Introduction and History of Operations Management
Download as PPTX, PDF0 likes286 views
Frederick Taylor was a pioneer in scientific management who applied engineering principles to operations management. The document discusses Taylor's contributions and provides context on the evolution of operations management from early thinkers like Adam Smith to modern concepts. It also summarizes key events like Eli Whitney's invention of interchangeable parts and the assembly line innovations of Henry Ford. Overall the document provides a high-level history of the field of operations management from its origins to the present day.
Introduction and History of Operations Management
- 1. Let’s Learn Operations Management - Dr. Karishma Chaudhary
- 3. Operations Management Books for Reference 1. Heizer / Render -Principles of Operations Management, 6e Operations Management, 8e ( Prentice Hall Publication) 2. Operations Management by Norman Gaither & Greg Frazier ( Cengage Learning Publication) 3. Operations Management – B Mahadevan ( Pearson Publication) 4. Production & Operations Management - Everett E Adam, Jr Ronald J Ebert. ( PHI Publication) Text Book Dan Reid R. Sanders Nada, Operations Management – An Integrated Approach 1 – 3
- 5. transport of oxygen, carbon dioxide and nutrients.
- 6. What Is Operations Management? Production is the creation of goods and services Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs 1 – 6
- 7. The main purpose of the operations management is to run the business operations successfully, smoothly and effectively by using the minimum resources and meeting customer expectations.
- 8. Let's start with some basics ... The application of operations management to our every day activities is illustrated in the following quotation: 'Operations management is about the way organizations produce goods and services. Everything you wear, eat, sit on, use, read or knock about on the sports field comes to you courtesy of the operations managers who organized its production. Every book you borrow from the library, every treatment you receive at the hospital, every service you expect in the shops and every lecture you attend at university - all have been produced. This definition reflects the essential nature of Operations Management: it is a central activity in organizing things. Another way of looking at an operation, is to consider it as a transformation process ...
- 9. As a Transformation Process
- 10. Operations are a transformation process: they convert a set of resources (INPUTS) into services and goods (OUTPUTS). These resources may be raw materials, information, or the customer itself. These resources are transformed into the final goods or services by way of other 'transforming' resources - the facilities and staff of the operation. An obvious example is a cabinet maker, who takes some wood, cuts and planes it, and then polishes it until a piece of furniture is produced.
- 11. Information A tourist office gathers and provides information to holiday makers, and assists in advising on places to stay or visit. Customers At an airport, you are one of the many resources being processed. The operation you are involved in is about processing your ticket and baggage, moving from ticket desk through the customs and duty-free areas, to deliver you to the awaiting plane. The next time you stand on a moving walkway, think of yourself as a tin of baked beans moving along a factory conveyor!
- 12. extending the process ... If we add a few more parts to the transformation process, we can see the key elements that operations managers need to consider. Operations is about: designing services, products and delivery systems; managing and controlling the operations system; and finding ways to improve operations.
- 14. Case Study- The PowerSki Jetboard
- 16. The product development process can be complex and lengthy. It took sixteen years for Bob Montgomery and others at his company to develop the PowerSki Jetboard, and this involved thousands of design changes. It was worth it, though: the Jetboard was an exciting, engine- propelled personal watercraft – a cross between a high-performance surfboard and a competition water-ski/wakeboard that received extensive media attention and rave reviews. It was showered with honors, including Time magazine’s “Best Invention of the Year” award. Stories about the Jetboard appeared in more than fifty magazines around the world, and it was featured in several movies, over twenty-five TV shows, and on YouTube.
- 17. Montgomery and his team at PowerSki enjoyed taking their well- deserved bows for the job they did designing the product, but having a product was only the beginning for the company. The next step was developing a system that would produce high-quality Jetboards at reasonable prices. Before putting this system in place, PowerSki managers had to address several questions. • What kind of production process should they use to make the Jetboards? • How large should their production facilities be, and where should they be located? • Where should they buy needed materials? • What systems will be needed to control the production process and ensure a quality product?
- 18. Answering these and other questions helped PowerSki set up a manufacturing system through which it could accomplish the most important task that it had set for itself: efficiently producing quality Jetboards.
