Operations Management 797 (1)

8/4/2019 Operations Management 797 (1)

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Operations and CompetitivenessOperations Management - 5thEdition

Chapter 1

Roberta Russell & Bernard W. Taylor, III


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Lecture outline

What do operations managers do?

Operations function

Evolution of operations management Operations management and ebusiness

Globalization and competitiveness

Primary topics in operations management

Learning objectives for this course


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What Do OperationsManagers Do?

What is operations? a function or system that transforms inputs into

outputs of greater value

What is a transformation process? a series of activities along a value chain

extending from supplier to customer

activities that do not add value are superfluous

and should be eliminated What is operations management?

design, operation, and improvement ofproductive systems


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Transformation Process

Physical: as in manufacturing operations

Locational: as in transportation

operations Exchange: as in retail operations

Physiological: as in health care

Psychological: as in entertainment Informational: as in communication


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INPUTMaterial

MachinesLaborManagement

Capital

TRANSFORMATIONPROCESS

OUTPUT

GoodsServices

Feedback

Operations as aTransformation Process


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Operations Function

Operations

Marketing

Finance

andaccounting

Humanresources

Outsidesuppliers


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How is operations relevant to mymajor?

Accounting

InformationTechnology

Management

As an auditor you must

understand the fundamentals ofoperations management.

IT is a tool, and theres no betterplace to apply it than inoperations.

We use so many things you

learn in an operations classscheduling, lean production,theory of constraints, and tons ofquality tools.


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How is operations relevant to mymajor?

Economics

Marketing

Finance

Its all about processes. Ilive by flowcharts andPareto analysis.

How can you do a goodjob marketing a product ifyoure unsure of its qualityor delivery status?

Most of our capitalbudgeting requests arefrom operations, and mostof our cost savings, too.


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Evolution of OperationsManagement

Craft production

process of handcrafting products orservices for individual customers

Division of labor dividing a job into a series of small tasks

each performed by a different worker

Interchangeable parts

standardization of parts initially asreplacement parts; enabled massproduction


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Scientific management systematic analysis of work methods

Mass production high-volume production of a

standardized product for a massmarket

Lean production adaptation of mass production that

prizes quality and flexibility

Evolution of OperationsManagement (cont.)


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Historical Events inOperations Management

Era Events/Concepts Dates Originator

Industrial

Revolution

Steam engine 1769 James Watt

Division of labor 1776 Adam SmithInterchangeable parts 1790 Eli Whitney

ScientificManagement

Principles of scientific

management1911 Frederick W. Taylor

Time and motion studies 1911Frank and Lillian

GilbrethActivity scheduling chart 1912 Henry Gantt

Moving assembly line 1913 Henry Ford


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(cont.)Era Events/Concepts Dates Originator

HumanRelations

Hawthorne studies 1930 Elton Mayo

Motivation theories 1940s Abraham Maslow1950s Frederick Herzberg

1960s Douglas McGregor

OperationsResearch

Linear programming 1947 George Dantzig

Digital computer 1951 Remington Rand

Simulation, waitingline theory, decision

theory, PERT/CPM

1950sOperations researchgroups

MRP, EDI, EFT, CIM1960s,1970s

Joseph Orlicky, IBM

and others


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(cont.)

Era Events/Concepts Dates Originator

Quality

Revolution

JIT (just-in-time) 1970s Taiichi Ohno (Toyota)

TQM (total qualitymanagement)

1980s W. Edwards Deming,Joseph Juran

Strategy and

operations1990s

Wickham Skinner,

Robert HayesBusiness process

reengineering 1990s

Michael Hammer,

James Champy


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Historical Events in OperationsManagement (cont.)

Era Events/Concepts Dates OriginatorGlobalization WTO, European Union,

and other tradeagreements

1990s

2000s

Numerous countries

and companies

InternetRevolution

Internet, WWW, ERP,supply chainmanagement

1990s ARPANET, Tim

Berners-Lee SAP,

i2 Technologies,

ORACLE,PeopleSoft

E-commerce 2000s Amazon, Yahoo,

eBay, and others


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Continuum from

Goods to Services

Source:Adapted from Earl W. Sasser, R. P. Olsen, and D. Daryl Wyckoff,Management of Service Operations(Boston: Allyn Bacon, 1978), p.11.


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Operations Managementand E-Business

Categories of E-Commerce

Business

Consumer

Business Consumer

B2BCommerceone.com

B2C

Amazon.com

C2BPriceline.com

C2CeBay.com


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An Integrated Value Chain

Value chain: set of activities that create anddeliver products to customer

Manufacturer SupplierCustomer

Flow of information (customer order)

Manufacturer SupplierCustomer

Flow of information (customer order)

Flow of product (order fulfillment)


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Impact of E-Business onOperations Management

Comparison shopping

by customers

Direct contact withcustomers

Business processesconducted online

Customer expectations escalate;

quality must be maintained andcosts lowered

No more guessing about demandis necessary; inventory costs godown; product and service designimproves; build to-order products

and services is made possible Transaction costs are lower;

customer support costs decrease;e-procurement saves big bucks

Benefits of E-Business Impact on Operations


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Impact of E-Business onOperations Management (cont.)

