Page 203 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes Once the key supply chains have been identified, one must identify the supply chain member
organizations (suppliers and customers) that are considered most critical to the organization’s
supply chain management efforts. In selecting external members, several issues should be
addressed.
 SCM endeavours are likely to be more productive if participating organizations are not
direct competitors. There may be limits to collaborative supply chain efforts when both
buyer-supplier and competitor relationships exist between participating organizations.

 All organizations and their representatives must be pursuing similar goals. This does not
mean that each organization should have identical goals, but that their respective goals
must be compatible with the overall SCM initiative.
 SCM initiative is unlikely to be successful unless all members from each organization
involved feel they are benefiting from participation. SCM efforts have to be focused
where the involvement is beneficial to all the members.
In well managed organizations, in the planning phase uncertainty in demand, exchange rates,
and competition over this time horizon are included in the decisions. Given a shorter time
horizon and better forecasts than the design phase, the planning phase tries to exploit the supply
chain design to optimize performance.

10.1.3 Supply Chain Operation

This has a short-term time horizon, monthly, weekly or daily. The focus, during this phase, is on
individual customer orders. At the operational level, within planning policies, the goal is to
handle incoming customer orders in the best possible manner. Firms allocate inventory or
production to individual orders, set a date that an order is to be filled, generate pick lists at a
warehouse, allocate an order to a particular shipping mode and shipment, set delivery schedules
of trucks, and place replenishment orders.
Aggregate planning is the basis for decisions at this stage. The aggregate plan serves as a broad
blueprint for operations and establishes the parameters within which short-term production
and distribution decisions are made. It allows the supply chain to alter capacity allocations and
change supply contracts. In addition, many constraints that must be considered in aggregate
planning come from supply chain partners outside the enterprise, particularly upstream supply
chain partners. Without these inputs from both up and down the supply chain, aggregate
planning cannot realize its full potential to create value.
Production plans for an organization define demand from suppliers and establish supply
constraint for customers. If a manufacturer has planned an increase in production over a given
time period, the supplier, the transporter, and warehousing partner must be aware of this plan
and incorporate the increase in their own plans.
Because operation decisions are being made in the short term, there is less uncertainty about
demand information. Given the constraints established by the configuration and planning
policies, the goal during the operation phase is to exploit the reduction of uncertainty and
optimize performance.

Did u know? The output from aggregate planning is also of value to both upstream and
downstream partners.
Ideally, all stages of the supply chain should work together to optimize supply chain performance.
An important supply chain issue is collaboration with down stream supply chain partners. Slack

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