- 19. Operations Management in Manufacturing Like PowerSki, every organization—whether it produces goods or provides services— sees Job 1 as furnishing customers with quality products. Thus, to compete with other organizations, a company must convert resources (materials, labor, money, information) into goods or services as efficiently as possible. The upper-level manager who directs this transformation process is called an operations manager. The job of operations management (OM) consists of all the activities involved in transforming a product idea into a finished product. In addition, operations managers are involved in planning and controlling the systems that produce goods and services. In other words, operations managers manage the process that transforms inputs into outputs. Figure 10.2 illustrates these traditional functions of operations management.
- 21. Like PowerSki, all manufacturers set out to perform the same basic function: to transform resources into finished goods. To perform this function in today’s business environment, manufacturers must continually strive to improve operational efficiency. They must fine- tune their production processes to focus on quality, to hold down the costs of materials and labor, and to eliminate all costs that add no value to the finished product. Making the decisions involved in the effort to attain these goals is another job of operations managers. Their responsibilities can be grouped as follows: Production planning. During production planning, managers determine how goods will be produced, where production will take place, and how manufacturing facilities will be laid out. Production control. Once the production process is under way, managers must continually schedule and monitor the activities that make up that process. They must solicit and respond to feedback and make adjustments where needed. At this stage, they also oversee the purchasing of raw materials and the handling of inventories. Quality control. The operations manager is directly involved in efforts to ensure that goods are produced according to specifications and that quality standards are maintained.
- 22. Operations Management for Service Providers As the U.S. economy has changed from a goods producer to a service provider over the last sixty years, the dominance of the manufacturing sector has declined substantially. Today, only about 8 percent of U.S. workers are employed in manufacturing,in contrast to 30 percent in 1950. Most of us now hold jobs in the service sector, which accounts for 80 percent of U.S. jobs. In 2013, Wal-Mart was America’s largest employer, followed by McDonald’s, United Parcel Service (UPS), Target and Kroger. Not until we drop down to the ninth-largest employer—Hewlett Packard—do we find a company with a manufacturing component.
- 23. Operations Planning as Service Industry When starting or expanding operations, businesses in the service sector must make a number of decisions quite similar to those made by manufacturers: • What services (and perhaps what goods) should they offer? • Where will they locate their business, and what will their facilities look like? • How will they forecast demand for their services?
- 24. Examples of Logistics Operation Flow
- 26. Organizing to Produce Goods and Services 1 – 26 • Essential functions: • Marketing – generates demand • Production/operations – creates the product • Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
- 27. Organizational Charts Operations Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security Finance Investments Security Real estate Accounting Auditing Marketing Loans Commercial Industrial Financial Personal Mortgage Trust Department Commercial Bank 1 – 27
- 28. Organizational Charts Operations Ground support equipment Maintenance Ground Operations Facility maintenance Catering Flight Operations Crew scheduling Flying Communications Dispatching Management science Finance/ accounting Accounting Payables Receivables General Ledger Finance Cash control International exchange Airline Marketing Traffic 1 – 13 administration Reservations Schedules Tariffs (pricing) Sales Advertising
- 29. Marketing Sales promotion Advertising Sales Market research Organizational Charts Operations Facilities Construction; maintenance Production and inventory control Scheduling; materials control Quality assurance and control Supply-chain management Manufacturing Tooling; fabrication; assembly Design Product development and design Detailed product specifications Industrial engineering Efficient use of machines, space, and personnel Process analysis Development and installation of production tools and equipment Finance/ accounting Disbursements/ credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issue and recall Manufacturing
- 30. Why Study OM? OM is one of three major functions (marketing, finance, and operations) of any organization • We want (and need) to know how goods and services are produced • We want to understand what operations managers do • OM is such a costly part of an organization 1 – 30
- 31. Options for Increasing Contribution Finance/ Marketing Option Accounting Option OM Option Increase Reduce Reduce Sales Finance Production Current Revenue 50% Costs 50% Costs 20% Sales $100,000 $150,000 $100,000 $100,000 Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000 Gross Margin Finance Costs 20,000 – 6,000 30,000 – 6,000 20,000 – 3,000 36,000 – 6,000 Subtotal Taxes at 25% 14,000 – 3,500 24,000 – 6,000 17,000 – 4,250 30,000 – 7,500 Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500 1 – 31
- 32. What Operations Managers Do Planning Organizing Staffing Leading Controlling 1 – 32
- 33. • Service and product design • Quality management • Process and capacity design • Location • Layout design • Human resources, job design • Supply-chain management • Inventory management • Scheduling • Maintenance Ten Critical Decisions
- 34. The Critical Decisions Service and product design What good or service should we offer? How should we design these products and services? Quality management How do we define quality? Who is responsible for quality?
