Session1 3PP

2023-01-09
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OPERATIONS MANAGEMENT
Lecture - 1
Ch.1 Operations and Supply Chain Management

Ch.2 Strategy and Sustainability
Ch.5 Projects
McGraw-Hill Education / Jacobs Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution
without the prior written consent of McGraw-Hill Education.
OPERATIONS AND SUPPLY

CHAIN MANAGEMENT
Chapter 1
Learning Objectives
1. Identify the elements of operations and supply chain

management (OCSM).
2. Evaluate the efficiency of the firm.
3. Know the potential career opportunities in operations and
supply chain management.
4. Recognize the major concepts that define the operations
and supply chain management field.
Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

McGraw-Hill Education / Jacobs without the prior written consent of McGraw-Hill Education.
1
2023-01-09
COVID19 and Supply Chain Disruption
1. Identify the elements of operations and supply chain

management (O C S M).
2. Evaluate the efficiency of the firm.
3. Know the potential career opportunities in operations and
supply chain management.
4. Recognize the major concepts that define the operations
and supply chain management field.

COVID19 and Supply Chain Disruption
During the 2020-21 COVID19 crisis, all of you have heard about :
• Shortages of personal protective equipment (P P E).
• Shortages of hospital beds.
• Shortages of front-line workers.
• Medicines/therapies to treat COVID19.
• Absence or shortage of vaccines to prevent COVID19.
While all shortages cannot be solved by SC alone, most of these can be

remedied by improving supply chain by
• Better planning.
• SC diversification.
• Improved risk estimation leading to diversification and stocking
strategies.
• Improved communication among SC actors.
5
Strategy, Processes, and Analytics
Operations and supply chain management involves

specialists in:
• Product design.
• Purchasing.
• Manufacturing.
• Service operations.
• Logistics.
• Distribution.
Success depends upon:

• Operations-related strategy.
• Processes to deliver products and services.
• Analytics to support the decisions needed to
manage the firm.
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What is Operations and Supply Chain Management?
The design, operation, and improvement of the systems that

create and deliver the firm’s primary products and services
Operations and Supply Chain Management (OSCM) is

concerned with the management of the entire
production/delivery system
The functional fields of business:

• Operations and Supply Chain Management
• Marketing, Finance, Sales and etc.

Careers in Operations and Supply Chain Management
Hospital Department
Plant manager Branch manager
administrator store manager
Call center Supply chain Purchasing Quality control

manager manager manager manager
Business process Lean

Production
improvement improvement Project manager
control analyst
analyst manager
Facilities Chief operating

manager officer

Careers in Operations and Supply Chain Management (2)
• Plant manager - oversees the workforce and physical resources (inventory,

equipment, and information technology) required to produce the organization’s
product
• Hospital administrator - oversees human resource management, staffing, and
finances at a health care facility
• Branch manager (bank) - oversees all aspects of financial transactions at a branch
• Department store manager - oversees all aspects of staffing and customer
service
• Call center manager - oversees staffing and customer service activities at a call
center.
• Supply chain manager - negotiates contracts with vendors and coordinates the
flow of material inputs to the production process and the shipping of finished
products to customers
• Purchasing manager - manages the day-to-day aspects of purchasing, such as
invoicing and follow-up
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Careers in Operations and Supply Chain Management (3)
• Logistics manager - oversees the movement of goods throughout the supply

chain
• Warehouse/Distribution manager - oversees all aspects of running a warehouse
• Business process improvement analyst - applies the tools of lean production to
reduce cycle time and eliminate waste in a process
• Quality control manager - applies techniques of statistical quality control
• Lean improvement manager - trains organizational members in lean production
and continuous improvement methods
• Project manager - plans and coordinates staff activities, such as new-product
development, new-technology deployment, and new-facility location
• Production control analyst - plans and schedules day-to-day production.
• Facilities manager - ensures that the building facility design, layout, furniture,
and other equipment are operating at peak efficiency

10
Operations and Supply Chain Processes
Operations
Manufacturing and service processes used to transform
resources into products.
• Manufacturing produces physical products.
• Services produce intangible products.
Supply Chain
Processes that move information and material to and from
the firm.
• Logistics processes move products.
• Warehousing processes store products.
• Information makes the process more efficient.
11
Operations and Supply Chain Processes
Planning – processes needed to operate an existing supply chain strategically

Sourcing – selection of suppliers that will deliver the goods and services needed to create the firm’s product.
A set of pricing, delivery, payments, and partner relationship metrics needed
Making – producing the major product or providing the service
Delivering – logistics processes such as selecting carriers, coordinating the movement of goods and
information, and collecting payments from customers
Returning – processes for receiving worn-out, defective, and excess products back from customers

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What is Operations Management? (Cont.)
• Operations is often defined as a transformation

process
• Inputs are transformed into outputs
• Feedback and requirements from customers are
used to adjust transformation factors in the
transformation process

