UNIVERSITY OF CEBU – MAIN

GRADUATE SCHOOL
SANCIANGKO ST., CEBU CITY

BM208A
OPERATIONS MANAGEMENT:
PROCESSES AND SUPPLY CHAINS
CHAPTER DIGEST

SUBMITTED BY:
JOHN PAUL G. PRESTON
MBA – GENERIC
BLOCK 2, SAT 7:30-12:00

SUBMITTED TO:
DR. ILY Y. ABELLA
 CHAPTER 1: USING OPERATIONS TO CREATE VALUE

SALIENT FEATURES

The basis of operations strategy is that is integrated with the corporate strategy

and market analysis to help build a consumer driven firm to be competitive.

Through the integration, the organization’s functions can be carried out. It also

specifies the business or businesses that the company will pursue. With that the

SWOT Analysis can commence. The corporate strategy is based on the

business environment, developing core competencies, developing core

processes, and the developing global strategies. Operations also deals with the

competitive priorities and capabilities of the firm as these give value with

consideration to costs and quality of products or services and time to create and

deliver resources and final products. Trends and challenges that operation

management faces include productivity improvement of resources and the global

competition.

OBSERVATIONS

From the perspective of a consumer, former business development officer, and

entrepreneur, I do believe value is something that is utmost important for any

product or service. Marketing does not necessarily create value. Marketing is the

tool to make the value of a product known. Operations is the main source of

value creation as operations include all the resources placed into the creation of

a product. As a consumer, before I consider the price and promotions, I always

take into careful consideration that value that the product is able to have. At first,

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 I did not like iPhones because I thought that they were too overrated and too

expensive. However, with the two years using an iPhone I realize the features,

benefits and capacities that it is built upon. Even after two years, the

responsiveness of it still is as if it’s brand new. Apple also updates their iPhones

continuously. Compared to Samsung that only has three major updates, Apple

offers updates even for older models. When I was a business development

officer, I was selling HMO (health maintenance organization) services. In selling

insurance, service level agreements are extremely high. So much more that this

service is something that can only be used during emergencies as that is the

point of getting insurance. However, a year and three months in that industry, I

realized that operations where a bit sluggish. Although I had the purest intent of

wanting to improve the services since it also would go back to me being the first

person the company had contact with, my immediate superiors could not do

anything as their hands are tied and decision makers are in the head office in

Manila. Given that the premiums were not too expensive, service would also be

directly proportional which means cheaper rates, lackluster service. However,

there were times that the service when well, but most just made me want to quit.

Being empathetic to my customers, I felt that the HMO did not live up to value.

As an entrepreneur, I take into full consideration the value of the food I sell. I

always ensure that product quality is as good or will get better. Through this, I

can build a good relationship with my customers and they will always prefer the

products I offer. Aside from that, I also ensure that I benchmark the practice I

have dealing with my customers is as good as Starbucks. Since Starbucks does

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 offer the best practice of customer service, and copying them will not even cost

me a single centavo.

SYNTHESIS

Ideally, for companies to be competitive they need to create and foster a culture

that creates value from the ideas of everyone in the organization. Though

marketing conceptualizes these ideas, operations take the main responsibility in

turning the intangible to tangible with the help of other departments. Each

department should create a strategy based on the corporate strategy. This

should be done by the managers of each department with the help of their

subordinates. Through creating a culture that sees everyone as important and

considers each employees ideas, operations would be able to create more value

to turn into great customer experiences.

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 MANAGING PROCESSES

CHAPTER 2: PROCESS STRATEGY AND ANALYSIS

SALIENT FEATURES

Process structure in services and manufacturing differ as the former focuses on

delivering something intangible and the latter delivers something tangible.

However, regardless of the final output being delivered, operations looks into the

process structure that best fits with the strategy and vision of the company. For

process structure in services, we consider the customer-contact matrix and the

service process structuring. Through the customer-contract matrix, the degree

of customer contact is considered and the customization of the service offered.

The service process structuring looks into the front office, hybrid office, and back

office. Process structure in manufacturing is made up of product-process matrix,

manufacturing process structuring, and production and inventory strategies, and

layout. With these process strategy, it is highly important to redesign for

improvements.

OBSERVATIONS

I view restaurants as a fusion of service and manufacturing since food is being

prepared and directly consumed by the customers and the kitchen crew and front

liners work simultaneously to deliver the best customer experience possible. For

the front liners, they need to ensure that the customers feel special through

following the set customer service standards as the customer is entering the

area, ordering their meal, getting their meal on time, having other orders or

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 concerns, asking, receiving and paying the bill and leaving the area. For the

kitchen crew, they need to make sure that the meals they prepare are up to the

set standards by ensuring that the materials are clean, well-cooked, arrange

properly and other special requests from the customer. In our restaurant,

Southside Chicken Wings, I always take to consider both the process structures

in services and manufacturing. I always remind the front liners that although

we’re not a five-star restaurant, it wouldn’t hurt or cost much to adapt to some of

their practices. They also have the highest amount of customer contact. They

also customize greetings based on the time of day and the customers they are

attending to. Since we are proudly Cebuano, I always remind my staff to use

Cebuano statements like, “maayong buntag/hapon/gabii” or “daghan’g salamat

ug balik-balik”. This also helps in our branding. For the kitchen side, I always

remind them to prepare what needs to be prepared on time. Since our menu has

a variety of preparation such as frying, grilling, sautéing, and others, we have

different employees who specialize in the different tasks. I always ensure that

the dining area and kitchen are spacious enough for customers to be comfortable

and for our crew to be able to deliver. We usually have the standard preparation

of our meals, however, if a customer would want customization which is usually

adjustment of spice level of our chicken wings, we also cater to that. I also take

to consideration constant questioning of our process and procedures for us to

be able to brainstorm on bettering them. This is usually done by my brother, his

wife and I with help from our staff. Since we’re relatively young, we need to

benchmark on those restaurants that have been sustainable and profitable.