- 35. The Critical Decisions Process and capacity design What process and what capacity will these products require? What equipment and technology is necessary for these processes? Location Where should we put the facility? On what criteria should we base the location decision?
- 36. The Critical Decisions Layout design How should we arrange the facility and material flow? How large must the facility be to meet our plan? Human resources and job design How do we provide a reasonable work environment? How much can we expect our employees to produce?
- 37. The Critical Decisions Supply-chain management Should we make or buy this component? Who are our suppliers and who can integrate into our e- commerce program? Inventory, material requirements planning, and JIT How much inventory of each item should we have? When do we re-order?
- 38. The Critical Decisions Intermediate and short–term scheduling Are we better off keeping people on the payroll during slowdowns? Which jobs do we perform next? Maintenance Who is responsible for maintenance? When do we do maintenance?
- 39. Where are the OM Jobs?
- 41. Where are the OM Jobs? 1 – 41 • Technology/methods • Facilities/space utilization • Strategic issues • Response time • People/team development • Customer service • Quality • Cost reduction • Inventory reduction • Productivity improvement
- 42. George Santayana: “To know your future you must know your past” The present position where the operations management finds itself today has gone through a large number of stages to reach the present formidable stage. Although the history of operations management is not very old—the roots of this type of management can be easily linked with the concept which deals with the phenomenon of division of labor. This concept was given by Adam Smith in his very famous book ‘The Wealth of Nations’ in 1776. Experts in the field, from the time of Adam Smith and F.W. Taylor, leading to Dodge and Tippet, have contributed to the important present status of operations management in today’s world.
- 43. Significant Events in OM Figure 1.3 1 – 43
- 44. EVOLUTION with Industrial REVOLUTION Began in the 1770s in England and spread to the rest of Europe and to the United States during the 19th century. Substituted machine power for human power. Most significant machine was steam engine.
- 45. Who invented Steam Engine?
- 46. Who invented Steam Engine? - James Watt
- 47. What did take place Production became fast and low costly one Economies of scale Development of standard gauging system Factories grew rapidly Provided countless jobs
- 48. The Heritage of OM • Division of labor (Adam Smith 1776; Charles Babbage 1852) • Standardized parts (Whitney 1800) • Scientific Management (Taylor 1881) • Coordinated assembly line (Ford/ Sorenson/Avery 1913) • Gantt charts (Gantt 1916) • Motion study (Frank and Lillian Gilbreth 1922) • Quality control (Shewhart 1924; Deming 1950) 1 – 48
- 49. The Heritage of OM • Computer (Atanasoff 1938) • CPM/PERT (DuPont 1957) • Material requirements planning (Orlicky 1960) • Computer aided design (CAD 1970) • Flexible manufacturing system (FMS 1975) • Baldrige Quality Awards (1980) • Computer integrated manufacturing (1990) • Globalization (1992) • Internet (1995) • Current- Digitilization, Information and communication, Quality, Green Operations 1 – 49
- 50. Adam Smith- Division of Labor
- 51. Adam Smith was a Scottish economist, philosopher as well as a moral philosopher, a pioneer of political economy, and a key figure during the Scottish Enlightenment, also known as ''The Father of Economics'’ or ''The Father of Capitalism''. Smith wrote two classic works, The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The latter, often abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics.
- 52. Concept of division of labor, which Adam Smith wrote about in the wealth of Nations (1776) was used by Ford. An operation is divided up in to a series of many small tasks, individual workers are assigned to one of those tasks.
- 54. Eli Whitney • Born 1765; died 1825 • In 1798, received government contract to make 10,000 muskets • Showed that machine tools could make standardized parts to exact specifications – Musket parts could be used in any musket Fact- Invented Cotton Gin machine
- 56. Frederick Winslow Taylor • Father of Scientific Management • His pioneering work in applying engineering principles to the work done on the factory floor was instrumental in the creation and development of the branch of engineering that is now known as industrial engineering. • Taylor made his name, and was most proud of his work, in scientific management; however, he made his fortune patenting steel-process improvements. • Taylor was also an athlete who competed nationally in tennis.
