Operations Management

IBS (MBA)
Bangalore

MODULE -2

Course Coordinator
Dr. L.R.S.Mani
CURRENT ISSUES IN OPERATIONS AND SUPPLY
CHAIN MANAGEMENT

OSCM is a dynamic field, and issues arising in global

enterprise present exciting new challenges for
operations managers. Looking forward to the future,
the major challenges in the field will be as follows:
1.Coordinating the relationships between mutually supportive
but separate organizations
2.Optimizing global supplier, production, and distribution
networks
3.Managing customer touch points
4.Raising senior management awareness of OSCM as a
significant competitive weapon.
5.Sustainability (3E- Economic Development, Equity and
Environmental Protection )
Resource Courtesy:, Chase, Aquilano & Jacobs, Operations Management for competitive advantage,
11th Edition, Chapter 1,P-10.
OPERATIONAL EXCELLENCE: PERFORMANCE
MEASURES
 Provide critical linkage between order winning
and order qualifying attributes and choices
made in operations
 Help organisations evaluate how well the
operations system is responding to the
requirements at the marketplace
 Serve a useful purpose in comparing
performances amongst competitors and for
benchmarking
 Four generic options are useful for developing
measures for operational excellence; this
includes Quality, Cost, Delivery and Flexibility
OPERATIONAL EXCELLENCE: PERFORMANCE
MEASURES
Quality Cost
Average days of inventory (No. of inventory
First Pass Yield turns)
Quality Costs Manufacturing cost as percent of sales
Defects per Million Opportunities Procurement costs, total cost of ownership
Number of suggestions per employee Value of import substitution, cost reduction
Process Capability Indices Target cost reduction efforts
Delivery Flexibility
Lead time for order fulfillment Number of models introduced
Procurement and Manufacturing Lead time New product development time
Breadth and depth of the product and service
On time delivery for supplies offerings
Schedule adherence Process flexibility
Indirect Measures
Indirect-labour to Direct-labour ratio Number of suggestions per employee
Ratio of Lead time to work content Non-value added content in processes
Process rate to sales rate ratio No. of certified deliveries
Delivery quote for customised products and
Average training time per employee services
A SUSTAINABLE OPERATIONS AND SUPPLY
CHAIN STRATEGY

Social Responsibility. This pertains to fair and beneficial

business practices toward labour, the community, and the
region in which a firm conducts its business.
A SUSTAINABLE OPERATIONS AND SUPPLY
CHAIN STRATEGY

 Economic Prosperity. The firm is obligated to

compensate shareholders who provide capital
through stock purchases and other financial
instruments via a competitive return on
investments.
 Environmental Stewardship. This refers to the firm’s
impact on the environment. The company should
protect the environment as much as possible—or at
least cause no harm. Managers should move to
reduce a company’s ecological footprint by carefully
managing its consumption of natural resources and
by reducing waste.
WHAT IS OPERATIONS AND SUPPLY CHAIN
STRATEGY?

 Operations and supply chain strategy is

concerned with setting broad policies and plans
for using the resources of a firm and must be
integrated with corporate strategy.
 So, for example, if the high-level corporate
strategy includes goals related to the
environment and social responsibility, then the
operations and supply chain strategy must
consider these goals. A major focus to the
operations and supply chain strategy is
operations effectiveness.
SUPPLY CHAIN STRATEGY

 Supply chain management (SCM) should enable companies to

develop and execute strategies that efficiently integrate the
management of all the players in a supply chain—suppliers,
manufacturers, distributors, and customers—so that production and
distribution are accomplished at the lowest possible total cost while
meeting customer needs.
 Business strategy involves leveraging the core competencies of the
organization to achieve a defined high-level goal or objective. It also
includes the analytic and decision-making process surrounding what
to offer (e.g., products and services), when to offer (timing, business
cycles, etc), and where to offer (e.g., markets and segments) as a
competitive plan.
 While the business strategy constitutes the over all direction that an
organization wishes to go, the supply chain strategy constitutes the
actual operations of that organization and the extended supply chain
to meet a specific supply chain objective.
MEASURING SUPPLY CHAIN PERFORMANCE

Supply chain performance measure can be defined

as an approach to judge the performance of supply
chain system. Supply chain performance measures
can broadly be classified in to two categories−
 Qualitative measures − For example, customer
satisfaction and product quality.
 Quantitative measures − For example, order-to-
delivery lead time, supply chain response time,
flexibility, resource utilization, delivery performance.
(Non-financial measures, Financial measures)
UNDERSTANDING SUPPLY CHAINS

Push Strategies
 A push-model supply chain is one where projected
demand determines what enters the process.
 For example, warm jackets get pushed to clothing
retailers as summer ends and the fall and winter
seasons start.
 Under a push system, companies have predictability in
their supply chains since they know what will come
when–long before it actually arrives. This also allows
them to plan production to meet their needs and gives
them time to prepare a place to store the stock they
receive.
UNDERSTANDING SUPPLY CHAINS

Pull Strategies

 A pull strategy is related to the just - in-time school of inventory

management that minimizes stock on hand, focusing on last-second
deliveries.
 Under these strategies, products enter the supply chain when
customer demand justifies it.
 One example of an industry that operates under this strategy is a
direct computer seller that waits until it receives an order to actually
build a custom computer for the consumer. With a pull strategy,
companies avoid the cost of carrying inventory that may not sell. The
risk is that they might not have enough inventory to meet demand if
they can not ramp up production quickly enough.
UNDERSTANDING SUPPLY CHAINS

Push /Pull Strategies

 Technically, every supply chain strategy is a hybrid between
the two. A fully-push based system still stops at the retails to re
where it has to wait for a customer to "pull“ a product off of the
shelves.
 However, a chain that is designed to be a hybrid flips between
push and pull somewhere in the middle of the process.
 For instance, a company may choose to stock pile finished
product at its distribution centers to wait for orders that pull
them to stores. Manufacturers might choose to build up
inventories of raw materials – especially those that go up in
price –knowing that they will be able to use them for future
production.
BULLWHIP EFFECT
 Through the numerous stages of a supply chain; key factors such
as time and supply of order decisions, demand for the supply, lack
of communication and disorganization can result in one of the
most common problems in supply chain management. This
common problem is known as the bullwhip effect; also some times
the whiplash effect. In this blog post we will explain this concept
and outline some of the contributing factors to this issue.
 The bullwhip effect can be explained as an occurrence detected
by the supply chain where orders sent to the manufacturer and
supplier create larger variance then the sales to the end customer.
These irregular orders in the lower part of the supply chain
develop to be more distinct higher up in the supply chain. This
variance can interrupt the smoothness of the supply chain process
as each link in the supply chain will over or under estimate the
product demand resulting in exaggerated fluctuations