Chapter 1: Introduction to Operations Management

What is operations management?

What is an operation?
 Operation is a set of activities that create certain goods and services.
 Most organizations exist to provide either goods or services.
 When an organ. Deciding to provide goods, they will have certain inputs, in order to
convert to certain outputs.
 Can be goods or services.
 Whether a hospital, restaurant etc. there is a production of goods and services.
 Production is the creation of goods and services.
 Any activity that is involved in the creation of input to output, is known as operation.
 If there is an activity related to the conversion or transformation of raw material into
goods, then that activity would be managed by the operations management.
 E.g. mobile phones, they will buy certain screens, chips, and once they buy these
things these inputs will be put together in order to form a mobile phone.
 E.g. airline when the customer goes to fly somewhere, the first activity is checking
in, they need to schedule the aircrafts, then when you land they have to clean the
aircraft,
 All these activities are the process where the customer is flying from one place to
another.
 OM is compulsory for the existence of any organization. One of the major functions.
 For e.g. in uni, scheduling classes, giving books.
 Without the operations, the company or organization cannot exist.
 All organizations perform 3 major functions. Marketing (sales in the market to
generate profits), Production/operations (major function) and
finance/accounting

 Why study OM?

 Operations roles are like purchasing raw materials, getting people to work on
machines etc.
 Another major reason for studying OM, is that it is a very costly part. For example
converting some raw materials into output is very expensive. Raw materials are
expensive.
 If operations are not done in the right way, it can lead to losses.

 What operations managers do?

 Planning, organizing, etc.
 They perform these functions of planning etc. in 10 major areas of decision-making.

 Differences between goods and services

 Services are intangible
 Services can be delivered: for example can record a lecture and listen later.
 Services can be unique. The type of service you receive from a doctor can be
different. The demands are different, therefore unique.
 Services have inconsistent product definition
 Services are often knowledge based like the medical field, like the doctor can
diagnose you etc.
 Services are frequently dispersed, like there are many facilities to provide the
services. E.g. QNB, ooredoo. This is because services are frequently brought.
  Majority of the service cannot purely be services, like nothing tangible. Like ooredoo
is largely a service, but they also sell tangible items like phones.
 Or like Qatar Airways is a service, but you also get tangible items like food.
 What is operations management? Is that part of the management that manages the
conversion process. That converts inputs into outputs.
 Let's say university, what are the inputs to the university? High School students are
the main people coming as an input. You can have professors, books. Then you
have the transformation process; courses, training, exams. Once you complete all
these requirements, the output is a degree.
 For hospital? Inputs are the patients with diseases, nurses, transformation
is a diagnosis, treatment etc. the output is healthy people.
 Productivity is a measure which helps OM measure how they are measuring their
operations?
 Production is the making.
 Productivity is the ratio of outputs.
 Ratio is output divided by input.
 To increase productivity, you increase the output?

The productivity challenge

 Any organization will have certain inputs, could be labor capital, energy, could
be other things. These inputs go inside the organization, where
transformation is happening. Then transformed into outputs.
 Outputs are goods and services, inputs are labor capital and
management.
 Inputs (such as raw materials or hours of labor). Output (finished goods
or delivered services)
 Operations management of those activities that convert inputs into useful
goods, or services.
 Measurement of productivity is a good way to evaluate a country’s ability to
improve the standard of living for its people.
 Only through increases in productivity can the standard of living
improve because increases in productivity ensure that labor capital and
management receive additional payments.

 Productivity measurement
 Productivity can be labor, material etc.
 Productivity = output/input
 Productivity is a measure of the efficiency of the organization.
 Higher the productivity, the more you are utilizing your resources efficiently.
 Productivity is the ratio of the outputs/inputs.
 Can be energy productivity, etc.
 If you are using one input, then you call it a single factor productivity.
 Multifactor productivity= output/for example, labor + raw materials + machine -
when you use this you convert to dollars or riyals

Chapter 1: Introduction to Operations Management Problems

1.1: Output: 120, Input: 40
 A) 120/40 = 3 boxes per labor hour
 B) 125/40 = 3.125 boxes per labor hour
 C) unit increase = new productivity - productivity = 3.125-3 = 0.125 boxes/hr
 D) percentage change in productivity = new productivity - old productivity/old
productivity x 100
 = (3.125-3/3) x 100
 = 4.16%
1.2
 A) = 160/(8x10) = 2 per labor hour
 B) = 180/80= 2.25 per labor hour
 C) percentage change in productivity = 2.25-2/2 x 100 = 12.5%

1.6
 A) single factor productivity = 65/(520x13) = 0.0096 rugs per dollar
 B) multi factor (always convert everything to dollar) = 65/(labor cost + solvent +
machine)
= 65/ (520x13 + 100x5 + 20x50)
= 65/8260
= 0.007869 rugs/dollar

1.13
 output/input
 You need to use the good garments and the bad garments. And it tells you the labor
productivity in dollars.
 (80x198)+ (52x90)/(8x45) = 0.37
 20520/360 = 57 dollars/labor hour
 If the question says that the total hours is this much, you do not. If they say
each worker has worked 10 hours, and the number of workers is 5, you need to
multiply 10 by 5.

