Transformation processes are used in all types of businesses. A transformation processSystem by which resources are used to convert inputs into desired output. uses resources to convert inputs into some desired output. Inputs may be raw material, a customer, or a finished product from another system. Exhibit 1.2 shows examples of different types of transformation processes in such varied areas as health care, education, and retail stores. In general, transformation processes can be categorized as follows:

• Physical (as in manufacturing).

• Location (as in transportation).

• Exchange (as in retailing).

• Storage (as in warehousing).

• Physiological (as in health care).

• Informational (as in telecommunications).

These transformations are not mutually exclusive. For example, a department store can (1) allow shoppers to compare prices and quality (informational), (2) hold items in inventory until needed (storage), and (3) sell goods (exchange).

Operations and supply management is about learning how to design these transformation processes. In the context of supply chains, Exhibit 1.3 depicts sets of processes specialized for the various parts of the supply chain. Companies strive to learn the “best way” to perform each task, and these are often referred to as best practices. There are many ways that each function can be performed and significant performance related trade-offs that need consideration. Sourcing processes, for example, relate to how a firm purchases the raw materials and other goods needed to support manufacturing and service processes. Processes for sourcing (a fancy word for purchasing) vary from putting the item out for bid to simply buying from a catalogue. The best process will depend on such factors as volume, cost, and speed of delivery.

Logistics processes are the various ways that material can be moved. Here a variety of approaches are available, spanning the use of ships, trucks, and airplanes to the hand delivery of goods. Often combinations are used—for example, movement from China to the United States using a ship where the item is offloaded at a port of entry and moved to its final destination on a truck. The best process depends again on such factors as volume, cost, and speed of transit. Processes for moving material into the manufacturing and service processes are referred to as “inbound logistics,” and movement to distribution centers as “outbound logistics.”

Distribution processes relate to warehouse functions. These involve the storage of material, how material is picked and packed for delivery, and methods for moving material around in the warehouse. These functions can be simple manual procedures or highly computerized systems using robots and conveyor systems. The sourcing, logistics, and distribution processes link the elements of the supply chain and need to be tightly coordinated to be effective.

The manufacturing and service processes are involved with the actual production of the goods and services desired by different types of customers. The widely varying requirements for products result in many different types of processes ranging, for example, from high-volume assembly lines to very flexible work centers for making things. Similarly, for services the processes vary from the work done in a small architect's office to the high-volume processes needed in a global call center.