The Role of Technology in Operations DAVIS AQUILANO CHASE PowerPoint Presentation by Charlie Cook F O U R T H E D I T I O N chapter 4 The Role of Technology in Operations © The McGraw-Hill Companies, Inc., 2003

Chapter Objectives Introduce the different ways in which technology can add value to the operations function within an organization. Identify the various ways in which technology can be used in a manufacturing company. Describe enterprise resource planning (ERP) systems and how they impact an organization. Demonstrate the different ways in which technology can be integrated into service operations. Present a framework for defining the different types of e-services that are currently being offered. Fundamentals of Operations Management 4e

Managerial Issues Advances in technology are changing the way in which both manufacturing and service operations are designed. Technology is a tool, not an end in itself. Importance of maintaining compatibility between technology and the organization’s other elements. The need for continuous training in the use of technology. Fundamentals of Operations Management 4e

How Technology Affects Operations Traditional Tradeoffs Low costs Speed of delivery Quality of product/service Customization Technology’s Impact on Traditional Tradeoffs Tradeoffs are no longer valid—technology allows firms compete on several dimensions at once. Fundamentals of Operations Management 4e

How Technology Impacts Operational Performance Exhibit 4.1 Fundamentals of Operations Management 4e

Technology in Manufacturing Fundamentals of Operations Management 4e

Technology in Manufacturing (cont’d) Fundamentals of Operations Management 4e

Major Categories of Software Systems in Manufacturing Fundamentals of Operations Management 4e Exhibit 4.2

Information Technology Fundamentals of Operations Management 4e

Functional Areas as Independent Operations Exhibit 4.3a Fundamentals of Operations Management 4e

ERP Systems Link Functional Areas with a Common Software Platform and Database Exhibit 4.3b Fundamentals of Operations Management 4e

Example of How SAP’s R/3 System Integrates an Organization Exhibit 4.4 Fundamentals of Operations Management 4e

Leading ERP Software Companies and Respective Market Shares Total ERP Software and Services Revenue = $18.2 billion Exhibit 4.5 Source: AMR Research Fundamentals of Operations Management 4e

Evolution of ERP Systems ERP Systems Origins An outgrowth of Materials Requirements Planning (MRP) systems in the 1960s–70s Adoption of ERP systems updated the entire information technology infrastructure of firms. Benefits of ERP Systems Reduction in database errors Faster customer response Faster order fulfillment Better overall communication Fundamentals of Operations Management 4e

Evolution of ERP Systems (cont’d) Why ERP Systems Fail Lack of top management commitment Lack of adequate resources Lack of proper training Lack of communication Criticisms of ERP Systems Constraints of a single ERP system versus a mixture of Best of Breed software products Inflexibility of the built-in business model of ERP systems Fundamentals of Operations Management 4e

Technology Trends in Services Increase in Self-Service Reduces labor costs Speeds up service Decrease in the Importance of Location Lower costs for delivery of products and services increases remote points of access and reduces the need for specific service locations Fundamentals of Operations Management 4e

Methods of Pricing to Encourage Self-Service Exhibit 4.6 Source: Fundamentals of Operations Management 4e

Technology Trends in Services (cont’d) Shift from Time-dependent (Synchronous) to Non-time Dependent (Asynchronous) Transactions More economical (for the firm) and efficient (for the customer) forms of service Increase in Disintermediation Technology brings buyers and sellers closer together, eliminating intermediate steps or organizations. Fundamentals of Operations Management 4e

Integrating Technology into Services Integration Benefits Efficiency in operations Effectiveness in serving customers Areas for Integration Strategic planning Improved performance Faster service Improved customer knowledge Increased product customization Fundamentals of Operations Management 4e

Integrating Technology into Services (cont’d) Areas for Integration (cont’d) Increased efficiency Economies of scale in consolidating operations. Reduced labor costs through replacement of manpower and increased labor productivity. Fundamentals of Operations Management 4e

Categories of E-Services Fundamentals of Operations Management 4e

The Role of the Internet, Intranet, Extranet and EDI in an Organization Exhibit 4.7 Fundamentals of Operations Management 4e

Types of E-Services Fundamentals of Operations Management 4e

Challenges for E-Tailers Infrastructure Developing the structure to efficiently and quickly deliver goods to customers. Lack of tangibility Having no physical presence to which customers can turn with problems. Differentiation Creating a unique on-line presence that sustains growth. Fundamentals of Operations Management 4e

Technology Issues Overcoming Barriers to Entry (Customer) “Fear of the unknown” Lack of knowledge by the customer Training and Support Worker skill development through hands-on training in the new technology. Customer familiarization with technology. Fundamentals of Operations Management 4e