The document presents trends in operations management, emphasizing the significance of supply chain management (SCM) and performance measurement systems. It discusses the frameworks for assessing performance across various supply chain dimensions, including metrics design, revenue sharing contracts, and information security. Additionally, it highlights the importance of service-oriented architecture in improving business processes and the need for integration between IT and business strategies.

1. Dr S G Deshmukh
ABV-Indian Institute of Information Technology & Management
www.iiitm.ac.in
Trends of Research in Operations
Management :
A case of SCM
Presentation @FDP @iiitm Gwl
On 27 July 2012

2. The business function responsible for planning,
coordinating, and controlling the resources
needed to produce products and services for a
company
Source: Operations Management. Dan Reid & Nada R. Sanders, Wiley,
2010, 4th Edition
2
Operations Management

3. • A management function
• An organization’s core function
• In every organization whether Service or
Manufacturing, profit or Not for profit
SUPPLY CHAIN MANAGEMENT – an important
domain within OM !
3
Operations Management

4. • Opening remarks
• Track 1: Performance Measurement System
• Track 2: Revenue Sharing
• Track 3: Information security issues
• Track 4 :Service Oriented Architecture
• Closing remarks
Speaking points..

5. • Manufacturing as Services
Opening Remarks..

6. • Source:
• Cuthbertson R and Piotrowicz, 2011,
Performance measurement systems in Supply
chains: A framework fro contextual analysis,
Int J of Productivity & Performance
Measurement , 60(6),583-602
Research Track 1: Performance
Measurement System

7. • As early as 1985 A T Kearney Consultants have
identified a high correlation between superior
performance & development /use of
sophisticated assessment/measurement
capabilities
– Firms engaging such systems reported realized
improvements in productivity of 14 to 22 %
Performance Measurement
System

8. What Is Performance Management?
 It is a systematic process of
 Planning work and setting expectations
 Continually monitoring performance
 Developing the capacity to perform
 Periodically rating performance in a summary
fashion
 Rewarding good performance

9. Performance Management Cycle
Planning
Rewarding
Rating
Developing
Monitoring

10. • How well the organization is doing?
• Is the organization meeting its goals?
• Are the customers happy?
• Are the processes in control?
• If and where improvements are
necessary?
Issues in performance
measurement system

11. • Measuring the activity (volume) and the SC
performance
• Setting goals and comparing the actual situation
• Following a plan
• Determining the levers that will help achieve
goals and single out the priority action programs
• Revealing the degree of flexibility
Objectives of Metrics

12. Speed, reliability , and simplicity are the main
criteria for efficient metrics
• Arranging indicators by priority
• Segmenting the metrics
• Visualizing the function content
• Classifying objectives of the function or team
• Selecting indicators that deal with quality
• Formatting the metrics effectively
Principles of metrics design

13. • Independence
• Appropriateness
• Objectivity
• Regularity
• Linkage with other
indicators
• Coherence
• Simplicity
• Cumulative
• Realistic
Characteristics of Effective Metrics

14. • Transparent
• Simple
• self-regulating
• Objective
• Motivating and stimulating to all
stakeholders
Performance measurement system (PMS):
Desirable Features

15. • PMS should have multiple criteria
• Primary purpose should not be to reward or to punish
• Performance-to-schedule measures must use group, not
individual results
• Specific goals must be established and reviewed
• PM must be understood by those whose performance is
being measured.
• PM data must be available for constant review
Performance measurement system (PMS):
Desirable Features (contd.)

16. • Measurements of multiple performance factors
occur frequently at each stage in the supply chain
• Time and cost are key measures, but others are used
as appropriate to the specific supply chain.
• All measures must relate to the ultimate supply
chain goals.
Quantitatively based performance
management

17. • Cost { total cost, cost/unit, cost/sales, inbound freight,
outbound freight, warehouse cost, admn, processing, direct
labor etc.}
• Customer service {fill rate, stock-outs, shipping errors, on-
time delivery, back-orders, cycle time, customer feedback}
• Productivity {units shipped/employee, units/labour Rs.,
orders per sales person, etc.}
• Asset Measurement {Inventory turns, Inv. Carry costs,
obsolete Inv., ROI etc.}
• Quality {frequency of damage, Rs of damage, Customer
returns, Cost of returned goods etc.}
Internal Performance Measurement

18. • Customer Perception Measurement
• Best Practices benchmarking
– World Class Logistic- CLM
– Logistics Excellence - Michigan State University
External Performance Measurement

19. • Framework 1: Function based measurement system
• Framework 2: Dimensions based measurement
system
• Framework 3: Hierarchical measurement system
• Framework 4: Balanced scorecard system
• Framework 5:SCOR model
Various frameworks for measurement

