Chapter 1

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

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 Revolution Late 1700s Scientific Management Early 1900s Human Relations Movement 1930s to 1960s Management Science Mid-1900s Computer Age 1970s Just-In-Time Systems 1980s Total Quality Management (TQM) 1980s Reengineering 1980s Flexibility 1990s Time-based Competition 1990s Supply Chain Management 1990s Global Competition 1990s Environmental Issues 1990s Electronic Commerce Late 1990s – Early 21st 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 theHawthorn 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