- 57. Frederick W. Taylor • Born 1856; died 1915 • Known as ‘father of scientific management’- • In 1881, as chief engineer for Midvale Steel, studied how tasks were done – Began first motion and time studies • Created efficiency principles 1 – 57
- 58. Taylor’s Principles Management Should Take More Responsibility for: • Matching employees to right job • Providing the proper training • Providing proper work methods and tools • Establishing legitimate incentives for work to be accomplished 1 – 58
- 60. Today, an updated version of his original theory is used by such companies as FedEx and Amazon. Digital Taylorism is based on maximizing efficiency by standardizing the tools and techniques for completing each task involved with a given job. Every task is broken down to the smallest motion and translated into an exact procedure that must be followed to complete that task. Because everyone is operating in the same mechanistic way, it increases predictability and consistency while reducing errors. It is relatively easy for managers to replace workers and retain the same productivity. The criticism of this type of management approach is similar to that of Taylor’s original theory: It reduces worker creativity; it requires management to monitor all aspects of employee behavior; and it is unforgiving to workers who don’t meet the standard.
- 61. Frank and Lillian Gilbreth
- 62. Frank & Lillian Gilbreth • Frank (1868-1924); Lillian (1878- 1972) • Husband-and-wife engineering team • Further developed work measurement methods • Applied efficiency methods to their home and 12 children! • Book & Movie: “Cheaper by the Dozen,” book: “Bells on Their Toes” 1 – 62
- 63. Taylor and the Gilbreths belonged to the classical school of management, which emphasized increasing worker productivity by scientific analysis. They differed, however, on the importance of the worker. Taylor’s emphasis was on profitability and productivity; the Gilbreths were also focused on worker welfare and motivation. They believed that by reducing the amount of motions associated with a particular task, they could also increase the worker’s well-being. Their research, along with Taylor’s, provided many important principles later incorporated into quality assurance and quality control programs begun in the 1920s and 1930s. Eventually, their work led to the science of ergonomics and industrial psychology. (Ergonomics is the study of people in their operating environment, with the goal of increasing productivity and reducing risk of work-related injury.)
- 66. Henry Ford- Game Changer of Automobile World https://www.youtube.com/watch?v=f5_mQpR2_Uo https://www.youtube.com/watch?v=gglrbduPbQ0
- 67. • Born 1863; died 1947 • In 1903, created Ford Motor Company • In 1913, first used moving assembly line to make Model T – Unfinished product moved by conveyor past work station • Paid workers very well for 1911 ($5/day!) Henry Ford 1 – 67
- 68. W.EdwardsDeming • Born 1900; died 1993 • Engineer and physicist • Credited with teaching Japan quality control methods in post- WW2 • Used statistics to analyze process • His methods involve workers in decisions 1 – 68
- 69. SCIENTIFIC MANAGEMENT Widely changed the management of factories. Developed by Frederick Winslow Taylor, the father of scientific management. Based on observation, measurement, analysis and improvement of work methods and economic incentives. Studied to identify the best method for doing each job.
- 70. Cont…. Henry Ford practically adopted the scientific management principles for Taylor. Introduced the moving assembly line, which affected to many industries. Introduced mass production to the automotive industry.
- 72. The concept of “Interchangeable Parts” was applied by Eli Whitney, an American inventor. The basis for interchangeable parts was to standardize parts. Any part in a batch of parts would fit any automobile coming down the assembly line. Result was a high decrease in assembly time and cost.
- 73. Henry Gantt - recognized the value of nonmonetary rewards to motivate workers, and developed a widely used system for scheduling, called Gantt charts.
- 74. Harrington Emerson - applied Taylor’s ideas to organization structure and encouraged the use of experts to improve organizational efficiency. He testified in a congressional hearing that railroads could save a million dollars a day by applying principles of scientific management.
- 75. DECISION MODELS AND MANAGEMENT SCIENCE Accompanied by the development of several quantitative techniques. F.W. Harris developed a mathematical model for inventory order size in 1915. H.F. Dodge, H.G. Romig and W. Shewhart developed statistical procedures for sampling and quality control in 1930. L.H.C. Tippett conducted studies that provided the groundwork for statistical sampling theory In 1935.