Chapter 2: The Global Environment and Operations Strategy

 Mission will tell you the purpose of the company.

 For example, Qatar Airways wants to provide the best service at high quality.
 This can be developed by a strategy. It is the action plan to achieve the mission.
 1.) Differentiation you come out with a product that is different from your
competitors. Like different designs etc.
 2.) Cheaper you provide the product at the lowest cost.
 3.) Responsive delivery of products is fast, which helps to beat competition in the
market.
 Apple, samsung believe in providing products that are different from their
competitors. All these luxury products like rolex charge such high prices because
rolex products are differential.
 Competitive advantage: a system that has a unique advantage over competitors.
 All the firms that want to be successful need to have competitive advantage. If it's not
there, it will be hard to gain market share and beat competitors.
 3 different strategies
 First strategy: Differentiation is concerned with providing uniqueness. Apple,
samsung or services like Qatar Airways tend to compare on uniqueness.
 Banks provide convenience as a form of competitive advantage.
 Internet banking was also considered to be a form of differentiation, as some
banks did not therefore have a strategy.
 SUVs that are produced by Bentley or Rolls Royce, pay much higher prices
because the product is unique.
 Experience differentiation is related to the service sector Or burj al Arab
they have uniqueness, as they provide a special service.
 Second strategy: Low-cost leadership meaning I will provide a product or service
with acceptable qualot and I will charge the cost of that, that will provide the
maximum value for it. It tries to provide maximum value.
 Air Arabia/Fly Dubai is an airline from Sharjah that takes people from one place to
another. But their strategy is that they cost lower than airlines like emirates. So one is
low cost, and one is differentiation based strategy.
 Operation managers that work in fly dubai, they try to reduce the costs. For example,
you do not get food, you cannot choose seats, a certain amount of luggage.
 Low cost leadership does not imply low value or low quality. Entails achieving
maximum value as defined by the customer.
 Third strategy: Response: flexible response means how fast you can change for
the need of the customer.
 Zara and Mango have to be very responsive, because there are many seasons.
Because if you do not consider customer choices, and do not deliver clothes on time
people will not buy.

 Key success factors are those that are necessary. Without them, the company
cannot achieve their goals.
 Developing an online website is KSF.
 Establishing a new campus in Al Wakrah
 Core competence is a subset of critical success factors.
 Core competence for Honda is their engine, as it is very reliable.
 If you do not have core competence, after sometime you will be out of the
competition.
 Core competence will provide a firm with competitive advantage.
 Local responsiveness is how much I respond to the local needs.
 Cost reduction: how much my product is costly or not.
 International strategy: they use exports to enter the market. They are not bringing
anything local. This strategy might be good for those companies producing aluminum
etc. this strategy is costly, and transporting is costly
 Multidomestic you have substantial autonomy. I will now start operations in different
companies. They can change their services. Baladna for example, has a lot of
revenue therefore they will want to open a subsidiary in France. When they open it in
france the same product they are selling will not be acceptable there. Therefore they
have to change their products depending on the consumers.
 Global strategy a lot of responsiveness, they will produce the same product over all
the countries. This will help them achieve economies of scale. If the demand
increases, I can supply. Those products that do not require a lot of changes will
follow this.
 Transnational strategy: they move materials, people, ideas across national
bounds. They also produce in a way to exploit economies of scale.
 Chapter 3: Managing Projects

 Hosting the 2022 World Cup is a project. Developing a vaccine is also a project.
 How can we differentiate a project from a normal organization? For example, QU Is
not a project, because QU is continuously working. So, what are the characteristics
of a project? 1) It has a definite beginning, and end. There might be delays, but it
will finish. 2) projects will always have some elements of uniqueness. (Fifa world
cups, are all different they are unique) (or Hamad international airport, and Dubai
airport they are different. There will always be some element of uniqueness. 3)
Requires a lot of resources for a period of time.
 Projects require a lot of resources, degree of uniqueness. (difference between usual
organization)
 Planning the project: decide about the delivery time (how much time it will take to
complete the project), budget: how much cost it will be to deliver the project, and the
performance: what kind of quality are you looking for?
 What in the end do I want to achieve? I want to achieve my project is finished within
time. My project comes within project, and third, my project is in the quality that I
have planned. Goal setting
 Define the project: what I want to see at the end of the project. Who are the
key people that will lead the project?
 Breaking down the project: to break the project into small parts, like the
metro. Like one component is building the line on which the metro will run,
another part is building the station.
 Identify the team: who will lead the project, who are the people that we need,
do we have the competencies in the country, or do I need to bring from
outside, and what resources we need.
 Scheduling the project: this is about the sequence of activities. Which activity will
start when? Each activity will start when. How the activities are related to each other?
Which activities need to be completed?
 Assign people: I need to assign people to activities. Who is responsible for
what.
 Schedule deliverables deliverables at the end of the particular phase.
 Schedule resources: Means for example, I am building a stadium, I cannot
buy everything in the firth month. in the first month, I need to schedule what I
will buy, or in the next 6 months how much steel, cement etc. I will need.
 I have to schedule these delivers because I do not have the space to store, or
get all the suppose so that when each phase Is complete, I get the materials
and use it.
 the major focus here is timing. Which activity, which time, when do we need
to get the material etc.
 Controlling the project I need to see if my activities are running on time. Requires
monitoring the resources, costs and quality. Whatever the cost, the time, I will
monitor them. If I find there is some delay, I will revise and change plan. If I find an
activity that will delay a project, I will shift resources (men, machines, raw materials,
land).

