1.

Introduction to Operations and Supply Chain

Management (OSCM)

🔹 Definition

 Operations Management (OM):

Refers to the planning, organizing, and supervising of business processes to produce
goods or provide services efficiently.
➤ Example: Managing the production of smartphones in a factory.
 Supply Chain Management (SCM):
Coordination and integration of all supply chain activities—from raw materials to
delivering the final product to the customer.
➤ Example: Managing the entire journey of a laptop from Intel (chip manufacturer) →
Dell (assembler) → Amazon (distributor) → Customer.

🔹 Concept of OSCM

 Operations Management focuses on internal processes (within the company) such as

production, scheduling, maintenance, and quality.
 Supply Chain Management focuses on the entire network (suppliers, logistics,
retailers, customers).

➡ Together, OSCM ensures that products/services are delivered efficiently, cost-effectively,

and with quality.

🔹 Significance of OSCM

Area Contribution of OSCM

Cost Control Reduces waste and optimizes use of resources
Customer
Ensures timely delivery and consistent product/service quality
Satisfaction
Competitiveness Enables companies to react quickly to market changes
Sustainability Adopts eco-friendly practices and reduces environmental impact
Efficient operations and supply chain reduce costs and improve bottom-
Profitability
line performance
➡ Example: Zara uses fast fashion operations and a responsive supply chain to deliver trendy
clothes quickly.

🔹 Functions of Operations and SCM

Operations Management Supply Chain Management

Product & service design Supplier relationship management
Process planning & scheduling Procurement and inventory control
Quality assurance Transportation and logistics
Capacity planning Demand forecasting
Maintenance & workforce management Distribution network design

🌟 2. Evolution of OSCM

🔹 From Manufacturing to Operations Management

Before Now
Focus only on production (factories) Covers both manufacturing & services
Mechanical & labor-intensive Data-driven, automated, AI-supported
Little concern for customer feedback Customer-centric operations design

➡ Example: Traditional car production vs. Tesla’s AI-driven, customized production systems.

🔹 From Physical Distribution → Logistics → Supply Chain Management

 Physical Distribution (1950s-60s):

Focus on shipping finished goods from factories to customers.
 Logistics (1970s-90s):
Involved transportation, warehousing, inventory management.
 SCM (1990s-present):
Involves end-to-end management, from raw material sourcing to customer delivery.

➡ Example: Amazon evolved from a book seller to a global supply chain powerhouse
managing millions of SKUs with predictive analytics.
🔹 Goods vs. Services: Operations Perspective

Physical Goods Services

Tangible Intangible
Stored for future use Cannot be stored
Production precedes consumption Produced & consumed simultaneously
Easy quality control Quality is subjective & variable

➡ Examples:

 Good: Manufacturing of laptops

 Service: Providing IT support or banking service

🌟 3. Quality in Operations and Supply Chains

🔹 Definition of Quality (Multiple Perspectives)

Perspective Definition
Customer View Fitness for use, reliability, consistency
Manufacturer View Conformance to specifications, low defect rate
Operations View Efficiency in meeting quality goals with minimum waste

➡ Example: A customer sees a high-quality smartphone as fast, durable, and user-friendly; a

manufacturer sees it as one built with zero defects as per the design specs.

🔹 Concept of Internal Customer

 Internal customers are employees or departments within the same organization that
depend on others for output.

➡ Example: The design department is an internal customer to the R&D team.

✔ This approach ensures end-to-end quality even before the product reaches the external
customer.
🌟 4. TQM and LEAN Management

🔹 Total Quality Management (TQM)

A philosophy where everyone in the organization is responsible for continuously improving

quality.

 Principles:
✔ Customer Focus
✔ Continuous Improvement (Kaizen)
✔ Employee Involvement
 Tools:
✔ PDCA (Plan–Do–Check–Act)
✔ Six Sigma
✔ Control Charts

➡ Example: Toyota implements Kaizen in its plants—employees suggest and implement small
changes that add up to major quality improvements.

🔹 LEAN Management

Focuses on maximizing value while eliminating waste (time, materials, motion, etc.).

 7 Wastes (Muda):
Overproduction, Waiting, Transport, Over-processing, Inventory, Motion, Defects.
 Lean Techniques:
✔ 5S (Sort, Set in order, Shine, Standardize, Sustain)
✔ Value Stream Mapping
✔ Just-in-Time (JIT) Production

➡ Example: McDonald’s uses JIT for burger ingredients, reducing storage and spoilage costs.

