OPERATIONS MANAGEMENT -TOPICS & EXAMPLES
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
functional field of business ¤ Concerned with the management of the entire production/delivery system
Goods versus Services
Tangible Less interaction with customers Often homogeneous Not perishable – can be inventoried
Intangible Interaction with customer required Inherently heterogeneous Perishable/time ...view middle of the document...
Four Dimensions of Performance
Important for defining a business strategy and performance measurement.
-Product Quality(performance) -Process Quality (conformance)
Responsiveness to Demand
Four Dimensions: Trade offs
▪ Efficiency ▪ Measured by:
- cost per unit - utilization
▪ Product quality (how good?)
▪ Process quality (as good as
promised?) => Defect rate
▪ Customer heterogeneity ▪ Measured by:
- number of options - flexibility / set-ups - make-to-order
▪ Responsiveness to demand ▪ Measured by:
- customer lead time - flow time
Efficiency, Effectiveness, and Value
Efficiency • Doing something at the lowest possible cost Effectiveness • Doing the right things to create the most value Value • The attractiveness of a product relative to its cost
Management challenge is balancing the trade-offs between Efficiency and effectiveness
Efficiency and Wall Street
The impact of Operations
Receivable turnover ratio
efficiency on collecting its sales on credit. ¤ High ratio means efficient collection. ¤ Factors such as quality of products and order processing activities may have a huge impact on this ratio
efficiency turning inventory into sales. ¤ Greatly controlled by operations and supply chain processes.
efficiency at using assets to generate sales revenue. ¤ Can be influenced by technology investments & outsourcing
Consider the following financial data from the past year for Midwest Outdoor Equipment Corporation.
Gross%Income% Total%Sales% Total%Credit%Sales% Net%Income% Cost%of%Goods%Sold% Total%Assets% Average%Inventory% Average%Receivables% $25,240,000% %%24,324,000% %%18,785,000% %%%%2,975,000% %%12,600,000% %%10,550,000% %%%%2,875,000% %%%%3,445,000%
Receivable turnover = credit sales / avg receivables à 18,785/ 3,445 = 5.45 Inventory turnover = cost of goods sold / avg inventory à 12,600 / 2,875 = 4.38 Asset turnover...