SUPPLY CHAIN MANAGEMENT

2011-03-01T05:28:00.000-08:00

Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision ofproduct and service packages required by end customers (Harland, 1996). Supply chain management spans all movement and storage ofraw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).

Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally."

Definitions

More common and accepted definitions of supply chain management are:

Supply chain management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer et al., 2001).

A customer focused definition is given by Hines (2004:p76) "Supply chain strategies require a total systems view of the linkages in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer. As a consequence costs must be lowered throughout the chain by driving out unnecessary costs and focusing attention on adding value. Throughput efficiency must be increased, bottlenecks removed and performance measurement must focus on total systems efficiency and equitable reward distribution to those in the supply chain adding value. The supply chain system must be responsive to customer requirements."

Global supply chain forum - supply chain management is the integration of key business processes across the supply chain for the purpose of creating value for customers and stakeholders (Lambert, 2008).

According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise.

A supply chain, as opposed to supply chain management, is a set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer. Managing a supply chain is 'supply chain management' (Mentzer et al., 2001).

Supply chain management software includes tools or modules used to execute supply chain transactions, manage supplier relationships and control associated business processes.

Supply chain event management (abbreviated as SCEM) is a consideration of all possible events and factors that can disrupt a supply chain. With SCEM possible scenarios can be created and solutions devised.

Problems addressed by supply chain management

Supply chain management must address the following problems:

Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers.
Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner-operated, private carrier, common carrier, contract carrier, or 3PL).
Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs, there will be an increase in inventory holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy.
Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc.
Inventory Management: Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods.
Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.

Supply chain execution means managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional.

Activities/functions

Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement.

Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels . The CSCMP has adopted The American Productivity & Quality Center (APQC) Process Classification Framework^SM a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint.

Strategic level

Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities.
Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics.
Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities.
Information technology chain operations.
Where-to-make and make-buy decisions.
Aligning overall organizational strategy with supply strategy.
It is for long term and needs resource commitment.

Tactical level

Sourcing contracts and other purchasing decisions.
Production decisions, including contracting, scheduling, and planning process definition.
Inventory decisions, including quantity, location, and quality of inventory.
Transportation strategy, including frequency, routes, and contracting.
Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise.
Milestone payments.
Focus on customer demand and Habits.

Operational level

Daily production and distribution planning, including all nodes in the supply chain.
Production scheduling for each manufacturing facility in the supply chain (minute by minute).
Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.
Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.
Inbound operations, including transportation from suppliers and receiving inventory.
Production operations, including the consumption of materials and flow of finished goods.
Outbound operations, including all fulfillment activities, warehousing and transportation to customers.
Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.
From production level to supply level accounting all transit damage cases & arrange to settlement at customer level by maintaining company loss through insurance company.

Importance of supply chain management

Organizations increasingly find that they must rely on effective supply chains, or networks, to compete in the global market and networked economy. In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies.

During the past decades, globalization, outsourcing and information technology have enabled many organizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott, 1993). This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither "market" nor "hierarchy" categories (Powell, 1990). It is not clear what kind of performance impacts different supply network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms (Zhang and Dilts, 2004). Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players. Therefore, the choice of an internal management control structure is known to impact local firm performance (Mintzberg, 1979).

In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances and business partnerships, significant success factors were identified, complementing the earlier "Just-In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices. Second, technological changes, particularly the dramatic fall in information communication costs, which are a significant component of transaction costs, have led to changes in coordination among the members of the supply chain network (Coase, 1998).

Many researchers have recognized these kinds of supply network structures as a new organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and "Next Generation Manufacturing System".In general, such a structure can be defined as "a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration" (Akkermans, 2001).

The security management system for supply chains is described in ISO/IEC 28000 and ISO/IEC 28001 and related standards published jointly by ISO and IEC.

Historical developments in supply chain management

Six major movements can be observed in the evolution of supply chain management studies: Creation, Integration, and Globalization (Movahedi et al., 2009), Specialization Phases One and Two, and SCM 2.0.

1. creation era

The term supply chain management was first coined by a U.S. industry consultant in the early 1980s. However, the concept of a supply chain in management was of great importance long before, in the early 20th century, especially with the creation of the assembly line. The characteristics of this era of supply chain management include the need for large-scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management.

2. integration era

This era of supply chain management studies was highlighted with the development of Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of internet-based collaborative systems. This era of supply chain evolution is characterized by both increasing value-adding and cost reductions through integration.

In fact a supply chain can be classified as a Stage 1, 2 or 3 network. In stage 1 type supply chain, various systems such as Make, Storage, Distribution, Material control, etc are not linked and are independent of each other. In a stage 2 supply chain, these are integrated under one plan and is ERP enabled. A stage 3 supply chain is one in which vertical integration with the suppliers in upstream direction and customers in downstream direction is achieved. An example of this kind of supply chain is Tesco.

3. globalization era

The third movement of supply chain management development, the globalization era, can be characterized by the attention given to global systems of supplier relationships and the expansion of supply chains over national boundaries and into other continents. Although the use of global sources in the supply chain of organizations can be traced back several decades (e.g., in the oil industry), it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business. This era is characterized by the globalization of supply chain management in organizations with the goal of increasing their competitive advantage, value-adding, and reducing costs through global sourcing.

4. specialization era—phase one: outsourced manufacturing and distribution

In the 1990s, industries began to focus on “core competencies” and adopted a specialization model. Companies abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This changed management requirements by extending the supply chain well beyond company walls and distributing management across specialized supply chain partnerships.

This transition also re-focused the fundamental perspectives of each respective organization. OEMs became brand owners that needed deep visibility into their supply base. They had to control the entire supply chain from above instead of from within. Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI).

The specialization model creates manufacturing and distribution networks composed of multiple, individual supply chains specific to products, suppliers, and customers who work together to design, manufacture, distribute, market, sell, and service a product. The set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands.

5. specialization era—phase two: supply chain management as a service

Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, and non-asset-based carriers and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution and performance management.

At any given moment, market forces could demand changes from suppliers, logistics providers, locations and customers, and from any number of these specialized participants as components of supply chain networks. This variability has significant effects on the supply chain infrastructure, from the foundation layers of establishing and managing the electronic communication between the trading partners to more complex requirements including the configuration of the processes and work flows that are essential to the management of the network itself.

