chap1 introduction to operations

5/24/2018 Chap1 Introduction to Operations

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To Accompany Russell and Taylor, Operations Management, 4th Edition,2003 Prentice-Hall, Inc. All rights reserved.

Chapter 1

In t roduct ion to

Operat ions and

Compet i t ivenessTo Accompany Russell and Taylor, Operations Management, 4th Edition, 2003 Prentice-Hall, Inc. All rights reserved.


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Operat ion s as a trans format ion

process

Operat ions as a

basic func t ion

Operat ions as the

technical co re

The Operat ions

Funct ion


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Operat ions as a

Transfo rmat ion Process

INPUT

MaterialMachinesLaborManagementCapital


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Operat ions as a


INPUT


TRANSFORMATIONPROCESS


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Operat ions as a


INPUT


OUTPUTGoodsServices



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Operat ions as a


Feedback

INPUT


OUTPUTGoodsServices



7/52To Accompany Russell and Taylor, Operations Management, 4th Edition,2003 Prentice-Hall, Inc. All rights reserved.

Transformat ion

Processes

Physical (manufactur ing)

Locat ional (transportat ion/warehouse)

Exchange (retail)

Physiological (health care)

Psychologica l (entertainment)

Informat ional (communicat ions)



Operat ions as the

Techn ical Core



Operat ions as the

Techn ical Core

Operations

Finance/Accounting

Human Resources

Marketing

Suppliers

Production andInventory data

Capital budgeting requestsCapacity expansion and

Technology plans

BudgetsCost analysisCapital investmentsStockholder

requirementsOrders for materialsProduction and delivery

Schedules QualityRequirements Design/

Performance specs

Material availabilityQuality data

Delivery schedulesDesigns

Product/ServiceAvailability

Lead-time estimatesStatus of order

Delivery schedules

Sales forecastsCustomer orders

Customer feedbackPromotionsPersonnel needs

Skill setsPerformance evaluations

Job design/workmeasurement

Hiring/firingTrainingLegal requirementsUnion contract negotiations



His to r ical Even ts in OM

Ind us tr ial Revo lut ion

Scien t i f ic Management

Human Relat ions

Management Science

Quali ty Revo lut ion

Global izat ion

Info rmat ion Age/Internet Revo lut ion



His to r ical Even ts in OMIndus tr ial Revo lut ion

Steam eng ine 1769 James Watt

Div is ion of labo r 1776 Adam Smith

Interchangeable parts 1790 Eli Wh itney

Scien t i f ic ManagementPrinc iples 1911 Frederick W. Taylo r

Time and motion studies 1911 Frank & Li l l ian GilbrethAc t iv i ty schedul ing chart 1912 Henry Gant

Movin g assembly l ine 1913 Henry Ford



His to r ical Even ts in OMHuman Relat ions

Hawtho rne stu dies 1930 Elton Mayo

Motivat ion theories 1940s Abraham Maslow

1950s Frederick Hertzberg

1960s Doug las McGregor

Management ScienceLinear programm ing 1947 George Dantzig

Digi tal compu ter 1951 Rem ing ton RandSimulation, PERT/CPM, 1950s Operations research

Wait ing l ine theory groups

MRP 1960s Jo seph Orl icky , IBM



His to r ical Even ts in OMQual ity Revo lut ion

JIT 1970s Taiich i Ohno, Toyota

TQM 1980s W. Edwards Deming,

Jo seph Juran, et. al.

Strategy and operat ions Skinner, HayesReengineering 1990s Hammer, Champy

Wor ld Trade Organizat ion 1990s Numerous coun tr ies

and companies

Global izat ionEuropean Union and 1970s IBM and others

oth er trade agreements

EDI, EFT, CIM 1980s



His to r ical Even ts in OM

In form at ion Age/

Internet Revo lut ion

In ternet, WWW, ERP 1990s ARPANET, TimSupp ly chain Berners-Lee, SAP, i2

management, Techno log ies, ORACLE,

E-commerce Peop leSoft, Am azon ,

Yahoo , eBay,

and others



Categories o f

E-Commerce



Categories o f

E-Commerce

Business

Consumer

Business Consumer

B2BCommerceone.com

B2CAmazon.com

C2B

Priceline.com

C2C

eBay.com



A New Value Chain

ManufacturerWholesaler/distributor

Retailer Consumer

(a) Traditional Value Chain



A New Value Chain


Retailer Consumer


Retailer Consumer


(b) Intermediaries Eliminated (Deintermediation)


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A New Value Chain


Retailer Consumer

InfomediaryManufacturer E-Retailer Aggregator Portal Consumer


Retailer Consumer


(b) Intermediaries Eliminated (Deintermediation)