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 SYNTHESIS

Regardless of category, whether an industry is a manufacturing or service, top

management must look into the possibility that practices for services can be

applied to manufacturing and vice-versa. At the end of the day, the company’s

purpose is to be able to deliver what they offer to the customer in the best way

they can. Merging principles of the process strategy and process manufacturing

can come up with great customer experience. Each employee should also be

trained on how to deliver their best. Employees also need to work hand in hand

with each other as one wring move could lead to a negative domino effect that

can affect the operations of the company.

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 CHAPTER 3: QUALITY AND PERFORMANCE

SALIENT FEATURES

Customers look into the value of a product or service, and because of this,

defects are unacceptable. No one purchases something because of defects,

unless their aim is to get a discount from it. The cost of quality considers that

when a process fails to satisfy a customer, the failure is counted as a defect.

These costs include, preventive cost, appraisal cost, internal failure cost,

external failure cost, and ethical failure cost. Preventive costs include cost of

preventing defects before they happen. Appraisal costs look into cost incurred

when the company assess the performance levels of its processes. Internal

failure costs result from defects that are discovered during the production of the

service or product. External failure costs arise when defect is discovered after

the customer receives the service or products such as warranties and

guarantees. Ethical failure cost come from societal and monetary costs

associated with deceptively passing defective products or services to internal

and external customers and this can destroy the wellbeing of the stakeholders.

Through TQM and Six Sigma, we are able to ensure that quality and

performance exceeds the expectations of the customers. TQM is a philosophy

that stresses the principles of customer satisfaction, employee involvement and

continuous improvement. Six Sigma, on the other hand, sees to maximize

business success by minimizing defects and variability in process. To reduce

variation in processes and centering processes on their target measures of

performance is what Six Sigma aims to accomplish.

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 OBSERVATIONS

Quality is very important because the value of the product or service being sold

is what makes the customer decide to go for it or not. With that consideration, I

always carefully look into delivering the best quality of my products in my

business, Southside Chicken Bits. This business of mine is a small branch out

of our restaurant. Instead of selling chicken wings, I sell chicken bits or fillet. It’s

the same concept with KFC’s Hot Shots. In keeping up with the brand, the bits I

sell have the same delectable taste as the wings we sell. Aside from capitalizing

on the taste of the chicken, the flavors I put on my bits are also the same flavors

we have in Southside Chicken Wings. Since we’re slowly building our brand, it

is very important to keep up with the quality. Although the product presentation

might be different, the taste and experience should leave a mark on the taste

buds of our customers. Since I believe I am a very proactive person, I always

make sure that preventive cost are established. Since it’s also a small business,

the simplest costs can already be hurting to the profits. In order to prevent costs,

I have set a standard on how much marinade to put per kilo of chicken. Also, the

best measurements to create our sauces. Aside from that, we make sure that

the ingredients we use are the same as what we used before since it’s already

part of our brand. Loyal patrons could easily tell if we substitute an ingredient or

two. However, substitution might not be all bad as this can help cut costs as long

as it is able to give the same standard or even better. Both dining and kitchen

crew have to check that the quality is at standard. For the kitchen, they need to

use the correct amount of ingredients to create our signature dishes as well as

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 arrange it on how we advertise it. For the dining crew, they also need to give

feedback to the kitchen crew should they see something wrong with the final

good. With this, errors can be kept within Southside. I also believe that quality

should also include how you see something. When we make our marketing

collaterals, I make sure that there is minimal to no edit on our food. How the

customer sees it in the ads should also be how they see it in actuality. As I

believe that expectations should be at par with reality. Through this we are able

to slowly adapt TQM principles. Customer satisfaction is achieved through the

taste and presentation. Employee involvement through being part of the process

is achieved. And we strive for continuous improvement.

SYNTHESIS

In any organization, defects will always be unacceptable. However, defects are

inevitable even for the best process and procedures made. Since nothing is

perfect, striving for perfection would only entail costs. The totality of a business

is not to sell defects, it is to sell value. Value is relative and everyone has their

perception of value. Defects might be unacceptable to some consumers, but they

can be acceptable to some. This in turn becomes surplus items sold at a fraction

of the price which usually is sold to other countries. Since defects are inevitable,

getting back the cost or even a little profit from it, it the aim. There will always be

a market that looks into defects as value for their money which in turn creates

customer satisfaction.

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 CHAPTER 4: CAPACITY PLANNING

SALIENT FEATURES

In planning long-term capacity, it is important to see new facilities and equipment

as investments and not as expenses. This decision also entails the approval of

top management as these decisions are not easily reversible. It’s important to

measure capacity and utilization as these are the basis should the resources be

maximize to their full potential or become waste. Economies and diseconomies

of scale are also considered as these help in minimizing cost and maximizing

profit. Since these are not easily reversible, it is important to have the perfect

timing and sizing as to not create chaos.

OBSERVATIONS

In our restaurant, we started off with a simple deep fryer which had limited

capacity. We also didn’t have a formal business plan when we started. We just

had dreams and luckily a spacious house with a good enough location. At the

time we started we had limited capacity from cooking equipment, furniture and

fixture and plates and utensils. Since we considered it to be a make or break

business, we didn’t really invest that much on these things. However, after

months, the hype of our restaurant slowly grew. With that grow as well as having

a good amount of capital, we decided to slowly start improvement. We started

off improving the kitchen since it would be hard to keep up with the demand using

substandard equipment. At the same time, just slowly improving the dining area

in order to make the dining experience a little better. After two years of operating,

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 we realized that using electric deep fryers would consume too much electricity.