Supply chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to focus on their core competencies and assemble networks of specific, best-in-class partners to contribute to the overall value chain itself, thereby increasing overall performance and efficiency. The ability to quickly obtain and deploy this domain-specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house is the leading reason why supply chain specialization is gaining popularity.

Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken root primarily in transportation and collaboration categories. This has progressed from the Application Service Provider (ASP) model from approximately 1998 through 2003 to the On-Demand model from approximately 2003-2006 to the Software as a Service (SaaS) model currently in focus today.

6. supply chain management 2.0 (SCM 2.0)

Building on globalization and specialization, the term SCM 2.0 has been coined to describe both the changes within the supply chain itself as well as the evolution of the processes, methods and tools that manage it in this new "era".

Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase creativity, information sharing, and collaboration among users. At its core, the common attribute that Web 2.0 brings is to help navigate the vast amount of information available on the Web in order to find what is being sought. It is the notion of a usable pathway. SCM 2.0 follows this notion into supply chain operations. It is the pathway to SCM results, a combination of the processes, methodologies, tools and delivery options to guide companies to their results quickly as the complexity and speed of the supply chain increase due to the effects of global competition, rapid price fluctuations, surging oil prices, short product life cycles, expanded specialization, near-/far- and off-shoring, and talent scarcity.

SCM 2.0 leverages proven solutions designed to rapidly deliver results with the agility to quickly manage future change for continuous flexibility, value and success. This is delivered through competency networks composed of best-of-breed supply chain domain expertise to understand which elements, both operationally and organizationally, are the critical few that deliver the results as well as through intimate understanding of how to manage these elements to achieve desired results. Finally, the solutions are delivered in a variety of options, such as no-touch via business process outsourcing, mid-touch via managed services and software as a service (SaaS), or high touch in the traditional software deployment model.

Supply chain business process integration

Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become known. The marketing department, responding to customer demand, communicates with several distributors and retailers as it attempts to determine ways to satisfy this demand. Information shared between supply chain partners can only be fully leveraged through process integration.

Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000), operating an integrated supply chain requires a continuous information flow. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert (2004) are:

Customer relationship management
Customer service management
Demand management
Order fulfillment
Manufacturing flow management
Supplier relationship management
Product development and commercialization
Returns management

Much has been written about demand management. Best-in-Class companies have similar characteristics, which include the following: a) Internal and external collaboration b) Lead time reduction initiatives c) Tighter feedback from customer and market demand d) Customer level forecasting

One could suggest other key critical supply business processes which combine these processes stated by Lambert such as:

Customer service management
Procurement
Product development and commercialization
Manufacturing flow management/support
Physical distribution
Outsourcing/partnerships
Performance measurement

a) Customer service management process

Customer Relationship Management concerns the relationship between the organization and its customers. Customer service is the source of customer information. It also provides the customer with real-time information on scheduling and product availability through interfaces with the company's production and distribution operations. Successful organizations use the following steps to build customer relationships:

determine mutually satisfying goals for organization and customers
establish and maintain customer rapport
produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are drawn up with suppliers to support the manufacturing flow management process and the development of new products. In firms where operations extend globally, sourcing should be managed on a global basis. The desired outcome is a win-win relationship where both parties benefit, and a reduction in time required for the design cycle and product development. Also, the purchasing function develops rapid communication systems, such as electronic data interchange (EDI) and Internet linkage to convey possible requirements more rapidly. Activities related to obtaining products and materials from outside suppliers involve resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers on matters of scheduling, supply continuity, hedging, and research into new sources or programs.

c) Product development and commercialization

Here, customers and suppliers must be integrated into the product development process in order to reduce time to market. As product life cycles shorten, the appropriate products must be developed and successfully launched with ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must:

coordinate with customer relationship management to identify customer-articulated needs;
select materials and suppliers in conjunction with procurement, and
develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination.

d) Manufacturing flow management process

The manufacturing process produces and supplies products to the distribution channels based on past forecasts. Manufacturing processes must be flexible to respond to market changes and must accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency in meeting customer demand. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e.g., links manufacturers, wholesalers, retailers).

f) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage, and outsource everything else. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Also, managing and controlling this network of partners and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally, with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level.

g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. Taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can both be correlated with firm performance. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. According to experts, internal measures are generally collected and analyzed by the firm including

Cost
Customer Service
Productivity measures
Asset measurement, and
Quality.

External performance measurement is examined through customer perception measures and "best practice" benchmarking, and includes 1) customer perception measurement, and 2) best practice benchmarking.

h)Warehousing management : As a case of reducing company cost & expenses, warehousing management is carrying the valuable role against operations. In case of perfect storing & office with all convenient facilities in company level, reducing manpower cost, dispatching authority with on time delivery, loading & unloading facilities with proper area, area for service station, stock management system etc.

Components of supply chain management are as follows: 1. Standardization 2. Postponement 3. Customization

Theories of supply chain management

Currently there is a gap in the literature available on supply chain management studies: there is no theoretical support for explaining the existence and the boundaries of supply chain management. A few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al. (2009) have tried to provide theoretical foundations for different areas related to supply chain by employing organizational theories. These theories include:

Resource-Based View (RBV)
Transaction Cost Analysis (TCA)
Knowledge-Based View (KBV)
Strategic Choice Theory (SCT)
Agency Theory (AT)
Institutional theory (InT)
Systems Theory (ST)
Network Perspective (NP)
Materials Logistics Management (MLM)
Just-in-Time (JIT)
Material Requirements Planning (MRP)
Theory of Constraints (TOC)
Total Quality Management (TQM)
Agile Manufacturing
Time Based Competition (TBC)
Quick Response Manufacturing (QRM)
Customer Relationship Management (CRM)
and many more

Supply chain centroids

In the study of supply chain management, the concept of centroids has become an important economic consideration. A centroid is a place that has a high proportion of a country’s population and a high proportion of its manufacturing, generally within 500 mi (805 km). In the U.S., two major supply chain centroids have been defined, one near Dayton, Ohio and a second near Riverside, California.

The centroid near Dayton is particularly important because it is closest to the population center of the US and Canada. Dayton is within 500 miles of 60% of the population and manufacturing capacity of the U.S., as well as 60 percent of Canada’s population.The region includes the Interstate 70/75 interchange, which is one of the busiest in the nation with 154,000 vehicles passing through in a day. Of those, anywhere between 30 percent and 35 percent are trucks hauling goods. In addition, the I-75 corridor is home to the busiest north-south rail route east of the Mississippi.