(b) New Intermediaries Introduced (Reintermediation)


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An In teg rated

Value Chain


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An In teg rated

Value Chain

Manufacturer SupplierCustomer

Flow of information (customer order)


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An In teg rated

Value Chain

Manufacturer SupplierCustomer

Flow of information (customer order)

Flow of product (order fulfillment)


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The Grow th o f

E-Commerce8000

6000

4000

2000

0| | | | |2000 2001 2002 2003 2004

Year

TrillionsofDolla

rs


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The Grow th o f

E-Commerce

B2B

B2C

8000

6000

4000

2000

0| | | | |2000 2001 2002 2003 2004

Year

TrillionsofDollars


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Types o f B2B Transact ions

Buyer Seller

Buyers

Sellers

Buyer

Sellers Buyers Sellers

(a) Electronic Storefront (b) Sellers Auction

(c) Buyers Auction (d) Exchange or E-Marketplace


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E-Business Promotes:

Better cus tomer relat ions

More eff ic ien t processesLower cost of mater ials

In format ion techno logy synergy

Better and faster decis ion making


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E-Business Promotes:

New form s o f organizat ions

Expanded supply chain

Higher cus tomer expectations

New ways of do ing bus iness

Global izat ion


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An In ternational Compar ison

o f Hou r ly Wage Rates

| | | | | |1975 1980 1985 1990 1995 2000

$ 35

$ 30

$ 25

$ 20

$ 15

$ 10$ 5

$ 0


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An In ternational Compar ison

o f Hou r ly Wage Rates

| | | | | |1975 1980 1985 1990 1995 2000

$ 35

$ 30

$ 25

$ 20

$ 15

$ 10$ 5

$ 0

GermanyJapan

United States

EU

Asian NIEs

Mexico


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Mult inat ional Corporat ions

Country Foreign SalesCompany of Origin as % of Total

Nestl Switzerland 98.2Nokia Finland 97.6

Philips Netherlands 94.0Bayer Germany 89.8ABB Germany 87.2SAP Germany 80.0

Exxon Mobil United States 79.6Royal Dutch/Shell Netherlands 73.3IBM United States 62.7McDonalds United States 61.5


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Compet i t iveness

The degree to which a nat ion can

produce goods and serv ices that

meet the test o f internat ional

markets whi le simul taneously

maintain ing o r expanding the real

incomes o f i ts ci t izens .


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Product iv i ty

Product iv i ty =Output

Input


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Product iv i ty

Become more eff ic ient

Downsize

Expand

Retrench

Ach ieve breakthroughs

Product iv i ty =Output

Input

Product iv i ty imp roves when f irms:


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Productivity in the 90s

| | | | | | | | | | | |90 91 92 93 94 95 96 97 98 99 00 2001

7

6

5

43

2

1

0

-1

-2

-3


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Productivity in the 90s

| | | | | | | | | | | |90 91 92 93 94 95 96 97 98 99 00 2001

7

6

5

43

2

1

0

-1

-2

-3

United States

GermanyJapan


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Measures o f

Compet i t ivenessProduct iv i ty

GDP (Gross domest ic produc t) grow thMarket cap ital izat ion

Techno log ical infrastructu re

Quali ty of educat ion

Eff ic iency of government


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Compet it iveness o f

Selec ted Coun tr ies

US Singapore Finland Ireland Germany UK Japan Mexico Russia

100

80

60

40

20

0


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Compet it iveness o f

Selec ted Coun tr ies

US Singapore Finland Ireland Germany UK Japan Mexico Russia

100

80

60

40

20

0


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Barr iers to Entry

Econom ies of scale

Capital investment

Access to supply and dis t ribu t ion

channels

Learning cu rves


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Compet it ion With in

Indus tr ies Increases When

Firms are relat ively equal in s ize

and resources

Produc ts and services are

standardized

Indu st ry grow th is s low orexponent ia l


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Primary Top ics in

Operat ions Management Strategy

Products and

serv ices Processes and

technologies

Facil i t ies

Project

management

Managing the supp ly

chain

Forecast ing demandfor products and

serv ices

Product ion plann ing

and schedu l ing

Ensur ing qual ity


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Purpose of the Text

To gain an appreciat ion of the

strategic impo rtance of operat ions

and how operat ions relates to o ther

bus iness funct ions

To develop a wo rk ing know ledge of

the concepts and methods related to

design ing and managing operat ions To develop a ski l l set for o rganizing

act iv i t ies as a part o f a process


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Organ izat ion o f the Text

The Strategic Design ing the

Impo rtance of Operat ing Managing the Ensu r ing

Operat ions System Supp ly Chain Qual ity

1. In t roduc ti on to

Operat ions and

Compet i t iveness2. Operat io n s

Strategy

3. Produc ts and

Services

4. Processes andTechnologies

5. Fac i li ti es

6. Pr ojec t

Management

7. Supply Ch ain

Management

8. Fo rec as tin g9. Cap ac ity an d

Aggregate

Planning

10. Inven tor y

Management

11. Jus t -in -Time and

Lean Produc t ion

12. Enterp ri se

Resource

Planning

13. Schedu li ng

14. Qu ality

Management

15. St at is ti calProcess

Control

16. Wait in g L in e

Models for

Service

Improvement

17. Hum an

Resources in

Operat ions

Management


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Operat ions Managers

Operat ions Managers play a cr i t ical role with in their

organizat ionsthey ult imately are respon sible for the success

of their manufactur in g or service units.

The Ops Mgr wo rks c losely w i th top management in set t ing the

strategic direct ion o f the company, and in def in ing the

competi t ive pr ior i t ies of the op erat ion.

The Ops Mgr is engaged in many act iv i t ies su ch as w el l known

management fun ct ion s of plannin g, organizing, staff ing,

d i rect ing and c ontro l l ing


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Two essent ial attr ibutes of an Ops Mgr are a sol id technolog y

know ledge base and p eople sk i l ls.

The Ops Mgr must fully understand the companys products or

serv ices, the process and process technologies used to

manufacture the produ cts or p rovid e the services, and the

operat ing s ystems, methods , and techniqu es that govern the

transform ation process.

Ops Mgrs must b e able to wo rk w i th people ef fect ive ly.


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They must b e able to make decis ions, communicate them toother managers, and to the wo rkforc e, and motivate both

managers and staff to imp lement these decision s.

The Ops Mgr m us t be appro achable and accessib le to oth ermanagers and staff , and genuin ely op en to their part ic ipat ion

and id eas.

The Ops Mgr mus t real ize that i t is people, managers and staff

who u lt imately determ ine the success o r fai lure of the

organization.


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Types o f Serv ices

Instead of m anufactur ing prod ucts o r good s, many

organizat ions prov ide something of value by faci l i tat ing the

produ ct ion of g oods or of fering serv ices.

Services are econom ic act iv i t ies that produce a place, t ime,

form, or ps ycho logica l ut il i ty for the consumer.

Examp les m ight be a disc oun t chain such as Wal-Mart, or K -

Mart in US; a car-wash or an auto service center; a Mobi le

Phone service pro vider; a Credit Union or Bank; Travel

companies, hotels and restaurants for the hospita l ity or tou r ist

indu stry etc.


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Types o f Serv ices con t.

Unsk i l led Personal Services: Housekeeping and street vendin g

often th e ini t ia l service act iv i t ies o f a soc iety.

Ski l led Person al Services: The next step up the ladder of developm ent

and inc lude sh opkeepers, who lesale and rental merchants, repair and

maintenance people, and f in ancial clerks.

Ind us tr ia l Services: These involv e support services suc h as lawyers,

accountants, bankers, and insurance f i rms, and c ommodi ty t raders.

Mass Consumer Services: Often invo lve disc ret ionary incom e/services

su ch as air l ines, hotels, auto rental , and entertainment.


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Class i fy ing Serv ice

Operat ions Service organizat ions try to m ake the conv ersion or

transform ation of inp uts to outputs as effect ive as po ss ible.

Service operat ions can be classi f ied accordin g to the

degree of s tandardizat ion of their service.

S i Fi b C it l


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Serv ice Firms by Cap ital

and Labor In tensi tyService

Capital Intensive Labor Intensive

Automatic Unskilled

Operators

Skilled

Operators

Unskilled

Labor

Skilled

laborProfessionals

Vending

machines,

car washes

Movies,

theaters,

dry

cleaners

Excavating,

airlines,

clinics

Lawn

care,

security

guards

Appliance

repair,

recruiting,

banks

Lawyers,

Mgmt

consultants,

accountants

, doctors


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Unique Character ist ics o f

Serv ice Operat ions High consumer contact

Act ive c onsumer p art ic ipat ion e.g. educat ion, cl in ics, univers i ty cafeter ia

Perishabi l i ty of the serv ice e.g. medical or dental appointments, auto

repair, transp ortat ion

Cons um er preferenc es that dictate the locatio n of serv ice faci l i t ies e.g.,

mo vies, restaurants, banking


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Unique Character ist ics o f

Serv ice Operat ions Labo r intrus iveness e.g., ho tels, restaurants , help centers

Variable or non-standard o utp uts e.g., barbers ho p, health clu b, taxserv ices

In tangib i l i ty o f the serv ice output e.g., branding , copyr igh ts and

trademarks, IPOs, some franchis ing McDonalds

chap1 introduction to operations

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