2. Chapter 1 Introduction to Operations and Competitiveness

3. Production/Operations management (POM) is concerned with the production of goods, services and information. All business enterprises produce goods, services and information. They try to serve in the satisfaction of human need in one way. So production activities are the foundation of a nation’s economic system.

4. Copyright 2006 John Wiley & Sons, Inc. 1-3 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.

5. Ch 1 - 7 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Historical Events In POM Industrial Revolution Scientific Management Human Relations Management Science Quality Revolution Information Age Globalization

6. Adam Smith, 18. century

7. Division of Labor, 21. century

8. Competitive Market Rules http://www.youtube.com/watch?v=3p1sW 9aIQ-Y

9. Copyright 2006 John Wiley & Sons, Inc. 1-8 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, www.wto.org

10. Copyright 2006 John Wiley & Sons, Inc. 1-9 Risks of Globalization Cultural differences Supply chain logistics Safety, security, and stability Quality problems Corporate image Loss of capabilities

11. James Watt was the most important person especially beginning the industrial revolution. Job shop production was organized in Whitney’s gun factory as the method of manufacturing in batches. Charles Babbage provided us too much contribution for management. Frederic Taylor is the father of management science.

12. Henry Ford begun job flow production in manufacturing which are called serialized production systems. http://www.youtube.com/swf/l.swf?video_id=S4KrIMZ pwCY http://www.youtube.com/swf/l.swf?video_id=S4KrIMZ pwCY

13. Harris gave us some important information about inventory control. Shewhart used the statistical theory for Quality Control (QC). Computer and Operations Research (OR) are used for business. Deeming and Juran presented us Total Quality Management (TQM). Toyota used pull system instead of push system (Just-in-Time JIT).

14. W HY STUDY PRODUCTıON / OPERATıONS MANAGEMENT (POM)? We study POM for four reasons: a. POM is one of the three major functions of any organisations, and it is integrally related to all the other business functions. All organisations market (sell), finance (account), and produce (operate), and it is important to know how the POM segment functions. Therefore, we study how people organise themselves for productive enterprise. b. We study POM because we want to know how goods and services are produced. The production function is the segment of our society that creates the products we use.

15. Ch 1 - 5 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Operations As A Basic Function MARKETING FINANCE OPERATIONS

16. Ch 1 - 6 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Production&Operations As The Technical Core Operations Finance Capital Markets, Stockholders Marketing Customers Workers Suppliers Purchasing Personnel

17. c. We study POM to understand what production/ operations managers do. By understanding what these managers do, you can develop the skills necessary to become such a manager. This will help you explore the numerous and lucrative career opportunities in POM. d. We study POM because it is such a costly part of an organisation. A large percentage of the revenue of most firms is spent in the POM function. Indeed, POM provides a major opportunity for an organisation to improve its profitability and enhance its service to society.

18. The production and operations management is also used to denote the wide scope of application. Production operations management or, more simply, operations management include the service industries as well. POM is related with system approach;

19. Ch 1 - 2 The Operations Function & The Field of Operations management Operations as a transformation process Operations as a basic function Operations as the technical core OM is defined as the design, operation, & improvement of the production systems that create the firm’s primary products or services. OM is fuctional fields of business with clear line manegement responsibilities.

20. This point is important because operations management is fruquently confused with Operations Research(OR) & Management Science(MS) and Industrial Engineering(IE). This sitiuation is need to support the application of QM to decision making in all fields.

21. OM is related with other business function like Management, Finance, & Accounting and etc. Because; –Accountants need to understand the basic of Investment Management, Capital Uti.&labor standarts to develop accurate cost data, perform audits & prepare financial reports. Cost Accountants in particular must be aware of how JIT and CIM work. –Finance managers can use investment& capital. Concepts to judge the need for capital investment, to forecast cash flow, & to manage current assests. Make or buy,plant expansion etc.

