I N T E G R A T E D OPERATIONS MANAGEMENT Adding Value for Customers A-1 INTRODUCTION OM history begins with industrial revolution (late 1700s) OM shares roots with other fields: –Organizational Behavior, Industrial Engineering, Management Science Trends influencing OM development: –dominance of service sector –internationalization of business –environmental concerns

I N T E G R A T E D OPERATIONS MANAGEMENT Adding Value for Customers A-2 THE CHRONOLOGICAL DEVELOPMENT OF OM The Industrial Revolution –Adam Smith –The Evolution of Management Thought – birth of mass production Scientific Management –a technical understanding of work –Frederick W. Taylor

I N T E G R A T E D OPERATIONS MANAGEMENT Adding Value for Customers A-3 THE CHRONOLOGICAL DEVELOPMENT OF OM Industrial psychology and industrial sociology –developing a human understanding of work –Hugo Munsterberg –Hawthorne Studies Statistical control of quality –Walter Shewhart

I N T E G R A T E D OPERATIONS MANAGEMENT Adding Value for Customers A-4 THE CHRONOLOGICAL DEVELOPMENT OF OM Management Science –optimizing the use of limited resources –WWII Operations Research Functionalization of OM –bringing it all together in one function –1950s production managers –1970s POM

I N T E G R A T E D OPERATIONS MANAGEMENT Adding Value for Customers A-5 THE CHRONOLOGICAL DEVELOPMENT OF OM The MRP crusades –computerizing operational decision making –Materials Requirements Planning JIT, the Quality Revolution and Operations strategy –Toyota production system –Total Quality Management –operations strategies

I N T E G R A T E D OPERATIONS MANAGEMENT Adding Value for Customers A-6 CURRENT TRENDS INFLUENCING THE FIELD OF OPERATIONS MANAGEMENT Growth and dominance of services –74% U.S. employment in service sector jobs Internationalization –business competition is global Environmental quality –environmental impact of operational decisions is a growing concern for businesses

I N T E G R A T E D OPERATIONS MANAGEMENT Adding Value for Customers A-7 CURRENT TRENDS INFLUENCING THE FIELD OF OPERATIONS MANAGEMENT Cross-functional management –Business Process Reengineering (BPR) Supply chain management –business is concerned with competitiveness of entire chain of value-adding activities

I N T E G R A T E D OPERATIONS MANAGEMENT Adding Value for Customers A-8 CURRENT TRENDS INFLUENCING THE FIELD OF OPERATIONS MANAGEMENT The explosion of E-commerce –operational decisions must be more responsive to other functional areas –the Internet Careers in Operations Management –APICS –entry level opportunities

I N T E G R A T E D OPERATIONS MANAGEMENT Adding Value for Customers A-9 Process, Volume, and Variety Process Focus projects, job shops (machine, print, carpentry) Standard Register Repetitive (autos, motorcycles) Harley Davidson Product Focus (commercial baked goods, steel, glass) Nucor Steel High Variety one or few units per run, high variety (allows customization) Changes in Modules modest runs, standardized modules Changes in Attributes (such as grade, quality, size, thickness, etc.) long runs only Mass Customization (difficult to achieve, but huge rewards) Dell Computer Co. Poor Strategy (Both fixed and variable costs are high) Low Volume Repetitive Process High Volume Volume Figure 7.1