Tax efficient supply chain management

Tax Efficient Supply Chain Management is a business model which consider the effect of Tax in design and implementation of supply chain management. As the consequence of Globalization, business which is cross-nation should pay different tax rates in different countries. Due to the differences, global players have the opportunity to calculate and optimize supply chain based on tax efficiency legally. It is used as a method of gaining more profit for company which owns global supply chain.

Supply chain sustainability

Supply chain sustainability is a business issue affecting an organization’s supply chain or logistics network and is frequently quantified by comparison with SECH ratings. SECH ratings are defined as social, ethical, cultural and health footprints. Consumers have become more aware of the environmental impact of their purchases and companies’ SECH ratings and, along with non-governmental organizations ([NGO]s), are setting the agenda for transitions to organically-grown foods, anti-sweatshop labor codes and locally-produced goods that support independent and small businesses. Because supply chains frequently account for over 75% of a company’s carbon footprint many organizations are exploring how they can reduce this and thus improve their SECH rating.

For example, in July, 2009 the U.S. based Wal-Mart corporation announced its intentions to create a global sustainability index that would rate products according to the environmental and social impact made while the products were manufactured and distributed. The sustainability rating index is intended to create environmental accountability in Wal-Mart's supply chain, and provide the motivation andinfrastructure for other retail industry companies to do the same.

Components of supply chain management integration

The management components of SCM

The SCM components are the third element of the four-square circulation framework. The level of integration and management of a business process link is a function of the number and level, ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan, 1985). Consequently, adding more management components or increasing the level of each component can increase the level of integration of the business process link. The literature on business process re-engineering, buyer-supplier relationships, and SCM suggests various possible components that must receive managerial attention when managing supply relationships. Lambert and Cooper (2000) identified the following components:

Planning and control
Work structure
Organization structure
Product flow facility structure
Information flow facility structure
Management methods
Power and leadership structure
Risk and reward structure
Culture and attitude

However, a more careful examination of the existing literature leads to a more comprehensive understanding of what should be the key critical supply chain components, the "branches" of the previous identified supply chain business processes, that is, what kind of relationship the components may have that are related to suppliers and customers. Bowersox and Closs states that the emphasis on cooperation represents the synergism leading to the highest level of joint achievement (Bowersox and Closs, 1996). A primary level channel participant is a business that is willing to participate in the inventory ownership responsibility or assume other aspects of financial risk, thus including primary level components (Bowersox and Closs, 1996). A secondary level participant (specialized) is a business that participates in channel relationships by performing essential services for primary participants, including secondary level components, which support primary participants. Third level channel participants and components that support the primary level channel participants and are the fundamental branches of the secondary level components may also be included.

Consequently, Lambert and Cooper's framework of supply chain components does not lead to any conclusion about what are the primary or secondary (specialized) level supply chain components (see Bowersox and Closs, 1996, p. 93). That is, what supply chain components should be viewed as primary or secondary, how should these components be structured in order to have a more comprehensive supply chain structure, and how to examine the supply chain as an integrative one (See above sections 2.1 and 3.1).

Reverse supply chain Reverse logistics is the process of managing the return of goods. Reverse logistics is also referred to as "Aftermarket Customer Services". In other words, any time money is taken from a company's warranty reserve or service logistics budget one can speak of a reverse logistics operation.

Supply chain systems and value

Supply chain systems configure value for those that organise the networks. Value is the additional revenue over and above the costs of building the network. Co-creating value and sharing the benefits appropriately to encourage effective participation is a key challenge for any supply system. Tony Hines defines value as follows: “Ultimately it is the customer who pays the price for service delivered that confirms value and not the producer who simply adds cost until that point”

Global supply chain management

Global supply chains pose challenges regarding both quantity and value:

Supply and value chain trends
Globalization
Increased cross border sourcing
Collaboration for parts of value chain with low-cost providers
Shared service centers for logistical and administrative functions
Increasingly global operations, which require increasingly global coordination and planning to achieve global optimums
Complex problems involve also midsized companies to an increasing degree,

These trends have many benefits for manufacturers because they make possible larger lot sizes, lower taxes, and better environments (culture, infrastructure, special tax zones, sophisticated OEM) for their products. Meanwhile, on top of the problems recognized in supply chain management, there will be many more challenges when the scope of supply chains is global. This is because with a supply chain of a larger scope, the lead time is much longer. Furthermore, there are more issues involved such as multi-currencies, different policies and different laws. The consequent problems include:

1. different currencies and valuations in different countries;

2. different tax laws (Tax Efficient Supply Chain Management);

3. different trading protocols;

4. lack of transparency of cost and profit.

2011-02-10T22:32:00.000-08:00

Internet marketing, also known as digital marketing, web marketing, online marketing, or e-marketing, is the marketing of products or services over the Internet.

Internet marketing is considered to be broad in scope because it not only refers to marketing on the Internet, but also includes marketing done via e-mail and wireless media. Digital customer data and electronic customer relationship management (ECRM) systems are also often grouped together under internet marketing.

Internet marketing ties together the creative and technical aspects of the Internet, including design, development, advertising, and sales.Internet marketing also refers to the placement of media along many different stages of the customer engagement cycle through search engine marketing (SEM),search engine optimization (SEO), banner ads on specific websites, email marketing, and Web 2.0strategies.

In 2008, The New York Times, working with comScore, published an initial estimate to quantify the user data collected by large Internet-based companies. Counting four types of interactions with company websites in addition to the hits from advertisements served from advertising networks, the authors found that the potential for collecting data was up to 2,500 times per user per month.

Internet marketing is associated with several business models:

§ E-commerce: a model whereby goods are sold directly to consumers (B2C), businesses (B2B), or from consumer to consumer (C2C).

§ Lead-based websites: a strategy whereby an organization generates value by acquiring sales leads from its website.

§ Affiliate Marketing: a process wherein a product or service developed by one entity is sold by other active sellers for a share of profits. The entity that owns the product may provide some marketing material (e.g., sales letters, affiliate links, tracking facilities, etc.); however, the vast majority of affiliate marketing relationships come from e-commerce businesses that offer affiliate programs.

§ Local Internet marketing: a strategy through which a small company utilizes the Internet to find and to nurture relationships that can be used for real-world advantages. Local Internet marketing uses tools such as social media marketing, local directory listing, and targeted online sales promotions.

