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Operations and Competitiveness

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Presentation on theme: "Operations and Competitiveness"— Presentation transcript:

1 Operations and Competitiveness
Chapter 1 Operations and Competitiveness Operations Management - 5th Edition Roberta Russell & Bernard W. Taylor, III Beni Asllani University of Tennessee at Chattanooga Copyright 2006 John Wiley & Sons, Inc.

2 Lecture Outline What Do Operations Managers Do? Operations Function
Evolution of Operations Management Operations Management and E–business Globalization and Competitiveness Primary Topics in Operations Management Learning Objectives for this Course Copyright 2006 John Wiley & Sons, Inc.

3 What Do Operations Managers Do?
What is Operations? a function or system that transforms inputs into outputs of greater value What is a Transformation Process? a series of activities along a value chain extending from supplier to customer. activities that do not add value are superfluous and should be eliminated What is Operations Management? design, operation, and improvement of productive systems Copyright 2006 John Wiley & Sons, Inc.

4 Transformation Process
Physical: as in manufacturing operations Locational: as in transportation operations Exchange: as in retail operations Physiological: as in health care Psychological: as in entertainment Informational: as in communication Copyright 2006 John Wiley & Sons, Inc.

5 Operations as a Transformation Process
INPUT Material Machines Labor Management Capital OUTPUT Goods Services TRANSFORMATION PROCESS Feedback Copyright 2006 John Wiley & Sons, Inc.

6 Operations Function Operations Marketing Finance and Accounting
Human Resources Outside Suppliers Copyright 2006 John Wiley & Sons, Inc.

7 How is Operations Relevant to my Major?
“As an auditor you must understand the fundamentals of operations management.” “IT is a tool, and there’s no better place to apply it than in operations.” “We use so many things you learn in an operations class—scheduling, lean production, theory of constraints, and tons of quality tools.” Accounting Information Technology Management Copyright 2006 John Wiley & Sons, Inc.

8 How is Operations Relevant to my Major?
“It’s all about processes. I live by flowcharts and Pareto analysis.” “How can you do a good job marketing a product if you’re unsure of its quality or delivery status?” “Most of our capital budgeting requests are from operations, and most of our cost savings, too.” Economics Marketing Finance Copyright 2006 John Wiley & Sons, Inc.

9 Evolution of Operations Management
Craft production process of handcrafting products or services for individual customers Division of labor dividing a job into a series of small tasks each performed by a different worker Interchangeable parts standardization of parts initially as replacement parts; enabled mass production Copyright 2006 John Wiley & Sons, Inc.

10 Evolution of Operations Management (cont.)
Scientific management systematic analysis of work methods Mass production high-volume production of a standardized product for a mass market Lean production adaptation of mass production that prizes quality and flexibility Copyright 2006 John Wiley & Sons, Inc.

11 Historical Events in Operations Management
Events/Concepts Dates Originator Industrial Revolution Steam engine 1769 James Watt Division of labor 1776 Adam Smith Interchangeable parts 1790 Eli Whitney Scientific Management Principles of scientific management 1911 Frederick W. Taylor Time and motion studies Frank and Lillian Gilbreth Activity scheduling chart 1912 Henry Gantt Moving assembly line 1913 Henry Ford Copyright 2006 John Wiley & Sons, Inc.

12 Historical Events in Operations Management (cont.)
Events/Concepts 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 Operations research groups MRP, EDI, EFT, CIM 1960s, 1970s Joseph Orlicky, IBM and others Copyright 2006 John Wiley & Sons, Inc.

13 Historical Events in Operations Management (cont.)
Events/Concepts Dates Originator Quality Revolution JIT (just-in-time) 1970s Taiichi Ohno (Toyota) TQM (total quality management) 1980s W. Edwards Deming, Joseph Juran Strategy and operations 1990s Wickham Skinner, Robert Hayes Business process reengineering Michael Hammer, James Champy Copyright 2006 John Wiley & Sons, Inc.

14 Historical Events in Operations Management (cont.)
Events/Concepts Dates Originator Globalization WTO, European Union, and other trade agreements 1990s 2000s Numerous countries and companies Internet Revolution Internet, WWW, ERP, supply chain management ARPANET, Tim Berners-Lee SAP, i2 Technologies, ORACLE, PeopleSoft E-commerce Amazon, Yahoo, eBay, and others Copyright 2006 John Wiley & Sons, Inc.

15 Continuum from Goods to Services
Source: Adapted from Earl W. Sasser, R. P. Olsen, and D. Daryl Wyckoff, Management of Service Operations (Boston: Allyn Bacon, 1978), p.11. Copyright 2006 John Wiley & Sons, Inc.

16 Operations Management and E-Business
Categories of E-Commerce Business Consumer B2B Commerceone.com B2C Amazon.com C2B Priceline.com C2C eBay.com Copyright 2006 John Wiley & Sons, Inc.

17 An Integrated Value Chain
Value chain: set of activities that create and deliver products to customer Manufacturer Supplier Customer Flow of information (customer order) Flow of product (order fulfillment) Manufacturer Supplier Customer Flow of information (customer order) Copyright 2006 John Wiley & Sons, Inc.

18 Impact of E-Business on Operations Management
Benefits of E-Business Impact on Operations Comparison shopping by customers Direct contact with customers Business processes conducted online Customer expectations escalate; quality must be maintained and costs lowered No more guessing about demand is necessary; inventory costs go down; product and service design improves; build to-order products and services is made possible Transaction costs are lower; customer support costs decrease; e-procurement saves big bucks Copyright 2006 John Wiley & Sons, Inc.

