Transcript Operations and Competitiveness

Chapter 1
Introduction to Operations and
Supply Chain Management – Part 1
Operations Management - 6th Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2006 John Wiley & Sons, Inc.
Beni Asllani
University of Tennessee at Chattanooga
Lecture Outline
 What Do Operations Managers Do?
 Operations Function
 Evolution of Operations Management
 Operations Management and E–
business
Copyright 2006 John Wiley & Sons, Inc.
1-2
What Do Operations
Managers Do?
 What is Operations?

a function or system that transforms inputs into outputs of
greater value
 What 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 eliminated
 What is Operations Management?

design, operation, and improvement of productive
systems
Copyright 2006 John Wiley & Sons, Inc.
1-3
Operations as a
Transformation Process
INPUT
•Material
•Machines
•Labor
•Management
•Capital
TRANSFORMATION
PROCESS
OUTPUT
•Goods
•Services
Feedback
Copyright 2006 John Wiley & Sons, Inc.
1-4
Transformation Process






Physical: as in manufacturing operations
Locational: as in transportation operations
Exchange: as in retail operations
Physiological: as in health care
Psychological: as in entertainment
Informational: as in communication
Copyright 2006 John Wiley & Sons, Inc.
1-5
An Integrated Value Chain
 Value chain: set of activities that create and
deliver products to customer
Customer
Manufacturer
Supplier
Flow of information (customer order)
Flow of product (order fulfillment)
Copyright 2006 John Wiley & Sons, Inc.
1-6
Operations Function
 Operations
 Marketing
 Finance and
Accounting
 Human
Resources
 Outside
Suppliers
Copyright 2006 John Wiley & Sons, Inc.
1-7
Historical Events in
Operations Management
Era
Industrial
Revolution
Events/Concepts
Dates
Originator
Steam engine
Division of labor
Interchangeable parts
Principles of scientific
management
1769
1776
1790
James Watt
1911
Frederick W. Taylor
Time and motion studies
Scientific
Management Activity scheduling chart
Moving assembly line
1911
1912
1913
Adam Smith
Eli Whitney
Frank and Lillian
Gilbreth
Henry Gantt
Henry Ford
Adam Smith’s Wealth of Nations: freely available at
http://www.gutenberg.org/etext/3300
Copyright 2006 John Wiley & Sons, Inc.
1-8
Historical Events in
Operations Management (cont.)
Era
Human
Relations
Operations
Research
Events/Concepts
Dates
Originator
Hawthorne studies
1930
1940s
1950s
1960s
1947
1951
Elton Mayo
Abraham Maslow
Frederick Herzberg
Douglas McGregor
George Dantzig
Remington Rand
1950s
Operations research
groups
1960s,
1970s
Joseph Orlicky, IBM
and others
Motivation theories
Linear programming
Digital computer
Simulation, waiting
line theory, decision
theory, PERT/CPM
MRP, EDI, EFT, CIM
Copyright 2006 John Wiley & Sons, Inc.
1-9
Historical Events in
Operations Management (cont.)
Era
Events/Concepts Dates Originator
JIT (just-in-time)
TQM (total quality
management)
Quality
Strategy and
Revolution
operations
Business process
reengineering
Copyright 2006 John Wiley & Sons, Inc.
1970s
1980s
1990s
1990s
Taiichi Ohno (Toyota)
W. Edwards Deming,
Joseph Juran
Wickham Skinner,
Robert Hayes
Michael Hammer,
James Champy
1-10
Historical Events in
Operations Management (cont.)
Era
Events/Concepts
Dates Originator
Globalization
WTO, European Union,
and other trade
agreements
Internet, WWW, ERP,
supply chain
management
1990s
2000s
Numerous countries
and companies
1990s
E-commerce
2000s
ARPANET, Tim
Berners-Lee SAP,
i2 Technologies,
ORACLE,
PeopleSoft
Amazon, Yahoo,
eBay, and others
Internet
Revolution
Copyright 2006 John Wiley & Sons, Inc.
1-11
Business
Consumer
Business
B2B
Commerceone.com
B2C
Amazon.com
Consumer
Operations Management
and E-Business
C2B
Priceline.com
C2C
eBay.com
Categories of E-Commerce
Copyright 2006 John Wiley & Sons, Inc.
1-12
Impact of E-Business on
Operations Management
Benefits of E-Business
 Comparison shopping
by customers
 Direct contact with
customers
 Business processes
conducted online
Copyright 2006 John Wiley & Sons, Inc.
Impact on Operations
 Customer expectations escalate;
quality must be maintained and
costs lowered
 No more guessing about demand
is necessary; inventory costs go
down; product and service design
improves; build to-order products
and services is made possible
 Transaction costs are lower;
customer support costs decrease;
e-procurement saves big bucks
1-13
Impact of E-Business on
Operations Management (cont.)
Benefits of E-Business
Impact on Operations
 Access to customers  Demand increases; order fulfillment
and logistics become major issues;
worldwide
production moves overseas
 Middlemen are
eliminated
 Access to suppliers
worldwide
Copyright 2006 John Wiley & Sons, Inc.
 Logistics change from delivering to a
store or distribution center to
delivering to individual homes;
consumer demand is more erratic and
unpredictable than business demand
 Outsourcing increases; more alliances
and partnerships among firms are
formed; supply is less certain; global
supply chain issues arise
1-14
Impact of E-Business on
Operations Management (cont.)
Benefits of E-Business
Impact on Operations
 Online auctions and emarketplaces
 Better and faster
decision making
 Competitive bidding lowers cost
of materials; supply needs can be
found in one location
 More timely information is
available with immediate access
by all stakeholders in decisionmaking process; customer orders
and product designs can be
clarified electronically; electronic
meetings can be held;
collaborative planning is
facilitated
Copyright 2006 John Wiley & Sons, Inc.
1-15
Impact of E-Business on
Operations Management (cont.)
Benefits of E-Business
 IT synergy
 Expanded supply
chains
Copyright 2006 John Wiley & Sons, Inc.
Impact on Operations
 Productivity increases as
information can be shared more
efficiently internally and
between trading partners
 Order fulfillment, logistics,
warehousing, transportation and
delivery become focus of
operations management; risk is
spread out; trade barriers fall
1-16