13
Output of Operation: Goods vs Services
Goods Services
Pure Goods Core Goods Core Services Pure Services
Intangible
Tangible
Interaction with customer required
Less interaction with customers
Inherently heterogeneous
Often homogeneous
Perishable/time dependent
Not perishable – can be inventoried
Defined and evaluated as a package of features

14
Product / Service Bundling
• Product / Service Bundling refers to a company

building service activities into its product offerings
• Many firms offer a combination of goods and
services
• Products are supported by services such as
warranties and training
• Services are enhanced through the inclusion of
products

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Efficiency, Effectiveness, and Value
Efficiency
• Doing something at the lowest possible cost
Effectiveness
• Doing the right things to create the most value for the customer
Value
• The attractiveness of a product relative to its price

16
Evaluating Efficiency
• Benchmarking – a process in which one

company studies the processes of another
company to identify best practices
• Benchmarking is important to investors
• From an operations and supply chain perspective,
the relative cost of providing a good or service is
closely related to earnings growth

17
Management Efficiency Ratios
• Days sales outstanding – number of days that it takes to collect

cash from customers
• Days inventory – number of days’ worth of inventory
• Payables period – how quickly suppliers are paid
• Cash conversion cycle – how quickly a company converts the cash it receives
from sales to company profits
• Receivables turnover – number of times receivables are collected
• Inventory turnover – average number of times inventory is sold and replaced
during the year
• Asset turnover – the amount of sales generated for every dollar’s worth of
assets
Copyright ©2020 McGraw-Hill Education. All rights reserved.

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McGraw-Hill Education / Jacobs consent of McGraw-Hill Education.
18
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2023-01-09
Management Efficiency Ratios
• Management efficiency ratios

Cash Conversion Cycle =Days sales outstanding + Days Inventory - Payable period
• Asset productivity
𝑨𝒏𝒏𝒖𝒂𝒍 𝒄𝒓𝒆𝒅𝒊𝒕 𝒔𝒂𝒍𝒆𝒔
• Receivables turnover ratio 𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆𝒔 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒂𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆
• Inventory turnover 𝑪𝒐𝒔𝒕 𝒐𝒇 𝒈𝒐𝒐𝒅𝒔 𝒔𝒐𝒍𝒅

𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒗𝒂𝒍𝒖𝒆
• Asset turnover 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 (𝒐𝒓 𝑺𝒂𝒍𝒆𝒔)

𝑨𝒔𝒔𝒆𝒕 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
Copyright ©2020 McGraw-Hill Education. All rights reserved.

No reproduction or distribution without the prior written
McGraw-Hill Education / Jacobs consent of McGraw-Hill Education.
19
Historical Development of Operations and Supply Chain

Management
Exhibit 1.6
Late 1970’s Manufacturing strategy developed
Early 1980’s Just-in-time (JIT) production

pioneered by the Japanese
Mid 1980’s Service quality and productivity
Total Quality Management
Early 1990’s
(TQM) and Quality Certification Six Sigma Quality
programs Mid 1990’s
Supply Chain
Business Process Late 1990’s Management (SCM)
Reengineering (BPR)
Early 2000’s Service Science
Electronic commerce
Mid 2010’s Sustainability
Business Analytics
Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or
McGraw-Hill Education / Jacobs distribution without the prior written consent of McGraw-Hill Education.
20
Current Issues in OSCM
Adapting to rapidly changing global business relationships

• Rebalancing the trade balance between low-cost producing Asian
economies and Developed economies which would also reduce supply
risk.
Accommodating the shift to online retail purchasing
• This is a significant change requiring reconfiguration of stores and
warehouses.
Optimizing global supplier production and distribution networks
• SC network optimization is an on-going activity which is supported by
analytics, real-time data and artificial intelligence,
The speedy adoption of new technology and automation
• Adopting new technologies such as working form home, self-driving
trucks, robots for simpler cooking tasks such as pizza and hamburgers
will present major challenges.
Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or
McGraw-Hill Education / Jacobs distribution without the prior written consent of McGraw-Hill Education.
21
7
2023-01-09
STRATEGY AND
SUSTAINABILITY
Chapter 2
22
Sustainable Operations
• Sustainability – the ability to meet current resource needs without compromising

the ability of future generations to meet their needs
• The firm’s strategy describes how it will create and sustain value for its current
shareholders
o Shareholders – individuals or companies that legally own one or more shares of stock in the
company
o Stakeholders – individuals or organizations who are directly or indirectly influenced by the actions of
the firm
• The goal of sustainability means that the scope of the firm’s strategy must focus on
three areas (the triple bottom line)
o Social responsibility – business practices should be fair to labor, the community, and the region
where the firm conducts business
o Economic prosperity – shareholders must be compensated via a competitive return
o Environmental stewardship – the company should protect the environment as much as possible

