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- 1. Copyright 2009 John Wiley & Sons, Inc.Copyright 2009 John Wiley & Sons, Inc. Beni AsllaniBeni Asllani University of Tennessee at ChattanoogaUniversity of Tennessee at Chattanooga Introduction to Operations andIntroduction to Operations and Supply Chain ManagementSupply Chain Management Operations Management - 6th EditionOperations Management - 6th Edition Chapter 1Chapter 1 Roberta Russell & Bernard W. Taylor, IIIRoberta Russell & Bernard W. Taylor, III
- 2. Copyright 2009 John Wiley & Sons, Inc. 1-2 Lecture OutlineLecture Outline What Operations and Supply ChainWhat Operations and Supply Chain Managers DoManagers Do Operations FunctionOperations Function Evolution of Operations and Supply ChainEvolution of Operations and Supply Chain ManagementManagement Globalization and CompetitivenessGlobalization and Competitiveness OperationsOperations Strategy and Organization of the TextStrategy and Organization of the Text Learning Objectives for This CourseLearning Objectives for This Course
- 3. Copyright 2009 John Wiley & Sons, Inc. 1-3 What Operations andWhat Operations and Supply Chain Managers DoSupply Chain Managers Do What is Operations Management?What is Operations Management? design, operation, and improvement of productivedesign, operation, and improvement of productive systemssystems What is Operations?What is Operations? a function or system that transforms inputs into outputs ofa function or system that transforms inputs into outputs of greater valuegreater value What is a Transformation Process?What is a Transformation Process? a series of activities along aa series of activities along a value chainvalue chain extending fromextending from supplier to customersupplier to customer activities that do not add value are superfluous andactivities that do not add value are superfluous and should be eliminatedshould be eliminated
- 4. Copyright 2009 John Wiley & Sons, Inc. 1-4 Physical:Physical: as in manufacturing operationsas in manufacturing operations Locational:Locational: as in transportation oras in transportation or warehouse operationswarehouse operations Exchange:Exchange: as in retail operationsas in retail operations Physiological:Physiological: as in health careas in health care Psychological:Psychological: as in entertainmentas in entertainment Informational:Informational: as in communicationas in communication Transformation ProcessTransformation Process
- 5. Copyright 2009 John Wiley & Sons, Inc. 1-5 INPUT •Material •Machines •Labor •Management •Capital TRANSFORMATION PROCESS OUTPUT •Goods •Services Feedback & RequirementsFeedback & Requirements Operations as aOperations as a Transformation ProcessTransformation Process
- 6. Copyright 2009 John Wiley & Sons, Inc. 1-6 Operations FunctionOperations Function OperationsOperations MarketingMarketing Finance andFinance and AccountingAccounting HumanHuman ResourcesResources OutsideOutside SuppliersSuppliers
- 7. Copyright 2009 John Wiley & Sons, Inc. 1-7 How is Operations Relevant to myHow is Operations Relevant to my Major?Major? AccountingAccounting InformationInformation TechnologyTechnology ManagemenManagemen tt ““As an auditor you mustAs an auditor you must understand the fundamentals ofunderstand the fundamentals of operations management.”operations management.” ““IT is a tool, and there’s no betterIT is a tool, and there’s no better place to apply it than inplace to apply it than in operations.”operations.” ““We use so many things youWe use so many things you learn in an operations class—learn in an operations class— scheduling, lean production,scheduling, lean production, theory of constraints, and tons oftheory of constraints, and tons of quality tools.”quality tools.”
- 8. Copyright 2009 John Wiley & Sons, Inc. 1-8 How is Operations Relevant to myHow is Operations Relevant to my Major? (cont.)Major? (cont.) EconomicEconomic ss MarketingMarketing FinanceFinance ““It’s all about processes. I liveIt’s all about processes. I live by flowcharts and Paretoby flowcharts and Pareto analysis.”analysis.” ““How can you do a good jobHow can you do a good job marketing a product if you’remarketing a product if you’re unsure of its quality or deliveryunsure of its quality or delivery status?”status?” ““Most of our capital budgetingMost of our capital budgeting requests are from operations,requests are from operations, and most of our cost savings,and most of our cost savings, too.”too.”