It would be a better option to use LPG and gas stove. We had to canvass for the

best industrial gas stove and luckily we were able to find it. It also cost a little

much, but we always look at it as an investment. Since we’re a simple business,

the decision makers are either me or my brother after we go through suggestions

from everyone. In the early stages of our business, my brother would usually

prepare the sauces on a per order basis. This would actually be a little costly

considering we have to cook it. I suggested to him to think about the economies

of scale, preparing more would spread the fixed costs as well as it wouldn’t take

time to prepare anymore. My brother also was a bit conservative before as he

would prepare to buy the inventory in small quantities and replenish once

depleted. I suggested to purchase ingredients in larger volumes as larger

volumes are discounted and we wouldn’t have to constantly go to the store which

saves time and energy. Planning long-term capacity has helped us realize that

it’s important to invest. Although it might entail a big cost in the start, it always

brings in a good return in the end.

SYNTHESIS

Investments in new facilities call for everyone’s view in the organization. The

best to plan on this is for top management to consider the ideas that middle and

lower management have, as well as the employees. Since new facilities

ultimately land on the grassroots, it is best to have their ideas looked into. They

also are more knowledgeable on the on-hand experience.

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 CHAPTER 5: CONSTRAINT MANAGEMENT

SALIENT FEATURES

The Theory of Constraints (TOC) is a systematic management approach that

focuses on actively managing constraints that could obstruct the progress of a

firm in reaching its goals. Bottlenecks are present for both service processes and

manufacturing processes. For service processes, throughput time which the total

time elapsed from the start to finish of a job or a customer begin processed at

one or more work centers. For manufacturing processes, it is essential to identify

bottlenecks through setup times. These can help see the difference between

actual and projected output. In relieving bottlenecks, redesign is important

through process reengineering or process improvement. To manage constraints

in line processes, assigning of work of stations is able to achieve the desired

output rate with the smallest amount of workstation.

OBSERVATIONS

I used to be a business development officer for an HMO company before I

decided to start my own business. It actually was my first and second job after

graduation. The first HMO company I worked had a lot of employees as they

believe in job specialization to be able to deliver the best possible service to their

clients, but this also comes with a cost. Since service was good, premiums we

also a bit higher compared to their competitors. For my second HMO company,

they offered lower rates, but service was a bit not as good as the first HMO

company I worked for. The number of employees that the second had was just

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 about 1/10 of the first. The second was conservative with the cost, however, they

also invest enough on software to automate the HMO availment process.

Although they had the system, I was a bit lackluster as there still problems when

availing. These constraints took a tool on the brand of the company and my

credibility. When I was still in Sales, I had to present that company in the best

way possible. Although promises are meant to be broken, I had to live to sell the

standards of the company on how they perceived their standards. No company

is perfect, but comparing the first and second company, I had more complaint

with the second on as compared to the first. This also made me realized that

although the second company had a much more generous offer for

compensation and benefits, it also has its downside. I also tried my best to pitch

in ideas on how to improve the system, but still it fell on deaf ears. When they

presented the smartphone app to automate availments, I tried to use it. I had

questions, but none of the IT could answer. Being a business development

officer also requires me to know what I am offering, however, it was a problem

as they did not even bother to have any form of training or handbook for using

the smartphone app. With that, I was a bit hard to sell the HMO product to

potential clients. Companies will always have their bottlenecks, but it’s how fast

they are able learn and solve it is what makes them competitive. Sadly, the

second company I worked for, took too much time resolving their smartphone

app and service issues that it was slowly damaging my reputation. When I realize

that it was hopeless, I resigned and started my own business. Coming from a

place that does not listen to employees’ concerns and suggestions, I learned to

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 be a better employer. I believe that since employees are the ones that does the

process, I have to listen to their ideas since they know a bottleneck concern

when I happens.

SYNTHESIS

Constraints are a problem in any organization as it cause bottlenecks that can

entail costs. The best way to deal with constraints is to create a culture of

employee involvement which is to listen to employees raising the concerns. At

the same time, finding ways to solve these constraints. Since these employees

are the ones that experience, it best to consider their ideas for solutions to the

problems. A culture that makes it easy for employees to voice out their concern

creates an effective organization in which processes and systems would be able

to develop to become more competitive.

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 CHAPTER 6: LEAN SYSTEMS

SALIENT FEATURES

Lean Systems Approach help in the continuous improvement of operations. The

Just-in-time philosophy is the belief that waste can be eliminated by cutting

unnecessary capacity to inventory and removing non-value-added activities in

operations. It basically eliminates the waste or wasters in the system. To have a

strategic Lean System, it is important to consider different aspects. Close

supplier ties enables a firm to be able to get what they want, when they want it.

Communication and the exchange of information enables a firm to be able to

have a better relationship with their suppliers. Having small lot sizes also help

as these can reduce or eliminate the waste of unutilized resources. However,

consideration for demand is inputted. A pull method of workflow also helps in the

getting more customers. With more customers, more production of goods or

services can commence. It’s important to always consider quality as quality gives

value. Defects are to be fixed in the area where they occur. Through this, quality

at the source can take effect. Uniform work station loads also help reducing or

eliminating wastes as this entails a process of reservation. Through reservation,

forecasting demand for raw materials or services is made easier. A flexible

workforce can also help in reducing waste as the talent and competencies of the

human capital can be maximized. Automation plays a role in in lean services as

it can result in higher quality, precision and productivity. Through automation,

standardization can occur as computers automatically generate what they need

to generate with consideration to the data inputted. Lastly, Total Preventive

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 Maintenance is to be done. It’s best to be proactive when it comes to machinery

and equipment. A faulty machinery or equipment can cause downtime in the

production of a product or it can be hazardous to employees involved with it.

OBSERVATIONS

Waste is the ultimate business killer. Sometimes waste comes from internal

sources which can be controlled, and sometimes is comes from external sources

which needs adjustment on our end. As for my business, I experience waste

both from internal and external sources. An example of waste from internal

sources include stocking up too much without the proper storage capacity.

