1. Chapter 1 Introduction to Operations Management

2. Three Functions in a Business Marketing – to “sell” products Operations – to “make” products Finance and Accounting – to use money effectively and keep track business activities in terms of dollar.

4. Role of “Operation” Role of operation in a business is to transform a company’s input into the finished goods or services. Value of the product is added in the process of operation.

5. Business Operation as a Value Added Process Inputs in $$ Transformation Process Outputs in $$$ Value Added by Process

6. Operations Management The business function responsible for planning, coordinating, and controlling the process and resources needed to produce a company’s products and services.

8. Essential Pursuit of OM The essential pursuit of operations management is EFFICIENCY (or productivity, or effectiveness).

9. Manufacturing vs. Service Manufacturing: Tangible product Product can be inventoried Low customer contact Capital intensive Long response time Services: Intangible product Product cannot be inventoried High customer contact Labor intensive Short response time

10. OM Decisions Strategic decisions: – Decisions that set the direction for the entire company. – Broad in scope & long-term in nature Tactical decisions: – Short-term & specific in nature – Bound by the strategic decisions

11. Spectrum of OM Decisions

12. Milestones of OM Development Industrial RevolutionLate 1700s Scientific ManagementEarly 1900s Human Relations Movement1930s to 1960s Management ScienceMid-1900s Computer Age1970s Just-In-Time Systems1980s Total Quality Management (TQM)1980s Reengineering1980s Flexibility1990s Time-based Competition1990s Supply Chain Management1990s Global Competition1990s Environmental Issues1990s Electronic CommerceLate 1990s – Early 21 st Century

13. Industrial Revolution (late 1700s) Replaced traditional craft methods Substituted machine power for labor (James Watt’s steam engine, …) Major contributions: – Adam Smith (1776): division of labor – Eli Whitney (1790): interchangeable parts

14. Scientific Management (early 1900s) Separated ‘planning’ from ‘doing’ Management’s job was to discover worker’s physical limits through measurement, analysis & observation Major contributors: – Fredrick Taylor: stopwatch time studies – Henry Ford: moving assembly line

15. Human Relations Movement (1930s-1960s) Recognition that factors other than money contribute to worker productivity Major contributions: – Understanding of the Hawthorn effect: Study of Western Electric plant in Hawthorn, Illinois intended to study impact of environmental factors (light & heat) on productivity, but found workers responded to management’s attention regardless of environmental changes – Job enlargement – Job enrichment

16. Management Science (mid-1900s) Developed new quantitative techniques for common OM problems: – Major contributions include: inventory modeling, linear programming, project management, forecasting, statistical sampling, & quality control techniques – Played a large role in supporting American military operations during World War II

17. Computer Age (1970s) Computer provided the tool necessary to support the widespread use of Management Science’s quantitative techniques – the ability to process huge amounts of data quickly & relatively cheaply Major contributions include the development of Material Requirements Planning (MRP) systems for production control

18. Development in 1980s Just-In-Time (JIT): – Techniques designed to achieve high-volume production using coordinated material flows, continuous improvement, & elimination of waste. “Lean system” Total Quality Management (TQM): – Techniques designed to achieve high levels of product quality through shared responsibility & by eliminating the root causes of product defects Business Process Reengineering: – ‘Clean sheet’ redesign of work processes to increase efficiency, improve quality & reduce costs

19. Development since 1990s (1) Flexibility: – Offer a greater variety of product choices on a mass scale (mass customization) Time-based competition: – Developing new product designs & delivering customer orders more quickly than competitors Supply Chain Management: – Cooperating with suppliers & customers to reduce overall costs of the supply chain & increase responsiveness to customers

20. Development since 1990s (2) Global competition: – International trade agreements open new markets for expansion & lower barriers to the entry of foreign competitors (e.g.: NAFTA & GATT) – Creates the need for decision-making tools for facility location, compliance with local regulations, tailoring product offerings to local tastes, managing distribution networks, … Environmental issues: – Pressure from consumers & regulators to reduce, reuse & recycle solid wastes & discharges to air & water

21. Electronic Commerce (since late 1990’s) Internet & related technologies enable new methods of business transactions: – E-retailing creates a new outlet for selling goods & services with global access and 24-7 availability. B2C. – Internet provides a cheap network for coordinating supply chain management information. B2B Developing influence of broadband & wireless