UNIT-1: Introduction to Operations

and Supply Chain Management

1. Concept, Significance and Functions of Operations and

SCM
2. Evolution from Manufacturing to Operations Management
3. Physical Distribution to Logistics to SCM
4. Physical Goods and Services perspectives
5. Quality definitions from various perspectives
6. Customer’s View and Manufacturer’s View of Quality
7. Concept of Internal Customer
8. Impact of Global Competition on SCM
 Operations and Supply Chain Management

Operations: It includes the planning, scheduling, and controlling

of all activities involved in the production/service process.
 Operations and Supply Chain Management

SCM: It involves the active streamlining of a business's supply-

side activities to maximize customer value and gain a competitive
advantage in the marketplace.
 Operations Management

• The concept of operations management arose in 1970.

• Operations management is an inclusive term which comprises

both manufacturing and services organizations.

• Definition: Operations management is the field of study that

focuses on the effective planning, scheduling, use and control
of resources in a manufacturing or service organization.
 Significance of Operations Management
• 1. Organization: Operations management helps an organization by making effective
utilization of scarce resources such as machines and labor. It also lowers levels of work in
process inventory for better utilization of capital. Organizations with better operations
management are also more responsive to customer needs. It helps in finding of hidden
capacity.
• 2. Consumer: Operations management helps consumer by offering them better
products and by lowering the price level. It also helps in ensuring timely availability of
the products at the right place.
• 3. Investors: Operations management helps investors by offering them better returns,
more security and higher credibility.
• 4. Employees: Workers get better job security, wages, higher job satisfaction and
improved working conditions.
• 5.Suppliers: They are assured of timely payment which builds faith in the organization.
• 6. Community: Better Production and operations management helps community by
providing economic and social stability.
• 7. Nation: The nation is benefited through robust industrial scene and higher prosperity.
 Functions of Operations Management

Operations management is a critical aspect of business that

involves designing, overseeing, and controlling the processes and
systems used to produce goods or deliver services.