One-to-one approach

In a one-to-one approach, marketers target a user browsing the Internet alone and so that the marketers' messages reach the user personally. This approach is used in search marketing, for which the advertisements are based on search engine keywords entered by the users. This approach usually works under the pay per click (PPC) method.

Appeal to specific interests

When appealing to specific interests, marketers place an emphasis on appealing to a specific behavior or interest, rather than reaching out to a broadly defined demographic. These marketers typically segment their markets according to age group, gender, geography, and other general factors.

Niche Marketing

Niche and hyper-niche internet marketing put further emphasis on creating destinations for web users and consumers on specific topics and products. Niche marketers differ from traditional Internet marketers as they have a more specialized topic knowledge. For example, whereas in traditional Internet marketing a website would be created and promoted on a high-level topic such as kitchen appliances, niche marketing would focus on more specific topics such as 4-slice toasters.

Niche marketing provides end users of such sites very targeted information, and allows the creators to establish themselves as authorities on the topic or product.

Geo-targeting

In Internet marketing, geo targeting and geo marketing are the methods of determining the geolocation of a website visitor with geolocation software, and delivering different content to that visitor based on his or her location, such as latitude and longitude, country, region or state, city, metro code or zip code, organization, Internet Protocol (IP) address, ISP, and other criteria.

Advantages and Limitations of Internet marketing

Advantages

Internet marketing is inexpensive when examining the ratio of cost to the reach of the target audience. Companies can reach a wide audience for a small fraction of traditional advertising budgets. The nature of the medium allows consumers to research and to purchase products and services conveniently. Therefore, businesses have the advantage of appealing to consumers in a medium that can bring results quickly. The strategy and overall effectiveness of marketing campaigns depend on business goals and cost-volume-profit (CVP) analysis.

Internet marketers also have the advantage of measuring statistics easily and inexpensively; almost all aspects of an Internet marketing campaign can be traced, measured, and tested. The advertisers can use a variety of methods, such as pay per impression, pay per click, pay per play, and pay per action. Therefore, marketers can determine which messages or offerings are more appealing to the audience. The results of campaigns can be measured and tracked immediately because online marketing initiatives usually require users to click on an advertisement, to visit a website, and to perform a targeted action.

Limitations

However, from the buyer's perspective, the inability of shoppers to touch, to smell, to taste, and "to try on" tangible goods before making an online purchase can be limiting. However, there is an industry standard for e-commerce vendors to reassure customers by having liberal return policies as well as providing in-store pick-up services.

Security concerns

Information security is important both to companies and consumers that participate in online business. Many consumers are hesitant to purchase items over the Internet because they do not believe that their personal information will remain private. Some companies that purchase customer information offer the option for individuals to have their information removed from the database, also known as opting out. However, many customers are unaware if and when their information is being shared, and are unable to stop the transfer of their information between companies if such activity occurs.

Another major security concern that consumers have with e-commerce merchants is whether or not they will receive exactly what they purchase. Online merchants have attempted to address this concern by investing in and building strong consumer brands (e.g.,Amazon.com, eBay, and Overstock.com), and by leveraging merchant and feedback rating systems and e-commerce bondingsolutions. All these solutions attempt to assure consumers that their transactions will be free of problems because the merchants can be trusted to provide reliable products and services.^{[citation needed]} Additionally, several major online payment mechanisms (credit cards, PayPal, Google Checkout, etc.) have provided back-end buyer protection systems to address problems if they occur.

Usage trends

Technological advancements in the telecommunications industry have dramatically affected online advertising techniques.Many firms are embracing a paradigm that is shifting the focus of advertising methodology from traditional text and image advertisements those containing more recent technologies like JavaScript and Adobe Flash. As a result, advertisers can more effectively engage and connect their audience with their campaigns that seek to shape consumer attitudes and feelings towards specific products and services.

Effects on industries

The number of banks offering the ability to perform banking tasks over the internet has increased. Online banking appeals to customers because it is often faster and considered more convenient than visiting bank branches.

Internet auctions

Internet auctions have become a multi-billion dollar business. Unique items that could only previously be found at flea markets are now being sold on Internet auction websites such as eBay. Specialized e-stores sell a vast amount of items like antiques, movie props, clothing, gadgets, and so on.

As the premier online reselling platform, eBay is often used as a price-basis for specialized items. Buyers and sellers often look at prices on the website before going to flea markets; the price shown on eBay often becomes the item's selling price.

Advertising industry

In addition to the major effect internet marketing has had on the technology industry, the effect on the advertising industry itself has been profound. In just a few years, online advertising has grown to be worth tens of billions of dollars annually. PricewaterhouseCoopersreported that US$16.9 billion was spent on Online marketing in the U.S. in 2006.

This has caused a growing impact on the United States' electoral process. In 2008, candidates for President heavily utilized Internet marketing strategies to reach constituents. During the 2007 primaries candidates added, on average, over 500 social network supporters per day to help spread their message. President Barack Obama raised over US$1 million in one day during his extensive Democratic candidacy campaign, largely due to online donors.

Several industries have heavily invested in and benefited from internet marketing and online advertising. Some of them were originally brick and mortar businesses such as publishing, music, automotive or gambling, while others have sprung up as purely online businesses, such as digital design and media, blogging, and internet service hosting.

2010-12-27T05:48:00.000-08:00

Green computing or green IT, refers to environmentally sustainable computing or IT.

In the article Harnessing Green IT: Principles and Practices, San Murugesan defines the field of green computing as "the study and practice of designing, manufacturing, using, and disposing of computers, servers, and associated subsystems—such as monitors, printers, storage devices, and networking and communications systems—efficiently and effectively with minimal or no impact on the environment."The goals of green computing are similar to green chemistry; reduce the use of hazardous materials, maximize energy efficiency during the product's lifetime, and promote the recyclability or biodegradability of defunct products and factory waste.

Research continues into key areas such as making the use of computers as energy-efficient as possible, and designing algorithms and systems for efficiency-related computer technologies.

Origins

In 1992, the U.S. Environmental Protection Agency launched Energy Star, a voluntary labeling program which is designed to promote and recognize energy-efficiency in monitors, climate control equipment, and other technologies. This resulted in the widespread adoption of sleep mode among consumer electronics. The term "green computing" was probably coined shortly after the Energy Star program began; there are several USENET posts dating back to 1992 which use the term in this manner.Concurrently, the Swedish organization TCO Development launched the TCO Certification program to promote low magnetic and electrical emissions from CRT-based computer displays; this program was later expanded to include criteria on energy consumption, ergonomics, and the use of hazardous materials in construction.