Although having a good amount of inventory is good as to keep up with demand,

it can turn to waste considering that I have chicken meat that needs to be stored

at a certain temperature or it’ll spoil. Since we still have a limited capacity in our

house, which acts as the commissary, I have to properly schedule when and

how much chicken I order to fit into our chiller as I am also sharing the chiller

with my brother for his chicken wings and other raw materials. Setting a plan was

very important as to not create waste. It would also be waste to turn down my

customers due to having a low supply. This also does not reflect well on

customer service and branding. So to be able to control waste, planning the

schedule and amount of chicken is important with consideration to capacity. As

for nonperishable items or those that would expire in months or longer, I usually

carry more of it so that I wouldn’t have to keep on going to the store. With that, I

can save time and energy considering that gas prices have risen and traffic is

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 getting a little worst. This minimizes waste that translates into costs. For external

sources, these would include the usually route that I have going to my place of

business. Due to the best fitting schedule I have created, we usually leave our

commissary at around 8:30 in the morning. During this time, there is still traffic

as workers are still travelling to their workplace and students to school. To adjust

to traffic, my route are the narrow and sometimes broken roads in Mandaue.

These roads are also where big trucks and container vans pass by as their

factories are located along the road. This also makes me question the Vision of

Mandaue as they look forward to in 2020 to become the best place for

manufacturing firms, yet they’re not doing anything about factories located in

these areas. Based on experience, am I able to reach the destination on time,

however, there are just times that I would be a little late due to the trucks and

container vans passing through the roads. To adjust to the time that could be

wasted, I need to properly schedule base on when these vehicles would pass

usually it’s on the 15th of the month or Mondays when they make a delivery.

With wastes, I need to be considerate to it. Planning and adjusting have helped

me control these.

SYNTHESIS

Wastes should be minimized. As compared to defects, wastes just are outright

costs while defects can still have some value. To enable waste minimization

studying the process is very important. Since grassroots employees experience

the on-hand processes and procedures every day, they should be delegated to

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 know when waste could become possible. They should be trained enough.

Investing in their learning and development to become more proactive will help

them make the best decision with lesser supervision. With that, they become

self-sufficient and their supervisors can focus on other things. Although it will

have some cost implications for the training, at the end of the day not having

training would be more costly.

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 CHAPTER 7: PROJECT MANAGEMENT

SALIENT FEATURES

Projects are important to companies because these interrelated set of activities

result in unique outcomes for a specific allocation of company resources. Project

management is a systemized, phased approach to define, organize, plan,

monitor and control projects. Since projects can contribute to depletion of

resources, they must give a purpose. They also must be planned well and

monitored during development and controlled once finished to ensure it gives

the expected results. In project management, analyzing cost-time trade-offs are

able to keep cost at levels that are not too conservative and not too risky. At the

same time, consideration for the expected date of delivery must be weighted. To

asses and analyze risks, it is fairly important to develop a risk management plan

through strategic fit, service or product attributes, project team capabilities, and

extent of operations. Of course, a project must be aligned to the strategies of the

company. The service or product attribute must also be competitive against

competitors for the costs of the project to be considered. The human capital and

operations capabilities have to be checked to know if they are eligible and

suitable for the project as well as if they can sustain it. To monitor and control

projects it is important to open issues and possible risks. It is inevitable that

projects would always flow smoothly, so to mitigate these possible issues or

risks, it’s best to open and talk about its possibilities. Lastly, scheduling the status

of the project helps in monitoring the percentage of completion of the project with

regards to the deadline of it. Through this, waste can be eliminated.

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 OBSERVATIONS

In our restaurant, we have 12 variety of flavored wings that have a distinct taste

from each other. To have sustainable competitive advantage, we need to

experiment on new flavors. Since there are a lot of restaurant offering chicken

wings in Cebu, we need to innovate constantly. Aside from that, our competitors

offer unlimited chicken wings, but having gone through these wing joints, they

usually substitute quality for quantity. At the same time, we have thought that not

everyone would want to indulge in unlimited chicken wings every day. Also, we

have to consider the price they pay. Should they be a group of five, they could

spend about a thousand pesos. With a thousand pesos, you could already get

so much both in quality and quantity in our restaurant. Since we believe in quality

than quantity, we need to create new flavors that would entice customers to dine

with us. Project management is essential here because we are able to ensure

that we won’t create too much waste and we would be able to get back our

investment either more or satisfactorily breakeven. For a year, we only had nine

flavors of wings, we had the Classic Flavors, Southside Originals, and Best

Sellers. There were three in each category. To offer something new, we usually

get ideas from our staff. We also dine in different restaurant to taste different

flavors. Although not all flavors might work well with chicken wings, it’s a good

try. After a year, we came up with three new flavors that added to the original

nine. These flavors also are unique as no other restaurant has offered them. Our

latest innovation was the 13th flavor. We started to introduce the Gold Wings

which is the first in Asia, as the first in the world is in New York City. These wings

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 were seen more of a novelty item that capitalized on its unique, shiny, gold color.

It also was priced at a premium since the gold hue took time, effort, and costs to

prepare. We also had to ensure that the taste was gold standard, so careful

research as to how we defined the gold standard. We believed that tagging it as

Asia’s first gold wings would help us become known and competitive. Sad to say,

although sales went well, our primary ingredient to create the gold hue became

scarce. But nonetheless, we always see to it that we constantly innovate new

flavors either competitor flavors or original flavors.

SYNTHESIS

For companies to have sustainable competitive advantage, they must always

develop new products or projects that can be the precursor to new products or

services. Since this is an investment opportunity for the company, it always has

a trade-off which is mainly the cost of pursuing the project. However, it can also

turn into an opportunity lost if the project does not take off. The best case practice

to ensure that projects will be successful is to look into the ideas of the

employees. At the same time, the project should have a meaning in the

organization, as well as being possible to pursue. Since issues and risks will

always happen as plans are not totally full proof, the organization should be able

to monitor and address these.

