1. Chapter 1 Introduction

2. John Butler  Ph.D. University of Texas  Previously at Ohio State  Office GWI 550 jbutler5@tulane.edu 865-5442  Office Hours Tuesday & Thursday 2:00 – 3:00 pm By appointment

3. Operations Management (OM)  The design, operation, and improvement of the systems that create and deliver the firm’s primary products and services The “M” is important  Not just tools or engineering We’re talking about decisions  Strategic (long term)  Tactical (intermediate)  Operational (short term)

4. Why bother? LloydLloyd  Part of Business Education  Cross Functional Applications  Systematic View of Organizational Processes  Job Opportunities

5. Key Terms  Efficiency Do it with the least number of resources  Effectiveness Do it right  Maximize value to the firm  Tradeoff?  Value  Quality / Price How can we increase value?

6. Managing the Value Chain

7. Transformation Process  A use of resources to transform inputs into desired outputs Physical - manufacturing Locational – transportation Exchange – retailing Storage – warehousing Physiological – health care Informational – telecommunications

8. Example : Tulane Tulane Resources Teachers Books Classrooms Transformation Process Impart knowledge & skills Inputs High School Grads Outputs Educated Individuals

9. Goods & Services  Tangible vs. Intangible  Services rely on interaction with customer to produce McDonalds makes “stuff” but is classified in service industry Customers are on the shop floor  Shades of gray

10. Where Do We “Operate”?  Manufacturing Typically group operations in one department Vertical  Service Firm Operations scattered throughout firm Bank, Airlines Horizontal

11. Operations as Service  Every company is really in the service business Core services  basic things that customers want from products they purchase Value-added services  differentiate the organization from competitors  build relationships that bind customers to the firm in a positive way

12. Core Services  Traditional OM performance measures Quality Flexibility Speed Price (Cost reduction)

13. Value-added Services  Information Support internal or external group  Problem Solving Support internal or external group  Sales Support Helping marketing close the deal  Field Support Fix items or replenish inventory

14. OM’s Role in A Company  Not perceived as glamorous Many C-level execs are not OM literate  But … Operations account for 60-80% of the direct expenses that burden a firm’s profit Synergies must exist with other functional areas of the organization for firm to succeed

15. 1 ST Industrial Revolution  1776: US Democracy, Law & Culture Adam Smith: Wealth of Nations James Watt: 1 st Steam Engine Sold  Automation 1790: First Advanced Textile Mill 1801: Eli Whitney  Interchangeable Parts England becomes the 1 st industrial nation.

16. OM History: 2 nd Industrial Revolution  1840+ Use of Coal Iron Mfg. Mass Production/ Distribution / Communication  Railroad Evolution of Managers, Accounting Standards  Scientific Management: Frederick Tayor, Henry Ganntt

17. Steel, Andrew Carnegie & Scale I believe the true road to preeminent success in any line is to make yourself master in that line  Focus: Details/Steel  Horizontal/Vertical Integration

18. The Model-T, Henry Ford & Speed  1908: Moving Assembly Line work specialization  Labor time/car from 12.5 to 1.5 hours, price from $850 to $290

19. Post WWII  Multidisciplinary team approach to complex problems: Dupont: a centrally governed multi- departmental structure for effective integration GM: Alfred Sloan reorganizes GM into a multi-divisional, decentralized structure; effective market segmentation, demand forecasting & inventory tracking  market share increase

20. New Practices in OM  JIT/Lean Manufacturing  Manufacturing Strategy Paradigm Use as a strategic lever  TQM  Business Process Reengineering  Supply Chain Management  E-commerce

21. Going Forward  Effectively consolidating the operations resulting from mergers  Developing flexible supply chains to enable mass customization of products and services  Managing global supplier, production and distribution networks  Increased “commoditization” of suppliers  Make efficient use of Internet technology