1. Operations Management
BUSN 6110/PROC 5820

2. Syllabus Class 1: (Aug 19) Introduction, Strategy, case study
Class 2: (Aug 26) Decision Making, Product and Service Design; Processes and Technologies, case study
Class 3: (Sep 2) Facility Planning, Project Management, (Take home exam)
Class 4: (Sep 9) Supply Chain Management and Forecasting
Class 5: (Sep 16) Capacity and Aggregate Planning, Inventory Management, The Beer Game
Class 6: (Sep 23) Just-in-Time, Reverse Logistics – need “The Forklifts Have Nothing To Do!” Available in the Lewis and Clark Bookstore
Class 7: (Sep 30) Resource planning, scheduling, quality
Class 8: (Oct 7) Group Presentations
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
→ Group Presentation – on some aspect of Operations Management

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

4. Grades Group Presentation/Class Participation – 5% Mid Term – 45%
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.
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,
management, ORACLE,
E-commerce 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
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. Pasadena Ritz-Carlton is sold for $170 million
A Hong Kong real estate investment firm agrees to pay $170 million in cash.

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

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

48. 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

49. 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

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

51. 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

52. 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

53. Homework
Motel 6 case study
Chap 3/Chap 5/Chap 6