Its primary goal is to ensure the efficient and effective utilization

of resources to meet customer demands while optimizing
productivity and minimizing costs.
 Functions of Operations Management
• Production Planning: This function involves determining what,
how, and when products or services will be produced. It includes
forecasting demand, setting production schedules, and allocating
resources to meet those demands efficiently.
• Inventory Management: Ensuring the right level of inventory is
maintained is crucial to avoid stock-outs or overstocking. Effective
inventory management aims to balance supply and demand to
optimize costs while meeting customer needs.
• Quality Control: Quality control focuses on ensuring that
products or services meet the established quality standards. This
involves implementing processes, testing methods, and inspections
to identify and rectify defects or deviations.
• Capacity Planning: Determining the capacity required to meet
demand and ensuring that the resources (e.g., labor, equipment,
facilities) are available to achieve production goals.
 Functions of Operations Management
• Process Improvement: Continuously analyzing processes to identify
inefficiencies and bottlenecks and implementing improvements to enhance
productivity, reduce waste, and increase quality.
• Resource Allocation: Allocating resources such as labor, materials, and
equipment effectively to maximize productivity and minimize costs.
• Scheduling: Creating schedules for production, employees, and resources
to optimize utilization and ensure smooth operations.
• Maintenance Management: Overseeing maintenance activities to
ensure that equipment and facilities are in good working condition,
reducing downtime and disruptions.
• Risk Management: Identifying potential risks that could affect
operations and implementing strategies to mitigate or minimize their
impact.
• Health and Safety Compliance: Ensuring that the workplace meets
health and safety standards to protect employees and customers from harm.
 Functions of Operations Management
• Lean Management and Six Sigma: Adopting methodologies like
Lean and Six Sigma to eliminate waste, improve efficiency, and
enhance quality.
• Customer Relationship Management (CRM): Incorporating
customer feedback into operations to better understand their needs
and align processes to meet customer expectations.
• Environmental Sustainability: Integrating environmentally
sustainable practices into operations to reduce the environmental
impact of the business.
• Technology and Innovation Management: Utilizing technology
and fostering innovation to enhance processes, product
development, and overall competitiveness.
Overall, operations management plays a crucial role in optimizing the
entire production or service delivery process, from start to finish, to
achieve the organization's objectives efficiently and effectively.
 Evolution from Manufacturing
to Operations Management
The evolution from manufacturing to operations management is a journey that reflects the
changing focus of businesses from traditional production-oriented approaches to more
integrated and strategic management of resources and processes. Here's an overview of the key
stages in this evolution:
• Craft Production: In the early stages of industrialization, manufacturing was typically done through
craft production. Skilled artisans would produce goods one at a time, and the focus was on
craftsmanship and attention to detail. Production was labor-intensive, and the scale was limited.
• Mass Production: The introduction of assembly lines and interchangeable parts by Henry Ford and
others revolutionized manufacturing. Mass production techniques enabled the rapid production of
standardized goods, reducing costs and making products more affordable to consumers. This era saw a
focus on efficient production and economies of scale.
• Scientific Management: Frederick Taylor introduced scientific management principles,
emphasizing time and motion studies to optimize work processes. The focus was on improving worker
efficiency and productivity through standardization and task specialization.
• Quality Control: During and after World War II, the emphasis shifted towards ensuring product
quality. Quality control methods, such as statistical process control, were introduced to identify and
address defects, reducing waste and improving customer satisfaction.
• Total Quality Management (TQM): In the 1980s and 1990s, TQM emerged as a holistic
approach to quality management. It involved the entire organization, encouraging a culture of
continuous improvement and customer focus. TQM integrated quality into all aspects of operations and
emphasized the involvement of all employees in the improvement process.
 Evolution from Manufacturing
to Operations Management
• Lean Manufacturing: Building on concepts from the Toyota Production System, lean
manufacturing focused on minimizing waste (e.g., overproduction, inventory, defects) and maximizing
value-added activities. Lean principles aimed to create a more agile and responsive production process.
• Operations Management: With the increasing complexity of businesses and the integration of
various functions, the term "operations management" emerged to encompass a more comprehensive and
strategic approach. Operations management goes beyond manufacturing and includes service
operations as well. It involves the coordination and optimization of resources and processes to deliver
value to customers and achieve organizational goals.
• Technology and Digitalization: The rise of technology and digitalization has significantly
impacted operations management. Advanced technologies like automation, artificial intelligence, and
data analytics have further optimized processes, improved decision-making, and enabled more efficient
supply chain management.
• Sustainability and Social Responsibility: More recently, operations management has embraced
sustainability and social responsibility. Organizations now consider the environmental and social
impacts of their operations and seek to implement sustainable practices throughout their supply chains.
Throughout this evolution, the role of operations management has evolved from a narrow focus
on production efficiency to a broader strategic function that integrates various disciplines to
optimize processes, enhance quality, and create value for customers and stakeholders. As
businesses continue to evolve, operations management will remain a crucial driver of
efficiency, innovation, and competitiveness.
 Physical Distribution to Logistics to SCM
The concepts of physical distribution, logistics, and supply chain management (SCM) are
interconnected and have evolved over time to address the challenges and complexities of
modern business operations. Let's explore the evolution and relationship between these terms:
• Physical Distribution: Physical distribution refers to the activities involved in moving finished
products from the production facility to the end consumers. It primarily focuses on the outbound
movement of goods and includes tasks such as order processing, inventory management,
warehousing, transportation, and distribution to retailers or end-users. In the past, physical
distribution was more about the efficient movement of goods from the manufacturer to the
market.
• Logistics: Logistics is a broader term that encompasses the entire process of planning,
implementing, and controlling the efficient movement and storage of goods, services, and
information from the point of origin to the point of consumption. It includes both inbound
logistics (raw material and component supply) and outbound logistics (product distribution).
While physical distribution is a part of logistics, logistics also involves procurement, production
planning, inventory management, and other activities that impact the overall flow of goods and
services.
• Supply Chain Management (SCM): Supply chain management is an even more
comprehensive and strategic approach to managing the flow of goods, services, and information
across the entire supply chain, from raw material sourcing to the end customer. SCM seeks to
optimize the entire network of organizations, processes, and resources involved in delivering a
product or service to the customer. This includes suppliers, manufacturers, distributors, retailers,
and other intermediaries.
 Physical Distribution to Logistics to SCM

In summary, physical distribution, logistics, and supply chain

management represent different stages in the evolution of
managing the flow of goods and services.

