SCM Terminology

IE/OR (Industrial Engineering/Operations Research)


IE (Industrial Engineering), a concept for improving the efficiency of production, is the driving force that brings success in mass production today. OR (Operations Research)  is an approach to explore optimization using statistical figures and linear programming. Both of them are included in supply chain flow.

IE (industrial engineering) is a concept that was first structured as a concept to enable the improvement of production efficiency during the time when various scientific approaches started by Taylor were tried out to improve production efficiency. During the Civil War, the U.S. promoted the standardization of firearms and parts of munitions. As a result, the U.S. succeeded in the mass production of parts by realizing low-cost and short-lead time production. The engine of this success was the concept of IE. IE was taken over by Henry Ford for producing the Model T Ford and that was a starting point of growth for auto industry.

The base of business administration and management consulting methodology of today started with IE, and going through World War I and World War II, the ammunition industry as a heavy industry and modern industrial society were created. We can also say that IE is a technology that combines product-specific manufacturing techniques and product technologies or that synchronizes management resources. If IT (information technology) can be used for many industries together with IE, information and communication will be combined, leading to the flow of supply chain management such as CALS, BPR, ECR, and QR.

OR (operations research) started with a military term of "operations research". It is a method of working out an optimal strategy using statistical figures, LP (linear programming), and DP (dynamic programming). It makes use of mathematics and computers as tools for modeling. The Lanchester theory is widely applied for operations research in business. With the principle that the square of military strength is proportional to the consumption rate of the enemy's fighting power, the Lanchester theory tries to determine the quantity, places, and timing of inputting military resources in order to synchronize the resources.

The Lanchester theory drew the attention of the retail distribution industry and the assumption that the square of the sales floor area is proportional to the ability to get customers was theorized, which had an impact base policies.

Making decisions in supply chain management as to the quantity, places, and timing of inputting management resources such as machines and workers is also part of the synchronization of management resources. At present, the direction of IE/OR seems to be leading to supply chain management in terms of communication and information technology such as the Internet and EDI (electronic data interchange).

Taken with kind permission from the book:
"Understand Supply Chain Management through 100 words" by Zenjiro Imaoka.