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Operations Mgmt.
Prof. Fandel; Chapter 2: Value Chains
| Question | Answer |
|---|---|
| Value Chain | A network of facilities and processes that describes the flow of goods, services, information, and financial transactions from suppliers through the facilities and processes that create goods and services and deliver them to customers. |
| Supply Chain | The portion of the value chain that focuses primarily on the physical movement of goods and materials, and supporting flows of information and financial transactions through the supply, production, and distribution processes. |
| Value | The perception of the benefits associated with a good, service, or bundle of goods and services (CBP) in relation to what buyers are willing to pay for them. |
| Value Equation: | Value= Perceived Benefits/ Price (cost) to the customer. *If the ratio is high, the good or service is perceived favorably by customers, and the organization providing it is more likely to be successful. |
| What must an organization do to increase value? | a) Increase perceived benefits while holding price or cost constant. b) Increase perceived benefits while reducing price or cost. c) Decrease price or cost while holding perceived benefits constant. |
| Vertical Integration | The process of acquiring and consolidating elements of a value chain to achieve more control. |
| Backward Integration | Acquiring capabilities toward suppliers. ex) BP buying raw material suppliers. |
| Forward Integration | Acquiring capabilities toward distribution or even customers. ex) Chemical companies in industrial countries acquiring smaller and more profitable specialty manufacturers of chemicals and advanced materials. |
| Outsourcing | Process of having suppliers provide goods and services that were previously provided internally. |
| Value Proposition | A competively dominant customer experience. |
| Break-even Quantity Equation: | Q = FC/(VC2 - VC1) *VC1: Variable cost/Unit if produced VC2: Variable Cost/unit if outsourced FC: Fixed costs associated with producing the part Q: Quantity Produced (Volume) |
| How do you find total cost of production? | = (VC1)Q + FC |
| How do you find total cost of outsourcing? | = (VC2)Q |
| Offshoring | The building, acquiring, or moving of process capabilities from a domestic location to another country location while maintaining ownership and control. |
| T/F: Sustainability improves the organization's perception among consumers, and improves the bottom line through reduced costs. | TRUE. |
| Multinational Enterprise | An organization that sources, markets, and produces its own goods and services in several countries to minimize costs, and to maximize profit, customer satisfaction, and social welfare. |
| Value Chain Integration | Process of managing information, physical goods, and services to ensure their availability at the right place, right time, right cost, right quantity, and with the highest attention to quality. |
| Operational Structure | Configuration of resources, such as suppliers, factories, warehouses, distributors, technical support centers, engineering design and sales offices, and communication links. |
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