🌟 5. Impact of Global Trends on OSCM

🔹 Global Competition

 Requires faster innovation, lower costs, higher quality.

 Firms need flexible operations and responsive supply chains.

➡ Example: Apple designs in the US, sources parts globally, and assembles in China to stay
competitive.

🔹 Technological Change

 Automation, AI, IoT, Blockchain transform operations.

 Helps real-time tracking, demand forecasting, process optimization.

➡ Example: DHL uses drones for last-mile delivery and AI to optimize warehouse picking.

🔹 Ethical and Environmental Issues

 Focus on green operations, sustainable sourcing, fair labor practices.

 SCM must reduce carbon footprint and be socially responsible.

➡ Example: Patagonia uses recycled materials and ensures fair wages in its supply chain.

2. Operations Processes

🔹 1. Process Characteristics in Operations: Volume, Variety, and Flow

These three dimensions help in classifying and designing operations processes.

Dimension Explanation Example

High volume: Coca-Cola

Volume Number of units produced
bottles
Dimension Explanation Example

Low variety: Paper

Variety Types of products/services offered
production

Movement of items through the process (how continuous and Smooth flow: Car
Flow
structured it is) assembly line

🔍 Insight: High volume + low variety = standardization (e.g., McDonald’s),

Low volume + high variety = customization (e.g., Tailor-made suits)

🔹 2. Types of Processes and Operations Systems

Operations systems can be broadly categorized into two:

a) Continuous Flow System

 Definition: Products move continuously through the system without stopping.

 Used for: High volume, low variety, standardized items.
 Features:
o Automated
o Capital intensive
o Hard to change once designed

➡ Examples:

 Oil refining
 Electricity generation
 Bottled water plant

b) Intermittent Flow System

 Definition: Work is performed in batches or small groups, and flow is interrupted.

 Used for: Low to medium volume, high variety items.
 Features:
o More flexible
o Labor intensive
o Ideal for customized products

➡ Examples:

 Custom furniture making

  Job shop printing
 Small-scale bakeries

🔹 3. Process-Product Matrix

This matrix connects type of process with the volume-variety characteristics.

Process Type Volume Variety Example

Job Production Low High Designer wedding dresses, artwork

Batch Production Medium Medium Bakery products, garments, pharma

Assembly Line High Low Automobiles, mobile phones

Continuous Flow Very High Very Low Oil refinery, cement manufacturing

📝 Notes:

 Moving from Job → Batch → Assembly → Con nuous = Increasing automa on and efficiency.
 Decreasing flexibility and customization.

🔹 4. Process and Product Layouts

Layout refers to the physical arrangement of equipment, machines, and people in the facility.

a) Process Layout (Functional Layout)

 Grouped by function
 Flexible, handles variety
 High material handling cost

➡ Example: Hospital departments (X-ray, pathology, surgery all separate)

b) Product Layout (Line Layout)

 Arranged according to sequence of operations

 Used in assembly lines
 Less flexibility, but faster

➡ Example: Car manufacturing plant where each station adds a component

🔹 5. Service System Design Matrix

Describes the relationship between:

 Degree of customer contact

 Customization
 Efficiency

System Customer Contact Customization Efficiency Example

Mail Contact Low Low High ATM, Online booking

Phone Contact Moderate Medium Medium Call center, Phone banking

Face-to-Face Contact High High Low Doctor consultation, Salon visit

🎯 Key Insight:

 As customer contact increases, customization increases, but efficiency goes down.

🔹 6. Service Blueprinting

A visual tool used to design and analyze service processes.

Components of a Service Blueprint:

1. Customer Actions – What the customer does (e.g., places order)

2. Front-stage (Visible Contact Employee Actions) – What the customer sees
3. Back-stage (Invisible Contact Employee Actions) – Behind-the-scenes processes
4. Support Processes – IT systems, inventory systems
5. Lines of Interaction & Visibility – Separate what is visible/invisible to the customer

➡ Example: Service blueprint of a coffee shop

 Customer places order → Cashier takes it (front-stage) → Barista prepares it (back-stage) →

Order is served → System updates inventory (support)

3. Production Planning & Control (PPC)

🔹 1. Role and Functions of PPC

PPC ensures that the right product is produced at the right time, in the right quantity, and at minimum
cost.

