1. Operations Management
BUSN 6110/PROC 5820

2. Syllabus Class 1 (Jan 7): snowed out
Class 2: (Jan 14) chap 1; chap 2, case study
Class 3: (Jan 21) Chap 6, Chap 8
Class 4: (Jan 28) chap 10, chap 11, Chap 17(Take home exam)
Class 5: (Feb 4) Chap 5, Chap 7
Class 6: (Feb 11) Chap 9, Chap 12, The Beer Game
Class 7: (Feb 18) Chap 15, Reverse Logistics – need “The Forklifts Have Nothing To Do!” Available in the Lewis and Clark Bookstore
Class 8: (Feb 25) Chap 13; Chap 16, Chap 4
Class 9: (Mar 4) Final Exam
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
→ Home Work

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

4. Grades Homework – 10% Mid Term – 40% Final Exam – 45%
Harley Paper – 5%

5. Contact Information
(760)
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.

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

7. Introduction to Operations Management
Chapter 1
Introduction to Operations Management

8. 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.

9. 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

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

11. 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

12. 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.

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

14. 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

15. 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
Activity scheduling chart Henry Gantt 1912
Moving assembly line Henry Ford 1913

16. 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

17. Key Events Quality Emphasis Globalization
JIT 1970s Taiichi Ohno, Toyota
TQM 1980s W. Edwards Deming,
Joseph Juran, et. al.
Strategy and operations Skinner, Hayes
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

18. Key Events Information Age/ Internet Revolution
Internet, WWW, ERP 1990s
Supply chain SAP, i2
management, Technologies, ORACLE,
E-commerce PeopleSoft, Amazon,
Yahoo, eBay,
and others

19. 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.

20. 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

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

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

23. 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 and Sons

24. 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

25. 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

26. 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.

27. Productivity
Productivity =
Output
Input

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

29. 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 and Sons

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

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

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

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

34. 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.

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

36. 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.”

37. 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

38. 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

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

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

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

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

43. 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

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

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

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

47. 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

48. 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

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

50. 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

51. 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

52. Strategic Decisions in Operations
Products
Processes and Technology
Capacity
Human Resources
Quality
Facilities
Sourcing
Services
Operating Systems
Figure 2.2

53. Products & Services Make-to-order Make-to-stock Assemble-to-order
Made to customer specifications after order received
Make-to-stock
Made in anticipation of demand
Assemble-to-order
Add options according to customer specification

54. Processes & Technology
Project
One-time production of product to customer order
Batch production
Process many jobs at same time in batch
Mass production
Produce large volumes of standard product for mass market
Continuous production
Very high volume commodity product

55. Product-Process Matrix
Volume
Low
High
Projects
Batch
Production
Mass
Continuous
Standardization
Figure 2.3

56. Service-Process Matrix
Volume
Low
High
Professional Service
Service Shop
Mass
Service
Service Factory
Standardization
Figure 2.4

57. Capacity & Facilities How much capacity to provide
Size of capacity changes
Handling excess demand
Hiring/firing workers
Need for new facilities

58. Facilities Best size for facility? Large or small facilities
Facility focus
Facility location
Global facility

59. Human Resources Skill levels required Degree of autonomy Policies
Profit sharing
Individual or team work
Supervision methods
Levels of management
Training

60. Quality Target level Measurement Employee involvement Training
Systems needed to ensure quality
Maintaining quality awareness
Evaluating quality efforts
Determining customer perceptions

61. Sourcing Degree of vertical integration Supplier selection
Supplier relationship
Supplier quality
Supplier cooperation

62. Operating Systems Execute strategy daily
Information technology support
Effective planning & control systems
Alignment of inventory levels, scheduling priorities, & reward systems

63. Policy Deployment Focuses employees on common goals & priorities
Translates strategy into measurable objectives
Aligns day-to-day decisions with strategic plan

64. Balanced Scorecard Finance — How should we look to our shareholders?
Customer — How should we look to our customers?
Processes — At which business processes must we excel?
Learning and Growing — How will we sustain our ability to change and improve?

65. Issues and Trends Global markets, sourcing, operations
Virtual companies
Greater choice
Emphasis on service
Speed and flexibility
Supply chains
Collaboration
Technological advances
Knowledge
Environment and social responsibilities

66. The Dilbert (Dogbert) Solution –
Change the Name of the Old Program

67. Supplement to Chapter 2

68. Decision Analysis Payoff Table - craps tables
Maximax - maximum of maximum payoffs - optimistic - “hard ways”
Maximin - maximum of minimum payoffs - safe bets or even odds bets
Minimax regret - minimum of maximum regrets or opportunity costs

69. Decision Trees
Graphical method of analyzing a decision - similar to Theory of Constraints
Payoff table can be translated to a Decision Tree

70. The Payoff Table
A method of organizing & illustrating the payoffs from different decisions given various states of nature
A payoff is the outcome of the decision – a Craps table pay off chart is an example of a payoff chart

71. Payoff Table States Of Nature (Alternatives) Decision a b
1 Payoff 1/a Payoff 1/b
2 Payoff 2/a Payoff 2/b

72. Maximums: 1,300,000; 500,000 Minimums: 500,000; 320,000; -150,000
STATES OF NATURE
Good Foreign Poor Foreign
DECISION Competitive Conditions Competitive Conditions
Expand $ 800,000 $ 500,000
Maintain status quo 1,300, ,000
Sell now 320, ,000
Maximums: 1,300,000; 500,000
Minimums: 500,000; 320,000; -150,000

73. Homework
Motel 6 case study – one page analysis
Chap 5/Chap 6