Introduction to Operations

Operations -- Prof. Juran

Outline

• Intro to Operations Management • Administrative Issues • Basic Definitions • Operations Strategy • Historical Development of OM • Scientific Management • Current Issues in OM • Measures of Productivity Operations -- Prof. Juran

About the Class

• Web site – Mission – Description – Syllabus (note special dates) – Downloads • Textbook • TAs Operations -- Prof. Juran

What is Operations Management?

The design, control, and improvement of the systems that create and deliver the firm’s primary products and services Operations -- Prof. Juran

What is a Production System?

A user of resources to transform inputs into some desired outputs Operations -- Prof. Juran

Important Measures of Performance

Efficiency: Using a minimum of resources Effectiveness: Creating value for some customer Operations -- Prof. Juran

Transformations Physical Locational Exchange Storage (Manufacturing) (Transportation) (Retailing) (Warehousing) Physiological (Health Care) Informational (Telecommunications)

Operations -- Prof. Juran

Manufacturing vs. Services

What differentiates manufacturing operations from service operations?

J&C proposition: All businesses are services Operations -- Prof. Juran

Operations Strategy

J&C: Setting broad policies and plans for using the resources of the firm to best support its long-term competitive strategy Juran: Deciding how the firm’s competitive strategy will actually happen, in terms of processes that are more efficient and/or more effective than the competition’s processes.

Operations -- Prof. Juran

Operations Strategy

Key questions: •What business are we in?

•Who are the customers?

•What do the customers need?

•How can we meet those needs more efficiently/effectively than the competition?

•How is all of this going to change over time?

Operations -- Prof. Juran

Competitive Dimensions

• Cost • Product Quality and Reliability • Delivery Speed • Delivery Reliability • Coping with Changes in Demand • Flexibility and New Product Introduction Speed • Other Product-Specific Criteria Operations -- Prof. Juran

Dealing with Trade-offs

•Cost vs. Quality •Flexibility vs. Speed •Etc.

Operations -- Prof. Juran

Strategic Frameworks

Kaplan and Norton: •Financial •Customer •Internal •Learning and Growth Operations -- Prof. Juran

Strategic Frameworks

Michael Porter: •Rivalry •Threat of Substitutes •Buyer Power •Supplier Power •Barriers to Entry / Threat of Entry Operations -- Prof. Juran

Historical Development of OM

• Craft System • Industrial Revolution • Scientific Management • Organizational Science • Operations Research • JIT and TQM • Supply Chain Management • Internet Commerce Operations -- Prof. Juran

Operations -- Prof. Juran

Craft System

Industrial Revolution

Operations -- Prof. Juran Eli Whitney 1765 - 1825

Scientific Management

Operations -- Prof. Juran Frederick W. Taylor 1856 - 1915

Industrial Revolution

Operations -- Prof. Juran Henry Ford 1863 - 1947

Scientific Management

• Frederick Winslow Taylor, (1856-1915), American industrial engineer.

• In 1878, he began working at the Midvale Steel Company.

• Developed measures of productivity based on time & motion studies. • Became rich from 100+ patents including tempered steel.

Operations -- Prof. Juran

Taylor’s Industrial Environment

• Large numbers of unskilled workers • Many immigrants who often didn’t speak English • Homogeneous markets meant great returns to scale (e.g, Model T dropped in price from $1000 to $360) • Management not viewed as a general or learnable skill Operations -- Prof. Juran

Scientific Management

• Defined by Frederick Taylor, late 1800s.

• The systematic study of the relationships between people and tasks to redesign the work for higher efficiency.

– Taylor sought to reduce the time a worker spent on each task by optimizing the way the task was done.

• Significant improvements in productivity Operations -- Prof. Juran

Taylor’s 4 Principles

• Develop a science for each element of work • Select, train, and develop workers • Cooperate with workers (share the savings – more $$$ for better performance) • Divide work and responsibility equally Operations -- Prof. Juran

Resistance to Taylor

• Separation of work from planning destroyed the traditional craft system – ‘money substituted for pride’ • Unions mistrusted – Taylor reduced work force from 450 to 150 on first job • Some firms cut rates after changes • Legislation to prevent time studies in government jobs.

Operations -- Prof. Juran

Frank & Lillian Gilbreth

Time and Motion Studies Film Therbligs Cheaper by the Dozen

Henry L. Gantt

Engineer; worked with Taylor Gantt Chart Operations -- Prof. Juran

methods.

The Gilbreths

• Frank and Lillian Gilbreth refined Taylor’s – Made many improvements to time and motion studies.

• Time and motion studies: – 1. Break down each action into components.

– – 2. Find better ways to perform it.

3. Reorganize each action to be more efficient.

• Gilbreths also studied fatigue problems, lighting, heating and other worker issues.

Operations -- Prof. Juran

Organizational Science

Operations -- Prof. Juran Elton Mayo (1880 - 1949)

Operations Research

Operations -- Prof. Juran Patrick Blackett (1897 - 1974)

JIT and TQM

Taiichi Ohno 1912 - 1990 Operations -- Prof. Juran Kaoru Ishikawa 1915 - 1989 Genichi Taguchi 1924 - 2012

JIT and TQM

Walter Shewhart 1891 - 1967 Operations -- Prof. Juran W. Edwards Deming 1900 - 1993 Joseph M. Juran 1904 - 2008

Current Issues in OM

• Coordinating relationships between mutually supportive but separate organizations • Optimizing global supplier, production, and distribution networks • Managing customer touch points • Raising awareness of competitive advantage – Amazon, Apple, Taco Bell, Southwest Airlines • Operational risk • Sustainability and “triple bottom line” – Economics, employees, environment Operations -- Prof. Juran

What is Productivity?

Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio: Outputs Inputs Operations -- Prof. Juran

Total Measure Productivity Total Measure Productivity = Outputs Inputs or = Goods and services produced All resources used

Operations -- Prof. Juran

Partial Measure Productivity Output or Output or Output or Output Labor Capital Materials Energy

Operations -- Prof. Juran

Multifactor Measure Productivity Output .

Labor + Capital + Energy or Output .

Labor + Capital + Materials

Operations -- Prof. Juran

Summary

• Intro to Operations Management • Administrative Issues • Basic Definitions • Operations Strategy • Historical Development of OM • Scientific Management • Current Issues in OM • Measures of Productivity Operations -- Prof. Juran