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 MANAGING CUSTOMER DEMAND

CHAPTER 8: FORECASTING

SALIENT FEATURES

Demand for a product is basically the reason a firm is able to profit. Knowing the

demand of consumers can help firms know how much to create or produce in

order to maximize the resources and profit and minimize cost. It is important to

understand that demand is based on the market with consideration to the timing

and sizing. In an effort to determine consumer demand it is best to look into the

basic demand patterns which are, horizontal, trend, seasonal, cyclical and

random. Horizontal demand basically shows that the demand of a product is

close to constant. This happens when products are basin necessities. For trends,

over time, there is either a systematic increase or decrease. These usually are

for products that people perceive are “in’ for the moment. For seasonal, the

pattern is the same depending on the time of day, week, month or season. For

example, coffee is more in demand in the morning to perk consumers or

umbrellas are in demand when the sun is too hot or if it is raining. Cyclical is the

less predictable gradual increase or decrease in demand over longer periods of

time which could be years or decades. An example of this are smartphones.

After the fiasco of the Samsung Galaxy Note 7, the Note 8 and Note 9 did not

really make an impact to the consumers. Lastly, Random demand is basically

erratic which means it can happen anytime. To manage demands, it is important

to have varying options through complimentary products, promotional pricing,

prescheduled appointments and reservations, revenue management, backlogs,

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 backorders and stockouts. These are able to help monitor demand through either

enticing the consumer to buy, knowing how many would avail or telling the

customer that they should’ve bought. In making forecasts, it is best to decide

whether going with level of aggregation or units measured. Forecasting

techniques also help in knowing the best fit for the company. These techniques

include judgement method, causal method, time-series analysis and trend

projection with regression.

OBSERVATIONS

Starting my own business, Southside Chicken Bits, was a bit scary for me. I

always had the question of what if no one will purchase my products. As a person

who is afraid to fail, the thoughts consumed me a little. It’s hard to predict

demand of a new product and considering that there are competitors that might

have better products. However, we cannot live in fear. There are risks whether

we take action or not, but the risks of inaction is greater. The first day of operation

went extremely well. It was something I was not prepared for due to fear. The

amount of chicken I prepared did not meet the demand. During my trial month, I

took note on the demand patterns of the students. With that, it helped me

forecast the demand which usually is meets my expectations. During my formal

operations, the start of the new school year, demand was high. After a few

weeks, there was another stall that opened. It took some of my customers for

about two weeks. However, after the two weeks, demand got back to normal.

There are days that I’d experience shortage and there are days that meet my

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 projections. The best case practice I have adapted is to be able to set a base

standard of how much to prepare. Also, prepare chicken that has not yet been

cooked. Should I have a feeling that demand is high on a specific date, I need

not worry as I have already prepared for it. Should I feel it would be low, it’s also

okay as I’ve prepared just enough. This also would not create waste. It’s best to

always take into account so that you will have data necessary for good

judgement of actions.

SYNTHESIS

Companies cannot survive if they do not study and forecast demand. Studying

the trends in demand help know the best number of units to produce. Companies

have to keep track on these figures to make decisions that are not too

conservative and not too careless. Studying demand also calls for consideration

of the demand patterns. Through these careful actions, companies will be able

to ensure to minimize wastes that create costs.

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 CHAPTER 9: INVENTORY MANAGEMENT

SALIENT FEATURES

Inventory is a stock of materials used to satisfy customer demand or to support

the production of services or goods. Managing inventory is important as planning

and controlling inventories are able to meet the competitive priorities of the

organization. This also help to maximize profit and minimize cost as inventories

are counted as assets. Inventory trade-offs can pressure both small and large

inventories. Having too much inventory is costly, and having too little can cause

an opportunity cost of sales. Pressures for small inventories include the cost of

capital, storage and handling cost, and taxes, insurances, and shrinkage. Since

inventory is being bought, there is a credit to the cash of the company and a

debit to the inventory. In short, there is outflow of cash and only by utilizing the

inventory can you get a return of your capital (cash). Since inventories are

tangible assets, they consume space, and the consumption of space means

cost. More taxes is also paid if end-of-year inventory is high as well as the cost

of insuring these. Aside from that, shrinkage can occur through theft,

obsolescence, and deterioration happens. Pressure for large inventories can

happen as well. Good customer service is when customers are able to receive

what they want when they want it. Having a large inventory reduces the chance

of backorders and stockouts. Ordering costs can also be affect as ordering a

large volume would entail a modest to big discounts. Setup cost is also

something to consider as creating of a new product would entail alterations of an

existing equipment. A good amount of inventory can also utilize the workforce

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 and equipment at its maximum. Transportation of larger inventory can also

maximize the cost of transportation of just enough or small levels. EOQ

(Economic Order Quantity) is the lot size that minimizes total annual inventory

holding and ordering cost. With this concept, waste can be evaded. As inventory

is an asset can has a certain cash value, it is important to monitor it. Monitoring

inventory can be through continuous review (Q) system and Periodic review (P)

system. For continuous review system, every time an inventory is utilized, it is

recorded. For periodic review system, inventory is reviewed at certain periods.

OBSERVATIONS

For my business, my inventories are classified as perishable, semi-perishable

and non-perishable. For the perishable items it is usually just the chicken breasts

and potatoes. Because chicken breasts need to be refrigerated and considering

that I have limited stocking capacity, I usually order chicken breast from my

supplier every other day. With this, it won’t consume too much space. At the

same time, since our wings are being delivered every day, it won’t cost additional

for delivery charge. Also, the delivery charge is already inputted in the selling

price, so regardless of the amount of chicken we order, price is the same. For

the potatoes, they usually last for a week under normal conditions before

spoiling. For the non-perishable items, these are the raw materials to marinade

the chicken and make the sauces. These items have an expiry date, but usually

it is a month or longer, so I can stock up on these to save time and effort in

restocking. For non-perishable items these include the wooden skewer, paper

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 bowl, and disposable spoons. Since these don’t deteriorate and considering that

I have to buy these in Carbon, I have to stock up a lot of these. When I purchased

non-perishable items, I usually have it good for two months. Every week, I

allocate a certain amount for my working capital. This is used to pay for the

chicken breasts and other items that might run out. Storage for the perishable

items is usually a challenge with limited space, but I learned how to adjust my

order. Delivery does not change regardless of weight purchased. Since I am still

a small business, it usually is easy for me to monitor my inventories and with the

help of Microsoft Excel and the Calendar App on my phone, I am able to know

how much inventory I have left and when I should purchase. Utilizing technology

should be done as it is a way to easily navigate through every day processes. At

the same time, these applications have more to what we perceive of them, and

exploiting their full capabilities gives us sustainable competitive advantage. The

monitoring process I apply is based on the continuous review system that

ensures me that I won’t be scarce of the items.