From a focus on the outbound movement of finished products to

a broader approach that considers the entire supply chain as a
strategic asset, businesses have recognized the importance of
efficient and integrated supply chain practices to remain
competitive in the global marketplace.
 Physical Goods and Services Perspectives
• When discussing physical goods and services, we are referring to two
distinct perspectives in business operations and delivery to customers. Let's
explore each perspective:
• Physical Goods Perspective:
– In the physical goods perspective, the primary focus is on tangible products or
items that are manufactured, produced, and delivered to customers.
– Physical goods can include a wide range of products, such as electronics,
clothing, automobiles, furniture, food items, and more.
– The production and distribution of physical goods involve various stages,
including raw material sourcing, manufacturing or production, quality control,
packaging, warehousing, and transportation.
– Businesses that deal with physical goods need to manage inventory effectively
to ensure that they have enough stock to meet customer demand while
minimizing excess inventory and associated carrying costs.
– Supply chain management plays a crucial role in the physical goods
perspective, as it involves coordinating suppliers, manufacturers, distributors,
and retailers to ensure the smooth flow of goods from the point of origin to the
end consumers.
 Physical Goods and Services Perspectives
• Services Perspective:
– In the services perspective, the primary focus is on intangible offerings
that provide value to customers through specialized skills, expertise, or
experiences.
– Services can encompass a wide variety of offerings, such as consulting,
healthcare, education, transportation, hospitality, financial services, and
more.
– Unlike physical goods, services cannot be touched, stored, or
possessed; they are consumed as they are delivered.
– Service delivery often involves interactions between service providers
and customers, and the quality of service is highly dependent on the
expertise and customer-centric approach of the service provider.
– In the services perspective, customer satisfaction and experience are
paramount, as customers' perceptions of the service directly impact
their overall satisfaction and likelihood of repeat business.
– The service perspective may also involve managing intangible factors
such as waiting times, communication, and customer support, which
significantly influence customer perceptions.
 Quality Definitions from Various Perspectives
• Customer Perspective:
– Fitness for use - Quality is the extent to which a product or service meets customer needs
and expectations, providing the intended benefits and value to the customer.
– Meeting or exceeding customer requirements - Quality is achieved when the product or
service meets or surpasses the specific needs and desires of the customer.
• Product Perspective:
– Conformance to specifications - Quality is the degree to which a product meets the
predetermined specifications and standards set by the organization.
– Absence of defects - Quality is the absence of any flaws, defects, or imperfections in the
product that could negatively impact its performance or functionality.
• Process Perspective:
– Consistency and repeatability - Quality is achieved through well-defined and consistent
processes that produce consistent results, reducing variations and errors.
– Efficiency and effectiveness - Quality is about optimizing processes to achieve desired
outcomes efficiently and effectively, minimizing waste and maximizing value.
• Employee Perspective:
– Pride in workmanship - Quality is reflected in the dedication and pride that employees take
in producing a product or delivering a service.
– Employee involvement and empowerment - Quality is enhanced when employees are
actively involved in process improvement and decision-making, leading to better outcomes.
 Quality Definitions from Various Perspectives
• Management Perspective:
– Continuous improvement - Quality is an ongoing process of continuous improvement,
striving for excellence and never being satisfied with the status quo.
– Meeting organizational goals - Quality is achieved when products and services align with
the overall goals and objectives of the organization.
• Supplier Perspective:
– Meeting supplier requirements - Quality is the extent to which the supplier's products or
services meet the requirements and expectations of the organization that purchases them.
– Reliability and consistency in supply - Quality is reflected in suppliers' ability to deliver
products or services reliably and consistently without disruptions.
• Value Perspective:
– Value for money - Quality is the balance between the price paid for a product or service and
the benefits and value it provides to the customer.
– Cost-effectiveness - Quality is achieved when the benefits of a product or service outweigh
the costs associated with its production and delivery.
• Societal Perspective:
– Social and environmental responsibility - Quality involves considering the impact of
products and services on society and the environment, promoting sustainable practices.
Overall, quality is a multidimensional concept and each perspective highlights a different aspect of
quality, and organizations must take a comprehensive approach to achieve and maintain high-quality
products and services.
 Customers' View of Quality:
From a customer's perspective, quality is all about meeting or
exceeding their expectations and needs. When customers
evaluate the quality of a product or service, they focus on several
key aspects:

Durability
Performance
Aesthetics
Reliability
User
Friendly
Value for
Customer Money Brand
Service Reputation
 Manufacturer's View of Quality:
From a manufacturer's perspective, quality is a crucial aspect that
affects their reputation, customer satisfaction, and overall
business success. Manufacturers aim to produce products or
deliver services that align with the following aspects:

