Chapter 1

Introduction to Operations and

Supply Chain Management

Russell and Taylor

Operations Management, 8th Edition

Key points chapter 1

Productivity. What is it? How to calculate it?

Lecture Outline

The Operations Function Slide 8

The Evolution of Operations and Supply Chain Management Slide 13

Productivity and Competitiveness Slide 25

Strategy and Operations Slide 30

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Operations Management

What is Operations?

a function or system that transforms inputs into outputs of greater value

What is Operations Management?

design, operation, and improvement of productive systems

What is a Value Chain?

a series of activities from supplier to customer that add value to a product or service

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Operations as a

Transformation Process

1-5

INPUT MaterialMachinesLaborManagementCapital

TRANSFORMATION

PROCESS

OUTPUT GoodsServices

Feedback & Requirements

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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

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Physical: as in manufacturing operations

Locational: as in transportation or warehouse operations

Exchange: as in retail operations

Physiological: as in health care

Psychological: as in entertainment

Informational: as in communication

Operations Function

Operations

Marketing

Finance and Accounting

Human

Resources

Suppliers

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Sample Organizational Structure

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CEOChief Executive Officer

CIOChief Information Officer

CFOChief Financial Officer

COOChief Operating Officer

VP Human Resources

VP Operations

VP Supply Chain Management

VP Marketing

How is Operations Relevant

to my Major?

Accounting

Information Technology

Management

As an auditor you must understand the

fundamentals of operations

management.

IT is a tool, and theres no better place to apply it than in operations.

We use so many things you learn in an operations classscheduling, lean production, theory of constraints, and

tons of quality tools.

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The Operations Function

Organizing work Selecting processes

Arranging layouts Locating facilities Designing jobs Measuring performance

Controlling quality Scheduling work

Managing inventory Planning production

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How is Operations Relevant

to my Major?

Economics

Marketing

Finance

Its all about processes. I live by flowcharts and Pareto analysis.

How can you do a good job marketing a product if youre unsure of its quality or delivery status?

Most of our capital budgeting requests are from operations, and most of our

cost savings, too.

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CraftIndividual customer

Division of LaborIndividual worker

Interchangeable part

Standardized parts

Evolution of Operations and Supply Chain

Management

Scientific Mgt

Method analyzed

Mass production

Standardized product

Lean Production

Quality & flexibility

Evolution of Operations and Supply Chain

Management (continued)

Evolution of Operations and Supply

Chain Management

Craft production process of handcrafting products or services 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 that enabled mass production

Scientific management

systematic analysis of work methods

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Evolution of Operations and

Supply Chain Management

Mass production high-volume production of a standardized product for

a mass market

Quality revolution an emphasis on quality and the strategic role of

operations

Lean production adaptation of mass production that prizes quality and

flexibility

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Historical Events in

Operations Management

Era Events/Concepts Dates Originator

Industrial

Revolution

Steam engine 1769 James Watt

Division of labor 1776 Adam Smith

Interchangeable parts 1790 Eli Whitney

Scientific

Management

Principles of scientific

management1911 Frederick W. Taylor

Time and motion studies 1911Frank and Lillian

Gilbreth

Activity scheduling chart 1912 Henry Gantt

Moving assembly line 1913 Henry Ford

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Historical Events in

Operations Management

Era Events/Concepts Dates Originator

Human

Relations

Hawthorne studies 1930 Elton Mayo

Motivation theories

1940s Abraham Maslow

1950s Frederick Herzberg

1960s Douglas McGregor

Operations

Research

Linear programming 1947 George Dantzig

Digital computer 1951 Remington Rand

Simulation, waiting

line theory, decision

theory, PERT/CPM

1950sOperations research

groups

MRP, EDI, EFT, CIM1960s,

1970s

Joseph Orlicky, IBM

and others

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Historical Events in

Operations Management

Era Events/Concepts Dates Originator

Quality

Revolution

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

TQM (total quality

management)1980s

W. Edwards Deming,

Joseph Juran

Strategy and

operations1980s

Wickham Skinner,

Robert Hayes

Reengineering 1990sMichael Hammer,

James Champy

Six Sigma 1990s GE, Motorola

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Historical Events in

Operations Management

Era Events/Concepts Dates OriginatorInternet

Revolution

Internet, WWW, ERP,

supply chain management

1990s ARPANET, Tim

Berners-Lee SAP,

i2 Technologies,

ORACLE, Dell

E-commerce 2000s Amazon, Yahoo,

eBay, Google, and

others

Globalization WTO, European Union,

Global supply chains,

Outsourcing, Service

Science

1990s

2000s

China, India,

Emerging

economies

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Historical Events in

Operations Management

Era Events/Concepts Dates OriginatorSustainability Global warming

Carbon footprint

Green products

Corporate social

responsibility (CSR)