SYNTHESIS

The best way for companies to monitor their inventory would depend on what

they see as fit. However, having a computerized system would enable seamless

monitoring of inventory. This would help reduce inconsistencies and help monitor

what goes in and what goes out. This also would entail costs for the company,

but in the end, benefits would still exceed the costs.

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 CHAPTER 10: OPERATIONS PLANNING AND SCHEDULING

SALIENT FEATURES

In this age of technology, operations planning and scheduling are utilizing

spreadsheets to their maximum capabilities. As spreadsheets are able to deliver

the fast and accurate information from data inputted with consideration of the

correct formula being used. Spreadsheets are utilized by firms regardless if

they’re a manufacturing or service firm. Input values, utilized time, inventory,

hires and layoffs, and calculated values are used by manufacturing firms.

Service firms also have the same except it does not have inventory. Scheduling

is easier to monitor through using spreadsheets. However, scheduling also

needs data which comes from the demand forecasts and customer specific

needs, resources availability from sales and operations plan, dues dates for

resources or material requirements, and the specific internal and external

constraints. Job and facility scheduling is done through the Gantt Progress Chart

and the Gantt Workstation Chart. Workforce scheduling determines when

employees work. Sequencing jobs at a workstation can done through priority

sequencing rules, first-come, first-serve, earliest due date, performance

measures, flow time, and the past due.

OBSERVATIONS

It’s very important to maximize the use of technology, especially when I come to

monitoring as this gives better and more accurate information. In this time and

age, technology basically runs our lives. We can’t even get through one day

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 without looking at our smartphones. Technology has adapted to most inventions

that have been made. It can be a clock, alarm clock, ruler, spirit level, camera,

voice recorder, flashlight and a lot more. But what people don’t usually use it for

is monitoring important business or work schedules. I usually depend on my

smartphone to monitor most activities that I have. I also use it to monitor my

inventory level, sales and other important schedules. Since the Microsoft Excel

app is free to download and use on my iPhone, I also take advantage of it as this

is where I input most of the data I collect from sales to inventory. Also, I have

linked it on Google Drive so that I can open it in my laptop. Although smartphones

and tablets are advanced, there are just somethings that you can do better on a

computer. Data collection, recording and storage is very important for me since

I need to check my profits and expenses daily. It also is able to help me forecast

demand and inventory. With these technological advances, I don’t believe that

anyone has an excuse as not being able to monitor. Some could reason out that

they don’t understand or know, but the internet is readily available. Everyone has

access to smartphones and tablets. Considering that there are cheaper

alternatives to expensive smartphone brands. Free internet is also available in

malls and restaurants already. It just comes down to the mindset of people.

Some would prefer to not learn or monitor because of laziness which is basically

the problem. But with diligence, one can already exploit technology to its fullest

capacity, and one can truly understand the peso value he has placed on the

smartphone or tablet decision he has made.

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 SYNTHESIS

Companies need to invest in software that would best fit their organizational

needs. Although it might be costly, it still is able to deliver greater benefits.

Having software would ease up the processes and procedures and minimize

errors. The human capital only needs to interpret the information given from

these systems and take corrective action on what would be produced. Since the

world is already in the post-industrial revolution, the human capital should be

more knowledge-based. As managers it is best to pitch in this ideas to top

management and the owners as there are some companies that are not yet open

when it comes to automation due to not understanding its value.

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 CHAPTER 11: RESOURCE PLANNING

SALIENT FEATURES

Material requirements planning (MRP) is a computerized information system

developed specifically to help manufacturers manage dependent demand

inventory and schedule replenished order. Of course, in this digital age, it’s best

to take advantage of what can help us monitor and perform. Through this firms

will know the status of their inventory, so much more if the firm is a big one. The

dependent demand is the demand for an item that happens because of the

quantity required varies with the production plan for other items held in the firm’s

inventory or in other words, it is demand for component parts or subassemblies.

Master production scheduling is part of MRP that gives out how many end items

will be created within a specified period of time. To develop a master production

schedule, there has to be a calculation of the project on-hand and determination

of the timing and size of the production quantities of specific products. Available

to promise is a concept that has the quantity of end items being promised to be

delivered on specified dates.

OBSERVATIONS

In my business, dependent demand would include the sauces and the chicken

bits that I am selling. Independent demand would be the final product which is

the chicken bits with the sauce that the customer would want. Since I am able to

forecast the number of units to prepare and sell per day, it’s not much a problem

to estimate this dependent demand. What I should prepare for is the dependent

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 demand of the sauces. Sometimes one sauce would be fast selling for the day

and on other days, there another sauce would be. However, I noticed that I have

patrons who would order the same sauce or flavor every day. Basically, they’ve

already have built a preference for it. Since it’s hard to know how much sauce to

be prepared for the day, I usually have five sauces prepared on a weekly basis.

The sauces are also semi-perishable so I am able to store them without worry of

spoiling. For the two other sauces, it’s only good for a day, so it has to be

prepared on a daily basis. Developing a master production schedule is important

as this is my basis for the sauces as I need to project availability of the raw

materials to make them. At the same time, I need to know when and how much

to make. With this, I am able to deliver value at the same time minimize waste.

SYNTHESIS

To be able to deliver the best, it usually is to be able to deliver it fast with zero

errors. Investment of software should be considered as this will help speed up

monitoring of inventory and resources. Although it entails cost, the benefit will

always follow.

