Chapter 1: Intro to Supply Chain Management

Operations Management The planning, scheduling, and control of the activities that transform inputs into
finished goods and services.
Supply Chain Management The active management of supply chain activities and relationships in order to
maximize customer value and achieve a sustainable competitive advantage.
Supply Chain A network of manufacturers and service providers that work together to create products or
services needed by end users. These manufacturers are linked together through physical flows, information flows,
and monetary flows.
Upstream Activities or firms positioned earlier in the supply chain.
Downstream Activities or firms positioned later in the supply chain.
First-tier supplier A supplier that provides products or services directly to a firm.
Second-tier supplier A supplier that provides products or services to a firms first-tier supplier.
Supply Chain Operations Reference (SCOR) Model - Planning activities, which seek to balance demand
requirements against resources and communicate these plans to the various participants
Sourcing activities, which include identifying, developing, and contracting with suppliers and scheduling the
delivery of incoming goods and services.
Make, or production, activities, which cover the actual production of a good or service.
Delivery activities, which include everything from entering customer orders and determining delivery dates
to storing and moving goods to their final destination.
Return activities, which include the activities necessary to return and process defective or excess products
or materials.
Electronic commerce - The use of computer and telecommunications technologies to conduct business via
electronic transfer of data and documents.
Increasing competition and globalization - Customer demands are changing and new competitors are entering
the markets.
Relationship management - Organizations must manage the relationships with their upstream suppliers as well a
Major Operations and Supply Chain Activities: Process selection, Forecasting, Capacity planning, Inventory
management, Planning and control, Purchasing, Logistics
Chapter 2: Operations and Supply Chain Strategies
Structural element - Includes tangible resources such as buildings, equipment, and computer systems.
Infrastructural element - Includes the policies, people, decision rules, and organizational structure choices made
by a firm.
Strategy - A mechanism by which a businesss coordinates its decisions regarding structural and infrastructural
elements.
Mission Statement - A statement that explains why an organization exists. It describes what is important to the
organization, called its core values, and identifies the organizations domain.
Business Strategy - The strategy that identifies a firms targeted customers and sets time frames and
performance objectives for the business.
Core Competency - An organizational strength or ability, developed over a long period, that customers find
valuable and competitors find difficult or even impossible to copy.
Functional Strategy - A strategy that translates a business strategy into specific actions for functional areas such
as marketing, human resources, and finance.
Operations and supply chain strategy - A functional strategy that indicates how structural and infrastructural
elements with the operations and supply chain areas will be acquired and developed to support the overall business
strategy. Help management choose the right mix of structural and infrastructural elements based on a clear
understanding of the performance dimensions valued by customers and the trade-offs involved. Ensure that the
firms structural and infrastructural choices are strategically aligned with the firms business strategy.
Support the development of core competencies in the firms operations and supply chains.
Structural Decision Categories Capacity-Amount, Type, Timing of capacity changes. FacilitiesServices/Manufacturing, Warehouses, Distribution hubs.Size, location, degree of specialization. Technology Services/Manufacturing processes, Material handling equipment, Transportation equipment, Information systems

Where:Customer Value - Value Index - A measure that uses the performance and importance scores for various

dimensions of performance for an item or a service to calculate a score that indicates the overall value of an item or
a service to a customer.

