Transcript Chapter 1

Chapter 1
Introduction
John Butler
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Ph.D. University of Texas
Previously at Ohio State
Office
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GWI 550
[email protected]
865-5442
Office Hours
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Tuesday & Thursday 2:00 – 3:00 pm
By appointment
Operations Management (OM)
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The design, operation, and
improvement of the systems that
create and deliver the firm’s
primary products and services
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The “M” is important
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Not just tools or engineering
We’re talking about decisions
Strategic (long term)
 Tactical (intermediate)
 Operational (short term)
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Why bother? Lloyd
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Part of Business Education
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Cross Functional Applications
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Systematic View of Organizational
Processes
Job Opportunities
Key Terms
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Efficiency
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Do it with the least number of
resources
Effectiveness
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Do it right
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Maximize value to the firm
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Tradeoff?
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Value  Quality / Price
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How can we increase value?
Managing the Value Chain
Transformation Process
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A use of resources to transform
inputs into desired outputs
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Physical - manufacturing
Locational – transportation
Exchange – retailing
Storage – warehousing
Physiological – health care
Informational – telecommunications
Example : Tulane
Tulane
Inputs
High
School
Grads
Resources
•Teachers
•Books
•Classrooms
Transformation
Process
•Impart
knowledge &
skills
Outputs
Educated
Individuals
Goods & Services
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Tangible vs. Intangible
Services rely on interaction with
customer to produce
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McDonalds makes “stuff” but is
classified in service industry
Customers are on the shop floor
Shades of gray
Where Do We “Operate”?
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Manufacturing
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Typically group operations in one
department
Operations
Finance
Operations Marketing
Vertical
Plant
Plant
Manager
Manager
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Operations
Operations
Manager
Manager
Director
Director
Service Firm
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Operations scattered throughout firm
Bank, Airlines
Horizontal
Operations as Service
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Every company is really in the
service business
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Core services
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basic things that customers want from
products they purchase
Value-added services
differentiate the organization from
competitors
 build relationships that bind customers to
the firm in a positive way
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Core Services
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Traditional OM performance
measures
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Quality
Flexibility
Speed
Price (Cost reduction)
Value-added Services
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Information
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Problem Solving
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Support internal or external group
Sales Support
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Support internal or external group
Helping marketing close the deal
Field Support
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Fix items or replenish inventory
OM’s Role in A Company
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Not perceived as glamorous
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Many C-level execs are not OM literate
But …
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Operations account for 60-80% of the
direct expenses that burden a firm’s
profit
Synergies must exist with other
functional areas of the organization for
firm to succeed
1ST Industrial Revolution
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1776: US Democracy, Law & Culture
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Adam Smith: Wealth of Nations
James Watt: 1st Steam Engine Sold
Automation
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1790: First Advanced Textile Mill
1801: Eli Whitney
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Interchangeable Parts
England becomes the 1st industrial
nation.
OM History: 2nd Industrial Revolution
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1840+
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Railroad
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Use of Coal
Iron Mfg.
Mass Production/ Distribution /
Communication
Evolution of Managers, Accounting
Standards
Scientific Management: Frederick
Tayor, Henry Ganntt
Steel, Andrew Carnegie & Scale
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I believe the true road to preeminent
success in any line is to make yourself
master in that line
Focus: Details/Steel
Horizontal/Vertical Integration
The Model-T, Henry Ford & Speed
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1908: Moving Assembly Line
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work specialization
Labor time/car from 12.5 to 1.5
hours, price from $850 to $290
Post WWII
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Multidisciplinary team approach to
complex problems:
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Dupont: a centrally governed multidepartmental structure for effective
integration
GM: Alfred Sloan reorganizes GM into a
multi-divisional, decentralized
structure; effective market
segmentation, demand forecasting &
inventory tracking
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market share increase
New Practices in OM
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JIT/Lean Manufacturing
Manufacturing Strategy Paradigm
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Use as a strategic lever
TQM
Business Process Reengineering
Supply Chain Management
E-commerce
Going Forward
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Effectively consolidating the operations
resulting from mergers
Developing flexible supply chains to
enable mass customization of products
and services
Managing global supplier, production and
distribution networks
Increased “commoditization” of suppliers
Make efficient use of Internet technology