20. • Covers detailed performance measures
applicable at different linkages of SC
– Marketing, Operations, Finance etc.
Framework 1: Function based measurement system

21. • Any SC can be measured on three dimensions
– SERVICE
– ASSETS
– SPEED
Framework 2: Dimensions based measurement
system

22. Performance in the functional areas of
• Inbound Logistics
• Operations
• Outbound Logistics
• Marketing
• Service-after-sales
Framework 3:Hierarchical System

23. • quality
• inventory
• customer service
• cost
• flexibility
• time, and
• productivity.
Framework 3:Hierarchical System :
Indicators

24. • cost structure of the warehouse operations (handling-in, storage, and
handling-out)
• total investment
• total cost of the warehouse
• total capacity concerning output volume
• costs warehouse operations per unit volume (m3
, ton)
• total number of trucks loaded/unloaded per worked time unit
• labor hours per unit of output volume ( m3
, ton)
• labor costs per unit of output volume (m3
, ton)
• labor costs as percentage of sales
Indicators: Outbound logistics

25. • Compare each of the metrics and compute the relative weightage
for each
• Compare each of the links (inbound logistics, manufacturing etc.)
on each of the metrics above and compare relative weightages .
• Compute the aggregate weight for the links.
• Rank the links on the basis of weights arrived
• Devise an action plan to improve the performance of
weakest/weaker links in the supply chain.
• Monitor the performance and repeat steps above on a continual
basis.
Hierarchical System :Procedure

26. • Various perspectives such as the following
should be Balanced!
– Financial
– Innovation & learning
– Customer service
– Internal business
Balance scorecard balances and links financial and non-
financial indicators, tangible and intangible measures,
internal and external aspects, performance drivers and
outcomes.
Framework 4: Balanced scorecard

27. The Supply-Chain Council (SCC) has developed and
endorsed the Supply Chain Operations Reference-
model (SCOR) as the cross-industry standard for
supply chain management
The SCC was organized in 1996 by 69 voluntary
member companies and the European Chapter was
started in 1998.
www.supply-chain.orgwww.supply-chain.org
Framework 5:SCOR model

28. Plan
DeliverMakeSource DeliverMakeSourceDeliver Source
Supplier
(Internal or External)
Your Company Customer
(Internal or External)
ReturnReturnReturn
Customer’s
Customer
Supplier’s
Supplier
Source Make Deliver
Return
Return Return
Return
Return
SCOR ModelSCOR Model
Processes Best Practices Metrics Technology
Building Block Approach
SCOR Framework
Demand Chain
Supply Chain

29. • Performance measurement system and its linkages
with strategy ?
• Behavioral issues related to performance
measurement system?
• Development of Multi-criteria decision making
framework ?
• Role of information system in measurement?
• Benchmarking and performance measurement
system?
Performance Measurement:
Research Issues ..1..

30. • What to benchmark and how?
• Industry/sector specific measures?
• Revenue /Profit/Cost sharing ?
Performance Measurement:
Research Issues ..2..

31. • Source:
Arshinder, Kanda Arun and Deshmukh, S G,2008,
Supply Chain Coordination: Perspectives,
Empirical Studies and Research Directions,
International J of Production Economics,
115(2), 316-335
Track 2: Revenue Sharing Contracts

32. • It increases the total supply chain profits
• It involves in risk sharing among supply chain
partners
• It may be possible with supply chain contracts
that a member achieves more profits than he
would do without contracts
• Hence, result in win-win situation for both
supplier and his buyer
Objective of Supply Chain Contracts

33. Revenue sharing model parameters
Supplier
c
Buyer
q
ω, Φ
p
d
Where,
c is the marginal unit cost of supplier
ω is a wholesale unit price charged by the supplier to the buyer
p is the selling price of buyer per unit
Φ is the fraction of supply chain revenue that the buyer keeps and (1- Φ) is the
fraction the supplier earns
q is the buyer’s order quantity

34. • The buyer orders single product
• The demand is uncertain with probability
distribution function fd(d) in a single selling
period
• The wholesale price is less than the unit
marginal cost (ω < c)
Assumptions

35. • To determine the total supply chain profits
• To determine the optimal order quantities
to achieve the optimal supply chain profits
Objectives of revenue sharing
contracts

36. • Most models in the form of network of “newsboy’ problem.
There is still room for simple yet imaginative models exploring
other inventory concepts
• Time evolution of decisions not fully explored
• Use of Game theoretic frameworks: Static games built in s
Markov decision process
• More complicated demand and supply structures (correlation,
advance information, disruptions etc.)
• Information availability
• More sophisticated Supply Chain structures
• Implementation issues
Research Issues

