Operations and Supply Chain Management Principles

Ch. 1 — Operations and Supply Chain Management

Ch. 1 — Operations and Supply Chain Management - design, operation and improvement of the systems that create and deliver the firm's primary products and services.

Key Processes

• Operations processes - how things are made.
• Supply chain processes - how things are moved.
• Supply chain management - the integrated management of operations and supply chain processes.

Definitions

• Process - One or more activities that transform inputs into outputs. Types are planning, sourcing, making, delivering, returning.
• Product-service bundling - when a firm builds service activities into its product offerings to create additional value for the customer.
• Mass customization - the ability to produce a unique product exactly to a particular customer's requirements.
• Business Analytics - the use of current business data to solve business problems using mathematical analysis.
• Sustainability - the ability to meet current resource needs without compromising the ability of future generations to meet their needs.
• Triple bottom line - a business strategy that includes social, economic, and environmental criteria.
• Efficiency - doing something at the lowest possible cost.
• Effectiveness - doing the things that will create the most value for the customer.
• Value - the attractiveness of a product relative to its price.
• Benchmarking - when one company studies the processes of another to identify best practices.

Common Financial Ratios

Receivable Turnover = Annual Credit Sales / Average Accounts Receivable

Inventory Turnover = COGS / Avg. Inventory Value

Asset Turnover = Revenue (or Sales) / Total Assets

Ch. 2 — Operations and Supply Chain Strategy

Ch. 2 — Operations and Supply Chain Strategy - the setting of broad policies and plans that will guide the use of the resources needed by the firm to implement its corporate strategy.

Strategic Concepts

• Operations effectiveness - performing activities in a manner that best implements strategic priorities at minimum cost.
• Straddling - when a firm seeks to match what a competitor is doing by adding new features, services, or technologies to existing activities. Often creates problems if trade-offs are necessary.
• Order Winner - a specific marketing-oriented dimension that clearly differentiates a product from competing products.
• Order Qualifier - a dimension used to screen a product or service as a candidate for purchase.
• Activity-system maps - diagrams that show how a company's strategy is delivered through a set of supporting activities.