- 9. Copyright 2009 John Wiley & Sons, Inc. 1-9 Evolution of Operations andEvolution of Operations and Supply Chain ManagementSupply Chain Management Craft productionCraft production process of handcrafting products orprocess of handcrafting products or services for individual customersservices for individual customers Division of laborDivision of labor dividing a job into a series of small tasksdividing a job into a series of small tasks each performed by a different workereach performed by a different worker Interchangeable partsInterchangeable parts standardization of parts initially asstandardization of parts initially as replacement parts; enabled massreplacement parts; enabled mass productionproduction
- 10. Copyright 2009 John Wiley & Sons, Inc. 1-10 Scientific managementScientific management systematic analysis of work methodssystematic analysis of work methods Mass productionMass production high-volume production of a standardizedhigh-volume production of a standardized product for a mass marketproduct for a mass market Lean productionLean production adaptation of mass production that prizesadaptation of mass production that prizes quality and flexibilityquality and flexibility Evolution of Operations andEvolution of Operations and Supply Chain Management (cont.)Supply Chain Management (cont.)
- 11. Copyright 2009 John Wiley & Sons, Inc. 1-11 Historical Events inHistorical Events in Operations ManagementOperations Management Era Events/Concepts Dates Originator Industrial Revolution Steam engine 1769 James Watt Division of labor 1776 Adam Smith Interchangeable parts 1790 Eli Whitney Scientific Managemen t Principles of scientific management 1911 Frederick W. Taylor Time and motion studies 1911 Frank and Lillian Gilbreth Activity scheduling chart 1912 Henry Gantt Moving assembly line 1913 Henry Ford
- 12. Copyright 2009 John Wiley & Sons, Inc. 1-12 Historical Events inHistorical Events in Operations ManagementOperations Management (cont.)(cont.) Era Events/Concept s Dates Originator Human Relations Hawthorne studies 1930 Elton Mayo Motivation theories 1940s Abraham Maslow 1950s Frederick Herzberg 1960s Douglas McGregor Operations Research Linear programming 1947 George Dantzig Digital computer 1951 Remington Rand Simulation, waiting line theory, decision theory, PERT/CPM 1950s Operations research groups MRP, EDI, EFT, CIM 1960s, 1970s Joseph Orlicky, IBM and others
- 13. Copyright 2009 John Wiley & Sons, Inc. 1-13 Historical Events inHistorical Events in Operations ManagementOperations Management (cont.)(cont.) Era Events/Concep ts Date s Originator Quality Revolutio n JIT (just-in-time) 1970s Taiichi Ohno (Toyota) TQM (total quality management) 1980s W. Edwards Deming, Joseph Juran Strategy and operations 1980s Wickham Skinner, Robert Hayes Business process reengineering 1990s Michael Hammer, James Champy Six Sigma 1990s GE, Motorola
- 14. Copyright 2009 John Wiley & Sons, Inc. 1-14 Historical Events inHistorical Events in Operations ManagementOperations Management (cont.)(cont.) Era Events/Concepts Date s Originator Internet Revolution Internet, WWW, ERP, supply chain management 1990s ARPANET, Tim Berners-Lee SAP, i2 Technologies, ORACLE E-commerce 2000s Amazon, Yahoo, eBay, Google, and others Globalizatio n WTO, European Union, and other trade agreements, global supply chains, outsourcing, BPO, Services Science 1990s 2000s Numerous countries and companies
- 15. Copyright 2009 John Wiley & Sons, Inc. 1-15 Evolution of Operations andEvolution of Operations and Supply Chain Management (cont.)Supply Chain Management (cont.) Supply chain managementSupply chain management management of the flow of information, products, and servicesmanagement of the flow of information, products, and services across a network of customers, enterprises, and supply chainacross a network of customers, enterprises, and supply chain partnerspartners
- 16. Copyright 2009 John Wiley & Sons, Inc. 1-16 Globalization andGlobalization and CompetitivenessCompetitiveness Why “go global”?Why “go global”? favorable costfavorable cost access to international marketsaccess to international markets response to changes in demandresponse to changes in demand reliable sources of supplyreliable sources of supply latest trends and technologieslatest trends and technologies Increased globalizationIncreased globalization results from the Internet and falling traderesults from the Internet and falling trade barriersbarriers
- 17. Copyright 2009 John Wiley & Sons, Inc. 1-17 Globalization andGlobalization and Competitiveness (cont.)Competitiveness (cont.) Hourly Compensation Costs for Production WorkersHourly Compensation Costs for Production Workers Source:Source: U.S. Bureau of Labor Statistics, 2005.U.S. Bureau of Labor Statistics, 2005.