 Planning happens before the project, scheduling the project is at the start of the
project, and controlling the project is during the project.
 During different activities, like planning etc. there are more different activities that go
under project planning, like selecting project manager. Also select the project
organization.
 Matrix organization which usually does so many projects, like ashgal. If temporary,
like a small project.
 Project manager most important person in managing a project. What are those
important things they do? 1) All necessary activities are finished in sequence and on
time. We do not like to see delay as it will affect the budget and delivery time.
 2) Project managers try to deliver the project within the budget. Airports, highways
etc. they get delayed. Once projects get delayed, there is a lot of extra money put in
because etc. extra equipment.
 3) meets its quality time
 Project manager they have to ensure the projects are within time, budget and
quality.
 The other responsible of project manager is to provide motivation, direction, and
information and good communicators to the people that are working on the
project.
 This is an important role to motivate.
 Time, budget and quality.
 Providing motivation from the project manager is particularly important because there
are a lot of uncertainties in the project. Because of these uncertainties, the workers
can feel unmotivated; people need direction, information on what is happening. The
person who is a project manager needs to provide direction continuously.
 Also, there are ethical issues; sometimes contractors will give gifts to the project
manager (contractor like supplying steel, he might give steel that’s of bad quality) and
1.) provide low quality goods, which is unethical. 2.) Or alter status reports for the
completion time; pressure from top management like there are delays and they do
not want to show it to the government or for whom they are doing the project.
 Many institutions provide guidelines on how work ethically.
 When talking about project, how will you start it? You need to break down the
whole project into smaller parts.
 Work breakdown structure: it is dividing project into major subcomponent, which
are then subdivided into detailed components, then into activities. Important because
then you will know what are different activities that are part of the project, and cost
and timing. Here you know the activity.
 Project scheduling: managers decide how much time each activity will take, money
the activity will require. You can use Gantt charts which shows what are those
activities, and when to start and end an activity. Gantt chart provides an easy method
with understanding what activities we need to perform, and how much time each
activity will take. if there is a delay in any activity, the whole thing will be delayed.
 in simple projects, Gantt charts allow managers to observe the progress of each
activity and find out what are the problems. However, Gantt charts do not show the
interrelated of each activity, like how an activity is related to this activity, etc.

- Project controlling
- Some of the things we know it is monitoring the resources, cost, quality, budget; so,
we say everything is on time. If there is something not happening on time, there is a
feedback loop to revise the plan. All these tasks are under project controlling.
- Most important thing in project management is the scheduling part.
- We know one is Gantt chart and another important one are PERT and CPM.
 2 major techniques which are used in scheduling
 One is PERT (program evaluation review technique), the other is CPM (Critical
path method).
 - They are used to develop network techniques and shows the relationship of each
activity to others and to the whole project.
 - They consider precedence, which activity comes before another activity. Which
activity needs to be completed.
 - it encourages the setting of realistic time and cost estimates for each activity.
 - it helps make better use of people, money, and material resources by identifying
critical bottlenecks in the project.
 Steps of PERT and CPM.
 1. Work breakdown structure (usually this will be given to you)
 2. The relationship among activities (also given to you)
 3. Draw the network connecting activities
 4. Assign time and/or cost estimates
 5. Compute the longest time path through the network - this is called the critical
path. This finds the longest path in the network. It is called the critical path, because
if there is a delay in the project, it will delay the whole project. So we have to put
special emphasis in managing the activities which are part of the critical path. The
path with the longest duration, will be the critical path. If you delay a critical activity,
you will delay the whole project, which will lead to cost increase.
 6. Use the network to help plan, schedule, monitor
 The purpose of CPM is to find the longest path in the network, because that path
will be the critical path.
 We call it critical, because if there is a delay in that particular project, it will
delay the whole project.
 If you delay any activity of this critical path, the whole project is delayed. Therefore,
we have to put special emphasis in managing the activities which are part of the
critical path. We form our analysis; we can find which is the critical path (longest
duration) will be the critical path.
 ALL activities on the critical path, will be known as critical activities. There is
no chance to delay the activity
 If you delay a critical activity, you delay the whole project. There will be cost increase.
We have to be extra careful with these activities.
 A is a predecessor of C. Activity C cannot be started unless you finish A.
 Slack is the time by which we have the chance to delay an activity.
 Slack is the length of time an activity can be delayed without delaying the
entire project

 Immediate predecessors: that activity that is before that activity.

