7. Lecture outline
What operations and supply chain managers
Operations function
Evolution of operations management
Globalization and competitiveness
Operations
Strategy and organization of the text
do
Learning objectives for this course
1-2
8. What Operations and Supply Chain
Managers Do
What is operations management?
Design, operation, and improvement of productive systems
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
eliminated
do not add value are superfluous and should be
1-3
9. Transformation Process
Physical: as in manufacturing operations
Locational: as in transportation or warehouse
operations
Exchange: as in retail operations
Physiological: as in health care
Psychological: as in entertainment
Informational: as in communication
1-4
14. Historical Events in Operations Management
Era Events/Concept
s
Steam engine
Division of labor
Dates Originator
1769
1776
1790
James Watt
Adam Smith
Eli Whitney
Industrial
Revolution
Interchangeable parts
Principles of scientific
management
Time and motion
studies
Activity scheduling
chart
Moving assembly line
1911 Frederick W. Taylor
Frank and Lillian
Gilbreth
1911
Scientific
Manageme
nt 1912
1913
Henry Gantt
Henry Ford
1-13
15. Historical Events in Operations Management (cont.)
Era Events/Concepts Dates Originator
Hawthorne studies 1930 Elton Mayo
1940s Abraham Maslow
Human
Relations 1950s Frederick Herzberg
Motivation theories
1960s Douglas McGregor
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, waiting
line theory, decision
theory, PERT/CPM
Operations
Research 1950s Operations research groups
Joseph Orlicky, IBM
and others
1960s,
1970s
MRP, EDI, EFT, CIM
1-14
16. Historical Events in Operations Management (cont.)
Dates Originator
Era Events/Concepts
JIT (just-in-time) 1970s Taiichi Ohno (Toyota)
TQM (total quality
management)
W. Edwards Deming,
Joseph Juran
1980s
Quality
Revolution
Strategy and
operations
Wickham Skinner,
Robert Hayes
1980s
Michael Hammer,
James Champy
Business process reengineering 1990s
Six Sigma 1990s GE, Motorola
1-15
17. Historical Events in Operations Management (cont.)
Era
Internet
Revoluti
on
Events/Concepts Dates
1990s
Originator
ARPANET, Tim
Berners-Lee SAP,
i2 Technologies,
ORACLE
Internet, WWW,
management
ERP, supply chain
E-commerce 2000s Amazon, Yahoo,
eBay, Google, and
others
Globaliz
ation
WTO, European Union, and other
trade agreements, global supply
chains, outsourcing, BPO, Services
Science
1990s
2000s
Numerous countries
and companies
1-16
18. Supply Chain Management
Supply chain management - management of the flow
of information, products, and services across a
network of
partners
customers, enterprises, and supply chain
1-17
19. Globalization and Competitiveness
Why “go global”?
favorable cost
access to international markets
response to changes in demand
reliable sources of supply
latest trends and technologies
Increased globalization
results from the Internet and falling trade barriers
1-18
20. Productivity and Competitiveness
Competitiveness
degree to which a nation can produce goods and
services that meet the test of international markets
Productivity
ratio of output to input
Output
sales made, products produced, customers served,
meals delivered, or calls answered
Input
labor hours, investment in equipment, material usage,
or square footage
1-19
22. Productivity and Competitiveness
(cont.)
Retrenching
productivity is increasing, but both output and input
decrease with input decreasing at a faster rate
Assumption that more input would cause output
increase at the same rate
to
certain limits to the amount of output may not be
considered
output produced is emphasized,
increased inventories
not output sold;
1-21
23. Strategy and Operations
Strategy - provides direction for achieving a mission
Five steps for strategy formulation
Defining a primary task
What is the firm in the business of doing?
Assessing core competencies
What does the firm do better than anyone else?
Determining order winners and order qualifiers
What qualifies an item to be considered for purchase?
What wins the order?
Positioning the firm
How will the firm compete?
Deploying the strategy
1-22
25. Order Winners
Qualifiers
and Order
Source: Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan
Betts, Operations and Process Management, Prentice Hall, 2006, p. 47
1-24
27. Positioning the Firm: Cost
Waste elimination
relentlessly pursuing the removal of all waste
Examination of cost structure
looking at the entire cost structure for reduction
potential
Lean production
providing low costs
operations
through disciplined
1-26
28. Positioning the Firm: Speed
Fast moves, fast adaptations, tight linkages
Internet - conditioned customers to expect immediate responses
Service organizations - always competed on speed
(McDonald’s, LensCrafters, and Federal Express)
Manufacturers - time-based competition: build-to-order
production and efficient supply chains
Fashion industry - two-week design-to-rack lead time of
Filipino retailer ex. Bench
1-27
29. Positioning the Firm: Quality
Minimizing defect rates or conforming to design
specifications; please the customer
Ritz-Carlton - one customer at a time
Service system is designed to “move heaven and earth”
customer
Every employee is empowered to satisfy a guest’s wish
to satisfy
Teams at all levels set objectives and devise quality action plans
Each hotel has a quality leader
1-28
30. Positioning the Firm:
Flexibility
Ability to adjust to changes in product mix,
production volume, or design
National Bicycle Industrial Company
offers 11,231,862 variations
delivers within two weeks at costs only 10% above
standard models
mass
parts
customization: the mass production of customized
1-29
31. Balanced Scorecard
Balanced scorecard
measuring more than financial performance
finances
customers
processes
learning and growing
Key performance indicators
a set of measures that help managers
performance in critical areas
evaluate
1-32
32. O
Op
pe
e a
a o
on
ns
s M
Ma
an
na
ag
ge
em
me
en
n
Decision Analysis
Roberta Russell & Bernard W. Taylor, III
Operations Management
Chapter 1 Supplement
33. • Decision Analysis
• Decision Making without Probabilities
• Decision Analysis with Excel
• Decision Analysis with OM Tools
• Decision Making with Probabilities
• Expected Value of Perfect Information
• Sequential Decision Tree
Supplement 1-44
Lecture Outline
34. • Quantitative methods
• a set of tools for operations manager
• Decision analysis
• a set of quantitative decision-making
techniques for decision situations in which
uncertainty exists
• Example of an uncertain situation
• demand for a product may vary between 0 and 200
units, depending on the state of market
Supplement 1-45
Decision Analysis
35. • States of nature
• Events that may occur in the future
• Examples of states of nature:
• high or low demand for a product
• good or bad economic conditions
Decision making under risk
• probabilities can be assigned to the
states of nature in the future
•
occurrence of
• Decision making under uncertainty
• probabilities can NOT be assigned to the
occurrence of states of nature in the future
Supplement 1-46
Decision Making
Without Probabilities
36. • A graphical method for analyzing
decision situations that require a
sequence of decisions over time
• Decision tree consists of
• Square nodes - indicating decision points
• Circles nodes - indicating states of nature
• Arcs - connecting nodes
Supplement 1-64
Sequential
Decision Trees
