Operations & Supply Chain Management

Exam Study Notes — Module 1: Foundations of OSCM | Module 2: Operations Strategy

Based on: Chase, Shankar & Jacobs — Operations and Supply Management, 15th ed. (Ch.1 & Ch.2) and course
lecture slides.

Covers: CO1 & CO2 · Chapters 1–2 (Chase) · Akshayapatra Case

 MODULE 1 — Foundations of Operations & Supply Chain
Management
1. Why OSCM Matters
Operations keep the promises made by marketing — marketing promises (fast delivery, always in stock, low price);
operations delivers (sourcing, making, moving — on time, at the right cost).
• 70–80% of total cost in manufacturing/service firms is operations cost.
• ~80% of CEOs rank operational efficiency as their #1 priority.
• Firms that manage operations well earn ~9% higher shareholder returns.
Examples: Amazon (ships a package every 0.4 sec), Blinkit (10-min delivery via micro-fulfilment/dark stores), ISRO
(Chandrayaan-3 Moon landing for ~$75M — far cheaper than Hollywood films), Toyota Production System (JIT +
Jidoka), Zara (2-week design-to-shelf vs 26-week industry average, 12 inventory turns/yr), Amul (farmer-owned
reverse supply chain), Dell (build-to-order), UPS ORION (route optimization).

2. What Is OSCM?
Operations and Supply Chain Management (OSCM) = the design, operation, and improvement of the systems
that create and deliver the firm's primary products and services.
• A functional field of business with clear line-management responsibility.
• Concerned with managing the entire production/delivery system.
Operations vs Supply Chain:
• Operations — manufacturing/service processes INSIDE the firm that transform resources into products.
• Supply Chain — processes BETWEEN firms (suppliers, logistics partners, customers) linked by material &
information flow.

3. The Elements of OSCM

• Strategy — integrating a great operations-related strategy.
• Processes — used to deliver products and services.
• Analytics — supports decisions needed to manage the firm.

4. Categorizing Operations & Supply Chain Processes (5 core processes)

Process Meaning

Planning Processes needed to operate an existing supply chain

Sourcing Selecting suppliers who deliver goods/services for the firm's product

Making Producing the major product or service

Delivering Logistics — carriers, coordinating movement of goods/info, collecting payments

Returning Receiving worn-out, excess, or defective products back from customers

Flow: Sourcing → Making → Delivering, with Planning coordinating all, and Returning flowing back from Delivering
to Sourcing (reverse logistics).

5. Goods vs Services
Good Service

Tangible, physical dimension Intangible process — can't be weighed/measured

Can be stored/inventoried Perishable, time-dependent, cannot be stored

Low customer interaction needed Requires customer interaction to be delivered

 More homogeneous Inherently heterogeneous

Goods–Services Continuum: Pure Goods (food, chemicals, mining) → Core Goods (appliances, autos) → Core
Services (hotels, airlines, ISPs) → Pure Services (university, medical, investment).
4 categories of service businesses: (1) impacting human bodies — salons, fitness; (2) directed at physical
products — freight, laundry; (3) directed at people's minds — advertising, education; (4) directed at risk/money —
insurance, banking, legal.
Product–Service Bundling: building service activities into product offerings — firms consolidate service aspects
under one organization.

6. Careers in OSCM
OSCM careers are hands-on — working with people to figure out the best way to deliver goods/services.
Examples: plant manager, hospital administrator, branch manager, call-center manager, supply chain manager,
purchasing manager, quality control manager, lean improvement manager, project manager, facilities manager,
COO.
Chief Operating Officer (COO): works with CEO/president on competitive strategy — decides location, facilities,
vendors, hiring policy implementation; lower-level operations staff execute these decisions.

7. Key OSCM Concepts Timeline (know the era!)

Era Concept

Late 1970s Manufacturing strategy developed

Early 1980s Just-in-Time (JIT) — pioneered by the Japanese

Mid 1980s Service quality & productivity

Early 1990s Total Quality Management (TQM) & quality certification

Mid 1990s Six Sigma Quality

Late 1990s Business Process Reengineering (BPR); Supply Chain Management (SCM)

Early 2000s Electronic Commerce; Sustainability

Mid 2010s Business Analytics

Early 2020s Internet of Things (IoT)