Regulations and industry initiatives

The Organisation for Economic Co-operation and Development (OECD) has published a survey of over 90 government and industry initiatives on "Green ICTs", i.e. information and communication technologies, the environment and climate change. The report concludes that initiatives tend to concentrate on the greening ICTs themselves rather than on their actual implementation to tackle global warming and environmental degradation. In general, only 20% of initiatives have measurable targets, with government programs tending to include targets more frequently than business associations.

Government

Many governmental agencies have continued to implement standards and regulations that encourage green computing. The Energy Star program was revised in October 2006 to include stricter efficiency requirements for computer equipment, along with a tiered ranking system for approved products.

Some efforts place responsibility on the manufacturer to dispose of the equipment themselves after it is no longer needed; this is called the extended producer responsibility model. The European Union's directives 2002/95/EC (Restriction of Hazardous Substances Directive), on the reduction of hazardous substances, and 2002/96/EC (Waste Electrical and Electronic Equipment Directive) on waste electrical and electronic equipment required the substitution of heavy metals and flame retardants like Polybrominated biphenyl and Polybrominated diphenyl ethers in all electronic equipment put on the market starting on July 1, 2006. The directives placed responsibility on manufacturers for the gathering and recycling of old equipment.

There are currently 26 US States that have established state-wide recycling programs for obsolete computers and consumer electronics equipment.The statutes either impose an "advance recovery fee" for each unit sold at retail, or require the manufacturers to reclaim the equipment at disposal.

In 2009 the American Recovery and Reinvestment Act (AARA) was signed into legislation by President Obama. The Bill allocated over $70 billion to be invested in green initiatives (renewable energy, smart grids, energy efficiency, etc…) In January 2010 the U.S. Energy Department granted $47 million dollars of the AARA money towards projects that aim to improve the energy efficiency of data centers. The projects will provide research on the following three areas; optimize data center hardware and software, improve power supply chain, and data center cooling technologies.

Industry

§ Climate Savers Computing Initiative (CSCI) is an effort to reduce the electric power consumption of PCs in active and inactive states. The CSCI provides a catalog of green products from its member organizations, and information for reducing PC power consumption. It was started on 2007-06-12. The name stems from the World Wildlife Fund's Climate Savers program, which was launched in 1999. The WWF is also a member of the Computing Initiative.

§ The Green Electronics Council offers the Electronic Product Environmental Assessment Tool (EPEAT) to assist in the purchase of "greener" computing systems. The Council evaluates computing equipment on 51 criteria - 23 required and 28 optional - that measure a product's efficiency and sustainability attributes. Products are rated Gold, Silver or Bronze depending on how many optional criteria they meet. On 2007-01-24, President George W. Bush issued Executive Order 13423, which requires all United States Federal agencies to use EPEAT when purchasing computer systems.^[12][13]

§ The Green Grid is a global consortium dedicated to advancing energy efficiency in data centers and business computing ecosystems. It was founded in February 2007 by several key companies in the industry – AMD, APC, Dell, HP, IBM, Intel, Microsoft, Rackable Systems Spray Cool, Sun Microsystems and VMware. The Green Grid has since grown to hundreds of members, including end users and government organizations, all focused on improving data center efficiency.

§ The Green500 list rates supercomputers by energy efficiency (megaflops/watt, encouraging a focus on efficiency rather than absolute performance.

§ Green Comm Challenge is an organization that promotes the development of energy conservation technology and practices in the field of Information and Communications Technology (ICT). Green Comm Challenge achieved worldwide notoriety in 2007, when it enlisted as one of the challengers in the 33rd edition of the America's Cup, an effort meant to show how researchers, technologists and entrepreneurs from around the world can be brought together by an exciting vision: building the ultimate renewable energy machine, a competitive America’s Cup boat.

§ The Transaction Processing Performance Council (TPC) Energy specification augments the existing TPC benchmarks by allowing for optional publications of energy metrics alongside their performance results.

§ The SPEC Power is the first industry standard benchmark that measures power consumption in relation to performance for server-class computers.

Approaches to green computing

In the article Harnessing Green IT: Principles and Practices, San Murugesan defines the field of green computing as "the study and practice of designing, manufacturing, using, and disposing of computers, servers, and associated subsystems—such as monitors, printers, storage devices, and networking and communications systems—efficiently and effectively with minimal or no impact on the environment." Murugesan lays out four paths along which he believes the environmental effects of computing should be addressed: Green use, green disposal, green design, and green manufacturing.

Modern IT systems rely upon a complicated mix of people, networks and hardware; as such, a green computing initiative must cover all of these areas as well. A solution may also need to address end user satisfaction, management restructuring, regulatory compliance, and return on investment (ROI). There are also considerable fiscal motivations for companies to take control of their own power consumption; "of the power management tools available, one of the most powerful may still be simple, plain, common sense."

Product longevity

Gartner maintains that the PC manufacturing process accounts for 70 % of the natural resources used in the life cycle of a PC.^[16] Therefore, the biggest contribution to green computing usually is to prolong the equipment's lifetime. Another report from Gartner recommends to "Looking for product longevity, including upgradability and modularity." For instance, manufacturing a new PC makes a far bigger ecological footprint than manufacturing a new RAM module to upgrade an existing one, a common upgrade that saves the user having to purchase a new computer.

Software and deployment optimization

Algorithmic efficiency

The efficiency of algorithms has an impact on the amount of computer resources required for any given computing function and there are many efficiency trade-offs in writing programs. As computers have become more numerous and the cost of hardware has declined relative to the cost of energy, the energy efficiency and environmental impact of computing systems and programs has received increased attention. A study by Alex Wissner-Gross, a physicist at Harvard, estimated that the average Google search released 7 grams of carbon dioxide (CO₂). However, Google disputes this figure, arguing instead that a typical search produces only 0.2 grams of CO₂.

Resource allocation

Algorithms can also be used to route data to data centers where electricity is less expensive. Researchers from MIT, Carnegie Mellon University, and Akamai have tested an energy allocation algorithm that successfully routes traffic to the location with the cheapest energy costs. The researchers project up to a 40 percent savings on energy costs if their proposed algorithm were to be deployed. Strictly speaking, this approach does not actually reduce the amount of energy being used; it only reduces the cost to the company using it. However, a similar strategy could be used to direct traffic to rely on energy that is produced in a more environmentally friendly or efficient way. A similar approach has also been used to cut energy usage by routing traffic away from data centers experiencing warm weather; this allows computers to be shut down to avoid using air conditioning.