Conformance to
Specifications Continuous
Process Improvement
Efficiency Quality
Control
Product
Supply Chain Safety &
Management Compliance
Employee Brand
Training & Identity
Empowerment
 Concept of Internal Customer
Concept of "Internal Customer" refers to the individuals or departments
within an organization who receive products, services, or information
from other individuals or departments within the same organization as
part of the overall business processes. This concept is essential for
optimizing the efficiency and effectiveness of operations within the
organization
• Supply Chain and Process Integration: Each department is
considered a supplier to the next department in the production or service
delivery process. The department receiving the output becomes the internal
customer.
• Quality and Continuous Improvement: When one department
provides output to another, the quality of that output becomes crucial, as it
directly affects the quality of the final product or service. Continuous
improvement efforts also involve feedback from internal customers to
identify areas of improvement in processes.
• Resource Allocation and Capacity Planning: By considering the
needs and demands of internal customers, resource allocation decisions can
be better aligned with the production requirements and customer demands.
 Concept of Internal Customer
• Resource Allocation and Capacity Planning: By considering the needs and demands of
internal customers, resource allocation decisions can be better aligned with the production
requirements and customer demands.
• Communication and Coordination: Internal customers need to communicate their
requirements clearly to internal suppliers, and suppliers need to provide timely and accurate
information to customers. This coordination helps avoid bottlenecks, delays, and
misunderstandings.
• Process Efficiency: By considering internal customers, process flow can be streamlined to
ensure that each department receives what it needs when it needs it.
• Inventory Management: Internal customers may have varying demands and lead times.
By understanding these demands, operations management can plan inventory levels more
effectively, ensuring that each department has the necessary materials or inputs to meet
production schedules.
• Employee Involvement and Empowerment: By viewing internal colleagues as customers,
the organization can foster a culture of teamwork and employee empowerment to enhance
collaboration and productivity.
By emphasizing the concept of internal customer in operations management, organizations can
improve process efficiency, enhance collaboration between departments, and ensure that the
final products or services meet customer expectations. This customer-centric approach helps
organizations create a more effective and integrated operation, ultimately leading to better
overall performance and customer satisfaction.
 Impact of Global Competition on Operations Management
Global competition has a significant impact on operations management, influencing how
organizations plan, execute, and optimize their production and service delivery processes. The
rise of globalization and the opening of international markets have introduced several
challenges and opportunities for businesses. Here are some key impacts of global competition
on operations management:
• Supply Chain Complexity: Global competition often involves sourcing raw materials, components,
and finished goods from various countries. This creates a more complex and extended supply chain
with multiple stakeholders, increasing the challenges of coordinating and managing the flow of goods
and information across borders.
• Market Demands and Variability: Organizations face more diverse and rapidly changing market
demands on a global scale. Operations management must adapt to these varying demands efficiently
and be flexible enough to adjust production schedules and inventory levels accordingly.
• Cost Pressures and Efficiency: Global competition often leads to cost pressures as organizations
strive to remain competitive on pricing. Operations management must continuously focus on cost
reduction initiatives, process efficiencies, and waste minimization to maintain profitability.
• Risk Management: Operating in a global environment exposes organizations to various risks, such
as supply chain disruptions, political instability, currency fluctuations, and regulatory changes.
Operations management must implement risk management strategies to mitigate these uncertainties
effectively.
• Quality and Standardization: Organizations operating in multiple countries need to maintain
consistent product quality and service standards across various markets. Operations management plays
a crucial role in ensuring that standardized processes and quality control measures are in place.
 Impact of Global Competition on Operations Management
• Technology and Digitalization: To stay competitive in a global landscape, organizations need to
leverage advanced technologies and digital solutions in their operations. Operations management must
embrace Industry 4.0 concepts, such as IoT, AI, and data analytics, to optimize processes and enhance
decision-making.
• Lead Time Reduction: Global competition often demands faster delivery times to meet customer
expectations. Operations management needs to focus on reducing lead times through streamlined
processes, better inventory management, and strategic location of facilities.
• Talent and Workforce Management: Organizations competing on a global scale may need to
manage a diverse and dispersed workforce. Operations management must address challenges related to
talent acquisition, training, and cultural integration.
• Sustainability and Social Responsibility: Global competition also puts a spotlight on
sustainability and social responsibility. Operations management must consider environmentally friendly
practices and ethical sourcing to meet the demands of socially conscious consumers.
• Collaboration and Partnerships: To navigate global competition successfully, organizations often
form strategic partnerships and collaborations. Operations management must foster effective
relationships with suppliers, customers, and other stakeholders to enhance efficiency and
competitiveness.
In conclusion, global competition significantly shapes the landscape of operations management.
Organizations must continuously adapt to the dynamic global environment, embracing
technological advancements, managing risks, maintaining high-quality standards, and
optimizing supply chains to remain competitive and deliver value to customers worldwide.
Appendix
 Customers' View of Quality:
From a customer's perspective, quality is all about meeting or exceeding their expectations