Access to customers

worldwide

Middlemen areeliminated

Access to suppliersworldwide

Demand increases; order fulfillment

and logistics become major issues;production moves overseas

Logistics change from delivering to astore or distribution center todelivering to individual homes;consumer demand is more erratic and

unpredictable than business demand Outsourcing increases; more alliances

and partnerships among firms areformed; supply is less certain; globalsupply chain issues arise



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Online auctions and e-

marketplaces

Better and fasterdecision making

Competitive bidding lowers cost

of materials; supply needs can befound in one location

More timely information isavailable with immediate accessby all stakeholders in decision-making process; customer orders

and product designs can beclarified electronically; electronicmeetings can be held;collaborative planning isfacilitated



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IT synergy

Expanded supplychains

Productivity increases as

information can be shared moreefficiently internally andbetween trading partners

Order fulfillment, logistics,warehousing, transportation anddelivery become focus of

operations management; risk isspread out; trade barriers fall



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Globalization andCompetitiveness

Favorable cost

Access to internationalmarkets

Response to changesin demand

Reliable sources ofsupply

14 major tradeagreements in 1990s

Peak: 26% in 2000World Trade Compared to World GDPSource:Real GDP and Trade Growth of OECD Countries, 200103, International Trade Statistics 2003, World Trade Organization,

www.wto.org


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Globalization andCompetitiveness (cont.)

Hourly Wage Rates for Selected CountriesSource:International Comparisons of Hourly Compensation Costs for Production Workers inManufacturing, Bureau of Labor Statistics, U.S. Department of Labor, Updated September 30, 2003.

Germany: $26.18

USA: $21.33

Taiwan: $5.41

Mexico: $2.38

China: $0.50


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Globalization andCompetitiveness (cont.)

Trade with China: Percent of each countrys trade

Source:Share of China in Exports and Imports of Major Traders, 2000 and 2002,International Trade Statistics 2003, World Trade Organization, www.wto.org


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Risks of Globalization

Cultural differences

Supply chain logistics

Safety, security, andstability

Quality problems

Corporate image

Loss of capabilities


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Competitiveness andProductivity Competitiveness

degree to which a nation can produce goods andservices that meet the test of international markets

Productivity ratio of output to input

Output sales made, products produced, customers served,

meals delivered, or calls answered Input

labor hours, investment in equipment, materialusage, or square footage


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Measures of Productivity

Competitiveness andProductivity (cont.)


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Changes in Productivity forSelect Countries

Internet-enabledproductivity

- Dot com bust- 9/11 terrorist attacks

Source:International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002, Bureau of LaborStatistics, U.S. Department of Labor, September 2003. U.S. figures for 20022003 from Major Sector Productivity andCosts Index, Bureau of Labor Statistics, U.S. Department of Labor, March 2004


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Become efficient output increases with little or no increase in input

Expand both output and input grow with output growingmore rapidly

Achieve breakthroughs output increases while input decreases

Downsize

output remains the same and input is reduced Retrench

both output and input decrease, with inputdecreasing at a faster rate

Productivity Increase


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Competitiveness andProductivity

Productivity as a Function of Inputs and Outputs, 20012002Source:International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002, Bureau of LaborStatistics, U.S. Department of Labor, September 2003

BreakthroughPerformance

More Efficient

Retrench


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Global Competitiveness Ranking

1. Finland2. United States3. Sweden

4. Denmark5. Taiwan6. Singapore7. Switzerland

8. Iceland9. Norway10.Australia

Source: Global Competitiveness Report20032004, World Economic Forum,January 2004, www.weforum.org


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OperationsOriented Barriersto Entry

Economies of Scale

Capital Investment

Access to Supply and DistributionChannels

Learning Curve


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Primary Topics inOperations Management


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Primary Topics in OperationsManagement (cont.)


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Operations Strategy

Strategy: Chapter 2 Maintaining an operations strategy to support firms

competitive advantage

Quality: Chapters 3 and 4 Focusing on quality in operational decision making

Product and Services: Chapter 5 Designing quality products and services

Processes, Technologies, and Capacity:Chapter 6 Setting up process so that it works smoothly and

efficiently


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Operations Strategy (cont.)

Facilities: Chapter 7

Setting up facility so that it works smoothlyand efficiently

Human Resources: Chapter 8

Designing jobs and work to produce qualityproducts

Project Management: Chapter 9

Managing complex projects


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Supply Chain Management

Supply Chain: Chapter 10 Managing supply chain

Forecasting: Chapter 11 Predicting customer demand

Aggregate Planning: Chapter 12 How much to produce and when to produce

it Inventory Management: Chapter 13

How much to order and when to order


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Supply Chain Management(cont.) Resource Planning: Chapter 14

Planning capacity and other resources

Lean Production: Chapter 15 Designing efficient production lines

Scheduling: Chapter 16 Job and task assignments

Waiting Lines: Chapter 17 Minimizing waiting time of customers and

products


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Learning Objectives of thisCourse Gain an appreciation of strategic importance of

operations in a global business environment

Understand how operations relates to other

business functions Develop a working knowledge of concepts and

methods related to designing and managingoperations

Develop a skill set for quality and processimprovement

Operations Management 797 (1)

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