- 18. Copyright 2009 John Wiley & Sons, Inc. 1-18 Globalization andGlobalization and Competitiveness (cont.)Competitiveness (cont.) World Population DistributionWorld Population Distribution Source:Source: U.S. Census Bureau, 2006.U.S. Census Bureau, 2006.
- 19. Copyright 2009 John Wiley & Sons, Inc. 1-19 Globalization andGlobalization and Competitiveness (cont.)Competitiveness (cont.) Trade in Goods as % of GDPTrade in Goods as % of GDP (sum of merchandise exports and imports divided by GDP, valued in U.S. dollars)(sum of merchandise exports and imports divided by GDP, valued in U.S. dollars)
- 20. Copyright 2009 John Wiley & Sons, Inc. 1-20 Productivity andProductivity and CompetitivenessCompetitiveness CompetitivenessCompetitiveness degree to which a nation can produce goods anddegree to which a nation can produce goods and services that meet the test of internationalservices that meet the test of international marketsmarkets ProductivityProductivity ratio of output to inputratio of output to input OutputOutput sales made, products produced, customerssales made, products produced, customers served, meals delivered, or calls answeredserved, meals delivered, or calls answered InputInput labor hours, investment in equipment, materiallabor hours, investment in equipment, material usage, or square footageusage, or square footage
- 21. Copyright 2009 John Wiley & Sons, Inc. 1-21 Measures of Productivity Productivity andProductivity and Competitiveness (cont.)Competitiveness (cont.)
- 22. Copyright 2009 John Wiley & Sons, Inc. 1-22 Productivity andProductivity and Competitiveness (cont.)Competitiveness (cont.) Average Annual Growth Rates in Productivity, 1995-2005.Average Annual Growth Rates in Productivity, 1995-2005. Source:Source: Bureau of Labor Statistics. A Chartbook ofBureau of Labor Statistics. A Chartbook of International Labor Comparisons. January 2007, p. 28.International Labor Comparisons. January 2007, p. 28.
- 23. Copyright 2009 John Wiley & Sons, Inc. 1-23 Productivity andProductivity and Competitiveness (cont.)Competitiveness (cont.) Average Annual Growth Rates in Output and Input,Average Annual Growth Rates in Output and Input, 1995-20051995-2005 Source:Source: Bureau of Labor Statistics. A Chartbook of InternationalBureau of Labor Statistics. A Chartbook of International Labor Comparisons, January 2007, p. 26.Labor Comparisons, January 2007, p. 26. Dramatic Increase in Output w/ Decrease in Labor Hours Dramatic Increase in Output w/ Decrease in Labor Hours
- 24. Copyright 2009 John Wiley & Sons, Inc. 1-24 RetrenchingRetrenching productivity is increasing, but both output and inputproductivity is increasing, but both output and input decrease with input decreasing at a faster ratedecrease with input decreasing at a faster rate Assumption that more input would causeAssumption that more input would cause output to increase at the same rateoutput to increase at the same rate certain limits to the amount of output may not becertain limits to the amount of output may not be consideredconsidered output producedoutput produced is emphasized, notis emphasized, not output soldoutput sold;; increased inventoriesincreased inventories Productivity andProductivity and Competitiveness (cont.)Competitiveness (cont.)