V = Value index for product or service

V I P
In = Importance of dimension n
n

i 1

n n

Four Performance Dimensions Quality, Time, Flexibility, Cost

Pn = Performance with regard to dimension n

Quality - Performance Quality Addresses the basic operating characteristics of a product or service.
Conformance Quality Addresses whether a product was made or a service performed to specifications.
Reliability Quality Addresses whether a product will work for a long time without failing or requiring
maintenance.
Time - Delivery Speed - How quickly the operations or supply chain function can fulfill a need once it has been
identified. Delivery Reliability The ability to deliver products or services when promised.
Flexibility - Mix Flexibility The ability to produce a wide range of products or services. Changeover Flexibility
The ability to produce a new product with minimal delay. Volume Flexibility The ability to produce whatever
volume the customer needs.
Cost - Labor costs, Material costs, Engineering costs, Quality-related costs
Order Winners -A performance dimension that differentiates a companys products and services from its
competitors.
Order Qualifiers- A performance dimension on which customers expect a minimum level of performance.
Chapter 3: Process Choice and Layout Decisions in Manufacturing and Services
Questions to ask when selecting a manufacturing process: What are the physical requirements of the
companys product? How similar to one another are the products the company makes? What are the companys
production volumes? Where in the value chain does customization take place (if at all)?
Product-based layout- A type of layout where resources are arranged sequentially, according to the steps
required to make a product.
Functional layout- A type of layout where resources are physically grouped by function.
Production Line A type of manufacturing process used to produce a narrow range of standard items with
identical or highly similar designs. Follows a product-based layout. Steps are usually linked by some system that
moves the items from one step to the next. Suitable for high-volume production of product(s) characterized by
similar design attributes. Need high volumes to justify the required investment in specialized equipment and labor.
Are inflexible with regard to items that do not fit the design characteristics of the production line.
Continuous Flow Processes - A type of manufacturing process that produces highly standardized products using
a tightly linked, paced sequence of steps. Closely resembles the production line process Form of product usually
cannot be broken into discrete units. Examples include yarns and fabric, food products, and chemical products such
as oil and gas
Job Shops A type of manufacturing process used to make a wide variety of highly customized products in
quantities as small as one. Characterized by general-purpose equipment and broadly skilled workers. Main
emphasis is meeting a customers unique requirements. Product design is not standardized. Typically follow a
functional layout. Examples include custom furniture, specialized machine tools used by manufacturers, and
restoration and refurbishing work.
Batch Manufacturing A type of manufacturing process where items are moved through the different
manufacturing steps in groups or batches. Fits between job shops and lines in terms of production volumes and
flexibility and strikes a balance between the flexibility of a job shop and the efficiency of a line. Are the most
common type of manufacturing process. The sequence of steps is not as tightly linked as a production line. Flexible
Manufacturing Systems Highly automated batch processes that can reduce the cost of making groups of similar
products.
Fixed-Position Layout A type of manufacturing process in which the position of the product is fixed. Materials,
equipment, and workers are transported to and from the product. Used in industries where the products are very
bulky, massive, or heavy and movement is problematic. Examples include shipbuilding, construction projects, and
traditional home building.
Hybrid Manufacturing Process A term referring to a manufacturing process that seeks to combine the
characteristics, and hence advantages, of more than one of the classic processes. Machining centers, Group
technology, Flexible manufacturing systems
Four Levels of Customization- Make-to-stock (MTS) Products that require no customization. Assemble-to-order
(ATO) Products that are customized only at the very end of the manufacturing process. Make-to-order (MTO)
Products that use standard components but the final configuration of those components is customer specific.
Engineer-to-order (ETO) Products are designed and produced from the start to meet unusual customer needs or
requirements.

Law of Variability - The greater the random variability either demanded of the process or inherent in the process
itself or in the items processed, the less productive the process is.
When customization occurs early in the supply chain: Flexibility in response to unique customer needs will be
greater. Lead times to the customer will tend to be longer. Products will tend to be more costly.
When customization occurs late in the supply chain: Flexibility in response to unique customer needs will be
limited. Lead times to the customer will tend to be shorter. Products will tend to be less costly.
Three dimensions on which services can differ: the nature of the service package.The degree of
customization. The level of customer contact
Service Package A package that includes all the value-added physical and intangible activities that a service
organization provides to the customer.
Service Customization - Ranges from highly customized to standardized. As the degree of customization
decreases, the service package becomes more standardized. As the degree of customization increases, the service
package becomes less predictable and more variable.
Customer Contact The degree of customer contact determines the relative importance of front room and back
room operations in a service process. Front Room The physical or virtual point where the customer interfaces
directly with the service organization. Examples: Sales floor in a retail store, Help desk for a software provider, Web
page for a company. Back Room The part of a service operation that is completed without direct customer contact.
Examples: Package sorting at FedEx or UPS, Testing medical samples
Service Blueprinting - A specialized form of business process mapping that lays out the service process from the
viewpoint of the customer and parses out the organizations service actions based on: The extent to which an
action involves direct interaction with the customer. Whether an action takes place as a direct response to a
customers needs.
Service Positioning- Service operations compete and position themselves in the marketplace based on the three
dimensions: Nature of the Service Package.Degree of Customization.. Degree of Customer Contact
Fixed position layout Productive resources have to be moved to where the product is being made or the service
is being provided.
Product-based layout Arranges resources sequentially, according to the steps required to make a product or
provide a service.
Functional layout Physically groups resources by function.
Cellular layout Production resources are dedicated to a subset of products with similar requirements known as a
product family.
Line balancing A technique used in developing product-based layouts that works by assigning tasks to a series
of linked workstations in a manner that minimizes the number of workstations and minimizes the total amount of
idle time at all stations for a given output level.
Takt Time = Available production time/ Required output rate
The six basic steps of line balancing: Identify all the process steps required, their times, immediate
predecessors and the total time for all tasks. Draw a precedence diagram. Determine takt time for the line.
compute the theoretical minimum number of workstations needed . Use a decision rule to assign tasks to
workstations. Evaluate the performance of the proposed line by calculating some basic performance measures.
Assigning Department Locations in Functional Layouts - Arrange the different functional areas or
departments in such a way that departments that should be close to one another are, while departments that dont
need to be or shouldnt be near one another arent. Minimize the total distance traveled
Chapter 4: Business Processes
Process A set of logically related tasks or activities performed to achieve a defined business outcome.
Primary process A process that addresses the main value-added activities of an organization.
Support process A process that performs necessary, albeit not value-added activities
Development process A process that seeks to improve the performance of primary and support
processes.
Mapping The process of developing graphic representations of the organizational relationships and/or activities
that make up a business process.

