Week Ten - Operations Management and Supply Chain

1. Define the term operations management

Operations management (OM) is the management of systems or processes that convert or transform resources (including human resources) into goods and services. Operations management is responsible for managing the core processes used to manufacture goods and produce services.

OM FUNDAMENTALS

1. Explain operations management’s role in business

The scope of OM ranges across the organisation and includes many interrelated activities, such as forecasting, capacity planning, scheduling, managing inventories, assuring quality, motivating employees, deciding where to locate facilities and more. Businesses must use OM to schedule production, deal with components, order parts and materials, schedule and train employees, ensure quality standards are met and above all satisfy the customers. The success of an organisation depends on short and long term planning and the ability of it executives and managers to make informed decisions.

2. Describe the correlation between operations management and information technology

Managers use IT to heavily influence OM decisions including productivity, costs, flexibility, quality, and customer satisfaction. Decision support systems and executive information systems can help an organisation perform what-if analysis, sensitivity analysis, drill-down, and consolidation. Numerous managerial and strategic key decisions are based on OM information systems that affect the entire organisation.

}  Managers use IT to heavily influence OM decisions, including :

}  What: What resources will be needed and in what amounts?

}  When: When should the work be scheduled?

}  Where: Where will the work be performed?

}  How: How will the work be done?

}  Who: Who will perform the work?

 

3. Explain supply chain management and its role in a business

Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximise total supply chain effectiveness and profitability. Today, organisations are quickly realising the tremendous value they can gain from having visibility throughout their supply chain. Knowing immediately what is transacting at the customer end of the supply chain, instead of waiting days or weeks for this information to flow upstream, allows the organisation to react immediately.

The five basic supply chain management components
Plan	This is the strategic portion of supply chain management.A company must have a plan for managing all the resources that go toward meeting customer demand for products or services, A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, cousts less and delivers high quality and value to customers.
Source	Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. Companies must also develop a set of pricing, delivery, and payment processes with suppliers and create metrics for monitoring and improving the relationships.
Make	This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery. This is by far the most metric-intensive portion of the supply chain, measuring quality levels, production output and worker productivity.
Deliver	This step is commonly referred to as logisitics.During this step, companies must be able to receive orders from customers, fulfil the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments.
Return	This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products.

1. What is the bullwhip effect, and how can it be avoided?

One phenomenon common to supply is the bullwhip effect - where variability in the size and timing of orders increase at each stage up the supply chain, from customer to supplier. The bullwhip effect is a natural dynamic that occurs because of the multistage nature of the supply chain. It is not related to erratic consumer demand. The mis-information regarding a slight rise in demand for a product could cause different members in the supply chain to stockpile inventory. These changes ripple throughout the supply chain magnifying the issue and creating excess inventory and costs. Today, information technology allows additional visibility in the supply chain.  Electronic information flows allow managers to view their suppliers and customers supply chains.

 

1. How does technology assist in supply chain management?

Technology advances have significantly improved companies’ forecasting and business operations. Integrated Systems provide companies with greater visibility over the supply chain inventory levels. IT’s primary role is to create integrations or tight process and information linkages between functions within an organisation.

 

Visibility – more visible models of different ways to do things in the supply chain have emerged.  High visibility in the supply chain is changing industries, as Wal-Mart demonstrated.

Consumer behavior-Companies can respond faster and more effectively to consumer demands through supply chain enhancements

}  Demand planning software – generates demand forecasts using statistical tools and forecasting techniques

Competition- Supply chain planning (SCP) software– uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain. Supply chain execution (SCE) software – automates the different steps and stages of the supply chain.

Speed-

·         Competition often equates to speed

·         Advances in IT are delivering this speed

·         Factors fostering speed:

·         Pleasing customers

·         Need for reducing inventory

·         Strategic planning requirements