Unit 1: Introduction to Operations and Supply Chain Management
Supply chain management is the efficient integration of suppliers, factories, warehouses, and stores so that merchandise is produced and distributed in the right quantities to the right locations at the right time. The main areas of the supply chain are purchasing, manufacturing, warehousing, and customers. These areas have conflicting objectives because of their inherent complexities and competing priorities. Purchasing needs to balance being stable and remaining flexible. Manufacturing needs to balance high quality with low costs. Warehousing needs to maintain low inventory and low transport costs but also have the ability to replenish goods quickly. Finally, customers demand shorter times, lots of inventory, and huge variety at the lowest possible price. Generally speaking, challenges associated with supply chains relate to working in a complex network while managing uncertainty. Virtually every consumer item we own is the result of a successful supply chain that sources raw materials, transports these raw materials to manufacturing sites, and ultimately delivers the products to stores. Managing the network of interconnected steps in a defined system requires designing, planning, executing, controlling, and monitoring with the ultimate objective of creating value, generating competitive advantage, leveraging systemic logistics, and balancing supply with demand with the ability to measure performance. Logistics is focused on managing the flow of items between the point of origin and the point of consumption to meet demand. Essentially, logistics is concerned with managing inventory, purchasing materials, transportation, warehousing, and planning. Whether an entity is a manufacturer of goods or a service-based firm, production and operations management is vital. Organizations are concerned with inputs, outputs, and the many decisions that happen in the process. Operations management has roots in the industrial revolution, when society shifted from small, localized agrarian communities to large-scale, complex production. On a small scale, operations were quite simple and relatively easy to manage. However, as the scale of production, manufacturing, logistics, and distribution increased, organizations sought to increase productivity and decrease costs by increasing their overall efficiency. This focus on effectively managing operations allows companies to strategically position themselves to create results and gain a competitive advantage.
Completing this unit should take you approximately 13 hours.
Upon successful completion of this unit, you will be able to:
- explain the relationship between productivity and optimization;
- describe the main tools used to analyze problems in OSCM, such as flowcharts, facility layout design, waiting line analysis, and statistical process control (SPC);
- explain areas of uncertainty in OSCM, such as delays or breaks in supply
of production inputs and demand forecasting, and possible methods to
deal with them; and
- explain the difference between goods and services in the context of OSCM.
1.1: Operations and Productivity
We'll start by going through an overview of common principles of Operations and Supply Chain Management (OSCM) and the techniques used to analyze, problem-solve, and operationalize operations and supply chains.
Watch this video which provides a general overview of operations and productivity. Pay attention to the lists on the white board. Which elements do you think are the most important to operations? What elements will help to increase productivity?
Watch this video. It will visually walk you through Supply Chain Management along with a mention of associated careers.
Read this article. Pay particular attention to the 3 main types of decisions.
Watch this video. It is a good introduction to operations management, presenting both a historical context and a description of how individuals require management and leadership qualities within the organizational structure. In addition, it details the overall role of OSCM in a business, system optimization, and within the context of globalization.
1.2: Optimizing Operations
Efficiency is the key to every supply chain. However, the ultimate goal is to create value for the customer. The recipient of the good or service is one of the most important elements of the supply chain process. The chapter on efficiency and customer satisfaction emphasizes this part of the process. Improving production and overall operations is a continuous evolution. Customers want quality products for the best possible price. To aid in quality improvements, there are process tools that corporations can employ. Some of the more mainstream tools include Total Quality Management (TQM), Six Sigma, International Organization for Standardization (ISO), and Just In Time (JIT), among many others. Productivity can be described as the efficiency with which an entity can transform materials into goods while creating more out of less. The pursuit of efficiency is a driving force to produce more, with less effort, at a lower cost to maximize profits.
Read this chapter. More than ever, supply chain managers play a major role in both cost control during the process and customer satisfaction at the end. Dell computer is used here as an example of their international supply chain process.
Read this article and compare and contrast different production and operations approaches. Which ones do you think would apply to your favorite brand?
Read this chapter, which explores the beneficiaries of, affecting factors, measurement of, and technological advances associated with productivity.
1.2.1: Global Optimization
Supply chain optimization on a global scale poses enormous challenges to corporations that operate in different countries. Particular interest today lies in the environmental costs of doing business around the world. Many products need vast amounts of physical resources to be produced. Once large-scale global production is reached, transporting these goods requires air, land, and water logistics. Maintaining stockpiles then requires a substantial physical footprint to stock sufficient inventory in warehouses to successfully supply retailers and customers. Each step in the process is complex, indicating why managing the supply chain is vital. Optimizing supply chains is a high priority, especially for organizations that operate on a global level. With customers, resources, and operations spread across geographically diverse locations, these organizations must have a global vision to maintain a competitive advantage. On a larger scale, countries rely on their corporations for national imports and exports, which play a key role in the global balance of trade.
