Overview Study Material Operations and Logistics Management 2017-2018

A. Strategy and analytics

Definition of operations and supply chain management Supply chain management is a design, operation and improvement of systems which create and deliver products and services to customers in order to reach their expectations. Each operation can also be done by a separate company or unit located in another country. Then Global supply chain management can be discussed.

Business strategy is matching customer needs with real systems defined by boundaries. Operations are those activities which transform resources into and services, whereas supply chain refers to activities which move information and materials from to firms and customers.

Operations and supply chain processes Process refers to activity which transforms input into output. From the customer point of view there are five process types:  Planning: analysing demand and developing the process system;  Sourcing: choosing suppliers;  Making: the actual making of a product or service including coordination of workers and material;  Delivering: shipping and transportation of good, i.e., logistics;  Returning: returning defects, excess and worn out products from customers.

Comparison of services and goods Characteristics of services are:  Services are intangible;  There needs to be an interaction with the customer;  Services are heterogeneous, they vary over the time;  Services are perishable and time dependant.

The fifth aspect is a combination of the following features: services can be described with facility (location and decoration), facilitating goods (scissors in a hair-dresser salons); explicit services (trained personnel), implicit services (the attitude of staff).

PURE GOODS CORE GOODS CORE SERVICES PURE SERVICES

•magazines •cars •waterparks •legal advice

Figure 1: Sequence of .

Figure 1 shows the sequence of goods and services. It can be observed that there are also products which consist of goods and services at the same time, however in some cases the product is focused on goods more than on services.

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Overview Study Material Operations and Logistics Management 2017-2018

Pure goods are those which represent just a product, for example, magazines and books. Core goods are focused more on the good, but it includes also a service. For example, when a customer purchases a car, the dealer offers after-purchase service. Core services are those which mainly offer service, but also goods are involved in it. One of the examples is a waterpark, where clients enjoy not only sliding and water as such, but waterpark construction itself is a good too. Finally, pure services are those which are only performed as service, such as giving legal advice.

Product service bundling is a product with an additional service which creates an extra value for the item. One example is a car computer maintenance.

Efficiency, effectiveness and value Efficiency and effectiveness need to be differentiated. Efficiency is activities performed at the lowest cost, whereas effectiveness is about creating the biggest value. For example, company is efficient and effective when it can deliver the product to the customer in 24 hours (value) and at the same time have low costs for such action. Figure 2 illustrates the efficiency and effectiveness terms.

Efficiency Effectiveness

Figure 2: Efficiency versus effectiveness.

Value can be described with the following formula: 푄푢푎푙푖푡푦 푉푎푙푢푒 = 푃푟푖푐푒 Therefore, the bigger the quality for the same price, the bigger the perceived value for the customer.

Efficiency can be measured in several ways:  Net income per employee;  Revenue ( or sales) per employee; 퐶표푠푡 표푓 푔표표푑푠 푠표푙푑  Receivable Turnover= , where the lower is the calculated ratio, 퐴푣푒푟푎푔푒 푖푛푣푒푛푡표푟푦 푣푎푙푢푒 the bigger is the risk that receivables will not be collected;

퐶표푠푡 표푓 푔표표푑푠 푠표푙푑  Inventory Turnover= , where the lower is the calculated ratio, 퐴푣푒푟푎푔푒 푖푛푣푒푛푡표푟푦 푣푎푙푢푒 the less efficient the company is;

푅푒푣푒푛푢푒 (표푟 푆푎푙푒푠)  Asset Turnover= 푇표푡푎푙 푎푠푠푒푡푠

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Overview Study Material Operations and Logistics Management 2017-2018

Job positions at operations and supply chain management Operations and supply chain manager’s duty is to develop systems that will successfully deliver goods and services to the customer. Managers tend to work according to the client’s needs. Some of the job positions are: manufacturing manager, supply manager and warehouse manager. The goal of any employee working in operations and supply chain management is to become the COO- chief operating officer.

History 1970s: the first manufacturing strategy was developed by researchers at Harvard School. They emphasized the importance of establishing a company goal in production and managing manufacturing -offs.

Early 1980s: Japanese invented JIT ( Just-In-Time) strategy which allowed to keep small inventories due to a lack of space in Japan. This approach was linked to TQC (Total Quality Costs), which is a way to remove all the reasons of ineffective production. To describe these concepts the term lean manufacturing is used.

Late 1980: it was the time when a lot of services were developed such as cinemas, aqua parks and festivals. During this time McDonald successfully introduced their service and quality and this example shows how to deliver customers a big volume of products.

Early 1990s: the process of establishing various quality measures progressed. There was an even bigger focus on TQC concepts and a quality certification standard ISO 9000 that is very well known nowadays was found. This standard is needed in order to acquire contracts with other sellers.

Meanwhile Six sigma quality was adopted. It was firstly introduced to environmental and health companies, but later on it was applied also to marketing, finance and legal enterprises. Supply chain management was improved and was seen as management of information, goods and knowledge through all parts of the production cycle starting from the raw material supplier to the final customer.

Late 1990s: an important upgrade in managing operations was adopting Web services to the production. It completely changed the way how managers collect information and communicate with all stakeholders.

2000s: development of SSME (Service Science Management and Engineering) was progressing which allowed to apply latest technology concepts to a profitable production.

2010s: in the past years business analytics have become more popular due to their productivity. It allows collecting the data and transforming it to the appropriate knowledge, for example, in hotels reservation managers gather data about incoming demand of clients and set the prices for every next guest. In some cases, the computer automatically does this activity, but in some companies personnel is involved in it too.

Current challenges of operations and supply chain management  Maintaining the communication between all stakeholders involved in the production;  Collecting the data of all stakeholder operations and transforming it to a valuable information for the manager;  Working in order to satisfy customer needs and preferences by training personnel and creating appropriate goods and services;  Introducing the importance of operations and supply management to senior management.

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