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Handout 1

Pressures on business or management-global competition-rapid change in technology-shortening of Product Life Cycle-diversification of customer needs-continuous increase in labor cost

definition of Production/Operation: transforming inputs(resources) into outputs(product/service) to create or to add values for

customer benefit and satisfaction

agriculture/plantation, mining/collecting, fishing

physical/chemical transforming(manufacturing)

transportation(passenger/freight/cargo) storage/inventory

distribution(wholesale/retail) psychological, behavioral change(service)

meaning of 'Operation Management'

- the systematic design, direction and control of processes that transform inputs into

products and services which offer customers benefits and satisfaction-ultimate goal: to minimize overall costs related(not partial minimization but global minimization)

development(a brief history) of OM

1) F. Taylor: the father of scientific management-time/motion study(observation, measurement, job design): design of work methods and work process to improve performances(output, quantity)-setting up standards: determining a workers fair work quantity per day-motivation by differentiated wage system

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2) H. Ford: founded mass production system which includes assembly line-division of labor and introduction of moving assembly line manufacturing system-3S: simplification, specialization, standardization

3) OR/MS after World War II-introduced mathematical models in order to solve decision making problems and, as a

result, applying to actual decision problems-uses interdisciplinary approach

-uses computer in order to minimize time to solve problems and to minimize human

mistakes in problem-solving process

4) Japans impact on manufacturing in the 1990's:

JIT(by Toyota), TQM, keiretzu() etc.-try to prevent wastes, mistakes-emphasize continuous effort-give emphasis on supplier relationship:a foundation of Supply Chain Management as an extended approach

Competitiveness(competitive priorities) in OM

-costthe ability to produce(manufacture) and to deliver the same level of products services at

lower cost level than competitors one

-flexibilitythe ability to meet change in demand volume (to absorb fluctuation of demand)and to satisfy variety of customer needs

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: volume flexibility: the ability of controlling or changing production quantity or service

capacity in accordance with demand fluctuation: variety flexibility: variety of product line or assortment to satisfy customer's various

needs

-quality: the ability to meet or to satisfy customers expectations and industry standards: consistency - the ability of preventing variation in offering product/service

-time: the ability of more rapid release of new product/service than competitors: shorter time span of offering product/service than competitors one: timeliness - the ability to supply properly(on time) when each customer needsmost

cf. core competence(competency): a companys unique strength or advantage in technology, process, customer relationship or

supply relationship, etc.

ex) Sony, Caterpillar, Harley-Davidson: a companys area of specialized expertise

ex) Honda in engine area, Xerox in copy machine

Strategy: a directing plan to mobilize its limited resources in order to achieve

an organization's goal

cf. competitive strategy(M. Porter) - three kinds of generic strategies in a certain industry-low cost strategy-differentiation strategy

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-concentration strategy

Operation Strategy: a concept of making full use of the function of operations in a company as a competitive

weapon-requires to consider corporate strategy, market analysis(S-T-P), competitiveness,

competency