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 MANAGING SUPPLY CHAINS

CHAPTER 12: SUPPLY CHAIN DESIGN

SALIENT FEATURES

In supply chain design, there has to be strategic options for it. It must create a

network of firms that work together in order to achieve each other’s competitive

priorities and individual goals. Efficient supply chains have the concept of make-

to-stock wherein it is created or produced based on forecast, hence, it is made

and stocked in a warehouse for safekeeping. Responsive supply chains can

either be assemble-to-order, make-to-order, or design-to-order. Each are alike

as a customer is able to specify what he wants, however, they differ in other

aspects. Assemble-to-order has customer’s specification, but there are existing

components of the product. Make-to-order has the standard design based on

what the company has already and the customer can have his inputs. Design-

to-order is made entirely on the customer’s specification. It is important to take

note of the design of supply chain to give value to the customer as well as be

efficient and responsive. Supply chains have to consider the need to be mass

customized in order to ensure competitive advantage. Outsourcing processes

are also considered as these practice can have an impact on different factors

that include labor costs, rework and product returns, logistics costs, tariffs and

taxes, market effects, labor laws and unions, the internet, energy costs, access

to low cost capital, and supply chain complexity.

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 OBSERVATIONS

When we started the restaurant business, we usually got our wings from Carbon

Public Market since the place is known to offer the best value. However, there

were times that shortages would occur, so with no other options, we got our

wings from the malls which have a higher price. It wasn’t until the sixth month of

operation that there was this guy who messaged us on our Facebook Page. He

introduced himself and his business wherein he supplies chicken to restaurants.

Comparing his price to carbon and to the malls, it was by far the best offer we

had. At the same time delivery is also counted in the price. Without further

hesitation, we ordered from him. Since we were satisfied with the quality and

price, he has become our sole supplier for chicken wings and later on chicken

fillet. This supplier-customer relationship has been on for about two years and a

half. In the supply chain he basically is at the second level, which is after the

main producer. Since he’s at the second level, his markup is not too high as

compared to those in the market and malls. For our other inventory items, we

still have to buy it from the market or malls considering that we are still a small

business. Hopefully, once we are able to grow in the future, our supply chain will

also as well grow.

SYNTHESIS

Ideally, the different network of companies in a supply chain should work

together to achieve each other’s competitive goals. However, that is not always

the case. As good as it sound to have every company in a win-win situation,

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 there are companies that through information exploit their negotiating

capabilities. To be able to not get taken advantage, it’s important to continuously

learn about the market. It’s also important to be able to build a good relationship

with suppliers. Through this good relationship, transparency and best prices can

happen. Companies also have to be competitive enough for firms to pick them

to be their supplier or service provider. Usually, responsive supply chains are

better options as these give customers the ability to specify how they want their

orders to be like. However, with customization also comes a certain cost that

companies would usually bargain. With this, their own operations add value to

the products or services they offer.

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 CHAPTER 13: SUPPLY CHAIN LOGISTIC NETWORKS

SALIENT FEATURES

One of the most crucial decisions in starting a business or a new project is the

location as the location can be one of the biggest source of costs or it can be the

biggest benefit. This is why factors affecting location decisions are to be

considered. These factors include sensitivity to the location and the impact it has

for the company to achieve its goals. Factors for manufacturing and services are

different as well. For manufacturing, there is a consideration for the favorable

labor climate, proximity to the markets, suppliers, resources, and facilities of the

parent company, environmental impact, quality of life, and the costs of utilities,

taxes and estate costs. For services, these include proximity to customers, costs

of transportation, market proximity, location of competitors and site-specific

factors such as for customer centric reasons. A systematic location selection

process is to be tapped to be able to identify important location factors,

consideration for alternatives, collection of relevant data, analysis of data

collected, and copulating the qualitative and quantitative factors.

OBSERVATIONS

When I was with the first HMO company I worked for, we were strategically

located where most of the major hospitals in Cebu were. Other HMO companies

in Cebu are located nearer to their clients or are located in areas where potential

clients are. But in the first HMO I worked for they believe that it is best to be

located nearer to their partner hospitals. Although the building we were located

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 at was already very old, they still stuck to it as it was nearer to Chong Hua

Hospital – Fuente, Cebu Doctors’ University Hospital, Velez Hospital, and

Perpetual Succor Hospital. They were also confident that their members need

not go their office to get an LOA or letter of authorization which is used before a

member can avail the benefits, as they have already built a system that does not

require members to visit their office. Since they were nearer to their partner

hospitals, the patient relations officers (those that visit members who are

admitted) can easily travel and monitor the admitted members. They also

considered that most of their members preferred to stay in these major hospitals.

You could also not see any form of branding or signage on the building as they

were very conservative. However, they believe that their brand is something that

should speak from their operations and not on marketing collaterals. For other

HMO companies in Cebu, they are usually located in business districts like Ayala

or IT Park as they believe that branding is important and visibility would enable

more potential customers.

SYNTHESIS

Competition in the supply chain happens as firms compete to be the chosen

supplier or the first option. These firms have to look into different factors that

could give them the upper hand or be modified. Usually, the biggest question for

them is where the location would be. Through a systematic location selection

process, a firm would be able to know what do with the factors. As a location in

decision is big both in benefit and costs.

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 CHAPTER 14: SUPPLY CHAIN INTEGRATION

SALIENT FEATURES

Supply chains are open to disruptions as these are inevitable. These disruptions

have to be studies for the firm to be able to provide the best value to the

customers. Disruptions can come from external and internal factors. These

external factors include environmental disruptions (including, but not limited to

force majeure, political issues, general public concerns), supply chain

complexity, loss of major account, loss of supply, customer-induced volume

changes, service and product mix changes, late deliveries, and undefiled

shipments. Internal factors include the internally generated shortages such as

machine breakdowns, set up times, and capacity, quality failures that include

product recalls, and poor supply chain visibility where in there is no monitoring

of materials and products. Through new service or product development

process, supplier relationship process, order fulfillment process, customer

relationship process, these are able to help integrate the supply chain to get

better competitive advantage. With any process, supply chains are also

vulnerable to risks. To mitigate risks, supply chain risk management is done to

be proactive against operational risk, financial risks, and security risks.