22. Marketing specialists need to understand what operations can do relative to meeting customer due dates, product customization,& new product introduction. So Marketing & Operations Management have overlapping interests. Human Resource Managers must know how jobs are designed, relationship between standart & incentive plans, & the types of production skills required of the direct workforce. Management Information System (MIS) specialist often install OI systems that they themselves design or that are developed as off-the-shelf software by computer companies. As a major business application of computers in POQC.

23. Everybody know that entrepreneurs often fail because they run out of working capital due to poor production planning and inventory management. Because of all these reason The firm’s Corporate Strategy is based on the corporate mission and in essence reflects how the firm will plans to use all its resources and functions to gain competitive advantage. The Operation Strategy specifies how the firm employ its production capabilities to support its corporate strategy. Within the operations function, management decisions can be divided into three broad areas: Strategic (long term) decisions, Tactical (intermediate decisions), Operational planning and control (short- term) decisions.

24. We have omitted in the notes the theoretical treatments and have concentrated on providing an easy-to-read, easy-to- understand treatment of the basic POM knowledge. In other words, our aim was to give students a solid understanding of the analytical tools necessary to solve production/operations problems. Finaly the purpose of production/operations is to satisfy people’s wants. And then we can define; PO System.

25. Ch 1 - 3 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Operations As A Transformation Process OUTPUT Material Machines Labor Management Capital Goods or Services INPUT Transformation process Feedback

26. To produce goods and services various form of inputs are brought together in a transformation system.

27. WHAT IS PRODUCTION& OPERATIONS SYSTEM A production/operations system is a configuration of resources combined for the provision of goods or services. A production/operations system is that part of the organization that exists primarily to generate and produce the organization products, i.e. goods or services..

28. R ESOURCES IN P RODUCTION /O PERATIONS S YSTEMS Managers in production and operations functions practice production/operations management. They do not practice behavioural science, quantitative methods or systems analysis, although they utilise these underlying disciplines. Likewise doctors do not practice biology, although they know how to use biological methods. While methodologies are certainly important, they are not essence of POM. PO managers are principally concerned with the use of physical resources;

29. Therefore we shall take a physical view of PO systems and concentrate on the physical resources used by the system which for convenience will be categorized as follows: Materials, i.e. the physical items consumed or converted by the system, e.g. raw materials, fuel, indirect materials. Capital, i.e. the physical items equipment and facilities, used by the system, e.g. plant, tools, vehicles, buildings. Human Resources, i.e. the people, workers and managers, who provide or contribute to the operation of the system, without which neither machine nor materials are effectively used.

30. Ch 1 - 4 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Transformation Processes Physical (manufacturing) Locational (transport/storage) Exchange (retail) Physiological(healthcare) Psychological (entertainment) Informational (communications)

31. We know real production problems began to physical production in the industrial revaluation. For this reason the knowledge about the field is known as production management. And then service business came in to our life So it has been seen that production management concepts and tools could be easily applied in all types of enterprises.

32. In 1940 Operations Research Techniques were developed and computer became economical. Computers come along to give managers up-to-the- minute information about markets costs, production levels and inventories. Machines with linked computers that are responsible for changing them over from one job to another. Manufacturers began installing logic units in equipment.

33. Computers are the driving force in the long-wave changeover of manufacturing technology. The grouping of computer-controlled machines and development of industrial robots have now given production systems the flexibility to receive and respond to on line information. With robots, flexible manufacturing can deliver customized products.

34. Robots and flexible production system are reducing the demand for low skilled direct labor. Offsetting this surplus of untrained workers is the growing need for more technically trained control and maintenance personnel.

35. Retraining is needed to prepare low-skilled workers for the emerging more sophisticated fields of work. Learning organization is new important concept to manufacturing. Business of the future will be more active involving specialty items (high-tech metals) and advanced information and communications services.

36. A change in management technology is necessary Because traditional old approach do not provide appropriate support for new kind of manufacturing systems developed often The mid 1980, New manufacturing technology cannot be used without changes in management technology.

37. By the year 2020, about 85-90 percent of workforce will most likely be engaged in nonmanufacturing activities. Now about 70 percent of world workforce are engaged in service activities. High-technology system (e.g. electronic, fiber optics, laser) will play en major role.