Larger server centers are sometimes located where energy and land are inexpensive and readily available. Local availability of renewable energy, climate that allows outside air to be used for cooling, or locating them where the heat they produce may be used for other purposes could be factors in green sitting decisions.

Virtualization

Computer virtualization refers to the abstraction of computer resources, such as the process of running two or more logical computer systems on one set of physical hardware. The concept originated with the IBM mainframe operating systems of the 1960s, but was commercialized for x86-compatible computers only in the 1990s. With virtualization, a system administrator could combine several physical systems into virtual machines on one single, powerful system, thereby unplugging the original hardware and reducing power and cooling consumption. Virtualization can assist in distributing work so that servers are either busy, or put in a low power sleep state. Several commercial companies and open-source projects now offer software packages to enable a transition to virtual computing. Corporation and AMD have also built proprietary virtualization enhancements to the x86 instruction set into each of their CPU product lines, in order to facilitate virtualized computing.

Terminal servers

Terminal servers have also been used in green computing. When using the system, users at a terminal connect to a central server; all of the actual computing is done on the server, but the end user experiences the operating system on the terminal. These can be combined with thin clients, which use up to 1/8 the amount of energy of a normal workstation, resulting in a decrease of energy costs and consumption. There has been an increase in using terminal services with thin clients to create virtual labs. Examples of terminal server software include Terminal Services for Windows and the Linux Terminal Server Project (LTSP) for the Linux operating system.

Power management

The Advanced Configuration and Power Interface (ACPI), an open industry standard, allows an operating system to directly control the power-saving aspects of its underlying hardware. This allows a system to automatically turn off components such as monitors and hard drives after set periods of inactivity. In addition, a system may hibernate, where most components (including the CPU and the system RAM) are turned off. ACPI is a successor to an earlier Intel-Microsoft standard called Advanced Power Management, which allows a computer's BIOS to control power management functions.^{[citation needed]}

Some programs allow the user to manually adjust the voltages supplied to the CPU, which reduces both the amount of heat produced and electricity consumed. This process is called undervolting. Some CPUs can automatically undervolt the processor depending on the workload; this technology is called "Speed Step" on Intel processors, "PowerNow!"/"Cool'n'Quiet" on AMD chips, LongHaul on VIA CPUs, and LongRunwith Transmeta processors.

Data Center Power

Data Center, which has been criticized for its extra ordinary high energy demand, is a primary focus for proponents of green computing. The federal government has set a minimum 10% reduction target for data center energy usage by 2011. With the aid of a self-styled ultra efficient evaporative cooling technology, Google Inc. has been able to reduce its energy consumption to 50% of that of the industry average.

Operating system support

The dominant desktop operating system, Microsoft Windows, has included limited PC power management features since Windows 95.These initially provided for stand-by (suspend-to-RAM) and a monitor low power state. Further iterations of Windows added hibernate (suspend-to-disk) and support for the ACPI standard. Windows 2000 was the first NT based operating system to include power management. This required major changes to the underlying operating system architecture and a new hardware driver model. Windows 2000 also introduced Group Policy, a technology which allowed administrators to centrally configure most Windows features. However, power management was not one of those features. This is probably because the power management settings design relied upon a connected set of per-user and per-machine binary registry values, effectively leaving it up to each user to configure their own power management settings.

This approach, which is not compatible with Windows Group Policy, was repeated in Windows XP. The reasons for this design decision by Microsoft are not known, and it has resulted in heavy criticism. Microsoft significantly improved this in Windows Vistaby redesigning the power management system to allow basic configuration by Group Policy. The support offered is limited to a single per-computer policy. The most recent release, Windows 7 retains these limitations but does include refinements for more efficient user of operating system timers, processor power management, and display panel brightness. The most significant change in Windows 7 is in the user experience. The prominence of the default High Performance power plan has been reduced with the aim of encouraging users to save power.

There is a significant market in third-party PC power management software offering features beyond those present in the Windows operating system. Most products offer Active Directory integration and per-user/per-machine settings with the more advanced offering multiple power plans, scheduled power plans, anti-insomnia features and enterprise power usage reporting.

Power supply

Desktop computer power supplies (PSUs) are generally 70–75% efficient, dissipating the remaining energy as heat. An industry initiative called 80 PLUS certifies PSUs that are at least 80% efficient; typically these models are drop-in replacements for older, less efficient PSUs of the same form factor. As of July 20, 2007, all new Energy Star 4.0-certified desktop PSUs must be at least 80% efficient.

Storage

Smaller form factor (e.g. 2.5 inch) hard disk drives often consume less power per gigabyte than physically larger drives.^[34][35] Unlike hard disk drives, solid-state drives store data in flash memory or DRAM. With no moving parts, power consumption may be reduced somewhat for low capacity flash based devices.^[36][37]

In a recent case study, Fusion-io, manufacturers of the world's fastest Solid State Storage devices, managed to reduce the carbon footprint and operating costs of MySpace data centers by 80% while increasing performance speeds beyond that which had been attainable via multiple hard disk drives in Raid 0. In response, MySpace was able to permanently retire several of their servers, including all their heavy-load servers, further reducing their carbon footprint.

As hard drive prices have fallen, storage farms have tended to increase in capacity to make more data available online. This includes archival and backup data that would formerly have been saved on tape or other offline storage. The increase in online storage has increased power consumption. Reducing the power consumed by large storage arrays, while still providing the benefits of online storage, is a subject of ongoing research.

Video card

A fast GPU may be the largest power consumer in a computer.

Energy efficient display options include:

§ No video card - use a shared terminal, shared thin client, or desktop sharing software if display required.

§ Use motherboard video output - typically low 3D performance and low power.

§ Select a GPU based on low idle power, average wattage or performance per watt.

Display

CRT monitors typically use more power than LCD monitors. They also contain significant amounts of lead. LCD monitors typically use a cold-cathode fluorescent bulb to provide light for the display. Some newer displays use an array of light-emitting diodes (LEDs) in place of the fluorescent bulb, which reduces the amount of electricity used by the display.^[42] Fluorescent back-lights also contain mercury, whereas LED back-lights do not.