OBSERVATIONS

No matter how full proof the supply chain design is, there will always be

disruptions. It’s always good to look into the possible causes and effects that the

environment or time in order to mitigate these. The key is being proactive. For

38 | B M 2 0 8 A O p e r a t i o n s M a n a g e m e n t C h a p t e r D i g e s t | P R E S T O N
 my business, since it’s simple, the only major problems I would have is the

environment. Sometimes, chicken is scarce and my supply would have no

supply. With that, I also have to consider an alternate supplier, which I have. At

the same time, my supply would fluctuate base on the demand. Demand would

usually depend on school activities. Being proactive, I have to closely study and

monitor the school activities through the school calendar which the school gives

every first of the month. One regular school days, I already have my estimate.

During Periodical Exams or half-day classes, it would be lesser than the regular

schools days. With this, I have to prompt my supplier on how much I would order.

As much as possible, I scrutinize the supply that I have to ensure that I do not

create waste which creates costs and expenses. When I was with my second

HMO company, they had a small satellite office in Bacolod. It had about two

employees. Although having a small satellite office can be costly, it was very

important to have as there was one major BPO account that the company had

in Bacolod. This account is considered as well as one of the biggest account for

the HMO company in the entire Philippines. Losing it would mean losing a huge

chunk on the company’s income. With that, they had to ensure to deliver the best

service possible. They also had to make sure to consider the customer

relationship was kept in the highest level. Their practice was to sponsor the

company’s wellness program every company family day. Aside from that, the

HMO company also offered the best rates to the BPO company considering that

their utilization was good for the past years. With this, a futures contract could

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 be developed so that the BPO company can have the best healthcare program

at the best price and the HMO company will still be profitable in the operations.

SYNTHESIS

No matter how good a plan is, it must always be ready for disruptions that can

come along. For supply chains, disruptions are brought about by external and

internal factors. How a firm would handle these would become their sustainable

competitive advantage over other firms. It’s always best to check and study the

disruptions through systems and employees. Systems would give information

that can be interpreted. Also, employees are able to give their inputs and insights

and suggestions. To be able to integrate the supply chains, companies need to

be transparent of new projects that they will have so that suppliers will be able

to give their suggestions. As companies might need raw materials that the

supplier might or might not have, it’s best to get their inputs. Risk management

is also essential to check on as it’s best to evade possible risks. Companies need

to look into their operations as being strategically aligned to their goals at the

same time employees need to know the importance of these. Financial risks also

have to be monitored as these can make the company lose important financial

resources in the present or future. Lastly, security risks are considered to ensure

that materials or information do not fall into the wrong hands.

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 CHAPTER 15: SUPPLY CHAIN SUSTAINABILITY

SALIENT FEATURES

There are three elements of supply chain sustainability. These are financial

responsibility, environmental responsibility, and social responsibility. These

focus on how the firm can sustain us supply chain through meeting the financial

needs of the stakeholders such as being able to pay the suppliers and get paid

by the customers. Meeting environmental responsibility ensures that the

ecological needs of the planet are met and that natural resources are not being

irresponsibly depleted. And lastly, social responsibility make sure that the firm is

able to address the moral, ethical and charitable expectations. Sustainability also

calls for energy efficiency through the reduction of carbon footprint which is the

total amount of greenhouse gasses produced to support operations and usually

expressed through carbon dioxide. In looking at the reduction of carbon

footprints, the transport distant, freight density and transportation mode are

considered. Supply chain ethics call for a buyer-supplier relationship that

promotes win-win, a good facility location with output that do not endanger the

environment and community it is in, and proper inventory management. To

manage sustainable supply chains, a sustainable supply chain framework is to

be developed, data of the supplier’s performance is gathered, compliance is

required, and engagement of active supplier management and utilization of all

available ethical means, and periodic reports on the impact are to be provided.

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 OBSERVATIONS

Sustainability is very important as this is what keeps the business alive. In our

restaurant we do practice the three elements of supply chain sustainability in our

own little ways. We ensure that our employees are paid right. We pay our

chicken supplier on time. We practice environmental responsibility by supporting

the no plastic use on Wednesdays and Saturdays. Although it would be good to

totally get rid of plastic, it’s still the most cost efficient way for customers to carry

their take outs should it be more than four orders. Usually if the order is three or

below, we just put in a paper bag. Our utensils and plates are also washable so

that we don’t create too much waste. At the same time, we segregate the

biodegradable and non- biodegradable trash. For our social responsibility

programs, we usually sponsorships to our past organizations in the University of

Cebu – Banilad which includes HRMSO for my brother and CBEx and JPMAP

for me. In reducing carbon footprint, we also consider stocking up inventory as

to minimize costs on transportation and carbon footprint. We always ensure that

we give the best value for money food in our restaurant for our customers. We

want them to experience good food at a reasonable price. With these in place,

we aim to be a proud Cebuano brand that everyone will know and love.

SYNTHESIS

The book present ideal concepts that are very inspiring and noteworthy;

however, no matter how noteworthy the concepts are, it always ends up as being

intangible as there are costs that are considered. In supply chain sustainability,

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 three elements are considered, but these three also have their corresponding

costs and benefits. If companies had it their ways, they wouldn’t invest their

resources in these concepts. Although it sounds good for the company’s side,

we can’t escape the fact that we’re all busy in some way or motivation is not

present. The pressures of the law, local ordinances, the general public, and PR

concerns do exist. With their existence, companies have to abide by their rules

or else it can affect their operations. A bad supplier’s operation could become a

reason that competitors are chosen instead. Being ethical and moral is hard.

Doing the good thing is also more costly than just doing the opposite, but we

have to face facts that to be sustainable is to stay out of trouble. To be

sustainable is doing the right thing.

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