38. In the 1940s, nobody have guessed how much manufacturing technology would change by 1990. Using robots, in 1990 factories doubled output-with half as many blue-color workers-to match growth in consumer fueled by sharply lower costs and higher quality. We can say some new concepts: Smart Customer Smart factories “Smart Customers interact with smart factories to help design the goods and services that they want.”

39. The idea that the customer can use computer to intent out directly with the production process was suggested by Chrysler Coo. in 1960. Customers in 1990 dial the production process directly on their computerized telephones to set down their design specifications. For the particular varieties of the company’s product that they desire to purchase.

40. Companies have invented a variety of competing and co-operative strategies to fit their own unique situations. Some of the competitive approaches are continuous quality improvement, being first bringing new products to market increasing the firm’s value-added and so on. Competition relentlessly seeks to improve both manufacturing and management.

41. Technology and telecommunication have been brighten some new approach for business. Now we can write these two points as follows: 1) Changes in manufacturing technology- the use of information networks by people and computer driven equipment. 2) Changes in management technology- the managing of manufacturing technology for example JIT and Kanban, reengineering etc. As in all of these waves of technological change, there are new tactical production concepts and new strategic concepts that must be understood for the strategic production planning.

42. Because of global changes in business there are five main elements that capture the changing in manufacturing that are taking place. 1) There are fewer workers on the line. 2) There are fewer supervisors for the line. 3) More smart machines. 4) More workers engaged in planning systems. 5) More workers designing hardware and software.

43. So it is necessary a manufacturing system that receives all in formation that exists in the company, on-line and immediately. It has decision making competence based on all relevant information. So we can say that to use Computer Integrated Manufacturing (CIM) will be too important for us.

44. Ch 1 - 8 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Summarized; Historical Events In POM Industrial Revolution Steam engine1769 James Watt Division of labor1776Adam Smith Interchangeable parts1790Eli Whitney Scientific Management Principles1911Frederick W. Taylor Time / motion study1911Frank & Lillian Gilbreth Activity scheduling chart1912Henry Gant

45. Ch 1 - 9 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Human Relations Hawthorne studies1930Elton Mayo Motivation theories1940sAbraham Maslow 1950sFrederick Hertzberg 1960sDouglas McGregor Management Science Linear programming1947George Dantzig Digital computer1951Remington Rand Simulation, PERT/CPM, 1960Research groups Waiting line theory MRP1960sJoseph Orlicky, IBM

46. Ch 1 - 10 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Quality Revolution JIT1970sTaiichi Ohno, Toyota TQM 1980s W. Edwards Deming, Joseph Juran, et. al. Reengineering1990s Hammer, Champy Information Age EDI, EFT,1970sNumerous CIM 1980s individuals and 1990s companies Internet, World Wide Web1990sTim Berners-Lee

47. Components of e-Manufacturing Copyright 2011 John Wiley & Sons, Inc. 6-46

48. Product Technology Computer-aided design (CAD) Creates and communicates designs electronically Group technology (GT) Classifies designs into families for easy retrieval and modification Computer-aided engineering (CAE) Tests functionality of CAD designs electronically Collaborative product commerce (CPC) Facilitates electronic communication and exchange of information among designers and suppliers Copyright 2011 John Wiley & Sons, Inc. 6-47

49. Product Technology Product data management (PDM) Keeps track of design specs and revisions for the life of the product Product life cycle management (PLM) Integrates decisions of those involved in product development, manufacturing, sales, customer service, recycling, and disposal Product configuration Defines products “configured” by customers who have selected among various options, usually from a Web site Copyright 2011 John Wiley & Sons, Inc. 6-48

50. Process Technology Standard for exchange of product model data (STEP) Set standards for communication among different CAD vendors; translates CAD data into requirements for automated inspection and manufacture Computer-aided design and manufacture (CAD/CAM) Electronic link between automated design (CAD) and automated manufacture (CAM) Computer aided process (CAPP) Generates process plans based on database of similar requirements E-procurement Electronic purchasing of items from e-marketplaces, auctions, or company websites Copyright 2011 John Wiley & Sons, Inc. 6-49

