Operations and Supply Chain

Management
 Operations Management
• Operations management is an area of management
concerned with overseeing, designing, and controlling
the process of production and redesigning business
operations in the production of goods or services. It
involves the responsibility of ensuring that business
operations are efficient in terms of using as few
resources as needed, and effective in terms of meeting
customer requirements. It is concerned with managing
the process that converts inputs (in the forms of raw
materials, labor, and energy) into outputs (in the form
of goods and/or services)
 Industrial Revolution
• The beginning of the Industrial
Revolution is usually associated with
18th century English textile industry,
with the invention of flying shuttle by
John Kay in 1733, the spinning jenny
by James Hargreaves in 1765, the
water frame by Richard Arkwright in
1769 and the steam engine by James
Watt in 1765. In 1851 at the Crystal
Palace Exhibition the term American
system of manufacturing was used to
describe the new approach that was
evolving in the United States of
America which was based on two
central features: interchangeable
parts and extensive use of
mechanization to produce them.
 Industrial Revolution 2.0
• Henry Ford was 39 years old when he
founded the Ford Motor Company in 1903,
with $28,000 capital from twelve investors.
The model T car was introduced in 1908,
however it was not until Ford implemented
the assembly line concept, that his vision of
making a popular car affordable by every
middle-class American citizen would be
realized. The first factory in which Henry Ford
used the concept of the assembly line was
Highland Park (1913), he characterized the
system as follows:
• "The thing is to keep everything in motion
and take the work to the man and not the
man to the work. That is the real principle of
our production, and conveyors are only one
of many means to an end"
• This became one the central ideas that led to
mass production, one of the main elements
of the Second Industrial Revolution, along
with emergence of the electrical industry
and petroleum industry.
 What Successful 21st Century Supply
Chains Look Like
• Characteristics of
Successful Partnerships in
Supply Chains
• Peer to Peer
• Measurable Goals and
Objectives
• Traceability
• http://www.royaltalkies.c
om/fora-tv/what-
successful-21st-century-
supply-chains-look-like-
81837
 Peer to Peer

• Move from internal hierarchy

to flat supplier network
• Evolution from Internal
production and vertical
integration to:
– Purchasing
– Supplier networks
– Outsourcing
• Negotiation
• Power dynamics have shifted
• Leverage/Power
– Walmart
 Measurable Goals and Objectives
• What gets measured gets
managed
– Peter Drucker
• On time/lead time
• Quality
– Defect Rates
– Rejection Rates
– Return Rates
• Working Conditions
– Apple/FoxConn
– Garment works Bangladesh
• Financial Health
– Liquidity
– Sustainability
– Solvency
 Information Transparency
• Traceability
• Agility
• Sourcing: where
everything comes from
• Aggregation
• Efficiency
• E-beer
– Factory
– Distributor
– Wholesaler
– Retailer
 Process
Value Chain

Value Add
Value Add

1 Value Add

Step Step Step

2
3
 Sustainability
• Energy use per unit of
product
• How much we consume
• What is it we make
• Byproducts
• Pollution
• Accountability
 Operations Comparison
Restaurant Emergency Room
• Time • Time
• Variety • Right Care
• Quality • Quality
• Price • Price
 4 Dimensions
• Cost
– Efficiency
• Quality
– Product
– Process
• Responsiveness
– Time
• Variety
– Customer Heterogeneity
– Choice
– Preferences
 Performance Measures
• Flow Rate
– Throughput
• Inventory
– How much in system
– Mismatch between
Supply & Demand
• Flow Time
– How long in system
• Flow Unit
 Strategy
• Competitive Advantage
– Cost Leadership
– Differentiation
• Michael Porter
Elements in the Process
Value Add Chain and Flow
 Match Supply & Demand
• Price
• Quantity
• Inventory
– Excess/Surplus
– Shortfall
• Demand Curve
• Elasticity
• Information
– Feedback
– Sales
– Speed & Accuracy
• Delivery
Match Supply & Demand
 Process Flow Diagrams
• Bottlenecks
• Pinch points
 Process Management vs.
Project Management
• Cyclical • Linear
• Repetitive • Milestones
• Uniform Deliverables • Unique Deliverables
 Terms
• Processing Time PT
• Capacity 1/PT=C
• Bottleneck
– Weak Link
– Rate Limiter
• Flow Rate FR
• Utilization FR/C
• Flow Time
• Inventory
– # Flow Units in System
• Line Balance
Labor Productivity Measures
 Labor Productivity
• Line Balancing
– Labor Utilization
– Idle time
• Labor Content
• Direct Labor Cost
• Cost Accounting
 Financial Reporting of Labor
• Outsourcing
• Suppliers
• Obscures Labor
amounts from books
• Eschew Obfuscation
– (promote clarity)
 From Spreadsheet
1.2
Performance Measures

0.8

0.6 Capacity
Utilization

0.4

0.2

0
1 2 3 4 5 6
 John Cousins
• jjcousins@gmail.com
• Twitter: @jjcousins
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