Production Operations Management

1. Production Operations Management Supply Chain Management U. Akinc

2. Supply Chains • A supply chain encompasses all the facilities, activities and functions in the delivery of products to customers from the raw material to the finished product stages. • Modern supply chain management is to manage the facilities, activities and functions in an integrated and coordinated way so as to maximize customer satisfaction.

3. Supply chain management: • is a strategic area of management • involves strategic investments in facilities, technologies and relationships • significantly impacts the way the company competes • Efficiency (cost) • Delivery speed and reliability • Quality • Customization/flexibility

4. Structure of Supply Chain

5. I. Facilities • Involve plants, warehouses, distributioncenters, transportation infrastructure and communication links. Challenge: How should these be aligned and realigned across the members of the SC to maximize efficiency, speed and responsiveness for the whole chain.

6. II. Functions • Traditional functional organization around marketing, manufacturing, finance etc. does not foster an integrated approach to the challenges of the Modern Supply Chain Management • A more of an inter-functional, team approach to management is needed.

7. III. Activities: • Traditional Materials management involve: • purchasing • shipping/receiving • inventory management • production scheduling • transportation/distribution • customer service

8. Supply-Chain Decisions • Sourcing: • Quality of materials/parts • Supplier selection • Location of suppliers • Ordering practices • In-bound transportation channels • Production • Plant Location • Make versus Buy • Capacity of Plants • Product Quality

9. SC Decisions (cont.) • Inventory • How much safety stock? • JIT practices • Replenishment policies • Distribution • Channels of distribution • Transportation modes • In-house vs. out-sourced • DC locations • Recycling/recovery practices

10. State of Integration • Stage I: traditional managemet where all facilities, functions and activities are managed independently(prior to 1960’s) • Stage II: A company integrates its material management activities and functions within its own 4 walls (1960’s) • Stage III: Enterprise Extension-- couple, coordinate and integrate all facilities, functions and activities for the entire supply chain (1990’s and beyond)

11. Three Flows • Physical goods, components, materials, re-cycling and recovery • Information -- both upstream and downstream.. Main means of integration • Financial

12. Bull Whip Effect • Demand uncertainty is the main cause of inefficiencies on the supply chain • Small variations in demand at the customer end often produce dramatic and violent fluctuations in orders down stream (bullwhip) • Integrating the supply chain tries to dampen these fluctuations-- often by sharing information

13. Supply Chain Strategies • Responsive supply chains: • Great variety of short life cycle, customized products --Innovative Products • Efficient supply chains: • Highly stable and predictable demand --Functional products • A trade-off to be resolved

14. Relationships • Creating a trusting, mutually beneficial relationships among the members of the supply chain is essential • Contrary to the traditional approach, in modern SCM, the suppliers are not considered as adversaries but as trusted partners

15. SC Challenges • Involves a number of different companies with diverse objectives, philosophies and management styles • Information systems used by different members may not be compatible for seamless information sharing • Sharing the benefits and risks is not always easy • Lack of universally accepted performance measures