✅ Main Functions:
Function Explanation Example

What to produce, how much, when, with what

Planning Deciding next month's mobile output
resources

Routing Sequence of operations and path of materials Cutting → Assembly → Tes ng

Scheduling Timetable for each job or operation Shift-wise tasks for workers

Job A on Machine 1, Job B on

Loading Assigning tasks to specific machines/workers
Machine 2

Authorizing production to begin

Dispatching Issuing orders for start of production
Monday

Follow-up to avoid delays and ensure timely

Expediting Monitoring production progress
completion

Inspection Checking quality at various stages Quality check after packaging

Feedback Evaluating performance and improving future plans Analyzing production delays

➡ Real-life Example:
In a bike manufacturing unit, PPC decides:

 How many bikes to produce,

 Which worker does which job,
 When each bike part will be assembled.

🔹 2. Demand Forecasting

📌 Forecasting as a Planning Tool

 It helps predict future demand so the company can plan inventory, capacity, staffing, etc.
 “Forecasting is not predicting the future perfectly; it’s minimizing surprises.”

📆 Forecasting Time Horizons:

Type Duration Use

Short-term 0–3 months Scheduling, inventory planning

Medium-term 3 months–1 year Production planning, capacity allocation

Long-term 1–5 years Facility planning, capital budgeting

📂 Sources of Data:
Source Explanation

Historical Data Past sales records

Market Research Customer surveys, focus groups

Expert Opinion Sales team or consultants' estimates

Statistical Tools Trend analysis, regression, time-series forecasting

📊 Forecast Accuracy:

 Measured using: Mean Absolute Deviation (MAD), Mean Squared Error (MSE)
 Helps improve decisions and reduce overstock or stockouts

➡ Example: A clothing company forecasts demand for woolen wear in winter using 5 years of past
winter sales + weather predictions.

🔹 3. Capacity Planning

 Ensures that production capacity matches forecasted demand.

🎯 Key Terms:

 Design Capacity: Max output under ideal conditions

 Effective Capacity: Practical achievable output considering constraints

➡ Example: A bakery's oven has a design capacity of 500 loaves/day but effectively produces 400 due
to breaks and cleaning.
🔹 4. Production Planning

✅ Aggregate Production Planning (APP)

 Mid-term planning for overall production volume, not specific items.

 Time horizon: 3 to 18 months

⚖ Alternatives to Balance Demand & Supply:

Demand Side Supply Side

Pricing strategies Hiring/firing workers

Promotions Overtime/idle time

Backorders Inventory adjustments

New markets Subcontracting

➡ Example: During festive season, a chocolate factory hires temporary workers to meet high
demand.

🔹 Master Production Schedule (MPS)

 Breaks down the APP into specific product quantities and timelines.
 It answers: What to produce, how much, and when?

➡ Example: MPS for a furniture factory:

 Week 1: 100 chairs

 Week 2: 150 chairs, 50 tables

🔹 Material and Capacity Planning Tools

Tool Full Form Purpose

MRP Material Requirements Planning Calculates materials needed and when to order them

Ensures available machine/labor capacity matches production

CRP Capacity Requirements Planning
plan
 Tool Full Form Purpose

Distribution Requirements
DRP Plans movement of goods to various warehouses/distributors
Planning

MRP Manufacturing Resource Integrated planning of all manufacturing resources (people,

II Planning money)

➡ Example: A laptop factory uses MRP to plan when to order 500 RAMs based on forecasted sales.

🔹 5. Production Control

Ensures that the actual production process follows the plan efficiently.

🛠 Key Activities:
Activity Explanation

Loading Assigning specific jobs to work centers or machines

Scheduling Fixing the time sequence for job completion

Dispatching Authorizing start of operations

Monitoring Tracking actual progress vs planned schedule

🏭 Job Shop vs Floor Shop:

Shop Type Explanation Example

Job Shop Customized, low-volume jobs Custom car modifications

Floor Shop Repetitive, high-volume production Assembly line for refrigerators

🔹 Gantt Charts

 A visual scheduling tool to track progress of tasks against time.

 Shows start and end dates, dependencies, overlaps.

