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Book: Operations and Supply Chain Management: The Core by Jacobs & Chase

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Subscriber Bundle with online chaptersummaries of Operations and Supply Chain Management: The Core - Jacobs & Chase - 5th edition

Subscriber Bundle with online chaptersummaries of Operations and Supply Chain Management: The Core - Jacobs & Chase - 5th edition

What is Operations and Supply Chain Management about? - Chapter 1

What is Operations and Supply Chain Management about? - Chapter 1

If the network has a global dimension, the different components can be located in different countries. Due to the dynamic and competitive nature of global companies and the constant evolution in information technologies, the required activities and supply chain management can change quickly. Indeed, today's success - in a global market - requires a business strategy that matches customer preferences.

How are activities (operations) and the supply chain structured?

Operations and supply chain management (OSCM) contain the activities within a company and the supply chain management. It is the design, implementation and improvement of the systems that create and deliver the primary products of a company. The OSCM is responsible for the entire system that produces products and services. This can be about any product or service whatsoever.

Operations and Supply Chain both have special meanings within OSCM:

  • Operations is about converting sources into products or services that are wanted by customers.
  • Supply chain is about the transport of information and materials.

Materials and information flow through a supply chain network. The pipeline contains key locations where material and information are stored for future use. Often every part of the network is controlled by different companies.

If the network has a global dimension, the different components can be located in different countries. Due to the dynamic and competitive nature of global companies and the constant evolution in information technologies, the required activities and supply chain management can change quickly. Indeed, today's success - in a global market - requires a business strategy that matches customer preferences.

Processes in a supply chain

Supply chain processes address the activities that convert input into output. This process can be subdivided into 5 activities:

  1. Planning: The planning consists of the processes required to strategically implement the supply chain. The company determines here how they meet the demand with the available sources. It is important that the supply chain is monitored so that it is efficient and delivers high quality to its customers.
  2. Sourcing: The company hereby selects suppliers that provide the goods and services that the company needs to produce its products.
  3. Making: This activity is about where the product is produced or the service is offered. It is also about monitoring processes such as speed, quality and employee productivity.
  4. Delivering: This is also linked to the logistical process of picking up and transporting products to department stores and customers. The transport of products must be coordinated and the movement of goods and information must take place via the supply network.
  5. Returning: Is about the process of receiving goods that are not good and supporting customers who have problems with the products or services received.

In a supply chain, therefore, there are various participants and activities that must be coordinated.

Difference between a product and service

There are 5 essential differences between a product and a service:

  1. A service is not tangible, a product is.
  2. A service requires interaction with the customer. Products are produced separately from the customer.
  3. Services are heterogeneous; they vary from day to day. Products, on the other hand, can be produced without variability.
  4. Services have a limited shelf life and time, they cannot be stored like goods.
  5. A service is formed by a number of characteristics that influence the service, such as the attitude of employees, the speed of work, etc. These characteristics define the service.

Product-service ratio

There are "pure goods" and "pure services" that consist solely of goods and services. A "pure good" is, for example, chemicals and a "pure service" is, for example, a university. However, almost every product offering is a combination of goods and services, these are also called "core goods" or "core services". Core goods also contain a service component, such as car dealers who also offer car repairs as a service. Core services integrate tangible goods, such as telephone companies that offer cables in addition to offering cable repairs.

In total there are therefore 4 types of product-service relationships:

  1. Pure goods: Only focus on the products (chemicals).
  2. Core goods: Products that also contain a service component as part of the company (cars).
  3. Pure services: Focus only on services (University).
  4. Core services: Services that integrate tangible products such as (telephone cables).

Bundling of products and services

Product service bundling takes place when a company incorporates service activities into its products, such as maintenance, training etc. 

How do efficiency, effectiveness and value relate to each other?

Managers try to stimulate growth. Efficiency and effectiveness are important here. Efficiency means that you do something for the lowest possible costs. You therefore use as few sources as possible. Effectiveness means that you do the right things to create as much value as possible for the customer. The two goals for maximizing efficiency and effectiveness are often conflicting; a trade-off takes place. To determine which amount of efficiency and effectiveness is the best, you need to look at the concept of value. Value is the attractiveness of a product given its price. This can be calculated by dividing the quality by the price.

How do you evaluate efficiency?

Investors compare the activities and supply chain of companies with each other because the relative costs of goods and services are essential for high returns. Profit increases due to an increase in sales or a reduction in costs. Companies that are efficient can still make a profit in times of recession due to their low cost structure. As a result, companies are assessed on the basis of their efficiency ratios.

Benchmarking is used. This is the process in which a company identifies the process of another company (or industry) in order to assess the "best approach". The activities and supply chain processes of a company have an impact on these efficiency ratios.