UN Global Compact

Today Numerous

companies,

statesmen,

governments,

United Nations,

World Economic

Forum

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Evolution of Operations and Supply

Chain Management

Supply chain management

management of the flow of information, products, and services across a network of customers, enterprises, and supply chain

partners

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Productivity and Competitiveness

Competitiveness degree to which a nation can produce goods and

services 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, material usage,

or square footage

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Measures of Productivity

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Osborne Industries

1-24

B5*B7

B6*B8

B4/B5

B4/B6

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Percent Change in Input and Output and

Productivity

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1.1. tried and True Clothing has opened 4 new stores in

town. Monthly sales volume and labor hours data are

given below. Which store location has highest labor

productivity?

1.8. Carpet City recorded this data below. Use it to

calculate average rate (in yards/hour) at which carpet

can be installed. What is your opinion about installation?

Store Annandale Blacksburg Charlots Danvile

Sales volume ($) 40.000 12.000 60.000 25.000

Labor hour 250 60 500 200

Installation 1 2 3

Square yards 1225 1435 2500

No.of worker 4 3 5

No. of hours/worker 3 5 6

Productivity 160 200 120 125

Productivity/hour 102.08 95.67 83.33

Strategy and Operations

How the mission of a company is accomplished Provides direction for achieving a mission Unites the organization Provides consistency in decisions Keeps organization moving in the right direction

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Strategic Planning

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Mission

and Vision

Corporate

Strategy

Operations

Strategy

Marketing

Strategy

Financial

Strategy

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Positioning the Firm

Cost Speed Quality Flexibility Innovation

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1. Risk taking, failure as part of learning process

2. Uniform and well defined process to exceed customer expectation

3. Mass customization

4. High volume production, automation

5. Immediate response, rapid shipment

KEYWORDS:

Positioning the Firm: Cost

Waste elimination relentlessly pursuing the removal of all waste

Examination of cost structure looking at the entire cost structure for reduction potential

Lean production providing low costs through disciplined operations

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Positioning the Firm: Speed

Fast moves, Fast adaptations, Tight linkages

Internet

Customers expect immediate responses

Service organizations

always competed on speed (McDonalds, LensCrafters, and Federal Express)

Manufacturers

time-based competition: build-to-order production and efficient supply chains

Fashion industry

two-week design-to-rack lead time of Spanish retailer, Zara

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Positioning the Firm: Quality

Minimizing defect rates or conforming to design

specifications

Ritz-Carlton - one customer at a time

Service system designed to move heaven and earth

to satisfy customer

Employees empowered to satisfy a guests wish

Teams set objectives and devise quality action plans

Each hotel has a quality leader

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Positioning the Firm: Flexibility

Ability to adjust to changes in product mix, production volume, or design

Mass customization mass production of customized parts

National Bicycle Industrial Company

offers 11,231,862 variations

delivers within two weeks at costs only 10% above standard models

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Balanced Scorecard

Balanced scorecard

measuring more than financial performance

finances

customers

processes

learning and growing

Key performance indicators

set of measures to help managers evaluate performance in critical areas

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Balanced Scorecard

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Radar Chart Dashboard

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Operations Strategy

Products

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Services Process

and

Technology

Capacity

Human

Resources Quality

Facilities Sourcing Operating

Systems

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Emirates Airline Catering

Transformation process?

Operation functions mostly important?

Strategic positioning?

Productivity measurement

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Next week

Weekly group project: 2 groups will choose a company together for chp. Ensuring Quality

1 group as presenter, 1 group as debater Others will be given Q&A.

Individual task: Describe Historical events in Operations To show how Operations evolve. Take information outside from textbook state your

reference

Describe important people and event of Operation evolution

Maximum 2 pages of A4 paper size. EMAIL to novira.dasilva@pmbs.ac.id latest nextweek Format email in subject: Name, Class

Excercises Problem 1.2

Problem1.5

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