37. • Source:
• Arup Roy, 2012, Management of Information
Security in Supply Chains- A Process
Framework, Presented at 42nd
Intentional Con.
On Computers in Industrial Engg, Cape town, S
Africa, July 16-18
Track 3: Management of Information
Security in Supply Chains

38. What is Information Security?
Information
“Information is an asset that, like other
important business assets, is essential to
an organization's business and
consequently needs to be suitably
protected”
Information Security
“Preservation of confidentiality, integrity and
availability of information”
(Reference: ISO 27000)

39. Security in Supply Chains
“The application of policies, procedures, and technology to protect supply chain
assets (product, facilities, equipment, information, and personnel) from theft,
damage, or terrorism and to prevent the introduction of unauthorized contraband,
people or weapons of mass destruction into the supply chain”.
– Closs & McGarrell (2004)
There are 2 aspects:
• Soft aspect – Intangible vulnerabilities such as information theft
• Hard aspect – Tangible vulnerabilities such as physical theft /
physical damages / terrorism
Information Security – one of the soft aspects
Hard aspects influence the soft aspects

40. Why do we need Information
Security?
• Measure and mitigate risk related to information assets.
Key motivator –
• Management of business and financial risk
• Reduction of threat to both reputation and customers
.
• Ensure compliance to regulatory/ legislative/ contractual
requirements.

41. Summary of concerns
• Information leakage & misappropriation in supply chain networks, which can
lead to:
• Demand imperative overriding information imperative
• Product & service deliveries may not be optimal
• Firms may lose their competitive edge
• Vulnerabilities in IT infrastructure may not be adequately controlled
• Information reliability and consequently knowledge generation may be
compromised
• Human security requirements may be overlooked

42. What is a Process Framework?
• Formal description of processes in a company
• Formally existing / ad-hoc / need to be developed
• KPIs defined to “measure” the process, with industry benchmarks
• Improvements based on the KPI s achieved
• Methodologies – used to actually improve the process

43. Why do we need a Process
Framework?
To enable organizations develop and maintain
consistent business practices
• Helps in managing a company's key
processes and roles & responsibilities
• Aligns processes and performance
improvement with corporate strategy
• Can be implemented at any level of an
organization

44. Research Propositions
• Identify weaknesses related to information
security in supply chain processes
• Analyze information security related risks
• Study relationship between supply chain
performance metrics and information security

45. • Source:
Giannakis M, 2011, Management of service
supply chains with service-oriented reference :
A case of management consulting, Supply
Chain Management: An international Journal,
16(5), 346-361
Track 4: Service Oriented Architecture

46.  Integration
◦ Providing the linkage between people, processes, and data
 Open
◦ Supporting a strong commitment to standards for OS, Language and Web
Services/SOA
 Virtualized
◦ Providing a flexible Build-time and Runtime environment for developing and
running applications across a highly distributed IT architecture
 Autonomic
◦ Self regulating … self healing … self maintaining
46
Four Characteristics of On Demand

47. 47
SOA: Service Oriented Architecture
• An approach for building distributed systems that allows tight
correlation between the business model and the IT implementation.
• Characteristics:
◦ Represents business function as a service
◦ Shifts focus to application assembly rather than implementation
details
◦ Allows individual software assets to become building blocks that
can be reused in developing composite applications representing
business processes
◦ Leverages open standards to represent software assets

48. What is a service?
 A coarse grained, self-contained entity that performs a distinct business
function
What is a service description?
 A standards based interface definition that is independent of the
underlying implementation
How do services interact?
 Through loosely-coupled, intermediated connections
How are SOA solutions created and enhanced?
Using tools and middleware according to SOA principles
48
SOA Concepts

49.  Build –Model Driven Architecture
◦ A style of enterprise application development and integration based on
using automated tools to build system independent models and
transform them into efficient implementations1
 Run –Service Oriented Architecture
◦ An approach for designing and implementing distributed systems that
allows a tight correlation between the business model and the IT
implementation
 Manage –Business Performance Management
◦ An approach to systems management that tightly links IT concerns with
business process concerns
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Three Key Concepts for the
Foundation for On Demand

50. • How to define service standards?
• What is the role of technology in SOA?
• How to align business strategy with SOA?
• Issues related to flexibility ?
Research Issues

51. • Supply chain management: an opportunity for
seamless integration
• Research issues involving a variety of
domains : performance measurement,
modeling, security, on-demand business
• Borrowing terminology & frameworks from
IT !
• Research : interdisciplinary !
Concluding remarks..

52. • www.researchgate.net
• http://www.emeraldinsight.com/research/index.h
• http://www.emeraldinsight.com/research/connec
Useful web linkages

53. Thank you
deshmukh.sg@gmail.com
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