The most important 4 efficiency ratios are as follows:

  1. Cash conversion cycle = Days outstanding + Days inventory - Payable period

The cash conversion cycle is about the time that the company needs to convert the money, that they have spent on raw materials, into profit from the products sold. The less the number of days this takes, the better.

  1. Reiceivable turnover = Annual credit sales / Average accounts receivable

This ratio measures how often money is received in a year. This is about the efficiency in collecting their sales.

  1. Inventory turnover = Cost of good sold / Average inventory value

This ratio is about how efficient a company is in converting its inventory into sales. It shows the speed of use of its stock.

  1. Asset turnover = Revenue (or sales) / Total assets

This ratio measures the efficiency of the company when using its resources in general. The higher the ratio, the better.

What does a job in supply chain management look like?

People who pursue a career in OSCM specialize in managing the planning, production and distribution of goods and services. Every company depends on effective results that strive for long-term success, so there are always jobs in this field. As an employee you then have to find out how you can best tackle matters; which location, buyers and how you can best implement things.

Which concepts are mainly used within OCM?

Since the Industrial Revolution in 1800, concepts have been developed within the OSCM field that is still being used. This book focuses primarily on the concepts developed since 1980. These concepts are as follows:

  • Manufacturing strategy: Looks at how the capabilities of a company can be used strategically in order to gain an advantage.
  • Just-in-time (JIT): Integrated set of activities to achieve high volume production with minimal stocks. This is achieved by having parts delivered exactly when they are needed.
  • Total Quality Control (TQC): this is a way that aggressively searches for a way to eliminate causes of production errors.
  • Lean manufacturing: Refers to a set of concepts that are related to Just in Time (JIT) and Total quality control (TQC).
  • Total quality management (TQM): The company is organized in such a way that it excels on all dimensions of products and services that are important to the customer.
  • Business process reengineering (BPR): Approach to improve business processes that want to make revolutionary changes instead of small changes
  • Six Sigma: this is a statistical term to describe the quality of the goal. It also refers to a quality improvement philosophy and program. 
  • Mass Customization: The ability to create unique products that meet customer requirements.
  • Electronic commerce: Internet is used as an essential element for business activities.
  • Sutainability: Using the necessary resources without compromising the ability of future generations to meet their needs. 
  • Triple bottom line: This implies a business strategy that contains social, economic and environmental criteria.
  • Business analytics: Here, current business data is used to solve business problems through mathematical analysis.
When is a business strategy sustainable? - Chapter 2

When is a business strategy sustainable? - Chapter 2

Companies can be assessed on the basis of the triple bottom line. The triple bottom line evaluates a company based on social, economic and environmental criteria.

The criteria are as follows:

  • Social responsibility: Fair and beneficial business practices with regard to labor, the community and the region in which a company operates.
  • Economic prosperity: A company is required to compensate shareholders for providing capital. They must do this by delivering a positive result on the investment they have made.
  • Environmental stewardship: This refers to the impact of the company on the environment. The company must try to protect the environment as good as possible.
How do you predict the demand? - Chapter 3

How do you predict the demand? - Chapter 3

Forecasts can be made on the basis of 4 basic types: qualitative, time series analysis, causal relationships and simulation. In this book the focus is mainly on the time series analysis techniques.

  • Time series analysis: A prediction in which data from the past is used to predict future demand.
How do you determine the required capacity? - Chapter 4

How do you determine the required capacity? - Chapter 4

Capacity is the ability to keep something in custody; store. It is often seen as the amount of output that a system can achieve over a specific period of time. This may include the amount of customers that a company can serve or the number of cars that can be produced within a certain time. When assessing capacity, both input of raw materials and output of products must be considered. Management also looks at the time dimensions of capacity.

Generally there are 3 time units when planning capacity:

  1. Long range: Longer than one year. These are productive resources (such as buildings). For this you need the cooperation and approval of top management. It is therefore a question of planning long-term products.
  2. Intermediate range: These are monthly or quarterly schedules. The capacity can vary in such things as looking at the required personnel and materials.
  3. Short range: These last less than one month. This involves the daily or weekly schematic process and it has to do with making adjustments and eliminating variance between the planned and the current output.
What do projects look like? - Chapter 5

What do projects look like? - Chapter 5

Success in project management is an activity that requires secure controls and critical resources. In this book, much attention is paid to non-human resources, such as machines and materials. In projects, however, the time of employees are key assets. Human resources are often expensive and the people involved in a project are crucial to the succes of a business and are often the most valuable employees. 

How do you design a production process? - Chapter 6

How do you design a production process? - Chapter 6

This chapter looks at how processes are used to make tangible goods. Production processes are used to make everything you can buy, from an apartment to the ink with which we write. Production processes are used to produce tangible items.