 Precedes come before (something) in time
 Perform a critical path analysis: activity name, activity duration, ES, LS, EF, LF.
 Earliest start means when early can I start this activity? With the condition that all
the other activities before it has been completed.
 Earliest finish = activity duration + earliest start
 Latest start is there a chance to delay this? Or can I not delay it.
 Latest finish
 Earliest start (ES) = earliest time at which an activity can start, assuming all
predecessors have been completed
 Earliest finish (EF) = earliest time at which an activity can be finished
 Latest start (LS) = latest time at which an activity can start so as to not delay the
completion time of the entire project
 Latest finish (LF) = latest time by which an activity has to be finished so as to not
delay the completion time of the entire project

 Latest start, can I delay it? Or is there no chance to delay the activity.
 Latest finish cannot change. (so the last one)
 First calculate earliest start and earliest finish.
 Slack = LF-EF or LS-ES
 All activities with 0 slack, the activities cannot be delayed. Therefore, they are known
as critical activities.

 Cost-time tradeoffs and project crashing

  For example, in COVID nowadays there are many projects that stopped because
workers had corona, so they could not work so the project went behind schedule.
Sometimes the project is asked to move forward or is delayed.
 Sometimes the person3 who is doing the project can ask them to do it earlier.
 When something is lagging or a project is behind schedule, the project manager will
try to shorten the duration of the project in the cheapest manner possible. He will try
to reduce the duration. For example, if the normal time is 20 days, he will try to
complete it within 15 days.
 Crash time is what you reduce it to. (shortest duration required to complete an
activity)
 Crashing the process by which we shorten the duration of a project in the cheapest
manner possible.
 Shortage duration required to complete an activity, by using additional
resources.
 Normal time and normal cost are without anything.
 If I want to reduce the time of the activity, I will crash it. Meaning, I will reduce
the timing of the activity, by using additional resources.
 Crashing is using additional resources; therefore, the cost will be higher, and the
time will be less.

 Steps to crashing
 First step for crashing, you need to compute the crash cost per week or any time
period depending on the question.
 Let's say there's a project that takes 15, but management says I need to make it to
13 weeks and there are 5 activities, A B C D E. from 15 weeks, you need to reduce it
to 13 weeks. From where should I start? Should I take the activity with the lowest
cost, or critical activity etc.?
 Which activity do you take first? Crashing will only be done with critical activities.
Noncritical activities will not be affected.
 For critical activity, slack time is 0.
 Crashing will only be done with critical activities. Noncritical activities will not
be touched.
 Crashing will allow you to focus on the critical activities.
 Suppose we have 3 out of 5 activities that are critical, which ones should I crash?
Lowest crash cost. In these 3, I will select the activity that has the minimum crash
cost. Because crash cost is the additional cost. So I want my cost to be the lowest.
So, I will select the activity with the lowest cost.
 You need to target with the critical activity, and you choose the one with the minimum
crash cost. This is because we know this is the additional cost that we will put, so the
management will ask to be to reduce the cost at the minimum, so I have to crash that
activity.
 Once you crash, you have to check if the path is still the critical path.
 Crash cost per week = crash cost/crash time period needed to crash
 Why do we call it a critical path? BECAUSE WE CANNOT DELAY ANY
ACTIVITY ON THE CRITICAL PATH.
 After crashing, you need to check if it is still the critical path.
 When there are 2 paths that are critical, I will choose an activity that is common
between both paths. If there are 2 common activities, you choose the one with the
lowest cost.
 So, from 15-13 weeks, we need to crash by 2 weeks.

Crashing is the process of shortening the duration of a project in the cheapest manner
possible.
Crash time is defined as the shortest duration required to complete an activity.

FOR EXAMPLE, if the activity has 0 slack time is it critical?

Or what are the activities in planning? Role of the project manager?

Project manager needs to report to the project manager in temporary organization( means
you have a project do you bring people from diff organization) then you bring them
temporary or his department head also.

Permanent, there will be people permanently doing projects.

CPM and PERT both used for scheduling part only.

Gantt chart can be used with CPM or PERT

Critical path is that path which has all the critical activities. Critical activities which has 0
slack time. No delay any activity on the critical path.