Read this journal article, which examines supply chain management drivers and the motivation of sustainability for manufacturing enterprise supply chains in Pakistan.
Watch this video which describes the four main global links manufacturing and operations, transportation, warehouse, and distribution. It also explores examples of how effective supply chain management works.
Read this article, which, along with trade issues, touches on the interconnectedness of many other countries to be successful. Think of your favorite coffee shop or fast food restaurant and how they differ in products from one country to another.
1.2.2: Uncertainty in OSCM
Uncertainty in a supply chain can lead to delays or even drastic consequences. Delays due to bottlenecks can hamper performance, while on the other hand, a total breakdown of the chain can lead to declines in other business' operations. Global supply chains are fragile despite the appearance of being stable, physically strong, and sustainable. Natural and man-made disasters can potentially happen, but also security can be breached from both internal and external sources. The fragility of the supply chain is a high concern due to the number of individuals, communities, organizations, and countries that will suffer negative consequences should there be a disruption.
Read this article, which examines the impact of supply chain uncertainty on environmental management spending in manufacturing. Focus on the sections of Supply Chain Uncertainty and Linking Supply Chain Uncertainty to Environmental Management. What is your definition of uncertainty in supply chain management?
Read this executive summary and introduction as a guide addressing security, its importance, the major players, logistics requirements, as well as the overall vision.
1.3: Goods vs. Services
Products that are tangible can be physically held, seen, and experienced. Conversely, an intangible product does not have a physical presence which makes determining its value difficult. While demand refers to what a consumer is willing to buy given a purchase price, supply is the relationship between consumer prices and, given their costs, how much a firm is willing to supply the market. Equilibrium is defined as the balance of consumer demand and producer supply at the prevailing market price.
Read this chapter, which describes how intangibility differentiates a service from a product. While reading this passage think about what intangible purchases you may have made and how you determined the value of the product was high enough given the price.
Read this chapter. Pay particular attention to the section on the relationship between gas prices and community natural resource consumption.
1.3.1: Manufacturing
Globalization has caused manufacturers to reconsider the way they produce their goods. Rather than producing goods and pushing to consumers, the opposite effect is, in fact, happening. Consumers are demanding more options, better products, and greater choices at a faster pace. Despite supply chains undergoing radical transformations in an effort to keep up, they will continue to face increasing complexities. As part of these rapid and continuous transformations, technology is quickly changing how manufacturers run their operations. Additive manufacturing simply adds physical material to a production process instantly through the use of 3D printing. This can increase efficiency, quickly solve problems, and potentially reduce producers' dependence on input suppliers.
Read this article, which examines the challenges western nation manufacturers currently face. Specifically, it covers firms in industrial products, toys, fast fashion, and designer furniture.
Read this article. It covers additive and subtractive manufacturing methods and how technology is changing the future of supply chains. Its presence replacing some conventional manufacturing methods and has increased speed and quality without having to wait for a partner or service provider. Can you describe the limitations of additive manufacturing technologies?
1.3.2: Services
Supply chains that are service-based do not have a tangible or physical product. However, the same complexities exist in their supply chain as those with an organization that produces a physical product. Service supply chains must still rely on other industries, people, technology, and a host of other inputs to provide customer service.
- Read this article. The author argues that services are key to success in supply chain and operations management. Can you identify what services are important in e-commerce?
1.3.3: Decentralized Supply Chains
While centralized-supply chains rely on a hierarchy that funnels the decision-making process to a few individuals, decentralization allows decisions to be made at a more local level, thereby speeding up the process. These decentralized organizations may have divisions in different locations around the world, all of which can make decisions independent of the other locations.
Watch this video, as it presents both centralized and decentralized operations from the Indian Institute of Technology Bombay. What are some observable challenges associated with decentralized logistics?
1.3.4: Dropshipping
The advent of the internet has allowed individuals to communicate with one another online. E-commerce has evolved to where consumers can purchase an item from either an individual or business anywhere around the world. Dropshipping is one trend that has changed business supply chains because now an entrepreneur can create a brand product and have it shipped directly to a customer from a supplier without having to maintain any inventory.
Watch this video on dropshipping, which describes how an individual acts as an intermediary while another business fulfills the order. What are the benefits and challenges associated with dropshipping?
Study Guide: Unit 1
We recommend reviewing this Study Guide before taking the Unit 1 Assessment.
Unit 1 Assessment
- Receive a grade
Take this assessment to see how well you understood this unit.
- This assessment does not count towards your grade. It is just for practice!
- You will see the correct answers when you submit your answers. Use this to help you study for the final exam!
- You can take this assessment as many times as you want, whenever you want.