Production processes can be subdivided into 3 steps:

  1. Purchasing the required parts
  2. Making the items
  3. Sending the items to the customer
What does a service process look like? - Chapter 7

What does a service process look like? - Chapter 7

A service is the output, the result, of a process that is not tangible. This means that it has no physical dimensions that can be weighed or measured. In contrast to product innovations, a patent cannot be applied for a service. This requires a company to quickly expand a new concept before competitors can copy the procedures.

Services naturally contain a certain interaction with the customer. The degree of interaction often depends on the needs of the customer. Every service has its own service package; a bundle of goods and services that is offered in a specific environment.

What do we mean by sales and execution plans? - Chapter 8

What do we mean by sales and execution plans? - Chapter 8

The purpose of planning is to create a balance between supply and demand through coordination. Sales and executive schedules are a process that helps a company to provide better customer services, lower inventory levels, shorten customer waiting times, stabilize production percentages, and provide top management tools to handle business operations. The process has been developed to coordinate the key activities of a company and it is related to marketing, sales and supply chain activities that are required to meet demand on time. The end result of the planning is to reach an agreement between the various departments about the action that ensures an optimal balance between supply and demand.

How do you plan material requirements? - Chapter 9

How do you plan material requirements? - Chapter 9

The material requirement planning (MRP) is the key component that links the production functions to the material planning and controls.

  • Material requirement planning (MRP): The logic behind determining the number of parts, components and materials needed to produce a product.

MRP is installed in almost all production companies. The reason for this is that MRP is logically easy to understand when it comes to determining the number of parts, components, and materials needed to produce an item. MRP is based on the dependent demand. Because of this, you have to look carefully at the dependent demand of a product. What do you produce in parts yourself and what do you purchase? It is most commonly used when multiple products are produced with the same materials. It is most valuable for companies that make products that use the same equipment.

What is quality management and Six Sigma? - Chapter 10

What is quality management and Six Sigma? - Chapter 10

Total quality management (TQM) can be defined as managing an entire organization in such a way that it excels on all dimensions of the product and the services that are important to the customer.

This has 2 fundamental goals, namely:

  1. The design of the product or service
  2. The assurance that the organization's system can consistently produce that design
What does stock management look like? - Chapter 11

What does stock management look like? - Chapter 11

There is an economic benefit in reducing inventory. Stocks make up a large part of the costs of a company. This is partly due to the money invested in it, but also due to costs such as insurance, opportunity costs and so on. These costs can be reduced by handling less inventory and reducing waste.

  • Inventory: the inventory of each item or commodity used in an organization.

It is therefore important to estimate how much and when items must be purchased. There are 3 models that can be used if it is difficult to estimate demand and therefore determine the amount of stock. These 3 stock models are as follows:

  1. Single-period model: this is used when you make a one-off purchase of an item. Eample: buying a shirt for a one-off sporting event.
  2. Fixed-order quantity model: this is used if you want to keep an item in stock. It applies here that for every order that is placed the same number of that item must be ordered. The stock of that item is monitored until it reaches a certain level where the risk of not having enough of that item is large enough to place a new stock.
  3. Fixed-time period model: this is used when an item must be in stock and must be ready for use. The item is then ordered at certain interval levels of time.
What does "lean" mean in supply chain management? - Chapter 12

What does "lean" mean in supply chain management? - Chapter 12

The most significant approach within operations and supply management is lean production. This refers to the focus of eliminating as much waste as possible. All actions (steps, stock, etc.) that are not required are input for the lean process. The basis for lean thinking comes from just-in-time (JIT) production, designed in Japan. This philosophy is about eliminating waste. Customer value is also an important concept within lean. It refers to what the customer is willing to pay for. Finally, waste is important for lean management, this is something that adds no value. This could include matters such as overproduction, waiting etc. According to Lean, this should be minimized as much as possible.

Why do companies outsource processes? - Chapter 13

Why do companies outsource processes? - Chapter 13

Outsourcing is the act of moving internal activities and decision-making powers to providers outside the organization. The agreements that are drawn up are expressed in a contract. Not only the activities are outsourced, but also the people, factories, technology and other resources. The decisions about making uncertain elements are also outsourced.

  • Outsourcing: transferring the internal activities and decisions of a company to providers outside the organization.
What do we mean by location, logistics, and distribution? - Chapter 14

What do we mean by location, logistics, and distribution? - Chapter 14

Logistics deals with the entire picture concerning the coordination and relocation of materials and other sources from one location to another. The focus here is on the relocation of materials and on the location of department stores and factories. This is important for the costs of moving materials. With international logistics, these functions are managed on a global scale. There are certain logistics companies that specialize in such logistics operations, such as DHL. These transport organizations are also called third-party logistics companies. They provide their services to companies.

  

  

   

    

   

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