23
Triple Bottom Line
Exhibit 2.1

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Triple Bottom Line (People, planet, profit)
Social responsibility.
• Fair and beneficial business practices towards labor, community and the region it
operates.
• Forbid child labor, safe work environment, fair salaries, sustainable work hours.
• Giving back to the community through health care, education, special programs.
Environmental stewardship.
• Protect the environment to the greatest extent possible.
• Cause no harm at a minimum.
• Manage ecological footprint by managing resource consumption and reducing waste.
• Assess and act on cradle-to-grave cost.
Economic prosperity.
• Meet firm’s obligation to the investors through competitive ROI.
• Promote growth and long-term value.
• Beyond profit, provide lasting economic benefit to society.

25
Operations and Supply Chain Strategy
Setting broad policies and plans for using the resources of a firm – must
be integrated with corporate strategy
o Corporate strategy provides overall direction and coordinates operational
goals with those of the larger organization
Operations effectiveness – performing activities in a manner that best
implements strategic priorities at a minimum cost

26
Operations Strategy
Strategy Process Example
Customer Needs More Product
Corporate Strategy Increase Org. Size
Increase Production
Operations Strategy
Capacity
Decisions on Processes
Build New Factory
and Infrastructure

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Competitive Dimensions
Cost or Price
• Make the product or deliver the service cheap
Quality
• Make a great product or delivery a great service: design and process quality
Delivery Speed
• Make the product or deliver the service quickly
Delivery Reliability
• Deliver it when promised
Coping with Changes in Demand
• Change its volume
Flexibility and New-Product Introduction Speed
• Change it (offer a wide variety of existing products and introduce new products quickly)
Other Product-Specific Criteria
• Support it (technical assistance, meeting launch dates, after-sale support, environmental impact)

28
Trade-Offs
Management must decide which parameters of

performance are critical and concentrate resources on
those characteristics
o An operation cannot simultaneously excel on all
competitive dimensions
o For example, a firm that is focused on low-cost production
may not be capable of quickly introducing new products
Straddling – seeking to match a successful competitor by
adding features, services, or technology to existing
activities
o Often a risky strategy: E.g. Continental straddling
Southwest Airlines

29
Order Winners and Order Qualifiers
• Order winners are criteria that differentiate the products or services

of one firm from those of another
o Features that customers use to determine which product to ultimately
purchase
• Order qualifiers are screening dimensions that permit a firm’s
products to be considered as possible candidates for purchase
o Features customers will not forego

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Assessing Risk
• All strategies have an inherent level of risk

o Uncertainty in the environment causes supply chain planners to
evaluate the relative riskiness of their strategies
• Supply chain risk is the likelihood of a disruption that would
impact the ability of a company to continuously supply products
or services
o Supply chain coordination risks are associated with the day-to-day
management of the supply chain
o Disruption risks are caused by natural or manmade disasters
 March 2011 Japan tsunami, 10-minute fire at a Phillips plant in 2000 cost $400mil loss, 1997
Boeing supplier failure on 2 critical parts cost $2.6 Billion
 COVID-19

31
Risk Management Framework
1. Identify the sources of potential disruptions.

• Highly situation-dependent.
• Focus should be on highly unlikely events.
2. Assess the potential impact of the risk.

• Goal is to quantify the probability and impact.
3. Develop plans to mitigate the risk.

• Detailed strategy for minimizing the impact of the risk.

32
Productivity Measurement
• Productivity is a measure of how well resources are used

o 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
• Productivity is a relative measure

o Must be compared to something else to be meaningful
 Company can compare itself with similar operations within its industry
 Measuring productivity over time within the same operation
• Partial productivity is a ratio of some output to a single input
• Multifactor productivity ratio of some output to a group of inputs
• Total productivity is a ratio of all outputs to all inputs

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Productivity Measurement - Example

34
Partial Measures of Productivity
Exhibit 2.4

35
Partial Measures of Productivity
An electronics company makes

communications devices for military contracts.
The company just completed two contracts. The Navy contract Army contract
navy contract was for 2,300 devices and took 25 Output 2300 5500
workers two weeks (40 hours per week) to Input 25 × 40 × 2 35 × 40 × 3
complete. = 2000 ℎ𝑜𝑢𝑟𝑠 = 4200 ℎ𝑜𝑢𝑟𝑠
The army contract was for 5,500 devices that
were produced by 35 workers in three weeks. Productivity 2300 5500
= 1.15 = 1.31
On which contract were the workers more 2000 4200
productive?
The workers were more productive on the Army contract.

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PROJECTS
Chapter 5
37
Project Management
• What is a project?
• A series of related jobs, usually directed toward some major output and
requiring a significant period of time to perform.
• What is project management?
• Planning, directing, and controlling resources (people, equipment, material) to
meet the technical, cost, and time constraints of a project.
• Why is project management important?
• At the highest levels of an organization, management often involves juggling a
portfolio of projects.
• Choosing the “right mix” of projects that best supports the organizational
strategy.