- 76. Those qualitative models were widely used in world war 2. These decision models were also used for forecasting, inventory management, project management and other areas of operations management
- 77. THE INFLUENCE OF JAPANESE MANUFACTURERS Japanese manufactures developed management practices that increased the productivity and quality. Companies which were outside Japan was interested in their approaches. The influence of Japanese companies is continuing for the foreseeable future.
- 79. Contributions From 1 – 79 Human factors Industrial engineering Management science Biological science Physical sciences Information science
- 80. New Challenges in OM To Global focus Just-in-time Supply chain partnering Rapid product development, alliances Mass customization Empowered employees, teams From Local or national focus Batch shipments Low bid purchasing Lengthy product development Standard products Job specialization 1 – 80
- 81. Characteristics of Goods • Tangible product • Consistent product definition • Production usually separate from consumption • Can be inventoried • Low customer interaction 1 – 81
- 82. Characteristics of Service • Intangible product • Produced and consumed at same time • Often unique • High customer interaction • Inconsistent product definition • Often knowledge-based • Frequently dispersed 1 – 82
- 84. 1 – 40 Goods Versus Services Attributes of Goods (Tangible Product) Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Product is transportable Site of facility important for cost Often easy to automate Revenue generated primarily from tangible product Attributes of Services (Intangible Product) Reselling unusual Difficult to inventory Quality difficult to measure Selling is part of service Provider, not product, is often transportable Site of facility important for customer contact Often difficult to automate Revenue generated primarily from the intangible service Table 1.3
- 85. Goods and Services Automobile Computer Installed carpeting Fast-food meal Restaurant meal/auto repair Hospital care Advertising agency/ investment management Consulting service/ teaching Counseling Percent of Product that is a Good Percent of Product that is a Service 100% 75 50 25 0 25 50 75 100% | | | | | | | | | 1 – 85
- 86. New Trends in OM Local or national focus Low-cost, reliable worldwide communication and transportation networks Global focus Batch (large) shipments Short product life cycles and cost of capital put pressure on reducing inventory Just-in-time shipments Low-bid purchasing Quality emphasis requires that suppliers be engaged in product improvement Supply- chain partners, Enterprise Resource Planning, e-commerce Past Causes Future
- 87. New Trends in OM Lengthy product development Shorter life cycles, Internet, rapid international communication, computer- aided design, and international collaboration Rapid product development, alliances, collaborative designs Standardized products Affluence and worldwide markets; increasingly flexible production processes Mass customization with added emphasis on quality Job specialization Changing socioculture milieu; increasingly a knowledge and information society Empowered employees, teams, and lean production Past Causes Future 1 – 87
- 88. New Trends in OM Low-cost focus Environmental issues, ISO 14000, increasing disposal costs Environmentally sensitive production, green manufacturing, recycled materials, remanufacturing Past Causes Future Figure 1.6 1 – 88
- 89. 1 – 89 MANAGING GLOBAL OPERATIONS The term ‘globalization’ describes businesses’ deployment of facilities and operations around the world. Globalization can be defined as a process in which geographic distance becomes a factor of diminishing importance in the establishment and maintenance of cross border economic, political and socio- cultural relations. It can also be defined as worldwide drive toward a globalized economic system dominated by supranational corporate trade and banking institutions that are not accountable to democratic processes or national governments.
- 90. 1 – 90 There are four developments, which have spurred the trend toward globalization. These are: Improved transportation and communication technologies; Opened financial systems; Increased demand for imports; Reduced import quotas and other trade barriers. When a firm sets up facilities abroad it involves some added complexities in its operation. Global markets impose new standards on quality and time. Managers should not think about domestic markets first and then global markets later, rather it could be think globally and act locally. Also, they must have a good understanding of their other important competitors. Some multinational operations include other challenges of managing languages and customs, different management style, unfamiliar laws and regulations, and different costs.
- 91. 1 – 91 Managing global operations would focus on the following key issues: To acquire and properly utilize the following concepts and those related to global operations, supply chain, logistics, etc. To associate global historical events to key drivers in global operations from different perspectives. To develop criteria for conceptualization and evaluation of different global operations. To associate success and failure cases of global operations to political, social, economical and technological environments.To envision trends in global operations. To develop an understanding of the world vision regardless of their country of origin, residence or studies in a respectful way of perspectives of people from different races, studies, preferences, religion, politic affiliation, place of origin, etc.