Purposes of Mapping: It creates a common understanding of the content of the process: its activities, its results,
and who performs the various steps. It defines the boundaries of the process. It provides a baseline against which
to measure the impact of improvement efforts
Process Map A detailed map that identifies the specific activities that make up the informational, physical,
and/or monetary flow of a process.
Process Mapping Rules: Identify the entity that will serve as the focal point. Identify clear boundaries and
starting and ending points. Keep it simple
Swim lane process map - A process map that graphically arranges the process steps so that the user can see
who is responsible for each step.
Measures of Process Performance: Quality- Performance quality, Conformance quality, Reliability, Cost- Labor,
Material, Quality-related costs, Time - Delivery speed, Delivery reliability, Flexibility- Mix flexibility, Changeover
flexibility, Volume flexibility
Productivity = A measure of process performance= outputs/inputs
Single-factor productivity A productivity score that measures output levels relative to single input. = example :
Number of Customer Calls handled/ Support Staff Hours = Single-factor productivity ratio
Multifactor productivity A productivity score that measures output levels relative to more than one input. Exa:
Sales dollars generated/ Labor, Material, and Machine costs = Multifactor Productivity ratio.
Efficiency A measure of process performance; the ratio of actual outputs to standard outputs. Usually expressed
in percentage terms. Efficiency = 100% (actual outputs / standard outputs)
Standard output An estimate of what should be produced, given a certain level of resources.
Cycle Time The total elapsed time needed to complete a business process. Also called throughput time.
Percent Value-Added Time The percentage of total cycle time that is spent on activities that actually provide
value. Percent Value-Added Time = 100% (value-added time)/(total cycle time)
Benchmarking The process of identifying, understanding, and adapting outstanding practices from within the
same organization or from other businesses to help improve performance. Competitive Benchmarking The
comparison of an organizations processes with those of competing organizations. Process Benchmarking The
comparison of an organizations processes with those of noncompetitors that have been identified as having
superior processes.
Six Sigma A business improvement methodology that focuses an organization on:Understanding and managing
customer requirements,Aligning key business processes to achieve those requirements, Utilizing rigorous data
analysis to understand and ultimately minimize variation in those processes, Driving rapid and sustainable
improvement to the business processes.
Six Sigma Methodology DMAIC - Define the goals of the improvement activity, Measure the existing process,
Analyze the process, Improve the process, Control the new process
Continuous Improvement - The philosophy that small, incremental improvements can add up to significant
performance improvements over time.
Root cause analysis A process by which organizations brainstorm about possible causes of problems (referred to
as effects) and, through structured analyses and data gathering efforts, gradually narrow the focus to a few root
causes. Open Phase - Brainstorm root causes, Narrow Phase - Pare down list of possible causes to a manageable
number, Closed Phase - Validate the suspected root cause(s) through the analysis of available data.
Tools used in Root Cause Analysis - Cause-and-Effect Diagram A graphical tool used to categorize the
possible causes for a particular results. Also known as a fishbone diagram or Ishikawa diagram. Five Whys - An
approach used during the narrow in root cause analysis to brainstorm successive answers to the question Why is
this a cause of the original problem? The name comes from the general observation that the questioning process
can require up to five rounds. Scatter Plot - A graphical representation of the relationship between two variables.
Check Sheet - A sheet use to record how frequently a certain event occurs. Pareto Chart A special form of bar
chart that shows frequency counts from highest to lowest.
Bar graph A graphical representation of data that places observations into specific categories. Histogram A
special form of bar chart that tracks that number of observations that fall within a certain interval. Run chart - A
graphical representation that tracks changes in a key measure over time.
Some processes are not reasonably well-understood processes that can be analyzed, improved, and
controlled due to: Some processes are artistic in nature. That is, they require flexibility in carrying out the various
steps. Furthermore, customers actually value variability in the outcomes. Some processes may be so broken or so
mismatched to the organizations strategy that only a total redesign of the process will do. Some processes cross
organizational boundaries, which introduces additional challenges.
Four Types of Processes Mass processes Output is the same every time, Mass customization Variation is
controlled, Artistic processes Variability in process and outputs are valued. Nascent (broken) process Mismatch
between what the customer wants and what the process is currently capable of providing.
Business Process Reengineering A procedure that involves the fundamental rethinking and radical redesign of
business processes to achieve dramatic organizational improvements in such critical measures of performance as
cost, quality, service, and speed.
Supply Chain Operations Reference (SCOR) model A comprehensive model of the core management
processes and individual process types that, together, define the domain of supply chain management
Five core processes for Level 1: Source, Make, Deliver, Return, Plan
Level 2 Processes Break down Level 1 processes into more detail. For example: For make processes maketo-stock, make-to-order and engineer-to-order
Level 3 Processes Describe in detail the actual steps required to execute level 2 processes