Materials recycling

Recycling computing equipment can keep harmful materials such as lead, mercury, and hexavalent chromium out of landfills, and can also replace equipment that otherwise would need to be manufactured, saving further energy and emissions. Computer systems that have outlived their particular function can be re-purposed, or donated to various charities and non-profit organizations.^[43] However, many charities have recently imposed minimum system requirements for donated equipment.^[44] Additionally, parts from outdated systems may be salvaged and recycled through certain retail outlets^[45][46] and municipal or private recycling centers. Computing supplies, such as printer cartridges, paper, and batteries may be recycled as well.

A drawback to many of these schemes is that computers gathered through recycling drives are often shipped to developing countries where environmental standards are less strict than in North America and Europe.^[48] The Silicon Valley Toxics Coalition estimates that 80% of the post-consumer e-waste collected for recycling is shipped abroad to countries such as China and Pakistan.

The recycling of old computers raises an important privacy issue. The old storage devices still hold private information, such as emails, passwords and credit card numbers, which can be recovered simply by someone using software that is available freely on the Internet. Deletion of a file does not actually remove the file from the hard drive. Before recycling a computer, users should remove the hard drive or hard drives if there is more than one, and physically destroy it or store it somewhere safe. There is some authorized hardware recycling companies to whom the computer may be given for recycling, and they typically sign a non-disclosure agreement.

Telecommuting

Teleconferencing and telepresence technologies are often implemented in green computing initiatives. The advantages are many; increased worker satisfaction, reduction of greenhouse gas emissions related to travel, and increased profit margins as a result of lower overhead costs for office space, heat, lighting, etc. The savings are significant; the average annual energy consumption for U.S. office buildings is over 23 kilowatt hours per square foot, with heat, air conditioning and lighting accounting for 70% of all energy consumed. Other related initiatives, such as hotelling, reduce the square footage per employee as workers reserve space only when they need it. Many types of jobs, such as sales, consulting, and field service, integrate well with this technique.

Voice over IP (VoIP) reduces the telephony wiring infrastructure by sharing the existing Ethernet copper. VoIP and phone extension mobility also made hot desking more practical.

Education and Certification

There are a number of colleges that have individual green computing courses and institutions that offer certifications which indirectly encourage green computing techniques. Full fledged green computing degree programs and certifications are currently in their infancy but should grow over time as their definition and importance mature.

Green Computing Degree Programs

Degree programs that provide training in a range of information technology concentrations along with sustainable strategies in an effort to educate students how to build and maintain systems while reducing it's negative impact on the environment.

§ Metropolitan Community College (Omaha) has an associate’s degree available in managing green data centers.

§ Leeds Metropolitan University in the United Kingdom offers a year long graduate course in Green Computing.

Green computing certifications

Some certifications demonstrate that an individual has specific green computing knowledge, including:

§ CompTIA Strata Green IT is designed for IT managers to show that they have good knowledge of green IT practices and methods and why it is important to incorporate them into an organization.

§ Information Systems Examination Board (ISEB) Foundation Certificate in Green IT is appropriate for showing an overall understanding and awareness of green computing and where its implementation can be beneficial.

2010-12-14T05:57:00.000-08:00

Operations management is an area of business concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient in terms of using as little resource as needed, and effective in terms of meeting customer requirements. It is concerned with managing the process that converts inputs (in the forms of materials, labor and energy) into outputs (in the form of goods and services).

Operations traditionally refer to the production of goods and services separately, although the distinction between these two main types of operations is increasingly difficult to make as manufacturers tend to merge product and service offerings. More generally, Operations Management aims to increase the content of value-added activities in any given process. Fundamentally, these value-adding creative activities should be aligned with market opportunity for optimal enterprise performance.
According to the U.S. Department of Education, Operations Management is the field concerned with managing and directing the physical and/or technical functions of a firm or organization, particularly those relating to development, production, and manufacturing. Operations Management programs typically include instruction in principles of general management, manufacturing and production systems, plant management, equipment maintenance management, production control, industrial labor relations and skilled trades supervision, strategic manufacturing policy, systems analysis, productivity analysis and cost control, and materials planning.

Origins
The origins of operations management can be traced back through cultural changes of the 18th, 19th, and 20th centuries, including the Industrial Revolution, the development of interchangeable manufacture, the Waltham-Lowell system, the manufacturing, scientific, the development of assembly line practice and mass production, and the Toyota Production System. Combined, these ideas allowed for the standardization and continuous improvement of production processes. Key features of these early production systems were the departure from skilled craftsmen to a more thorough division of labor and the transfer of knowledge from within the minds of skilled, experienced workers into the equipment, documentation, and systems.
There are scores of people who can be viewed as thought leaders whose life's work laid the foundations for operations management (only some of which have name recognition among the general population). A very cursory list would include (in approximate chronological order)Adam Smith, Jean-Baptiste Vaquette de Gribeauval, Louis de Tousard, Honoré Blanc, Eli Whitney, John H. Hall, Simeon North, Frederick Winslow Taylor, Henry Gantt, Henry Ford, Sakichi Toyoda, Alfred Sloan, Frank and Lillian Gilbreth, Tex Thornton and his Whiz Kids team, and W. Edwards Deming and the developers of the Toyota Production System (Taiichi Ohno, Shigeo Shingo, Eiji Toyoda, Kiichiro Toyoda, and others).
Whereas some influences place primary importance on the equipment and too often viewed people as recalcitrant impediments to systems (e.g., Taylor and Ford), over time the need to view production operations as sociotechnical systems, duly considering both humans and machines, was increasingly appreciated and addressed.
Operations research as a subdiscipline gained prominence during World War II, when mathematicians applied analytical tools to optimize operational questions, initially with a military context, and later also within general operations.
Historically, the body of knowledge stemming from industrial engineering formed the basis of the first MBA programs, and is central to operations management as used across diverse business sectors, industry, consulting and non-profit organizations.