8. Definitions to Memorize
Just-in-Time (JIT): Integrated activities achieving high-volume production using minimal inventories that arrive
exactly when needed.
Total Quality Control (TQC): Aggressively seeks to eliminate causes of production defects.
Lean Manufacturing: High customer service with minimum inventory investment.
Total Quality Management (TQM): Managing the whole organization to excel in all dimensions of
products/services important to the customer.
Business Process Reengineering (BPR): Revolutionary (not evolutionary) redesign of business processes.
Six Sigma: Quality goal of ≤3.4 defects per million units; also a quality-improvement philosophy.
Mass Customization: Ability to produce a unique product exactly to a customer's requirements.
Sustainability: Meeting current resource needs without compromising future generations' ability to meet theirs.
Triple Bottom Line: Business strategy including social, economic, and environmental criteria.
Business Analytics: Using current business data to solve business problems via mathematical analysis.
Internet of Things (IoT): Billions of devices connected to the Internet.
Efficiency: Ratio of actual output to a standard; doing something at lowest possible cost.
Effectiveness: Doing the things that create the most value for the customer.
Value: The attractiveness of a product relative to its price.

9. Current Issues in OSCM

• Disruptions in global supply chains
• Geopolitical supply chain risk
• Uncertainty in global tariffs and regulations
• Difficulty hiring and retaining employees
• Adapting to change in business technology/infrastructure

Exam Tip
Common trap: questions describe a scenario (e.g., late delivery despite good marketing) and ask which function is
responsible — the answer is almost always Operations (fulfilment) or Supply Chain (if the cause is a
supplier/logistics failure). Marketing creates demand; Operations creates customer trust by fulfilling promises.
 MODULE 2 — Operations & Supply Chain Strategy
1. Definition
Operations and Supply Chain Strategy = setting broad policies and plans that guide the use of resources
needed by the firm to implement its corporate strategy.
• Corporate strategy provides overall direction and coordinates operational goals.
• Operations effectiveness = performing activities in a manner that best implements strategic priorities at
minimum cost.
• Initiatives = major steps needed to drive firm success.

2. Formulating an Operations & Supply Chain Strategy (3-stage process)

• Strategic Analysis → define vision/mission/objectives → conduct strategic analysis → define strategic
competitive dimensions. Outputs: customer preferences, new technologies, demographics, competition analysis.
• Initiatives → identify major steps needed in response to competitive dimensions → product design initiatives →
operations/supply chain initiatives. Outputs: product/platform changes, operation/supply chain changes.
• Implementation Projects → define specific implementation projects → identify resources needed → project
funding/procurement. Output: specific project plans.

3. Competitive Dimensions (how firms compete)

Dimension Meaning

Price Make the product / deliver the service cheap

Quality Make a great product / deliver a great service

Delivery Speed Make/deliver quickly

Delivery Reliability Deliver when promised

Coping with Changes in Demand Ability to change volume

Flexibility & New-Product Introduction

AbilitySpeed
to change/introduce products quickly

Other product-specific ('support it') criteria: technical liaison & support, meeting a launch date, supplier
after-sale support, environmental impact, other (colors, size, weight, location of fabrication, customization, product
mix).

4. The Notion of Trade-Offs

Management must decide which performance parameters are critical and concentrate resources there — a
strategic position is not sustainable unless there are compromises with other positions. E.g., a
low-cost-focused firm may not introduce new products quickly.
• Straddling = seeking to match a successful competitor while keeping one's existing position — adds
features/services/tech to existing activities; often a risky strategy.

5. Order Winners vs Order Qualifiers (Marketing–Operations Link)

• Order Qualifiers — dimensions necessary just to be considered for purchase (features customers won't forgo);
qualifies a firm as a possible supplier.
• Order Winners — criteria customers use to differentiate between firms' products/services — features that
determine the actual purchase.
Exam Tip: qualifiers = "must-haves to be in the game"; winners = "reason they choose YOU."

6. Strategy Implementation via Activities

• All operations activities relate to one another.
• To be efficient, minimize total cost without compromising customer needs.
Activity-system maps = diagrams showing how a company's strategy is delivered through a set of supporting
activities.
Case: IKEA's Strategy — targets young, low-cost buyers; self-service model with furniture shown in familiar room
settings; designs own low-cost modular ready-to-assemble furniture; stocks products in boxes customers pick
themselves; offers in-store childcare & extended hours. Strategic themes → store features → service features →
IKEA infrastructure features all reinforce the low-cost/self-service position (design staff minimizes manufacturing
cost, long-term supplier manufacturing, high inventory levels).

