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Copyright 2006 John Wiley & Sons, Inc.Beni Asllani University of Tennessee at ChattanoogaOperations and CompetitivenessOperations Management - 5th EditionChapter 1Roberta Russell & Bernard W. Taylor, III

Copyright 2006 John Wiley & Sons, Inc.

Copyright 2006 John Wiley & Sons, Inc.1-*Lecture OutlineWhat Do Operations Managers Do?Operations FunctionEvolution of Operations ManagementOperations Management and EbusinessGlobalization and CompetitivenessPrimary Topics in Operations ManagementLearning Objectives for this Course


Copyright 2006 John Wiley & Sons, Inc.1-*What Do Operations Managers Do?What is Operations?a function or system that transforms inputs into outputs of greater valueWhat 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 eliminatedWhat is Operations Management?design, operation, and improvement of productive systems


Copyright 2006 John Wiley & Sons, Inc.1-*Physical: as in manufacturing operationsLocational: as in transportation operationsExchange: as in retail operationsPhysiological: as in health carePsychological: as in entertainmentInformational: as in communication

Transformation Process


Copyright 2006 John Wiley & Sons, Inc.1-*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.


Copyright 2006 John Wiley & Sons, Inc.1-*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.


Copyright 2006 John Wiley & Sons, Inc.1-*Evolution of Operations ManagementCraft productionprocess of handcrafting products or services for individual customersDivision of labordividing a job into a series of small tasks each performed by a different workerInterchangeable partsstandardization of parts initially as replacement parts; enabled mass production


Copyright 2006 John Wiley & Sons, Inc.1-*Scientific managementsystematic analysis of work methodsMass productionhigh-volume production of a standardized product for a mass marketLean productionadaptation of mass production that prizes quality and flexibilityEvolution of Operations Management (cont.)


Copyright 2006 John Wiley & Sons, Inc.1-*Historical Events in Operations Management

EraEvents/ConceptsDatesOriginatorIndustrialRevolutionSteam engine1769James WattDivision of labor1776Adam SmithInterchangeable parts1790Eli WhitneyScientific ManagementPrinciples of scientificmanagement1911Frederick W. TaylorTime and motion studies1911Frank and Lillian GilbrethActivity scheduling chart1912Henry GanttMoving assembly line1913Henry Ford


Copyright 2006 John Wiley & Sons, Inc.1-*Historical Events in Operations Management (cont.)

EraEvents/ConceptsDatesOriginatorHuman RelationsHawthorne studies1930Elton MayoMotivation theories1940sAbraham Maslow1950sFrederick Herzberg1960sDouglas McGregorOperations ResearchLinear programming1947George DantzigDigital computer1951Remington RandSimulation, waitingline theory, decisiontheory, PERT/CPM1950sOperations research groupsMRP, EDI, EFT, CIM1960s, 1970sJoseph Orlicky, IBMand others



EraEvents/ConceptsDatesOriginatorQualityRevolutionJIT (just-in-time)1970sTaiichi Ohno (Toyota)TQM (total qualitymanagement)1980sW. Edwards Deming, Joseph JuranStrategy andoperations1990sWickham Skinner, Robert HayesBusiness processreengineering1990sMichael Hammer,James Champy



EraEvents/ConceptsDatesOriginatorGlobalizationWTO, European Union, and other trade agreements1990s2000sNumerous countriesand companiesInternet RevolutionInternet, WWW, ERP, supply chain management1990sARPANET, TimBerners-Lee SAP,i2 Technologies,ORACLE,PeopleSoftE-commerce2000sAmazon, Yahoo, eBay, and others


Copyright 2006 John Wiley & Sons, Inc.1-*Impact of E-Business on Operations ManagementComparison shopping by customers

Direct contact with customers

Business processes conducted onlineCustomer expectations escalate; quality must be maintained and costs loweredNo more guessing about demand is necessary; inventory costs go down; product and service design improves; build to-order products and services is made possibleTransaction costs are lower; customer support costs decrease; e-procurement saves big bucksBenefits of E-BusinessImpact on Operations


Copyright 2006 John Wiley & Sons, Inc.1-*Impact of E-Business on Operations Management (cont.)Access to customers worldwide