Organizations
The following organizations support and promote operations management:
§ Association for Operations Management (APICS) which supports the Production and Inventory Management Journal
§ European Operations Management Association (EurOMA) which supports the International Journal of Operations & Production Management
§ Production and Operations Management Society (POMS) which supports the journal: Production and Operations Management
§ Institute for Operations Research and the Management Sciences (INFORMS)
§ Institute of Operations Management (UK)
§ Association of Technology, Management, and Applied Engineering (ATMAE)

Publications
The following academic journals are concerned with Operations Management issues:
§ Journal of Operations Management
§ International Journal of Operations & Production Management
§ Production and Operations Management
§ Production and Inventory Management Journal
§ Journal of Modelling in Operations Management
§ Society of Operations Management

2010-09-09T06:14:00.000-07:00

The analysis and design of workflows and processes within an organization. A business process is a set of logically related tasks performed to achieve a defined business outcome. Re-engineering is the basis for many recent developments in management. The cross-functional team, for example, has become popular because of the desire to re-engineer separate functional tasks into complete cross-functional processes. Also, many recentmanagement information systems developments aim to integrate a wide number of business functions. Enterprise resource planning, supply chain management,knowledge management systems, groupware and collaborative systems, Human Resource Management Systems and customer relationship management.

Business Process Reengineering is also known as Business Process Redesign, Business Transformation, or Business Process Change Management.

Overview

Business process reengineering (BPR) began as a private sector technique to help organizations fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world-class competitors. A key stimulus for reengineering has been the continuing development and deployment of sophisticated information systems and networks. Leading organizations are becoming bolder in using this technology to support innovative business processes, rather than refining current ways of doing work.

Business process reengineering is one approach for redesigning the way work is done to better support the organization's mission and reduce costs. Reengineering starts with a high-level assessment of the organization's mission, strategic goals, and customer needs. Basic questions are asked, such as "Does our mission need to be redefined? Are our strategic goals aligned with our mission? Who are our customers?" An organization may find that it is operating on questionable assumptions, particularly in terms of the wants and needs of its customers. Only after the organization rethinks what it should be doing, does it go on to decide how best to do it.

Within the framework of this basic assessment of mission and goals, reengineering focuses on the organization's business processes—the steps and procedures that govern how resources are used to create products and services that meet the needs of particular customers or markets. As a structured ordering of work steps across time and place, a business process can be decomposed into specific activities, measured, modeled, and improved. It can also be completely redesigned or eliminated altogether. Reengineering identifies, analyzes, and redesigns an organization's core business processes with the aim of achieving dramatic improvements in critical performance measures, such as cost, quality, service, and speed.

Reengineering recognizes that an organization's business processes are usually fragmented into subprocesses and tasks that are carried out by several specialized functional areas within the organization. Often, no one is responsible for the overall performance of the entire process. Reengineering maintains that optimizing the performance of subprocesses can result in some benefits, but cannot yield dramatic improvements if the process itself is fundamentally inefficient and outmoded. For that reason, reengineering focuses on redesigning the process as a whole in order to achieve the greatest possible benefits to the organization and their customers. This drive for realizing dramatic improvements by fundamentally rethinking how the organization's work should be done distinguishes reengineering from process improvement efforts that focus on functional or incremental improvement.

History

In 1990, Michael Hammer, a former professor of computer science at the Massachusetts Institute of Technology (MIT), published an article in the Harvard Business Review, in which he claimed that the major challenge for managers is to obliterate non-value adding work, rather than using technology for automating it. This statement implicitly accused managers of having focused on the wrong issues, namely that technology in general, and more specifically information technology, has been used primarily for automating existing processes rather than using it as an enabler for making non-value adding work obsolete.

Hammer's claim was simple: Most of the work being done does not add any value for customers, and this work should be removed, not accelerated through automation. Instead, companies should reconsider their processes in order to maximize customer value, while minimizing the consumption of resources required for delivering their product or service. A similar idea was advocated by Thomas H. Davenport and J. Short in 1990, at that time a member of the Ernst & Young research center, in a paper published in the Sloan Management Review the same year as Hammer published his paper.

This idea, to unbiasedly review a company’s business processes, was rapidly adopted by a huge number of firms, which were striving for renewed competitiveness, which they had lost due to the market entrance of foreign competitors, their inability to satisfy customer needs, and their insufficient cost structure. Even well established management thinkers, such as Peter Drucker and Tom Peters, were accepting and advocating BPR as a new tool for (re-)achieving success in a dynamic world. During the following years, a fast growing number of publications, books as well as journal articles, were dedicated to BPR, and many consulting firms embarked on this trend and developed BPR methods. However, the critics were fast to claim that BPR was a way to dehumanize the work place, increase managerial control, and to justify downsizing, i.e. major reductions of the work force , and a rebirth of Taylorism under a different label.

Despite this critique, reengineering was adopted at an accelerating pace and by 1993, as many as 65% of the Fortune 500 companies claimed to either have initiated reengineering efforts, or to have plans to do so. This trend was fueled by the fast adoption of BPR by the consulting industry, but also by the study Made in America, conducted by MIT, that showed how companies in many US industries had lagged behind their foreign counterparts in terms of competitiveness, time-to-market and productivity.

Development after 1995

With the publication of critiques in 1995 and 1996 by some of the early BPR proponents^{[citation needed]}, coupled with abuses and misuses of the concept by others, the reengineering fervor in the U.S. began to wane. Since then, considering business processes as a starting point for business analysis and redesign has become a widely accepted approach and is a standard part of the change methodology portfolio, but is typically performed in a less radical way as originally proposed.

More recently, the concept of Business Process Management (BPM) has gained major attention in the corporate world and can be considered as a successor to the BPR wave of the 1990s, as it is evenly driven by a striving for process efficiency supported by information technology. Equivalently to the critique brought forward against BPR, BPM is now accused of focusing on technology and disregarding the people aspects of change.

The role of information technology

Information technology (IT) has historically played an important role in the reengineering concept. It is considered by some as a major enabler for new forms of working and collaborating within an organization and across organizational borders.

Early BPR literature identified several so called disruptive technologies that were supposed to challenge traditional wisdom about how work should be performed.

Shared databases, making information available at many places
Expert systems, allowing generalists to perform specialist tasks
Telecommunication networks, allowing organizations to be centralized and decentralized at the same time
Decision-support tools, allowing decision-making to be a part of everybody's job
Wireless data communication and portable computers, allowing field personnel to work office independent
Interactive videodisk, to get in immediate contact with potential buyers
Automatic identification and tracking, allowing things to tell where they are, instead of requiring to be found
High performance computing, allowing on-the-fly planning and revisioning

In the mid 1990s, especially workflow management systems were considered as a significant contributor to improved process efficiency. Also ERP (Enterprise Resource Planning) vendors, such as SAP, JD Edwards, Oracle, PeopleSoft, positioned their solutions as vehicles for business process redesign and improvement.