Page 296 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes The process involves comparing practices and procedures to those of the 'best' to identify ways
in which an organization (or organizations) can make improvements. This is accomplished
through benchmarking. Benchmarking is an effective means of determining the supply chain's
performance relative to those of other organizations.
Metrics can include a wide variety of performance measures: delivery (in full, on time, in
specification), order fulfillment, fill rate (for make-to-stock), lead time or supply-chain response
time, production flexibility, total cost, realized margin, warranty costs, returns processing costs
and more. A company is not likely to meet best practice norms in all metrics, but the metrics it
should focus on should reflect its customer needs and market realities.

The model draws attention to process gaps rather than pointing to specific departments'
performance. This is meant to help the company communicate without ambiguity and help
measure, manage and refine processes. It also helps the organization quantify operational
performance and set improvement targets based on best practices in similar companies. However,
this needs to be related to functional performance measures. Organizations have to devise
means to relate departmental performance metrics to the SCOR model.
The challenge in SCM is to integrate the functional performance measures into overall measures
that will reflect the performance of the entire supply chain. The performance measures must
show not only how well you are providing for your customers (service metrics) but also how
you are handling your business (speed, asset/inventory, and financial metrics). Measurement is
also an ideal way to communicate requirements to other members of the supply chain and to
promote continuous improvement and change.
Many organizations are willing to receive information from other supply chain members but
are reluctant to share their information with other members. The issue of the organization's
willingness to share information with other supply chain members is something that needs
management attention and a solution to make the SCM initiative successful. Working together,
organizations can better satisfy the customer's requirements for quality, cost, product and service.

13.7 Decisions in Supply Chain Management: The Steps

Supply chain management involves proactively managing the two-way movement and
coordination (that is, the flows) of goods, services, information, and funds from raw material
through end user. A company with a "supply chain orientation" is one that recognizes the
strategic value of managing operational activities and flows across a supply chain. Its decisions
fall into three categories or phases:

Supply Chain Design

Supply Chain Design is a strategic decision. It reflects the structure of the supply chain over the
next several years. It decides what the chain's configuration will be, how resources will be
allocated, and what processes each stage will perform.
Successful design requires a high degree of functional and organizational integration. In order
to do so, it is essential to develop supply chain process maps (flow charts) for major supply
chains and their related processes helps establish an understanding of the supply chain. There
should be a clearly understood mapping convention to be utilized, along with other information
requirements. The objective of this exercise is to develop supply chain maps that present all
supply chain entities along with key processes.
From this exercise will flow such decisions as the location and capacities of production and
warehousing facilities, the products to be manufactured or stored at various locations, the
modes of transportation, and the type of information system to be utilized. The organization

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