➡ Example: Project for building furniture:

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| Task | Week 1 | Week 2 | Week 3 | Week 4 |
|-------------|--------|--------|--------|--------|
| Cutting | ██████ |
| Assembling | ██████ |
| Finishing | ██████ |

4. Inventory Planning and Control

🔹 1. Concept of Inventory

Inventory refers to the stock of goods kept by a business to meet demand.

🏭 Types of items in inventory:

 Raw Materials
 Work-in-Progress (WIP)
 Finished Goods
 Maintenance, Repair, and Operations (MRO) supplies

🔹 2. Need for Inventory

Reason Explanation

To meet demand Prevent stockouts during sudden demand spikes

To decouple operations Keeps processes running even if a previous stage delays

To take advantage of bulk buying Reduces per-unit cost when purchasing in bulk

To hedge against uncertainty Deals with delays, shortages, or price fluctuations

🔹 3. Demand Systems

Type Explanation Example

Continuous Demand occurs regularly and predictably Daily sale of bread in a bakery

Intermittent Irregular or seasonal demand Wedding dress or air coolers

🔹 4. Types of Inventory

Type Purpose Example

Seasonal Built up to meet seasonal demand Ice creams in summer

Decoupling Buffers between operations to avoid disruption Stock between cutting & welding

Cyclic Inventory due to batch-wise production Weekly production of soaps

Shipment of shoes from

Pipeline Goods in transit or in process
warehouse

Safety Extra inventory to handle demand/supply

Extra medicines in pharmacy
Stock uncertainties

🔹 5. Inventory Costs

Cost Type Description Behavior

Decreases as order quantity

Ordering Cost Cost of placing and receiving an order
increases

Cost of holding/storing inventory (space,

Carrying Cost Increases with more inventory
insurance)

Shortage
Cost due to stockouts (lost sales, customer loss) Hard to estimate precisely
Cost

🔹 6. EOQ – Economic Order Quantity

EOQ is the order quantity that minimizes total inventory cost (ordering + carrying).

📐 EOQ Formula (Basic):

EOQ=2DSHEOQ = \sqrt{\frac{2DS}{H}}EOQ=H2DS

Where:

 DDD = Annual Demand

 SSS = Ordering Cost per order
  HHH = Holding Cost per unit per year

Numerical Example:

 Annual Demand D=5000D = 5000D=5000 units

 Ordering Cost S=₹100S = ₹100S=₹100
 Holding Cost H=₹2H = ₹2H=₹2 per unit per year

EOQ=2×5000×1002=500000≈707 unitsEOQ = \sqrt{\frac{2 \times 5000 \times 100}{2}} = \sqrt{500000} ≈

707 \text{ units}EOQ=22×5000×100=500000≈707 units

➡ Order 707 units each time to minimize total cost.

🔹 EOQ with Quantity Discounts

Suppliers offer price breaks on bulk orders. Here, compare:

1. Total cost with EOQ

2. Total cost with discounted price and higher order quantity

🔁 Choose the option with the lowest total cost (Purchase + Ordering + Holding)

🔹 Inventory Classification Techniques

✅ ABC Analysis (Always Better Control)

 ‘A’ items: High value, low volume → Tight control

 ‘B’ items: Moderate value and volume
 ‘C’ items: Low value, high volume → Loose control

➡ Example:

 ‘A’: Laptop processors

 ‘B’: Mouse
 ‘C’: Screws

✅ VED Analysis (Vital, Essential, Desirable)

Used in spare parts and medical inventory.

Category Meaning Example

V Vital ICU equipment parts

E Essential Oxygen cylinders

D Desirable Visitor chairs

✅ Other Techniques
Method Basis Example

HML High–Medium–Low price Medicines categorized by price

FSN Fast–Slow–Non-moving Grocery inventory turnover

GOLF Government–Ordinary–Local–Foreign Classifying materials by source

SOS Seasonal–Off-seasonal Woolens vs. cotton clothes

🔹 Inventory Turnover Ratio

Inventory Turnover=Cost of Goods Sold (COGS)Average Inventory\text{Inventory Turnover} =

\frac{\text{Cost of Goods Sold (COGS)}}{\text{Average
Inventory}}Inventory Turnover=Average InventoryCost of Goods Sold (COGS)