Chapter 8 Logistics
Logistics management That part of supply chain management that plans, implements, and controls the
efficient, effective forward and reverse flow and storage of goods, services, and related information between the
point of origin and the point of consumption in order to meet customers requirements.
Logistics Management Activities: Transportation, Warehousing, Material handling, Packaging, Inventory
management, Logistics information systems
Challenges and opportunities in managing logistics- Advances in information systems, Globalization of
markets, Push toward sustainability, Sustainability Performing activities in a manner that meets the needs of the
present without compromising the ability of future generations to meet their needs. Significant impact on delivery
speed and reliability.
Five Transportation Modes: Highway, Water, Air, Rail, Pipeline

Multimodal solution A transportation solution that seeks to exploit the strengths of multiple transportation
modes through physical, information, and monetary flows that are as seamless as possible
Roadrailer A specialized rail car the size of a standard truck trailer that can be quickly switched from rail to
ground transportation without changing the wheels.
Reducing Transportation Costs: Consolidation warehousing A form of warehousing that pulls together
shipments from a number of sources in the same geographic area and combines them into larger and more
economical loads. Cross-docking A form of warehousing in which large incoming shipments are received and
then broken down into smaller outgoing shipments to demand points in a geographic area. Break-bulk
warehousing Incoming sources are from a single source or manufacturer. Hub-and-spoke system A form of
warehousing in which strategically placed hubs are used as sorting or transfer facilities.
Postponement warehousing A form of warehousing that combines classic warehouse operations with light
manufacturing and packaging duties to allow firms to put off final assembly or packaging of goods until the last
possible moment.
Shortening Customer Lead Times: Assortment warehouses A form of warehousing in which a wide array of
goods is held close to the source of demand in order to assure short customer lead times. Spot stock warehouses
A form of warehousing that attempts to position seasonal goods close to the marketplace.
Lowering Inventory-Related Costs - Using inventory pooling can enable firms to reduce inventory-related costs.
Involves consolidating safety stock for stores into one centralized location to provide same-day service to all the
stores.
Material handling system A system that includes the equipment and procedures needed to move goods within
a facility, between a facility and a transportation mode, and between different transportation modes.
Packaging The way goods and materials are packed in order to facilitate physical, informational, and monetary
flows through the supply chain

Inventory Management- Implications for transportation: Using slower and cheaper transportation modes will
cause inventory levels within the supply chain to rise. Using faster and more expensive transportation modes will
enable firms to lower inventory levels. Implication for warehousing: Warehousing and inventory managers must
work closely to achieve the desired business outcome.
Logistics strategy A functional strategy which ensures that an organizations logistics choices are consistent
with its overall business strategy and support the performance dimensions that targeted customers most value.

Measuring Logistics Performance The perfect order represents the timely, error-free provision of a product or
service in good condition that is Delivered on time (according to buyers delivery dates),Shipped complete, Invoiced
correctly, Undamaged in transit

Landed cost The cost of a product plus all costs driven by logistics activities, such as transportation,
warehousing, handling, customs fees, etc.
Reverse logistics system A complete supply chain dedicated to the reverse flow of products and materials for
the purpose of returns, repair, remanufacture, and/or recycling. Challenges: Firms have less control over the
timing, transportation modes used, and packaging for goods flowing back up the supply chain. Goods can flow back
up the supply chain for a variety of reasons and a reverse logistics system needs to be able to sort and handle
these different flows. Forward logistics systems typically arent set up to handle reverse logistics flows.
Weighted center of gravity method A logistics decision modeling technique that attempts to identify the
best location for a single warehouse, store, or plant given multiple demand points that differ in location and
importance.
Optimization model A type of mathematical model used when the decision maker seeks to optimize some
objective function subject to some constraints. Objective function A quantitative function that an optimization
model seeks to optimize (minimize or maximize). Constraint A quantifiable condition that places limitations on the
set of possible solutions. The solution to an optimization model is acceptable only if it does not break any of the
constraints.