Chapter 11: Supply Chain Management

- Zara for example gets material from different suppliers, then goes factories, and
sewing happens in factories, then gets sent to the distribution center, that distribution
center goes to different GCC countries lie Doha, Dubai Saudi,etc.
- All these movements of goods that have all these activities, now you will see a lot of
activities, materials are moving, sometimes by planes and sometimes by trucks, then
production is happening, after it has been produced it goes to the distribution center,
then management of how much to produce and send to this store and this store, all
of this is a part of supply chain management.
- A supply chain encompasses all activities associated with the flow and
transformation of goods and services, from the raw material stage to the end
consume stage. In additional to material, also the information flow is there.
- Supply chain consists of all the activities, from the raw materials to the final
- How supply chain is created? Supply chain is made of many interrelated members.
- When I say members it means suppliers, factories, distributors, retailers.
- It is made of many interrelated members, starting with raw material supplies, parts
and components supplies, product or service producers, distributors, and end.
- Supply chain consists of management of all the activities that require conversion of
raw materials into final goods. Who are the members of the supply chain?
Suppliers, manufacturing plans or producer, distributors, retailers and even the
customers who buys it for their end use.
- The supply chain begins with suppliers, which are basic raw material suppliers, and
these suppliers (supplier 1,2) are referred to as upstream part. Factory is usually a
part of upstream. Generally, the factory is part of both, but you consider it a part of
upstream. Any partner before the factory, information etc. is upstream. Any member
after the factor, is known as downstream (distributors, retailers, and customers).
Factory is largely part of upstream.
- Upstream part of Ikea is whoever giving materials like giving semi-finished goods, or
raw materials, or even finished goods. Because Ikea is here, even distribution,
factories, become upstream.
- If I am the manager of distribution center, for me, upstream will even be the factory
warehouse and the suppliers. It also depends on what you are managing.
- But if you are a manager of factory, then only suppliers will be upstream.
- In general, the majority of the jobs are related to the factories, like Zara and apple.
- Supply chain is complex for big organization, there are multiple suppliers, multiple
distributors etc. it becomes something hard to manage
- For example, Zara, is located in Spain, but it is not producing most of the things in
Spain. It has production facilities in India, Bangladesh etc. and they are getting raw
materials from a number of places, like east European countries, and some in Asian
countries. And once the production is done, they are sending materials all over the
world; to Africa, GCC countries etc. so you can see how difficult the process is
managing the whole thing. And you see how much small time these companies have.
The time is very less, maybe like 3-4 months to plan the designs, order materials,
and even get them produced. Because if they do not do it fast, people will buy from
other companies.
- The delivery of product and service is a complex process, which has many
interrelated processes. First demand for a product is forecast, then plan and
schedule to meet the demand, and product and service.
- Parts and materials are purchased and transformed into final goods. Finally, they are
transported by carriers.
- Suppose you are running a food supply chain, and you will not ship since it is useless
therefore you need to think of that.
- Supply chain is an integrated (connected) group of business processes with
the same goal, of providing customer satisfaction.
- If I want to explain supply chain, like the different processes being done, the major
processes are procurement, production, manufacturing and distribution. And all are
connected through flow of information
- Procurement: that you purchase raw materials from suppliers (also known as
sourcing)
- Production: once you get raw material you convert into the goods you want to sell
(make)
- Distribution: how to manage the distribution
- if you define supply chain in term of processes; these processes include
procurement of services, materials and components from suppliers.
- Then production of goods and services.
- Finally, distribution of the products to customers including taking orders, filling
orders.
- So information technology is the one who brings the 3 processes together, and
what integrates them into a supply chain.
- If you do not integrate them that will not be considered as a supply chain.
- We have to manage all the 3 processes as integrated process, then only we can call
it as supply chain management.
- Supply chain provider does not always produced customer with the physical goods. A
service organization can be Qatar insurance, Qatar airways, Hamad hospital. They
have little physical goods.
- So, the supply chain of service tends to be more compact and less extended then
manufacturing supply chain.
- Its distribution network is smaller, almost nonexistent. Because you provide the
service, and you are done. But still, they need to be effectively managed.
- Qatar Airways, what are the suppliers are providing? Parts, planes etc.
- Similarly, for Hamad, one of the major suppliers are pharmacy. Those who provides
medicines. The large amount of material will be pharmacy. Medical equipment,
computers. Yes service providers do not have a complex supply chain, but still they
have supply chain and they have to manage their supply chain accordingly.
- 1) Material flow from suppliers, to factories, distribution centers etc. or called
physical flow. Flows are things that move from one end of the supply chain, to the
other end. Upstream to downstream.
- What are the other flows?
- Other flow is the 2) information flow. We need information about how much to
produce, when to produce. Information goes both directions
- Last flow is the 3) money flow which will go from downstream, to upstream. As when
a customer purchases, the money will go back to factories supplies etc. (or financial
flow)
- In some cases, some of the people have started to call supply chain as value chain
or demand driven value chain.
- And they are used interchangeably.
- A value chain is thought to have a broader focus. And it is more important and
visible. Why broader? Because they say it has customer manage post sale support,
chain management etc.
- Goal of value chain is delivery of maximum value to the end customer. There is still a
big difference, but some people use it interchangeable.
- The demand value driven chain is a global chain.
- Amongst these 3 is good quality.
- There are some slight differences between 3.
- If we want to quickly change products as required by the demand of the market, you
have to integrate these processes. So that the information is transferred very fast,
from one side of the supply chain, to the other.
- Key features of the vision of supply chain are operational and innovation
excellence.
- Operation is delivering products to consumers as promised. This is the delivery date,
this is the quality, this is the size, weight etc. this is operational excellence.
- Innovation excellence is changing products according to the needs of the customer.
Like apple, over the years changing their products. Innovative products, new
products etc.
- Need to achieve value to the customer
- Ultimate goal of supply chain and value etc. and the purpose is to create value for
the customer. Supply chain is integration of…
- All the activities that are part of procurement, production and distribution that
delivers the final goods and services arrives to the customers is a supply
chain.
- Supply Chain Management is focusing on integrating and managing on the flow of
goods, services and information through the supply chain in order to make it
responsive to customer needs with lowering total cost.

