Operations Management BUSN 6110/PROC 5820

Syllabus Class 1: (Aug 19) Introduction, Strategy, case study Class 2: (Aug 26) Decision Making, Product and Service Design; Processes and Technologies, case study Class 3: (Sep 2) Facility Planning, Project Management, (Take home exam) Class 4: (Sep 9) Supply Chain Management and Forecasting Class 5: (Sep 16) Capacity and Aggregate Planning, Inventory Management, The Beer Game Class 6: (Sep 23) Just-in-Time, Reverse Logistics – need “The Forklifts Have Nothing To Do!” Available in the Lewis and Clark Bookstore Class 7: (Sep 30) Resource planning, scheduling, quality Class 8: (Oct 7) Group Presentations Other requirements: →visit Harley-Davidson Plant in Kansas City to see operations management in practice and write a 3-5 page paper comparing the class slides and readings to the Harley operations → Group Presentation – on some aspect of Operations Management

Additional Text The #2 Selling Warehousing and Distribution Book and #1Non-text book Warehousing Book Book as of Apr 1, 2009

Grades Group Presentation/Class Participation – 5% Mid Term – 45% Final Exam – 45% Harley Paper – 5%

Contact Information joewalden@supplychainresearch.com (760) 447-3651 Personal background I spent 26+ years on Active Duty as a Quartermaster Officer that included command at the battalion and brigade levels with time in Kuwait at the start of OIF to establish the Theater Distribution Center. I am the only soldier to receive the APICS Certified Fellow in Production and Inventory Management Certification (the highest logistics and operations management commercial certification. I have authored two books and numerous articles for professional publications on supply chain and operations issues. I have an MBA with a concentration in Logistics and an MS in Systems Management from Florida Institute of Technology in Melbourne, FL; an MMAS from the SAMS War College Fellowship and continuing education from Ohio State, Penn State, and Exeter University. My military education includes CGSC, the Air Command and Staff College, the Air War College and the Army War College Fellowship. I have been teaching this course since 2004.

Class Slides and Information www.supplychainresearch.com Slides will be posted/updated week prior to class – therefore the slides currently on the website may change as new materials come available

Introduction to Operations Management Chapter 1 Introduction to Operations Management

The Operations Function Operations as a transformation process Operations as a basic function Operations as the technical core Operations management views operations at a transformation of inputs through a transformation process that produces outputs.

Operations as a Transformation Process INPUT Material Machines Labor Management Capital Inputs can take a variety of forms to include materials, machines, labor, management, and capital investment

Operations as a Transformation Process INPUT Material Machines Labor Management Capital TRANSFORMATION PROCESS Operations is the transformation process

Operations as a Transformation Process INPUT Material Machines Labor Management Capital OUTPUT Goods Services TRANSFORMATION PROCESS The resultant output could be a product or a service

Operations as a Transformation Process Feedback INPUT Material Machines Labor Management Capital OUTPUT Goods Services TRANSFORMATION PROCESS The key to a successful operations management process is the incorporation of feedback mechanisms.

Transformation Processes Physical (manufacturing) Locational (transportation/ warehouse) Exchange (retail) Physiological (health care) Psychological (entertainment) Informational (communications)

Impacts on Operations Management Industrial Revolution Scientific Management Human Relations or the lack thereof Advent of Management Science Quality Emphasis Globalization of Supply Chains Information Age/Internet Revolution

Industrial Revolution Scientific Management Key Events Industrial Revolution Steam engine 1769 James Watt Division of labor 1776 Adam Smith Interchangeable parts 1790 Eli Whitney Scientific Management Principles Frederick W. Taylor 1911 Activity scheduling chart Henry Gantt 1912 Moving assembly line Henry Ford 1913

Key Events Human Relations Management Science Hawthorne studies 1930 Elton Mayo Motivation theories 1940s Abraham Maslow 1950s Frederick Hertzberg 1960s Douglas McGregor Management Science Linear programming 1947 George Dantzig Digital computer 1951 Remington Rand Simulation, PERT/CPM, 1950s Operations research Waiting line theory groups MRP 1960s Joseph Orlicky, IBM

Key Events Quality Emphasis Globalization JIT 1970s Taiichi Ohno, Toyota TQM 1980s W. Edwards Deming, Joseph Juran, et. al. Reengineering 1990s Hammer, Champy World Trade Organization 1990s Numerous countries and companies Globalization European Union and 1970s IBM and others other trade agreements EDI, EFT, CIM 1980s

Key Events Information Age/ Internet Revolution Internet, WWW, ERP 1990s Supply chain SAP, management, ORACLE, E-commerce Amazon, Yahoo, eBay, and others

Categories of E-Commerce Business Consumer B2B Commerceone.com B2C Amazon.com C2B Priceline.com C2C eBay.com According to the book these are examples of e-business. E-Bay is also an example of Business to Consumer as more and more companies are using e-Bay to sell excess.