- 25. Copyright 2009 John Wiley & Sons, Inc. 1-25 StrategyStrategy Provides direction for achieving a missionProvides direction for achieving a mission Five Steps for Strategy FormulationFive Steps for Strategy Formulation Defining a primary taskDefining a primary task What is the firm in the business of doing?What is the firm in the business of doing? Assessing core competenciesAssessing core competencies What does the firm do better than anyone else?What does the firm do better than anyone else? Determining order winners and order qualifiersDetermining order winners and order qualifiers What qualifies an item to be considered for purchase?What qualifies an item to be considered for purchase? What wins the order?What wins the order? Positioning the firmPositioning the firm How will the firm compete?How will the firm compete? Deploying the strategyDeploying the strategy Strategy and OperationsStrategy and Operations
- 26. Copyright 2009 John Wiley & Sons, Inc. 1-26 Strategic PlanningStrategic Planning Mission and Vision Mission and Vision Corporate Strategy Corporate Strategy Operations Strategy Operations Strategy Marketing Strategy Marketing Strategy Financial Strategy Financial Strategy Voice of the Business Voice of the Business Voice of the Customer Voice of the Customer
- 27. Copyright 2009 John Wiley & Sons, Inc. 1-27 Order WinnersOrder Winners and Order Qualifiersand Order Qualifiers Source:Source: Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and AlanAdapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan Betts,Betts, Operations and Process ManagementOperations and Process Management, Prentice Hall, 2006, p. 47, Prentice Hall, 2006, p. 47
- 28. Copyright 2009 John Wiley & Sons, Inc. 1-28 Positioning the FirmPositioning the Firm CostCost SpeedSpeed QualityQuality FlexibilityFlexibility
- 29. Copyright 2009 John Wiley & Sons, Inc. 1-29 Positioning the Firm:Positioning the Firm: CostCost Waste eliminationWaste elimination relentlessly pursuing the removal of all wasterelentlessly pursuing the removal of all waste Examination of cost structureExamination of cost structure looking at the entire cost structure forlooking at the entire cost structure for reduction potentialreduction potential Lean productionLean production providing low costs through disciplinedproviding low costs through disciplined operationsoperations
- 30. Copyright 2009 John Wiley & Sons, Inc. 1-30 Positioning the Firm:Positioning the Firm: SpeedSpeed fast moves, fast adaptations, tight linkagesfast moves, fast adaptations, tight linkages InternetInternet conditioned customers to expect immediate responsesconditioned customers to expect immediate responses Service organizationsService organizations always competed on speed (McDonald’s, LensCrafters, andalways competed on speed (McDonald’s, LensCrafters, and Federal Express)Federal Express) ManufacturersManufacturers time-based competition: build-to-order production andtime-based competition: build-to-order production and efficient supply chainsefficient supply chains Fashion industryFashion industry two-week design-to-rack lead time of Spanish retailer, Zaratwo-week design-to-rack lead time of Spanish retailer, Zara
- 31. Copyright 2009 John Wiley & Sons, Inc. 1-31 Positioning the Firm:Positioning the Firm: QualityQuality Minimizing defect rates or conforming toMinimizing defect rates or conforming to design specifications; please the customerdesign specifications; please the customer Ritz-Carlton - one customer at a timeRitz-Carlton - one customer at a time Service system is designed to “move heavenService system is designed to “move heaven and earth” to satisfy customerand earth” to satisfy customer Every employee is empowered to satisfy aEvery employee is empowered to satisfy a guest’s wishguest’s wish Teams at all levels set objectives and deviseTeams at all levels set objectives and devise quality action plansquality action plans Each hotel has a quality leaderEach hotel has a quality leader
- 32. Copyright 2009 John Wiley & Sons, Inc. 1-32 Positioning the Firm:Positioning the Firm: FlexibilityFlexibility ability to adjust to changes in product mix,ability to adjust to changes in product mix, production volume, or designproduction volume, or design National Bicycle Industrial CompanyNational Bicycle Industrial Company offers 11,231,862 variationsoffers 11,231,862 variations delivers within two weeks at costs only 10%delivers within two weeks at costs only 10% above standard modelsabove standard models mass customizationmass customization: the mass production of: the mass production of customized partscustomized parts