- If you want the final project to be very good, what do you need to ensure your project
is of good quality? Sharing information, work together (required collaboration,
cooperation), so you need to share information. This is the same thing that applies
to supply chain.

- the supplier and customer must have the same goals, they must be able to trust each
other. You cannot have required collaboration, cooperation without trust. And you
only can share information with trust, which is developed over time.

- In addition, suppliers and customers must work together in the design of supply
chain, to reach their desired goals. What is that software that manages the whole
production in a chemical industry like Qatar Gas? Enterprise Resource Planning
(ERP). This is what manages the production. If you want to manage your supply
chain in the best way, you try to integrate the information system of your suppliers,
distributors. And everyone needs an ERP system so that they can connect easily.
 You should have shared goals. ERP is a software used for production and now it
is even used for managing the supply chain, customer relationship and so on

- ERP usually refers to a system that helps manage a lot of things that have to
do with resources, like finance, HRM, procurement, For large companies, they
have 1 system that supports the entire business organization.

- Late deliveries, incomplete shipments, price fluctuations, all of them lead to

uncertainties in the supply chain.

- the negative effects of the supply chain are lateness and incomplete order. When
there is uncertainty, how will you supply to your customers?

- Companies cope with uncertainties and try to avoid delays. Inventories are extra
materials that supply chain members carry at various stages to minimize the negative
effects of uncertainties and to keep the goods and services following. For example,
lulu hypermarket knows that the supply of sugar is very uncertain. They are getting
this sugar from Thailand, and they know the supplier is sending the shipment in 20
days, and sometimes 25 days. What should they do to manage the smooth flow?

- They keep extra sugar bags (inventory). All supply chain members keep. Inventory is
a buffer, to minimize the negative affect of uncertainty.

- This is an issue because inventory leads to cost.

- The changes in the demand as it moves from the customer to the supplier.

- Bull whip effect there is distorted information because of inaccurate demand data.
You have to maintain high inventory etc.

- I am a retailer, I send my forecast to the distributor, the distributor then sends the
forecast to manufacturer, the manufacture will do it on forecast based on the
distributors forecast, the send to the retailer.

- Why is it happening? Because the demand data is inaccurate, people are not using
the right data from the market, they are using their partners data which might be
inaccurate which leads to a higher demand variability, which is called the Bull whip
effect.

- How to reduce the Bull whip effect? Transfer the same information which the
retailer is using to the distributor, to the manufacturer, to the supplier so everyone
has the same information. I will do forecast only on my previous customer.

- If I am a company like Apple, I am dependent on my product revenues. If I do not

manage my whole supply chain, I will not be ab

- le to bring my product at the right time in the market, therefore, I will lose my
customers. So, I need to be in charge of the supply chain. I will have the supplier’s
information etc. (example of ERP) so an apply supply chain can see when the
materials is coming, when they will produce, when the material will go to the
distribution center, how it will go, etc.

- For example, Zara supply chain, Zara has to manage.

- Qatar Gas, the biggest customer is India. In QG, they get the gas from the ground,
then they clean it, and convert it into liquid and send it for distribution. Once it
reaches India, now Qatar gasses role is finished. They only manage that part. In
India, they take the gas and put them in cylinders, which are distributed to customers
all over India. So that part of supply chain, Indian oil is managing. The supply change
which is in the beginning, Qatar gas is managing.

- For supply chain, we need our suppliers that are on our upstream. Once we know we
need our suppliers, we need goods and services for the supply chain, we need to
decide on supply-chain strategy like how we will get these suppliers. There are 6
strategies.

- First one is the many suppliers this strategy is common, when products are
commodities. You do not use it always. Commodities are like highly standardized,
like steel. Like from Qatar steel or Dubai steel it will be the same since it is
standardized. We ask the supplier to provide the price or cost or bid, and the supplier
will provide these specifications with the order, and we give the order to the supplier
that will give us the lowest cost. Like the metro wants to buy cement, so some
suppliers will send saying this is our cost and specifications, and the order will go to
the lowest bidder.