and needs. When customers evaluate the quality of a product or service, they focus on
several key aspects:
• Performance: Customers expect the product or service to perform its intended function
effectively and efficiently. For example, a smartphone should have reliable call quality and fast
processing speed.
• Reliability: Customers want products and services that can be trusted to work consistently and
without unexpected failures. Reliability is crucial for building trust and confidence in the brand.
• Durability: Customers desire products that have a long lifespan and can withstand wear and tear
without frequent repairs or replacements.
• Aesthetics: The appearance and design of a product play a significant role in customer perception
of quality. Customers are drawn to well-designed products that are visually appealing.
• Customer Service: The quality of customer service is crucial to the overall customer experience.
Customers appreciate responsive and helpful support when they encounter issues or have questions.
• Value for Money: Customers evaluate quality in terms of the perceived value they receive
relative to the price they pay. They want products and services that offer a good balance between
quality and cost.
• User-Friendly: Products and services that are easy to use and understand are seen as higher
quality. Intuitive interfaces and clear instructions enhance the user experience.
• Brand Reputation: Customers often associate quality with the reputation of the brand or
manufacturer. Brands known for high-quality offerings are perceived positively by customers.
 Manufacturer's View of Quality:
From a manufacturer's perspective, quality is a crucial aspect that affects their reputation,
customer satisfaction, and overall business success. Manufacturers aim to produce products or
deliver services that align with the following aspects:
• Conformance to Specifications: Manufacturers strive to ensure that their products or services
meet the predetermined specifications and standards set during the design and planning phase.
• Process Efficiency: Manufacturers focus on optimizing production processes to minimize defects,
reduce waste, and improve overall efficiency. This helps maintain consistent quality and control
production costs.
• Continuous Improvement: Manufacturers are committed to continuous improvement initiatives to
enhance the quality of their products and services over time. This involves identifying areas for
improvement and implementing corrective actions.
• Quality Control: Manufacturers implement quality control measures, such as inspections and
testing, to identify and rectify defects before products reach the customers.
• Supply Chain Management: Ensuring quality in the supply chain is vital for manufacturers. They
work closely with suppliers to maintain the quality of raw materials and components used in
production.
• Employee Training and Empowerment: Manufacturers invest in employee training to ensure
that the workforce has the necessary skills to produce high-quality products. Empowering employees to
make decisions that impact quality fosters a culture of quality consciousness.
• Product Safety and Compliance: Manufacturers prioritize product safety and compliance with
relevant regulations and standards to protect customers and meet legal requirements.
• Brand Identity: Maintaining consistent quality helps manufacturers build a strong brand identity
 Concept of Internal Customer
Concept of "Internal Customer" refers to the individuals or departments within
an organization who receive products, services, or information from other
individuals or departments within the same organization as part of the overall
business processes. This concept is essential for optimizing the efficiency and
effectiveness of operations within the organization
• Supply Chain and Process Integration: In operations management, various
departments or units often work together to produce goods or deliver services.
Each department is considered a supplier to the next department in the production
or service delivery process. The department receiving the output becomes the
internal customer. For example, in a manufacturing setting, the production
department is the internal supplier to the warehouse department, and the
warehouse department is the internal customer.
• Quality and Continuous Improvement: Operations management aims to
ensure that the products or services meet the required quality standards at each
stage of the production process. When one department provides output to another,
the quality of that output becomes crucial, as it directly affects the quality of the
final product or service. Continuous improvement efforts also involve feedback
from internal customers to identify areas of improvement in processes.
 Concept of Internal Customer
• Resource Allocation and Capacity Planning: Operations management involves allocating
resources such as materials, equipment, and labor to different departments. By considering the needs
and demands of internal customers, resource allocation decisions can be better aligned with the
production requirements and customer demands.
• Communication and Coordination: Effective communication and coordination between different
departments are vital to ensure smooth operations. Internal customers need to communicate their
requirements clearly to internal suppliers, and suppliers need to provide timely and accurate
information to customers. This coordination helps avoid bottlenecks, delays, and misunderstandings.
• Process Efficiency: Operations management aims to optimize processes to minimize waste, reduce
cycle times, and enhance overall efficiency. By considering internal customers, process flow can be
streamlined to ensure that each department receives what it needs when it needs it.
• Inventory Management: Internal customers may have varying demands and lead times. By
understanding these demands, operations management can plan inventory levels more effectively,
ensuring that each department has the necessary materials or inputs to meet production schedules.
• Employee Involvement and Empowerment: In operations management, employees play a
crucial role in delivering quality products and services. By viewing internal colleagues as customers,
the organization can foster a culture of teamwork and employee empowerment to enhance collaboration
and productivity.
By emphasizing the concept of internal customer in operations management, organizations can
improve process efficiency, enhance collaboration between departments, and ensure that the final
products or services meet customer expectations. This customer-centric approach helps organizations
create a more effective and integrated operation, ultimately leading to better overall performance and
customer satisfaction.