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1 Using Operations to Compete

any activity or group of activities that takes 1 or more inputs, transforms them, and provides 1 or more outputs for its customers
group of resources performing allor part of one or more processes
supply chain
the interrelated series of processes within a firm and across different firms that produce a service or product to the satisfaction of customers
Supply chain management
the synchronization of a firm’s processes with those of its suppliers and customers to match the flow of materials, services and information with customer demand.
Value Chain
Supply Chain
Chief Operations Officer – vice president of manufacturing (or of production or operations). Or vice president (or director) of operations if it is a service organization.
3 mainline functions of any business
Describe the relationships of the 3 mainline functions
Finance generates resources, capital & funds. Finance & Operations transforms these material and service inputs into product & service outputs. Marketing produces sales revenue of the outputs which returns to investors and capital for supporting operations. Accounting, Information Systems, human resources & engineering provide essential information, services, and other managerial support.
external customers
a customer who is either an end user or an intermediary (e.g. manufacturers, financial institutions, or retailers) buying the firms finished services or products
internal customers
One or more employees or processes that rely on inputs from other employees or processes in order to perform their work.
external suppliers
The businesses or individuals who provide the resources, services, products, and materials for the firm’s short-term and long-term needs.
internal suppliers
The employees or processes that supply important information or materials to a firm’s processes.
Important Historic Events for Supply Chain Management
1785 James Watt – Steam Engine (railroads helped move goods throughout Europe)
1794 Eli Whitney – Cottin Gin (interchangeable parts) helped lead to the industrial revolution
Early 19th century – Charles Babbage-mechanical computer (further improved by Frederick Taylor in 1911)
20th Century:
1909 Henry Ford – Model T (invention of assembly line)
1930 Alfred Sloan – idea of strategic planning to achieve product proliferation & variety “a car for every purse and purpose” GM.
1978 Taiichi Ohno – Toyota Production System (remove wasteful activities from an organization)
What was one of earliest industries to be mechanized
The Textile industry
Examples of Inputs
Workers, Managers, Equipment, Facilities, Materials, Land, Energy
Examples of Outputs
Goods or services.
2 special types of inputs
1. Participation by customers
2. Information on performance from both internal and external sources
nested process
The concept of a process within a proess. A subprocess.
2 main types of processes
service & manufacturing. 2 key differences between them are: 1. nature of output, 2. degree of customer contact
Service process
Intangible, perishable output
output cannot be inventoried
High customer contact
Shorter response time
Labor intensive
Quality not easily measured
Manufacturing process
Physical, durable output
Output can be inventoried
Low customer contact
Long response time
Capital intensive
Quality easily measured
5 dimensions transformation processes change materials
1. Physical properties
2. Shape
3. Size (e.g. length, breadth, and height of a rectangular block of wood)
4. Surface finish
5. Joining parts and materials
These materials can be produced, stored, and transported. If process does not change properties of materials on at least 1 of these 5 dimensions, it is considered a service process.
2 main types of processes in the supply chain
core and support processes
Core Process
set of activities that delivers value to external customers
4 types of core processes
Supplier Relationship Process
New Service/Product Development Process
Order Fulfillment Process
Customer Relationship Process
Supplier relationship process
A process that selects the suppliers of services, materials, and information and facilitates the timely and efficient flow of these items into the firm.
new service/product development process
A process that designs and develops new services or products from inputs received from external customer specifications or from the market in general through the customer relationship process.
Order fulfillment process
A process that includes the activities required to produce and deliver the service or product to the external customer.
customer relationship process
a process that identifies, attracts and builds relationships with external customers, and facilitates he placement of orders by customers, sometimes referred to as customer relationship management
Support Process
A process that provides vital resources and inputs to the core process and there fore is essential to the management of the business. e.g. Human resources, accounting, engineering, and IS
operations strategy
the means by which operations implements the firm’s corporate strategy and helps to build a customer-driven firm.
Corporate Strategy – 4 considerations
1. environment scanning (monitor & adjust to changes in business environment)
2. identify & develop the firms core competencies (workforce, facilities, market and financial know-how, systems and technologies)
3. develop the firms core processes (know the 4)
4. develop the firm’s global strategies
core competencies
the unique resources and strengths that an organization’s management considers when formulating strategy
lead time
the elapsed time between the receipt of a customer order and filling it.
competitive priorities
the critical dimensions that a process or supply chain must possess to satisfy its internal or external customers, both now and in the future
competitive capabilities
the cost quality, time and flexibility dimensions that a process or supply chain actually possesses and is able to deliver
time-based competition
a strategy that focuses on the competitive priorities of delivery speed and development speed.
order winner
a criterion customers use to differentiate the services or products of one firm from those of another
order qualifier
minimal level required from a set of criteria for a firm to do business in a particular market segment
the value of outputs (services and products) produced divided by the values of input resources (wages, costs of equipment, and so on – all resources used).
Cross Over Point
Breakeven point
Assumptions for Breakeven Analysis
• Price per unit is independent of the process
• Quality is equal between the 2 processes
• Neither one of the processes has any preferential treatment
Multifactor look at Productivity
Total Measure, or the bigger picture of how the company is doing.
Outputs(Units or $)/Inputs($)
Outputs/Labor + Capital + Energy
Outputs/Labor + Capital + Materials
Singlefactor look at Productivity
Performance of an individual department
e.g. How did my workers perform independent of labor rates? (Output units/Labor hours)

Output/Labor or Output/Capital or Output/Materials or Output/Energy

Batch Production (or Batch Process)
Batch production occurs when many similar items are produced together. Each batch goes through one stage of the production process before moving onto next stage. Good examples include:

Cricket bat manufacture
Baking / meal preparation
Clothing production

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