51. Manufacturing Technology Automatic guided vehicle (AGV) Driverless trucks that move material along a specified path; directed by wire or tape embedded in floor or by radio frequencies Automated storage and retrieval system (ASRS) An automated warehouse; items placed in a storage system and retrieved by fast-moving stacker cranes; controlled by computer Process Control Continuous monitoring of automated equipment; makes real-time decisions on ongoing operation, maintenance, and quality Computer-integrated manufacturing (CIM) Automated manufacturing systems integrated through computer technology; also called e-manufacturing Copyright 2011 John Wiley & Sons, Inc. 6-50

52. Information Technology Business – to –Business (B2B) E-transactions between businesses usually via the Internet Business – to –Consumer (B2C) E-transactions between businesses and their customers usually via the Internet Internet A global information system of computer networks that facilitates communication and data transfer Intranet Communication networks internal to an organization; can also be password (i.e., firewall) protected sites on the Internet Copyright 2011 John Wiley & Sons, Inc. 6-51

53. Information Technology Extranet Intranets connected to the Internet for shared access with select suppliers, customers, and trading partners Bar Codes Series of vertical lines printed on packages that identify item and other information Radio Frequency Identification tags (RFID) Integrated circuit embedded in a tag; can send and receive information; a “twenty-first century bar code” with read/write capabilities Electronic data interchange (EDI) Computer-to-computer exchange of business documents over a proprietary network; very expensive and inflexible Copyright 2011 John Wiley & Sons, Inc. 6-52

54. Information Technology Extensible markup language (XML) A markup language that facilitates computer–to–computer communication over the Internet by tagging data before its is sent Enterprise resource planning (ERP) Software for managing key functions of an enterprise, including sales, marketing, finance, accounting, production, materials management & human resources Supply chain management (SCM) Software to manage flow of goods and information among a network of suppliers, manufacturers and distributors Customer relationship management (CRM) Software to manage interactions with customers; compiling and analyzing customer data Copyright 2011 John Wiley & Sons, Inc. 6-53

55. Information Technology Decision support systems (DSS) Information system to help managers make decisions; includes quantitative modeling components and interactive components for what-if analysis Expert systems (ES) A computer system that uses the knowledge of experts to diagnose or solve a problem Artificial intelligence (AI) Field of study replicating elements of human thought and natural processes in software; includes expert systems, genetic algorithms, neural networks, and fuzzy logic Copyright 2011 John Wiley & Sons, Inc. 6-54

56. Ch 1 - 11 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Globalization Worldwide markets Numerous individuals and operations and companies Supply chain management Electronic commerce For The 21. Century ; World Class Manufacturing Mass customization Sutainability Green SCM Green Logistic Carbon Foot Print World Class Manufacturing in Crysler Video http://www.youtube.com/watch?v=BNHT3kStYyM&feature=related

57. Ch 1 - 12 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e TGW (Things Gone Wrong) In First Eight Months Per 100 Cars the end of 20 century Chrysler 285 GM256 Ford214 Japanese132 Toyota 55

58. Ch 1 - 13 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Quality Of Semiconductors U.S.Japan Defective on delivery16% 0% Failure after 1000 hrs14% 1%

59. Ch 1 - 14 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Quality Of Room Air Conditioners U.S.Japan Fabrication defects4.4% <0.1% Assembly line defects63.5%0.9% Service calls 10.5%0.6% Warranty cost 2.2%0.6% (% of sales)

60. Ch 1 - 15 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Quality Of Color TVs U.S.Japan Assembly defects1.40.01 Service calls1.00.09 (per set)

61. Ch 1 - 16 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Globalization will offer us : Take advantage of favorable costs Gain access to foreign markets Reduced trade barriers Changing markets