Higher ratio = Better inventory usage

Lower ratio = Excess inventory or poor sales

➡ Example:

 COGS = ₹5,00,000
 Average Inventory = ₹1,00,000

Turnover=5,00,0001,00,000=5 times\text{Turnover} = \frac{5,00,000}{1,00,000} = 5 \text{

times}Turnover=1,00,0005,00,000=5 times

🔹 Fixed Order Quantity Model

 Reorder same fixed quantity (Q) whenever stock reaches Reorder Point (ROP)
📌 Reorder Point (ROP):
ROP=Lead Time Demand=Demand per day×Lead Time (days)ROP = \text{Lead Time Demand} =
\text{Demand per day} \times \text{Lead Time
(days)}ROP=Lead Time Demand=Demand per day×Lead Time (days)

➡ Example:

 Demand = 100 units/week

 Lead time = 2 weeks

ROP=100×2=200 unitsROP = 100 \times 2 = 200 \text{ units}ROP=100×2=200 units

🔹 Periodic Review System

 Check inventory at fixed intervals, place order to restore stock to a target level

Used when:

 Orders can only be placed periodically

 Multiple items are managed together

➡ Example: Supermarket checks inventory every Monday and orders to restock shelves.

5. Supply Chain Management (SCM)

🔹 1. Supply Chain Concept

A Supply Chain is a network of entities, people, activities, information, and resources involved in
moving a product or service from supplier to customer.

✅ Basic Flow in a Supply Chain:

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Supplier → Manufacturer → Distributor → Retailer → Customer

🔹 2. What is Supply Chain Management (SCM)?

SCM is the management of flow of materials, information, and finances from supplier to end customer
with the objective of reducing cost, improving quality, and maximizing customer satisfaction.

🔹 3. Generalized Supply Chain Management Model

This model includes the following stages:

1. Plan – Forecasting demand, planning resources

2. Source – Selecting suppliers and procuring raw materials
3. Make – Manufacturing, assembly, and quality control
4. Deliver – Warehousing, transportation, logistics
5. Return – Handling returns and reverse logistics

➡ Example: A laptop company plans production, sources chips from Intel, assembles at a plant,
delivers through FedEx, and allows customer returns via website.

🔹 4. Key Issues in SCM

Key Issue Meaning Example

Supplier and retailer share demand

Collaboration All parties work together with shared goals
forecasts

Enterprise Marketing, Operations, and Finance

Integration across departments & functions
Extension synced in ERP

Speed and flexibility to respond to market Zara updates styles every two
Responsiveness
changes weeks

Time between paying suppliers and receiving Lower cycle = Better working
Cash-to-Cash Cycle
cash from customers capital

📉 Cash-to-Cash Conversion Cycle Formula:

C2C Cycle=Days Inventory Outstanding+Days Sales Outstanding−Days Payable Outstanding\text{C2C
Cycle} = \text{Days Inventory Outstanding} + \text{Days Sales Outstanding} - \text{Days Payable
Outstanding}C2C Cycle=Days Inventory Outstanding+Days Sales Outstanding−Days Payable Outstanding

➡ Lower the C2C cycle, better the liquidity!

🔹 5. Supply Chain Management and Customer Service

Customer satisfaction is central to SCM. Key components:

Component Explanation Example

Product is in stock when the customer

Availability Amazon showing "In Stock" label
needs it

On-time pizza delivery, correct laptop

Service Reliability Accuracy in order, delivery time, quantity
model

Right product, time, place, condition, and Amazon Prime delivery – fast and
Perfect Order
cost accurate

Customer
Result of meeting/exceeding expectations Repeat buyers and positive reviews
Satisfaction

🔹 6. Enablers of SCM

Enabler Description Example

Amazon warehouses, Flipkart

Facilities Plants, warehouses, retail stores
fulfillment centers

Inventory Stocks of raw materials, WIP, finished goods Car parts in Maruti Suzuki plant

Transportation Mode and speed of delivery – air, sea, road FedEx air cargo, DHL road delivery

ERP systems like SAP, barcodes,

Information Real-time data on demand, orders, shipping, etc.
RFID

Sourcing Selecting suppliers and managing relationships Apple sourcing chips from TSMC

Influences demand; includes discounts, margins, Uber surge pricing, Amazon

Pricing
value-based pricing lightning deals