- 33. Copyright 2009 John Wiley & Sons, Inc. 1-33 Policy DeploymentPolicy Deployment Policy deploymentPolicy deployment translates corporate strategy into measurabletranslates corporate strategy into measurable objectivesobjectives HoshinsHoshins action plans generated from the policyaction plans generated from the policy deployment processdeployment process
- 34. Copyright 2009 John Wiley & Sons, Inc. 1-34 Policy DeploymentPolicy Deployment Derivation of an Action Plan Using Policy DeploymentDerivation of an Action Plan Using Policy Deployment
- 35. Copyright 2009 John Wiley & Sons, Inc. 1-35 Balanced ScorecardBalanced Scorecard Balanced scorecardBalanced scorecard measuring more than financial performancemeasuring more than financial performance financesfinances customerscustomers processesprocesses learning and growinglearning and growing Key performance indicatorsKey performance indicators a set of measures that help managers evaluatea set of measures that help managers evaluate performance in critical areasperformance in critical areas
- 36. Copyright 2009 John Wiley & Sons, Inc. 1-36 Balanced ScorecardBalanced Scorecard BalancedBalanced ScorecardScorecard WorksheetWorksheet
- 37. Copyright 2009 John Wiley & Sons, Inc. 1-37 Balanced ScorecardBalanced Scorecard Radar ChartRadar Chart DashboardDashboard
- 38. Copyright 2009 John Wiley & Sons, Inc. 1-38 Operations StrategyOperations Strategy ProductsProducts ServicesServices ProcessProcess andand TechnologyTechnology CapacityCapacity HumanHuman ResourcesResources QualityQuality FacilitiesFacilities SourcingSourcing OperatingOperating SystemsSystems
- 39. Copyright 2009 John Wiley & Sons, Inc. 1-39 Organization of This Text:Organization of This Text: Part I – Operations ManagementPart I – Operations Management Intro. to Operations andIntro. to Operations and Supply Chain Management:Supply Chain Management: Chapter 1Chapter 1 Quality Management:Quality Management: Chapter 2Chapter 2 Statistical Quality Control:Statistical Quality Control: Chapter 3Chapter 3 Product Design:Product Design: Chapter 4Chapter 4 Service Design:Service Design: Chapter 5Chapter 5 Processes and Technology:Processes and Technology: Chapter 6Chapter 6 Facilities:Facilities: Chapter 7Chapter 7 Human Resources:Human Resources: Chapter 8Chapter 8 Project Management:Project Management: Chapter 9Chapter 9
- 40. Copyright 2009 John Wiley & Sons, Inc. 1-40 Supply ChainSupply Chain Strategy and Design:Strategy and Design: Chapter 10Chapter 10 Global Supply ChainGlobal Supply Chain Procurement and Distribution:Procurement and Distribution: Chapter 11Chapter 11 Forecasting:Forecasting: Chapter 12Chapter 12 Inventory Management:Inventory Management: Chapter 13Chapter 13 Sales andSales and Operations Planning:Operations Planning: Chapter 14Chapter 14 Resource Planning:Resource Planning: Chapter 15Chapter 15 Lean Systems:Lean Systems: Chapter 16Chapter 16 Scheduling:Scheduling: Chapter 17Chapter 17 Organization of This Text:Organization of This Text: Part II – Supply Chain ManagementPart II – Supply Chain Management
- 41. Copyright 2009 John Wiley & Sons, Inc. 1-41 Learning Objectives ofLearning Objectives of this Coursethis Course Gain an appreciation of strategic importanceGain an appreciation of strategic importance of operations and supply chain managementof operations and supply chain management in a global business environmentin a global business environment Understand how operations relates to otherUnderstand how operations relates to other business functionsbusiness functions Develop a working knowledge of concepts andDevelop a working knowledge of concepts and methods related to designing and managingmethods related to designing and managing operations and supply chainsoperations and supply chains Develop a skill set for quality and processDevelop a skill set for quality and process improvementimprovement
- 42. Copyright 2009 John Wiley & Sons, Inc. 1-42 Copyright 2009 John Wiley & Sons, Inc.Copyright 2009 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond thatAll rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act withoutpermitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for furtherexpress permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley &information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only andSons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility fornot for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from theerrors, omissions, or damages caused by the use of these programs or from the use of the information herein.use of the information herein.