Operations and Supply Chain Management

Optimizing Tradeoffs

• How do you make and deliver things in the most cost effective and efficient ways and also maintain the highest quality?

OSCM

• Operations and Supply Chain Management (OSCM) is defined as the design, operation and improvement of the systems that create and deliver the products and services of an enterprise.

• OSCM involves a series of steps and processes where inputs are transformed into the finished good.

Origins

• The Industrial Revolution was predicated on nascent ideas of OSCM: the divisions of labor and the assembly line and analyzing productivity and efficiency.

• Productivity and efficiency initiatives were brutal back in the day; like how many pins could an eight year old make in a typical 12 hour shift.

• We have tamed a lot of those issues through regulation and oversight, making a kinder, gentler work place. But it is still a problem in some of the outsourced areas like factories in Bangladesh and the notorious incidents at FoxConn.

Key Terms

• A couple of key terms to define in relation to the relevant business goals:

– Efficiency: doing something at the lowest possible cost

– Effectiveness: doing the right things to create the most value for the company

5 Sequential Steps

• OCSM can be categorized into these five sequential steps:

– planning,

– sourcing,

– making,

– delivering,

– returning.

Operations

• Operations refers to the process steps used to transform the resources employed by the company such as raw materials, labor, machines and scheduling, into products that are desired by customers. It can be a physical or electronic product, or a service, or some combination of both.

Supply Chains

• Supply Chains refer to the processes that move information and material to and from to and from the manufacturing or service and then on to customers. It also includes dealing with follow on support and returns.

Timeline

IT

• The constant evolution of information technologies has made it feasible and cost effective to capture information directly from the source through systems such as point-of-sale (POS), identification tagging, non-invasive testing, bar code reading and image recognition.

Match Supply & Demand

• Basically you don’t want to order too many supplies (or too little), build more than you can sell (or not enough and lose out on customers).

• You don’t want to be carrying too much inventory which is costly and can become obsolete. You want just as much as you need, when you need it, and you want to turn your products around fast and out the door and into the hands of customers.

• In other words, you want to match supply and demand. The closer you anticipate and match demand with your supply, the less waste and more profit.

Toyota

• There is a large body of work and expertise that has developed around OSCM since the 1980s when Toyota started eating everybody’s lunch in the car business by inventing and employing these techniques throughout their manufacturing process and holding their suppliers to higher standards and treating them like the strategic partners they are.

Japan Inc.

• In the 1980s Japan Inc. and especially Toyota developed an array of new and refined techniques to capitalize on manufacturing as a competitive advantage.

• Here is a quick recap of how the field has developed over the last thirty years:

Just In Time

• Just In Time (JIT)production was a major breakthrough in manufacturing philosophy. Pioneered by the Japanese, JIT is an integrated set of activities designed to achieve high volume production using minimal inventories of parts that arrive at the work station in a production line exactly when they are needed.

Total Quality Control

• Total Quality Control (TQC) these concepts relentlessly seek to eliminate the causes of production based defects.

Lean Manufacturing

• Lean Manufacturing: JIT coupled with TQC is now the basis of many production and service processes. Lean Manufacturing is the term used to refer to these practices and tools. Lean process ideas have been applied to many business disciplines. One of the interesting ones is in thinking about Start Ups and entrepreneurial activities.

Manufacturing Strategy Paradigm

• Manufacturing Strategy Paradigmwas developed at the Harvard Business School by William Abernathy, Robert Hayes, Kim Clark and others to show executives how they could harness their manufacturing capability as a strategic competitive advantage. This was accomplished by creating a focused factory concept that optimized a set of tasks and limited them for high performance. This type of design and analysis requires trade-offs between performance measures such as low cost, high quality, and flexibility. These techniques have been hugely influential in the management of factories.

Total Quality Management

• Total Quality Management TQM W Edwards Demming was an early apostle of the quality movement and his legacy is related to TQM. The Baldridge National Quality Award recognizes companies for outstanding quality management systems and their adherence to TQM. ISO 9000 is a certification standard developed to help implement, manage and measure compliance to these concepts. ISO plays a major role in setting quality standards for global manufactures. Many companies require that their vendors meet these standards as a condition for obtaining contracts.

Six-Sigma

• Six-Sigma Quality has to do with refining manufacturing processes to achieve quality by reducing defects to one in less than six standard deviations. A standard deviation is a statistical measure of deviation from a norm. Six standard deviations represent a tolerance of approximately 99.999%. That is considered the gold standard of quality and as close as is practically possible these days to attaining the holy grail of zero defects. These tools have been taught to managers as part of “Green Belt” and “Black Belt” programs. Besides manufacturing, Six-sigma has been applied across lots of repetitive error-prone business areas such as: accounts receivables, sales, finance, IT, legal, marketing, HR, R&D and environmental, health and safety services at companies.

Six Sigma

Operations and Strategy

• The strategy guru Michael Porter came up with a concise and clear framework for thinking about strategic goals as the search for Competitive Advantage. A company can perform effectively by some combination of Differentiation and Cost Leadership. Differentiation means that you products or services have distinct features that set them apart from other offerings and stand out as being superior in customers’ opinions. Cost Leadership means that a company provides the best value: faster, better, cheaper, to customers.

Careers in Operations

• Career opportunities in operations and supply management are plentiful today as companies strive to increase profitability by improving quality, productivity and reducing costs. Some of the jobs are: – Manager of a plant, call center,

bank– Hospital administrator– Supply chain, purchasing, or

quality control manager– Facilities manager– Project manager– The top of the heap is Chief

Operating Officer or COO.

John Cousinsjjcousin@gmail.com

@jjcousins