Friday, January 4, 2013

Operations Management with SAP

For many years now, I have been helping my clients to get better use out of their SAP investment (with bigbyte). Primarily in the areas of Sales & Operations Planning, Production Planning, Scheduling and Execution, MRP, Inventory Optimization and Procurement. Whenever we define the scope, everybody - including myself - has been speaking about 'Supply Chain Management'!

Isn't a much better description of what we're doing here 'Operations Management' ?

Let's see; Wikipedia defines operations management as "...an area of management concerned with overseeing, designing, and controlling the process of production and redesigning business operations in the production of goods and/or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed, and effective in terms of meeting customer requirements. It is concerned with managing the process that converts inputs (in the forms of materials, labor, and energy) into outputs (in the form of goods and/or services)."

In Factory Physics, Hopp and Spearman define it very similarly "...the term operations refers to the application of resources (capital, materials, technology, and human skills and knowledge) to the production and distribution of goods and services."

By this definition we can say that operations management would include all functions to operate the business; including the operation of the supply chain. That would mean that operations management is a broader area than supply chain management, which, in turn, would mean that what we do here - improving the business result with better operations - might not address all the areas necessary, if we only look at supply chain management, but might address too many areas if we look at operations management. I therefore suggest we take on the broader term - operations management - and define the scope by being more specific in it.

Splitting hair? yes, I might get carried away here a little, but I have had too many bad experiences defining scope by use of all those buzzwords: lean, agile, MRP, MRP2, TQM, TPS, BPR and lately SCM. And I am trying to find a way to effectively communicating what we try to do.

How is this?: "Optimization is an initiative to improve operations as they are supported and managed by SAP functionality !"

Now as for the scope of the initiative... Very often a company's goal (to make money... (See my blog on final and formal cause) is depicted in a value stream. And then people look at the value stream diagram and think to themselves... "That's a supply chain!" I am not arguing that it is not, but it certainly is depicting a material flow and an information flow. And that kind of terminology is much closer relating to a framework that we can use for improvement initiatives than a supply chain could ever do.

All functions in a value stream are 'operated' by either a system or a human. And here is where we can get better: "finding a way to better operate the functions that contribute to the value creation of our information or material streams."

Therefore, all we have to do is to lay out your value stream, ask pertinent questions about what areas we can improve and then design the initiatives around them



This approach will not only help getting clarity about what we are trying to achieve, but also allows us to define the goal and how we get there. All we need to do is to look at ways to better manage our operations which drive value and therefore sales, revenue, productivity and efficiency - all buzzword-free!

Operations Management with SAP 2.0 !