- Few supplier strategies are used when we want long term relationship with the
supplier. Long term suppliers help understand my objective. Long term objectives will
find out what you need etc. which type of suppliers will I go for? Those that are really
critical for the organization. Few supplier’s strategy will be long term relationships,
with few dedicated suppliers, and you want to do this because they understand me,
and they provide me with high quality goods. E.g., the mobile phone you know that
Samsung brings new products. Majority of the components they use in the phone,
they are not produced by Samsung. Maybe from somewhere else. Therefore, they
will have long term relationship with their supplier. Disadvantage is for example; with
few suppliers it is difficult to change the supplier. So you have a relationship that is
difficult to break.

- Vertical integration In some cases where I find my distributor are not doing a good
job. Suppliers are not providing me at a good time, or there are delays. On my
downstream side, you find customer are complaining about the service. I can take
over that business and purchase my suppliers plan. If you buy your supplier plan,
facilities, that is backward integration. If you buy distribution, retailers, then that Is
forward integration. Vertical integration can only be done with they have capital,
managerial talent, a lot of demand for the product. Advantages is cost reduction,
quality improvement, timely delivery. Nowadays people do not want to do vertical
integration because it will add to your responsibility. Focus on what you can do best,
and the rest leave it to your supplier.

- Backward happens when you take over your supplier. -If you are not happy you’re
your distributors or retailer, or want to take their profits, you will buy their distributor.

- Joint venture this joint venture happens with 2 companies come together and want
to create a 3rd company. For example, Qatar gas and Qatar petroleum and some
companies from outside are a joint venture. Joint ventures are big companies. For
example, Baladna wants to stat operations in Jordan, and they will find a local
company there and both of them collaborate and they start a joint venture.
- Keiretsu Networks this is for Japanese manufactures, where they take advantage of
collaborations. Japanese companies support some of these suppliers by giving them
 loans, and this supplier will supply mainly to the company giving them loans. Can
only be developed by few suppliers.
- Virtual Companies these the suppliers can be easily changed. Relationship can be
short or long term. Why we call is virtual? Maybe these companies are far, and the
relationship created can be through the internet.
- To achieve our supply chain goals, we need. A lot of collaboration and cooperation,
and it cannot happen without trust. In a supply chain, you need to share the risks and
rewards.

- Vendor Evaluation vender and supplier mean the same thing. This is a process
where your process is finding potential vendors and see if they are good suppliers. It
requires some evaluation criteria. For example, if I am not really a big company, I will
see if they are certified, and I will select from those companies to reduce my cost of
evaluation. Next stage is development where I want my supplier to improve its
performance over a period of time. Usually the big companies develop programs to
improve their supplier program. That is known as vendor development. There is
training, for example there is a supplier for QP, and they might bring these supplier
people here in
- Doha and train them. Not only train, but they also support them in implementing new
equipment, technology.

- How will I decide on the price? This step is known as negotiations. 3 types.

- Movement of goods means upstream side (how the material will be coming to you
from suppliers), and downstream side (how it will be going to distributors etc.
Purpose of logistics is to obtain efficiency. Manage all the activities in such a way
that your cost become minimum in the movements of goods from one place to
another

Focus of logistics: Minimize the cost of movement of goods, like raw materials, final
goods.

- 5 major means of distribution.

- Trucking trucks are the one of the most common transportation of goods. They are
more flexible to transport small quantities of items, as compared to ships.

- railroad not common in the middle east. In the US, indie is common. Common in big
countries because they have good infrastructure.

- Airfreight only a very small percentage. You use air when the items are light weight,
such as medical, electronic items, flowers, fruits. Food production like meat is coming
from a lot of countries like the US.

- Waterways low value. Nakilat converts gas into liquid then put It into ships and
transfer. Once it reaches there, transfer to gas and put it into small containers to
distribute to consumers.
- Pipelines
- Third party logistics There are some specialized companies that take over all
logistic activities. These are 3rd party logistics. 3rd because they are not your own
suppliers or distributers. those companies that are an important part in managing
efficient supply chain. They are not part of the suppliers. Like Aramex, DHL, UPS,
fedEX.
- CPFR there is collaboration, among partners in the supply chain. For planning, and
forecasting. Forecasting what? Customer demand. The companies in a supply chain
 work together to develop a forecast which will be used by all partner to plan their
operations. Companies collaborate and work together with their suppliers and work
together. They share and exchange past sale trends, point of sales data etc.
- Once they share this, they develop a joint forecast, so they have the same demand in
the market.
- ERP helps manage supply chain. SAP is a popular ERP software.
- Inventory turnover If we have a very low inventory turnover like 2,3,1.5, it indicates
that there is a large amount of inventory. I will compare my industry turnover with the
industry. Like dell, would compare theirs with HP, Lenovo etc. high inventory turnover
is a good thing, that means you are getting materials converting into goods and
selling them. Low means although you are getting enough materials, you are not
selling it fast.