38
Project Structure
Pure Project
• A self-contained team works full time on the project.
Functional Project
• Responsibility for the project lies within one functional division of the firm.
Employees from that division work on the project, usually only part time.
Matrix Project
• A blend of pure and functional project structures – people from different
functional areas work on the project, possibly only part time.

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Pure Project Structure
• The project manager has full authority

• Team members report to one boss
Advantages • Shortened communication lines
• Team pride, motivation, and commitment are high
• Duplication of resources
• Organizational goals and policies are ignored
Disadvantages • Lack of technology transfer
• Team members have no functional area home

40
Functional Project Structure
• A team member can work on several projects

• Technical expertise maintained in functional area
Advantages • Functional area is “home” after project completed
• Critical mass of specialized knowledge
• Aspects of the project that are not directly related to the functional
area get short-changed
Disadvantages • Motivation of team members is often weak
• Needs of the client are secondary and are responded to slowly

41
Matrix Project Structure
• Better communications between functional areas

• Project manager held responsible for success
Advantages • Duplication of resources is minimized
• Functional “home” for team members
• Policies of the parent organization are followed
• Too many bosses

• Success depends on project manager’s negotiating skills
Disadvantages • Potential for sub-optimization, as PMs hoard resources for their
own project.

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Defining the Project
 Statement of Work (SOW)

 A written description of the objectives to be
achieved
 Task
 A further subdivision of a project – usually
shorter than several months and performed by
a single group or organization
 Work Package
 A group of activities combined to be assignable
to a single organizational unit
 Activities
 Pieces of work that consume time

43
Work Breakdown Structure Example
Overview
Details

44
Managing Projects
• Charts provide an easily

understood visual presentation
• Software can be used to create
the charts
• Gantt chart – shows in a graphic
manner the amount of time
involved and the sequence of
activities. Often referred to as a
bar chart.

45
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Gantt chart Example
46
Graphic Project Report Samples

47
Next Time
• Finish reading Chapter 1, 2, and 5

• Continue discussion on Chapter 5 – Projects
• Network Planning model
• CPM - Critical Path Method
• PERT - Program Evaluation and Review Technique ,
also known as CPM with three activity time
estimates
• Project Crashing
48
16

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2023-01-09

Ch.1 Operations and Supply Chain Management

OPERATIONS AND SUPPLY

1. Identify the elements of operations and supply chain

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

COVID19 and Supply Chain Disruption

1. Identify the elements of operations and supply chain

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

COVID19 and Supply Chain Disruption

While all shortages cannot be solved by SC alone, most of these can be

Strategy, Processes, and Analytics

Operations and supply chain management involves

Success depends upon:

What is Operations and Supply Chain Management?

The design, operation, and improvement of the systems that

Operations and Supply Chain Management (OSCM) is

The functional fields of business:

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

Careers in Operations and Supply Chain Management

Call center Supply chain Purchasing Quality control

Business process Lean

Facilities Chief operating

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

Careers in Operations and Supply Chain Management (2)

• Plant manager - oversees the workforce and physical resources (inventory,

Careers in Operations and Supply Chain Management (3)

• Logistics manager - oversees the movement of goods throughout the supply

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

Operations and Supply Chain Processes

Operations and Supply Chain Processes

Planning – processes needed to operate an existing supply chain strategically

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

What is Operations Management? (Cont.)

• Operations is often defined as a transformation

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

Output of Operation: Goods vs Services

Pure Goods Core Goods Core Services Pure Services

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

Product / Service Bundling

• Product / Service Bundling refers to a company

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

Efficiency, Effectiveness, and Value

• Doing something at the lowest possible cost

• The attractiveness of a product relative to its price

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

• Benchmarking – a process in which one

Copyright ©2020 McGraw-Hill Education. All rights reserved. No reproduction or distribution

Management Efficiency Ratios

• Days sales outstanding – number of days that it takes to collect

Copyright ©2020 McGraw-Hill Education. All rights reserved.

Management Efficiency Ratios

• Management efficiency ratios

• Inventory turnover 𝑪𝒐𝒔𝒕 𝒐𝒇 𝒈𝒐𝒐𝒅𝒔 𝒔𝒐𝒍𝒅

• Asset turnover 𝑹𝒆𝒗𝒆𝒏𝒖𝒆 (𝒐𝒓 𝑺𝒂𝒍𝒆𝒔)

Copyright ©2020 McGraw-Hill Education. All rights reserved.

Historical Development of Operations and Supply Chain

Early 1980’s Just-in-time (JIT) production

Current Issues in OSCM

Adapting to rapidly changing global business relationships