62. Ch 1 - 17 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Copyright 2006 John Wiley & Sons, Inc. 1-61 Hourly Wage Rates 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

63. Ch 1 - 18 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Growth in Volume of World Trade World Trade Compared to World GDP Source: “Real GDP and Trade Growth of OECD Countries, 2001–03,” International Trade Statistics 2003, World Trade Organization, www.wto.org

64. Ch 1 - 19 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Impact of Trade Agreements

65. Ch 1 - 20 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Risks In Globalization Weak infrastructure Distinct languages, customs, trade barriers Inefficient distribution channels Instability of governments Poor economic conditions

66. Ch 1 - 21 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e In this case we can define Competitiveness ; The degree to which a nation, can, under demanding and rapidly changing market conditions, produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens.

67. Ch 1 - 22 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Measures Of Competitiveness Gross domestic product (GDP) Import/export ratio Productivity = output / input

68. Ch 1 - 23 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Productivity Increases When Firms Become more efficient Downsize Expand Retrench Achieve breakthroughs

69. Ch 1 - 24 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Productivity Rates Internet-enabled productivity - Dot com bust - 9/11 terrorist attacks - 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 2003. U.S. figures for 2002–2003 from “Major Sector Productivity and Costs Index,” Bureau of Labor Statistics, U.S. Department of Labor, March 2004

70. Ch 1 - 25 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Changes In Input and Output.. 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

71. Ch 1 - 26 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Competitive Industries Relatively equal in size and resources Standardized products and services Slow or exponential growth

72. Ch 1 - 27 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Measuring Competitiveness Number of major players Average market share Average profit margin

73. Ch 1 - 28 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Barriers To Entry Economies of scale Capital investment Access to supply and distribution channels Learning curves

74. It seems that flexible manufacturing or World Class Manufacturing (WCM) created the need for top management that was oriented towards putting it all together with the systems viewpoint. We know, some enterprises is related with one or two or more business activities.

75. On the other hand production activities are related with all of them. Finally production/operations management is the study of the principles and quantitative and qualitative tools of decision making in periodic tasks of selecting, designing and updating a productive system and continual tasks of operating controlling and maintaining it.

76. Ch 1 - 29 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Issues & Trends In Operations 1. Intense competition 2. Global markets, global sourcing, and global financing 3. Importance of strategy 4. Product variety and mass customization 5. More services

77. Ch 1 - 30 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Issues & Trends In Operations 6. Emphasis on quality 7. Flexibility 8. Advances in technology 9. Worker involvement 10. Environmental and ethical concerns

78. Ch 1 - 31 ©2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Primary Topics In Operations Management Deploying strategy Assuring quality Designing products & services Planning the production process Laying out the facility

79. Ch 1 - 32 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Primary Topics In Operations Management Designing jobs & work Managing the supply chain Forecasting demand for products & services Production planning & scheduling

80. Ch 1 - 33 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Organization Of Book Strategy of productive systems Designing productive systems Operating Productive systems

81. Ch 1 - 34 ©2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 2/e Strategy Of Productive Systems (Some topics for Term Research Project) 1. Introduction to Operations & competitiveness 2. Operations strategy 3. Forecasting 4. Product & Services Design

82. Ch 1 - 35 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Designing Productive Systems 5.Stratrgic Capacity Plannig- Decision Theory 6. Process planning, analysis and reengineering 7. Facility layout- Lineer programming, Assignment Models 8.Location Planning & Controll- Transportation Models 9. Supply chain management

83. Ch 1 - 36 ©2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Operating Productive Systems 10. Inventory management 11. Materials requirements planning 12. Quality Control- Total Quality Management 13. Just-in-time systems 14. Statistical Quality Control 15. Project management

84. Ch 1 - 37 © 2000 by Prentice-Hall Inc Russell/Taylor Oper Mgt 3/e Purpose Of Text Gain an appreciation of the strategic importance of operations and how operations can provide a competitive advantage in the marketplace Understand the relationship between operations and other business functions Develop a working knowledge of the concepts and methods related to designing and managing operations