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Operations and Supply Chain Management Introduction

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1 Operations and Supply Chain Management Introduction
Chapter 1 Operations and Supply Chain Management Introduction

2 What Operations and Supply Chain Managers Do
What is Operations Management? design, operation, and improvement of productive systems 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 Copyright 2011 John Wiley & Sons, Inc.

3 Operations as a Transformation Process
INPUT Material Machines Labor Management Capital OUTPUT Goods Services TRANSFORMATION PROCESS Feedback & Requirements Copyright 2011 John Wiley & Sons, Inc.

4 Transformation Process
Physical: as in manufacturing operations Locational: as in transportation or warehouse operations Exchange: as in retail operations Physiological: as in health care Psychological: as in entertainment Informational: as in communication Copyright 2011 John Wiley & Sons, Inc.

5 Operations Function Operations Marketing Finance and Accounting
Human Resources Outside Suppliers

6 How is Operations Relevant to my Major?
Accounting Information Technology Management “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.” Copyright 2011 John Wiley & Sons, Inc.

7 How is Operations Relevant to my Major?
Economics Marketing Finance “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.” Copyright 2011 John Wiley & Sons, Inc.

8 Evolution of Operations and Supply Chain 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 2011 John Wiley & Sons, Inc.

9 Evolution of Operations and Supply Chain Management
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 2011 John Wiley & Sons, Inc.

10 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 2011 John Wiley & Sons, Inc.

11 Historical Events in Operations Management
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 2011 John Wiley & Sons, Inc.

12 Historical Events in Operations Management
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 Wickham Skinner, Robert Hayes Reengineering 1990s Michael Hammer, James Champy Six Sigma GE, Motorola Copyright 2011 John Wiley & Sons, Inc.

13 Historical Events in Operations Management
Events/Concepts Dates Originator Internet Revolution Internet, WWW, ERP, supply chain management 1990s ARPANET, Tim Berners-Lee SAP, i2 Technologies, ORACLE, Dell E-commerce 2000s Amazon, Yahoo, eBay, Google, and others Globalization WTO, European Union, Global supply chains, Outsourcing, Service Science China, India, emerging economies Copyright 2011 John Wiley & Sons, Inc.

14 Historical Events in Operations Management
Events/Concepts Dates Originator Green Revolution Global warming, An Inconvenient Truth, Kyoto Today Numerous scientists, statesmen and governments Copyright 2011 John Wiley & Sons, Inc.

15 Evolution of Operations and Supply Chain Management
management of the flow of information, products, and services across a network of customers, enterprises, and supply chain partners Copyright 2011 John Wiley & Sons, Inc.

16 Globalization Why “go global”? Increased globalization favorable cost
access to international markets response to changes in demand reliable sources of supply latest trends and technologies Increased globalization results from the Internet and falling trade barriers

17 Hourly Compensation

18 Productivity and Competitiveness
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 2011 John Wiley & Sons, Inc.

19 Measures of Productivity
Copyright 2011 John Wiley & Sons, Inc.

20 Copyright 2011 John Wiley & Sons, Inc.

21 Copyright 2011 John Wiley & Sons, Inc.
Select your answer from the following: Countries: Germany, Japan, U.S., Singapore, Ireland, Sweden, France, Norway, Belgium, Iceland, Turkey, China, Brazil, South Korea; Industries: Automotive, Pharmaceutical, Retail, Textile, Biomedical, Electronics; and Companies: IBM, Bayer, Food Lion, Godiva, Shell Oil, Firestone, Budweiser, Nissan, MGM (Metro-Goldwyn-Mayer), McDonald’s Which country pays the highest wage rate? Which country pays the lowest wage rate? Which country has the highest individual Internet usage? Which country has the highest government usage of the Internet? Which country has the most readily available access to the Internet for its citizens? Which country has the best infrastructure for Internet access? Which industry is the most competitive? Which company does most of its business in the U.S.? How many of the companies listed claim the U.S. as their country of origin? Copyright 2011 John Wiley & Sons, Inc.

22 Strategy and Operations
How the mission of a company is accomplished Provides direction for achieving a mission Unites the organization Provides consistency in decisions Keeps organization moving in the right direction Copyright 2011 John Wiley & Sons, Inc.

23 Copyright 2011 John Wiley & Sons, Inc.
Strategy Formulation Defining a primary task What is the firm in the business of doing? Assessing core competencies What does the firm do better than anyone else? Determining order winners and order qualifiers What qualifies an item to be considered for purchase? What wins the order? Positioning the firm How will the firm compete? Deploying the strategy Copyright 2011 John Wiley & Sons, Inc.

24 Strategic Planning Mission and Vision Voice of the Business
Voice of the Customer Corporate Strategy Marketing Strategy Operations Strategy Financial Strategy

25 Positioning the Firm Cost Speed Quality Flexibility

26 Positioning the Firm: Cost
Waste elimination relentlessly pursuing the removal of all waste Examination of cost structure looking at the entire cost structure for reduction potential Lean production providing low costs through disciplined operations Copyright 2011 John Wiley & Sons, Inc.

27 Positioning the Firm: Speed
Fast moves, Fast adaptations, Tight linkages Internet Customers expect immediate responses Service organizations always competed on speed (McDonald’s, LensCrafters, and Federal Express) Manufacturers time-based competition: build-to-order production and efficient supply chains Fashion industry two-week design-to-rack lead time of Spanish retailer, Zara Copyright 2011 John Wiley & Sons, Inc.

28 Positioning the Firm: Quality
Minimizing defect rates or conforming to design specifications Ritz-Carlton - one customer at a time Service system designed to “move heaven and earth” to satisfy customer Employees empowered to satisfy a guest’s wish Teams set objectives and devise quality action plans Each hotel has a quality leader Copyright 2011 John Wiley & Sons, Inc.

29 Positioning the Firm: Flexibility
Ability to adjust to changes in product mix, production volume, or design Mass customization: the mass production of customized parts National Bicycle Industrial Company offers 11,231,862 variations delivers within two weeks at costs only 10% above standard models Copyright 2011 John Wiley & Sons, Inc.

30 Copyright 2011 John Wiley & Sons, Inc.
Policy Deployment Policy deployment translates corporate strategy into measurable objectives Hoshins action plans generated from the policy deployment process Copyright 2011 John Wiley & Sons, Inc.

31 Policy Deployment Derivation of an Action Plan Using Policy Deployment
Copyright 2011 John Wiley & Sons, Inc.

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