Chain Supply Chain Management Success Factors Future Supply Chain Trends Operations Management Fundamentals What is Operations Management (OM)? • It 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 to outputs. Examples of inputs and outputs?? Inputs: • Raw materials • Human resources • Data that comes in • Money • Education: textbooks, professors, knowledge Outputs: • Customer Service • Education: educated students • Outputs are not necessarily always positive. • You need quality and control monitoring, for positive outputs. What is the value added from inputs to the outputs? - The cost of things. - Value-added of outputs is that it costs less. - When employees are trained, it’s cheaper for us. - When employees are not trained, we need to pay for training. Operations Management Fundamentals OM in Business p.142 – The transformation of resources into goods and services involves various activities (things you can and should do). What are they? - Forecasting - Capacity Planning (resources, hours, people, design) - Scheduling- Managing Inventory - Assuring Quality - Motivating and Training employees - Locating Facilities OM and the supply chain - What is a supply chain? o Supply chain consists of all parties involved directly or indirectly in the procurement of a product or raw material - What is supply chain management o Supply Chain Management (SCM) involves the management of information flow between and among stages in a supply chain to maximize total effectiveness and profitability. Four basic components of supply chain management: 1. Supply chain strategy Strategy for managing all resources to meet customer demand for products and services 2. Supply chain partners Partners chosen to deliver finished products, raw materials, and services 3. Supply chain operation Schedule for production activities (testing, packaging, preparation for delivery) 4. Supply chain logistics Product delivery processes and elements (warehouses, carriers, invoicing, defective returns) Supply Chain Fundamentals - How much does an average company spend on production needs out of each dollar earned? - Nearly half of every dollar earned is spent on production needs - “Production needs” implies goods and services needed from external suppliers to keep producing  Supply chain - Extending an organization through SCM The supply chain has three main links: o Materials flow from suppliers and their “upstream” suppliers at all levels o Transformation of materials into semi-finished and finished products through the organization’s own production process o Distribution of products to customers and their “downstream” customers at all levels Visibility • Supply chain visibility – the ability to view all areas up and down the supply chain • Allows elimination of the Bullwhip effect o Occurs when distorted product demand information passes from one entity to the next throughout the supply chain. The misinformation regarding a slights rise in demand for a product could cause different members in the supply chain to stockpile inventory. These changes ripple throughout the supply chain, magnifying the issue and creating excess inventory and costs. Porter’s Model  PROBABLY ON MIDTERM Consumer Behaviour • Companies can respond faster and more effectively to consumer demands through supply chain enhances • Demand planning software – generates demand forecasts using statistical tools and forecasting techniques Competition • Supply chain planning (SCP) software– uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory Generate demand forecasts and develo
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