Chapter 4: Forecasting

- Predicting the future in terms of customer requirement, how much services, how
many customers will come etc. forecasting is an important decision or area of
operations because a lot of decisions depend on forecasting.
- For example, how much material should I order from my supplier? How many people
should I employ?
- Forecasting requires money, time consuming but the benefits are much higher.
- Forecasting is essential for any organization. It can be both art and science, science
means we will use some data and mathematical models to develop the forecast.
When we say art, it means that the forecast can be based on the managers intuition,
or someone who is an expert in the area. You can use either one, or also combine 2
of them
- Forecast also has different time horizons.
- Next thing was that forecasting can be divided in terms of planning, and we are
considered with demand forecast mainly, not the other economic forecast.
- We know how important forecasting is, unless I have a clear idea of the demand, it is
difficult to hire people and train them, and how much machine I should have. All
these things depend on forecast.
- In this chapter we are talking about demand forecasting, which is projection of
company sales for each time period. It is very important.
- What are the different methods of forecasting? Different approaches?
- Forecasting can be broken into 2 major approaches and methods.

- If we use mathematical models that depend on historical data, or some association

between variables, we call it quantitative forecast, which is use of data.
- If we use decision makers intuition, like personal experience and emotion, we call it
qualitative. You need experience managers and know the field.
- Jury of execution opinion people who have very high-level experts and highly
experienced. 4-5 experts take their view and develop estimate of demand. When you
are launching a new product, you can use jury of execution opinion
- Delphi depends on group of experts also, but in addition to experts, we have the staff
people who assist decisions makers by preparing distribution and summarizes series
of questionnaires. First there is a survey conducted by the staff people, and they
send the survey to a group of people whose judgements are valued. These inputs
are summarized, which are presented to the decision makers which consists of 5-10
people who make the forecast.
- Sales force composite you take inputs from salesperson from each area. If Toyota
want to forecast the number of cars they want to forecast in the GCC, they will
contact their sales people in different GCC countries, and based on their inputs, they
will refine it and develop.
 - Consumer market survey
- These are the 4 methods where you are not using historical data or any
mathematical model to do the forecast. This forecast is used when you do not
have historical data, the technology is new, the product is new, or launch a product
into a new region then you use the forecasts.
- When we already have historical data, we already have that data so in that case we
will use some quantitative forecasting methods which are based on mathematical
model and this data we have.
- Time series forecasting which are the quantitative method, they imply and consider
that future values are predicted from past values. We focus on past data to predict
the future.
- if I know the average Is going up, if I do not take it into consideration while doing the
forecast, the forecast will not be reflecting the actual demand in the market.
- Seasonality for example the sales of the movie tickets. Weekdays people do not go
to movies because busy, but on weekends, the sales go up. Same with restaurants.
sometimes the seasonality is in days, months. For example, sales of air conditioners
are on very long seasonality. Summer months, where people were purchasing, but in
October the sales will go down. If I do not consider with seasonality my forecasting
will be unrealistic and I would not be able to plan.
- Cycles are changes in data that occur in several years. For example, oil prices. Like
oil prices started to fall in 2015, before that it reached high? Sometimes there are
random variation which cannot be predicted. For example, corona, is a random
variation and all the demand went down. When we are doing our forecast, when
there is a trend, I need to adjust for it. Same for seasonality. Same for cycles.
- First method is moving averages. Or simple moving average. Forecast using
previous data. For example, we are currently in the month of September. If I went to
forecast for the month of October, I will take past 4 months average. I will take the
average of actual sales, and this average will become the average of October month.
Demand means actual demand or actual sale that happened in the past.
- if I want to give more importance to the recent values, I use weighted moving
average. Which is multiply previous forecast by weight (importance). Highest weight
is given to the most recent data. Data which is closest to the month where you are
doing the forecast.
- Next method is exponential smoothing. Only need previous period actual demand,
and last period forecast. In the question you will be given alpha.
- 3 methods that are quantitative methods, which all require historical data, they
are using some mathematical stuff.
- Which method should a person choose?
- Error is = actual – forecast (basically mean absolute deviation, MAD)
- Mean you have to take the mean of all the periods where you have the errors.
- Absolute means all the values you will calculate will become positive. Why?
Because in some cases the error will be positive, and in some it will be negative.
- N means the number of period of which you have found the error.
- Lower error is considered the better method.

Midterm Revision

1.2: input = number of workers x the workers that are working each shift.

L05: Total labor hour means all the labors, there were 4 labors, and each one was working 8
hours. Means 8+8+8+8 = 32
1.6: labor productivity per dollar, means you have to convert the labor hours into dollar. (rugs
per dollar)

Total hours you do not multiply.

If it says each worker worked for 10 hours, and the number of workers are 5, you multiple 5
by 10.

Chapter 3: in project crashing, when you are left with 2 critical paths, find the activity in the
common path then crash that.

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