19 Impact of E-Business on Operations Management (cont.)
Benefits of E-Business Impact on Operations Access to customers worldwide Middlemen are eliminated Access to suppliers worldwide Demand increases; order fulfillment and logistics become major issues; production moves overseas Logistics change from delivering to a store or distribution center to delivering to individual homes; consumer demand is more erratic and unpredictable than business demand Outsourcing increases; more alliances and partnerships among firms are formed; supply is less certain; global supply chain issues arise Copyright 2006 John Wiley & Sons, Inc.

20 Impact of E-Business on Operations Management (cont.)
Benefits of E-Business Impact on Operations Online auctions and e-marketplaces Better and faster decision making Competitive bidding lowers cost of materials; supply needs can be found in one location More timely information is available with immediate access by all stakeholders in decision-making process; customer orders and product designs can be clarified electronically; electronic meetings can be held; collaborative planning is facilitated Copyright 2006 John Wiley & Sons, Inc.

21 Impact of E-Business on Operations Management (cont.)
Benefits of E-Business Impact on Operations IT synergy Expanded supply chains Productivity increases as information can be shared more efficiently internally and between trading partners Order fulfillment, logistics, warehousing, transportation and delivery become focus of operations management; risk is spread out; trade barriers fall Copyright 2006 John Wiley & Sons, Inc.

22 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, Copyright 2006 John Wiley & Sons, Inc.

23 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 & Sons, Inc.

24 Globalization and Competitiveness (cont.)
Trade with China: Percent of each country‘s trade Source: “Share of China in Exports and Imports of Major Traders, 2000 and 2002,” International Trade Statistics 2003, World Trade Organization, Copyright 2006 John Wiley & Sons, Inc.

25 Risks of Globalization
Cultural differences Supply chain logistics Safety, security, and stability Quality problems Corporate image Loss of capabilities Copyright 2006 John Wiley & Sons, Inc.

26 Competitiveness and Productivity
degree to which a nation can produce goods and services that meet the test of international markets Productivity ratio of output to input Output sales made, products produced, customers served, meals delivered, or calls answered Input labor hours, investment in equipment, material usage, or square footage Copyright 2006 John Wiley & Sons, Inc.

27 Competitiveness and Productivity (cont.)
Measures of Productivity Copyright 2006 John Wiley & Sons, Inc.

28 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 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 & Sons, Inc.

29 Productivity Increase
Become efficient output increases with little or no increase in input Expand both output and input grow with output growing more rapidly Achieve breakthroughs output increases while input decreases Downsize output remains the same and input is reduced Retrench both output and input decrease, with input decreasing at a faster rate Copyright 2006 John Wiley & Sons, Inc.

30 Competitiveness and Productivity
Productivity as a Function of Inputs and Outputs, 2001–2002 Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002,” Bureau of Labor Statistics, U.S. Department of Labor, September 2003 Breakthrough Performance More Efficient Retrench Copyright 2006 John Wiley & Sons, Inc.

31 Global Competitiveness Ranking
Finland United States Sweden Denmark Taiwan Singapore Switzerland Iceland Norway Australia Source: Global Competitiveness Report 2003–2004, World Economic Forum, January 2004, Copyright 2006 John Wiley & Sons, Inc.

32 Operations–oriented Barriers to Entry
Economies of Scale Capital Investment Access to Supply and Distribution Channels Learning Curve Copyright 2006 John Wiley & Sons, Inc.

33 Primary Topics in Operations Management
Copyright 2006 John Wiley & Sons, Inc.

34 Primary Topics in Operations Management (cont.)
Copyright 2006 John Wiley & Sons, Inc.

35 Operations Strategy Strategy: Chapter 2 Quality: Chapters 3 and 4
Maintaining an operations strategy to support firm’s competitive advantage Quality: Chapters 3 and 4 Focusing on quality in operational decision making Product and Services: Chapter 5 Designing quality products and services Processes, Technologies, and Capacity: Chapter 6 Setting up process so that it works smoothly and efficiently Copyright 2006 John Wiley & Sons, Inc.

36 Operations Strategy (cont.)
Facilities: Chapter 7 Setting up facility so that it works smoothly and efficiently Human Resources: Chapter 8 Designing jobs and work to produce quality products Project Management: Chapter 9 Managing complex projects Copyright 2006 John Wiley & Sons, Inc.

37 Supply Chain Management
Supply Chain: Chapter 10 Managing supply chain Forecasting: Chapter 11 Predicting customer demand Aggregate Planning: Chapter 12 How much to produce and when to produce it Inventory Management: Chapter 13 How much to order and when to order Copyright 2006 John Wiley & Sons, Inc.

38 Supply Chain Management (cont.)
Resource Planning: Chapter 14 Planning capacity and other resources Lean Production: Chapter 15 Designing efficient production lines Scheduling: Chapter 16 Job and task assignments Waiting Lines: Chapter 17 Minimizing waiting time of customers and products Copyright 2006 John Wiley & Sons, Inc.

39 Learning Objectives of this Course
Gain an appreciation of strategic importance of operations in a global business environment Understand how operations relates to other business functions Develop a working knowledge of concepts and methods related to designing and managing operations Develop a skill set for quality and process improvement Copyright 2006 John Wiley & Sons, Inc.

40 Copyright 2006 John Wiley & Sons, Inc. All rights reserved
Copyright 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further 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 and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein. Copyright 2006 John Wiley & Sons, Inc.

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