Lecture 1

Question 1

What is Operation Management?

Answer 1

The administration of business practices to create the highest level of efficiency possible within in an organisation.
- it is concerned with converting labor and materials into goods/services as efficiently as possible.

Question 2

What do operation managers aim?

Answer 2

They aim to balance costs and revenue to maximise net operating profit.

Question 3

What is an important to achieve a higher level of efficiency in a company?

Answer 3

Using as less resources as possible to minimise cost, but at the same time the customer expectation should be followed.

Question 4

What is a Supply Chain? Give an example of a simple supply chain.

Answer 4

The network of organisations, people, activities, information, and resources involved in delivering a product/service to a consumer.
Raw material -> supplier -> factory -> distributor -> retailer -> consumer

Question 5

What is Supply Chain Management?

Answer 5

The set of approached to integrate the supplier, manufacturer, warehouses, and stores, so that merchandise is produced and distributed efficiently.

Question 6

What are the 5R’s?

Answer 6

Right product, right place, right price, right time, right quantity

This is important for SCM.

Question 7

If you look at the supply chain which direction do the following things flow?
- value
- material flow
- funds/demands flow
- information flow

Answer 7

Value and material flow go towards the right side of the SC, while funds/demands and information flows go towards the left side of the SC.

Question 8

If you look at the supply chain, who has the lowest profit margins?

Answer 8

Suppliers have the lowest profit margins. The closer you are at the right-hand side of the SC, the higher the profit margin (> value). Towards the right side value is added.

Question 9

Can you mention three different costs in the SC and which components this cost is relevant for?

Answer 9

Material costs: raw materials and semi-finished product suppliers

Manufacturing costs: semi-finished product suppliers and manufacturers

inventory costs and transportation costs: all except for consumers

Question 10

What is production slicing?

Answer 10

This is the seperation of the production at different locations. Here identifying the best location for each stage of the process is of importance. Value is added along the way.

Question 11

What decisions will define your OM strategy?

Answer 11

Your customer value proposition will be reflected throughout your SC which also affects the strategy.

Question 12

Can you name 4 challenges in OM and explain them?

Answer 12

1. identifying the appropriate OM strategy: there is no one size fits all, so all different products, channels, or even customers require different types of SC and eventually different strategies.
2. matching demand and supply: there could be supply challenges like raw material shortages, supply distributions, and productivity ineffectiveness, but also demand challenges like sales shortfall, higher-than-anticipated inventories, and cannibalisation (although cannibalisation can end up being good).
3. inventory and back-order level fluctuations: when the company cannot match supply and demand there could be either inventory (supply > demand) or back-order (demand > supply) and both of these are costly.
4. other uncertainties: demand is not the only uncertainty, others are product capacity, transportation times, component availability, natural disasters etc. (PS5 example)

Question 13

Can you describe the inventory and back-order levels in the SC?

Answer 13

The inventory and back-order levels fluctuate considerably across the SC. When looking at the demand over time, the variability gets lower when reaching the consumers (towards the right-side of the SC).

Question 14

Can you explain the bullwhip effect? Also mention causes and solutions.

Answer 14

This is a distribution channel phenomenon in which distorted information from one end of supply chain to the other leads to tremendous inefficiencies. Small changes in demand can produce a whiplike effect upstream. Example is the toiletpaper hoarding situation.

Causes: lack of communication, incorrect demand forecasts, too many discounts or promotions, order batching (orders in large quantities)
Solutions: more communication, improve order planning, limit promotions and sales, smaller and more frequent orders (but this can be more expensive)