Types of B2B Transactions Buyer Seller Buyers Sellers Buyer Buyers Sellers (a) Electronic Storefront (b) Seller’s Auction (c) Buyer’s Auction (d) Exchange or E-Marketplace

E-Business Promotes: Better customer relations More efficient processes Lower cost of materials Information technology synergy Better and faster decision making

E-Business Promotes: New forms of organizations Expanded supply chain Higher customer expectations New ways of doing business Globalization

Globalization and Competitiveness Favorable cost Access to international markets Response to changes in demand Reliable sources of supply 14 major trade agreements in 1990s Peak: 26% in 2000 World Trade Compared to World GDP Source: “Real GDP and Trade Growth of OECD Countries, 2001–03,” International Trade Statistics 2003, World Trade Organization, www.wto.org Copyright, 2006, John Wiley and Sons

Globalization and Competitiveness (cont.) Hourly Wage Rates for Selected Countries Source: “International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing,” Bureau of Labor Statistics, U.S. Department of Labor, Updated September 30, 2003. Germany: $26.18 USA: $21.33 Taiwan: $5.41 Mexico: $2.38 China: $0.50 Copyright, 2006, John Wiley and Sons

Multinational Corporations Country Foreign Sales Company of Origin as % of Total Nestlé Switzerland 98.2 Nokia Finland 97.6 Philips Netherlands 94.0 Bayer Germany 89.8 ABB Germany 87.2 SAP Germany 80.0 Exxon Mobil United States 79.6 Royal Dutch/Shell Netherlands 73.3 IBM United States 62.7 McDonald’s United States 61.5

Competitiveness The degree to which a nation can produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens.

Productivity Productivity = Output Input

Productivity improves when firms: Output Input Productivity improves when firms: Become more efficient Downsize Expand Achieve breakthroughs

Changes in Productivity for Select Countries Internet-enabled productivity - Dot com bust - 9/11 terrorist attacks Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002,” Bureau of Labor Statistics, U.S. Department of Labor, September 2003. U.S. figures for 2002–2003 from “Major Sector Productivity and Costs Index,” Bureau of Labor Statistics, U.S. Department of Labor, March 2004 Copyright, 2006, John Wiley and Sons

Measures of Competitiveness Productivity GDP (Gross domestic product) growth Market capitalization Technological infrastructure Quality of education Efficiency of government

Barriers to Entry Economies of scale Capital investment Access to supply and distribution channels Learning curves

Competition Within Industries Increases When Firms are relatively equal in size and resources Products and services are standardized Industry growth is slow or exponential

Chapter 2 Operations Strategy To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.

The Importance of Clearly Stated Missions/Visions ‘The Grand Duke said “one who is confused in purpose cannot respond to his enemy” Sun Tzu, The Art of War (III.23)   To know the purpose – there must be a clearly stated mission and vision.

Clearly Stated Mission??? “When you come to a fork in the road, take it.”

Example of A Clearly Understood Mission COL Rusling on General Grant: “He made certain his subordinates knew exactly what he wanted, and why and when he wanted it.”

Example of A Clearly Understood Mission “We endeavor to go to the moon and return safely before the end of this decade.” - John F. Kennedy

Velocity Management in Logistics and Distribution, 2005, Walden VISION® Vital to the Organization Integrated throughout the Organization Sustainable and Achievable Important from the viewpoint of the employees Organization Goals Not necessarily a one size fits all vision Velocity Management in Logistics and Distribution, 2005, Walden

Strategy Formulation Define a primary task Assess core competencies Determine order winners & order qualifiers Positioning the firm

Core Competencies Also known as core capabilities Skills that differentiate the service or manufacturing firm from competitors Those things that the company does best

Strategy Formulation Define a primary task Assess core competencies Determine order winners & order qualifiers Positioning the firm

Competing on Cost Eliminate all waste Invest in Updated facilities & equipment Streamlining operations Training & development

Competitive Priorities: Cost Southwest Airlines one type of airplane facilitates crew changes, record-keeping, maintenance, and inventory costs direct flights mean no baggage transfers $30 million annual savings in travel agent commissions by requiring customers to contact the airline directly Copyright, 2006, John Wiley and Sons

Competing on Quality Please the customer Understand customer attitudes toward and expectations of quality Example: Ritz Carlton

Pasadena Ritz-Carlton is sold for $170 million A Hong Kong real estate investment firm agrees to pay $170 million in cash.

Competing on Flexibility Produce wide variety of products Introduce new products Modify existing products quickly Respond to customer needs

Competing on Speed Fast moves Fast adaptations Tight linkages Example: FEDEX, UPS, DHL

Competitive Priorities: Speed Citicorp advertises a 15-minute mortgage approval L.L. Bean ships orders the day they are received Wal-Mart replenishes its stock twice a week General Electric reduces time to manufacture circuit-breaker boxes into three days and dishwashers into 18 hours Motorola needs less than 30 minutes to build to order pagers Copyright, 2006, John Wiley and Sons

Operations Role in Corporate Strategy Provide support for overall strategy of a firm Serve as firm’s distinctive competence Must be consistent Must be consistent with overall strategy

Operations and Wall Street Comparing operations at a firm with competitors Example income per employee revenue per employee inventory turnover customer turnover

Operations Strategy at Wal-Mart Provide value for our customers Low prices, everyday Low inventory levels Linked communications between stores Short flow times Fast transportation system Cross-docking Focused locations EDI/satellites Wal-Mart Mission Competitive Priority Operations Strategy Operations Structure Enabling Process and Technologies

Strategy and the Internet Create a distinctive business strategy Strengthen existing competitive advantages Integrate new and traditional activities Must provide a unique value to the customer

Homework Motel 6 case study Chap 3/Chap 5/Chap 6