7. Assessing Risk in Operations & Supply Chain Strategy

Supply chain risk = likelihood of a disruption that impacts a company's ability to continuously supply
products/services.
• Supply chain coordination risks — from day-to-day management of the supply chain.
• Disruption risks — caused by natural/manmade disasters (earthquakes, hurricanes, terrorism, pandemics).
Examples: 2011 Japan tsunami halted manufacturing in Sukagawa City; 2012 excess rain ruined Nyetimber's (UK)
grape harvest; 2014 Evonik plant explosion (Germany) caused nylon-12 resin shortage; Russia–Ukraine War
disrupted grain/metal/energy exports; Red Sea Crisis (Houthi attacks) forced rerouting and raised shipping costs;
China–Taiwan tensions threaten global semiconductor supply.

8. Risk Management Framework (3 steps)

• 1. Identify sources of potential disruption — focus on highly unlikely events with significant impact.
• 2. Assess potential impact — quantify probability & impact (financial, environmental, business viability,
brand/reputation, human lives).
• 3. Develop mitigation plans — detailed strategy to minimize impact, form depends on the problem.

9. Risk Mitigation Strategies (match risk → strategy)

Risk Mitigation Strategy

Natural disaster Contingency planning (alternate sites), insurance

Country risks Hedge currency, produce/source locally

Supplier failures Use multiple suppliers

Network provider failures Support redundant digital networks

Regulatory risk Up-front & continuing research; legal advice, compliance

Commodity price risks Multisource, commodity hedging

Logistics failures Safety stock, detailed tracking, alternate suppliers

Inventory risks Pool inventory, safety stock

Major quality failures Carefully select and monitor suppliers

Loss of customers Service/product innovation

Theft and vandalism Insurance, security precautions, patent protection

Risk Assessment Matrix maps sourcing/practice strategies (outsourcing, sole sourcing, lean practices,
distribution hubs) against risk types with High/Moderate/Low impact ratings — e.g., sole sourcing = High impact for
supplier failure & quality risk; lean practices = High impact for logistics/inventory risk (low buffer stock).

10. Productivity Measurement

Productivity = Outputs / Inputs
Productivity is a relative measure — must be compared to something else (other operations, other firms, or the
same firm over time) to be meaningful.
• Partial productivity — output ÷ a single input (Labor, Capital, Materials, or Energy).
• Multifactor productivity — output ÷ a group of inputs (e.g., Labor+Capital+Energy).
• Total productivity — output ÷ all inputs (Goods and services produced ÷ All resources used).

Worked Example (memorize the method)

Output ($000) Input ($000)

Finished units 10,000 Labor 153

Work-in-process 2,500 Material 3,000

Dividends 1,000 Capital 10,000

Total output 13,500 Energy 540

Other expenses 1,500

Total input 15,193

Total measure: Total output/Total input = 13,500/15,193 = 0.89

Multifactor: Total output/(Labor+Material) = 13,500/3,153 = 4.28; Finished units/(Labor+Material) = 10,000/3,153 =
3.17
Partial: Total output/Energy = 13,500/540 = 25; Total output/Labor = 13,500/153 = 88.2
Real-world partial productivity examples: Restaurant → meals per labor hour; Retail store → sales per sq. ft.;
Chicken farm → lbs of meat per lb of feed; Utility plant → kWh per ton of coal; Paper mill → tons of paper per cord
of wood.

11. Sustainable Operations & Supply Chain Strategy

• Shareholders — individuals/companies that legally own one or more shares of stock in the company.
• Stakeholders — individuals/organizations directly or indirectly influenced by the firm's actions.
Adding a sustainability requirement means meeting value goals without compromising future generations' ability
to meet their own needs.
Triple Bottom Line — evaluating the firm against three criteria:
• Economic Prosperity — obligation to compensate shareholders who provide capital.
• Social Responsibility — fair/beneficial business practices toward labor, community, and region.
• Environmental Stewardship — the firm's impact on the environment.

12. Summary — Key Takeaways

• Operations & supply chain strategy sets broad policies for using a firm's resources, coordinated with
organizational goals.
• Strategy is implemented through activities delivering products/services consistent with overall business strategy.
• Strategies must be evaluated for risk — supply chain coordination risks vs disruption risks.
• Productivity measures ensure the firm makes the best use of its resources.
• A sustainable strategy must create value while balancing economic, social, and environmental goals.

Exam Tip
If a question gives you $ figures for outputs and inputs and asks for a productivity ratio, first total the output column,
then divide by whichever input(s) the question specifies (one input = partial; 2+ inputs = multifactor; all inputs =
total).