Middlemen are eliminated

Access to suppliers worldwideDemand increases; order fulfillment and logistics become major issues; production moves overseasLogistics change from delivering to a store or distribution center to delivering to individual homes; consumer demand is more erratic and unpredictable than business demandOutsourcing increases; more alliances and partnerships among firms are formed; supply is less certain; global supply chain issues ariseBenefits of E-BusinessImpact on Operations


Copyright 2006 John Wiley & Sons, Inc.1-*Impact of E-Business on Operations Management (cont.)Online auctions and e-marketplacesBetter and faster decision makingCompetitive bidding lowers cost of materials; supply needs can be found in one locationMore timely information is available with immediate access by all stakeholders in decision-making process; customer orders and product designs can be clarified electronically; electronic meetings can be held; collaborative planning is facilitatedBenefits of E-BusinessImpact on Operations


Copyright 2006 John Wiley & Sons, Inc.1-*Impact of E-Business on Operations Management (cont.)IT synergy

Expanded supply chainsProductivity increases as information can be shared more efficiently internally and between trading partnersOrder fulfillment, logistics, warehousing, transportation and delivery become focus of operations management; risk is spread out; trade barriers fallBenefits of E-BusinessImpact on Operations


Copyright 2006 John Wiley & Sons, Inc.1-*Globalization and CompetitivenessFavorable costAccess to international marketsResponse to changes in demandReliable sources of supply14 major trade agreements in 1990sPeak: 26% in 2000


Copyright 2006 John Wiley & Sons, Inc.1-*Globalization and Competitiveness (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


Copyright 2006 John Wiley & Sons, Inc.1-*Competitiveness and ProductivityCompetitivenessdegree to which a nation can produce goods and services that meet the test of international marketsProductivityratio of output to inputOutputsales made, products produced, customers served, meals delivered, or calls answeredInputlabor hours, investment in equipment, material usage, or square footage


Copyright 2006 John Wiley & Sons, Inc.1-*Changes in Productivity for Select CountriesInternet-enabled productivity- Dot com bust- 9/11 terrorist attacksSource: International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002, Bureau of Labor Statistics, U.S. Department of Labor, September 2003. U.S. figures for 20022003 from Major Sector Productivity and Costs Index, Bureau of Labor Statistics, U.S. Department of Labor, March 2004


Copyright 2006 John Wiley & Sons, Inc.1-*Become efficientoutput increases with little or no increase in inputExpandboth output and input grow with output growing more rapidlyAchieve breakthroughsoutput increases while input decreasesDownsizeoutput remains the same and input is reducedRetrenchboth output and input decrease, with input decreasing at a faster rate

Productivity Increase


Copyright 2006 John Wiley & Sons, Inc.1-*Global Competitiveness RankingFinlandUnited StatesSwedenDenmarkTaiwanSingaporeSwitzerlandIcelandNorwayAustraliaSource: Global Competitiveness Report 20032004, World Economic Forum, January 2004, www.weforum.org


Critical Decisions with operations management field Copyright 2006 John Wiley & Sons, Inc.1-*

Decision Area Typical questions that need to be resolvedBundles of benefits offered by the organizationWhat should be offered?Facility Location Where should the facility be physically located? Process Design & choice of technologiesWhat types of process are required to be able to produce the bundles of benefits offered by the organization?


Critical Decisions with operations management field Copyright 2006 John Wiley & Sons, Inc.1-*

Make or Buy decisionWhat should be made in house Vs. bought in?Supplier selection practices How should suppliers be selected?Information exchange systemHow should information be exchanged internally? How should information be exchanged with external trading partners?Capacity PlanningWhat capacity level is needed to produce the bundles of benefits? Intermediate term aggregate planning of resourcesWhat level of resources is required to meet the demand?Production Planning & ControlWhat quantities should be produced?


Copyright 2006 John Wiley & Sons, Inc.1-*

Materials mgt & Inventory controlHow much inventory of each item should be carried?Distribution & LogisticsHow should outputs be delivered to customers?Quality Assurance & control How is quality defined?What is the acceptable quality level of inputs & outputs? How is this measured


Copyright 2006 John Wiley & Sons, Inc.1-*Learning Objectives of this CourseGain an appreciation of strategic importance of operations in a global business environmentUnderstand how operations relates to other business functionsDevelop a working knowledge of concepts and methods related to designing and managing operationsDevelop a skill set for quality and process improvement


Copyright 2006 John Wiley & Sons, Inc.1-*Copyright 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.


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