Chapter 1

1. Chapter 1 Introduction to Operations and Competitiveness To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved.

2. What is Operations? • Operations is about the “real work” • Goods are produced and services are delivered by the operations • “hub” of the organization

3. The Operations Function • Operations as a transformation process • Operations as a basic function • Operations as the technical core

4. INPUT Material Machines Labor Management Capital Operations as a Transformation Process

5. INPUT Material Machines Labor Management Capital TRANSFORMATION PROCESS Operations as a Transformation Process

6. INPUT Material Machines Labor Management Capital OUTPUT Goods Services TRANSFORMATION PROCESS Operations as a Transformation Process

7. INPUT Material Machines Labor Management Capital OUTPUT Goods Services TRANSFORMATION PROCESS Feedback Operations as a Transformation Process

8. Transformation Processes • Physical(manufacturing) • Locational(transportation/ warehouse) • Exchange(retail) • Physiological(health care) • Psychological(entertainment) • Informational(communications)

9. Operations as the Technical Core

10. Finance/Accounting Production and Inventory data Capital budgeting requests Capacity expansion and Technology plans Budgets Cost analysis Capital investments Stockholder requirements Orders for materials Production and delivery Schedules Quality Requirements Design/ Performance specs Material availability Quality data Delivery schedules Designs Product/Service Availability Lead-time estimates Status of order Delivery schedules Sales forecasts Customer orders Customer feedback Promotions Operations Suppliers Marketing Personnel needs Skill sets Performance evaluations Job design/work measurement Hiring/firing Training Legal requirements Union contract negotiations Human Resources Operations as the Technical Core

11. Historical Events in OM • Industrial Revolution • Scientific Management • Human Relations • Management Science • Quality Revolution • Globalization • Information Age/Internet Revolution

12. Historical Events in OM Industrial Revolution Steam engine 1769 James Watt Division of labor 1776 Adam Smith Interchangeable parts 1790 Eli Whitney Scientific Management Principles 1911 Frederick W. Taylor Time and motion studies 1911 Frank & Lillian Gilbreth Activity scheduling chart 1912 Henry Gant Moving assembly line 1913 Henry Ford

13. Historical Events in OM Human Relations 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

14. Historical Events in OM Quality Revolution JIT 1970s Taiichi Ohno, Toyota TQM 1980s W. Edwards Deming, Joseph Juran, et. al. Strategy and operations Skinner, Hayes 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

15. Historical Events in OM Information Age/ Internet Revolution Internet, WWW, ERP 1990s ARPANET, Tim Supply chain Berners-Lee, SAP, i2 management, Technologies, ORACLE, E-commerce PeopleSoft, Amazon, Yahoo, eBay, and others

16. Categories of E-Commerce

17. Business Consumer B2C Amazon.com B2B Commerceone.com Business C2C eBay.com C2B Priceline.com Consumer Categories of E-Commerce

18. (a) Traditional Value Chain Manufacturer Wholesaler/ distributor Retailer Consumer A New Value Chain

19. (a) Traditional Value Chain Manufacturer Wholesaler/ distributor Retailer Consumer (b) Intermediaries Eliminated (Deintermediation) Manufacturer Wholesaler/ distributor Retailer Consumer A New Value Chain

20. (a) Traditional Value Chain Manufacturer Wholesaler/ distributor Retailer Consumer (b) Intermediaries Eliminated (Deintermediation) Manufacturer Wholesaler/ distributor Retailer Consumer (b) New Intermediaries Introduced (Reintermediation) Manufacturer Infomediary E-Retailer Aggregator Portal Consumer A New Value Chain

21. An Integrated Value Chain

22. Customer Manufacturer Supplier Flow of information (customer order) An Integrated Value Chain

23. Customer Manufacturer Supplier Flow of information (customer order) Flow of product (order fulfillment) An Integrated Value Chain

24. 8000 – 6000 – 4000 – 2000 – 0 – Trillions of Dollars | | | | | 2000 2001 2002 2003 2004 Year The Growth of E-Commerce

25. 8000 – 6000 – 4000 – 2000 – 0 – B2B B2C Trillions of Dollars | | | | | 2000 2001 2002 2003 2004 Year The Growth of E-Commerce

26. Buyers Buyer Seller Sellers Buyers Sellers Sellers Buyer Types of B2B Transactions (a) Electronic Storefront (b) Seller’s Auction (c) Buyer’s Auction (d) Exchange or E-Marketplace

27. E-Business Promotes: • Better customer relations • More efficient processes • Lower cost of materials • Information technology synergy • Better and faster decision making

28. E-Business Promotes: • New forms of organizations • Expanded supply chain • Higher customer expectations • New ways of doing business • Globalization

29. Select your answer from the following: Countries: Germany, Japan, U.S., Singapore, Ireland, Finland, France, Belgium, China, Brazil; Industries: Automotive, Pharmaceutical, Retail, Textile, Biomedical, Electronics; and Companies: IBM, Bayer, Food Lion, Godiva, Shell Oil, Firestone, Nissan Which country pays the highest wage rate? GERMANY Which country has the highest number of Internet addresses per capita? FINLAND

30. Countries: Germany, Japan, U.S., Singapore, Ireland, Finland, France, Belgium, China, Brazil; Industries: Automotive, Pharmaceutical, Retail, Textile, Biomedical, Electronics; and Companies: IBM, Bayer, Food Lion, Godiva, Shell Oil, Firestone, Nissan Which country has the best infrastructure for Internet access? SINGAPURE Which country has the greatest number of computer programmers per capita? IRELAND

31. Countries: Germany, Japan, U.S., Singapore, Ireland, Finland, France, Belgium, China, Brazil; Industries: Automotive, Pharmaceutical, Retail, Textile, Biomedical, Electronics; and Companies: IBM, Bayer, Food Lion, Godiva, Shell Oil, Firestone, Nissan  Which industry is the most competitive? PHARMACEUTICALS Which company does most of its business in the U.S.? NISSAN Which two companies claim the U.S. as their country of origin? IBM and GODIVA 8. 

32. Countries: Germany, Japan, U.S., Singapore, Ireland, Finland, France, Belgium, China, Brazil; Which international event celebrated annually sends the largest number of people traveling? CHINESE NEW YEAR

33. $ 35 – $ 30 – $ 25 – $ 20 – $ 15 – $ 10 – $ 5 – $ 0 – | | | | | | 1975 1980 1985 1990 1995 2000 An International Comparison of Hourly Wage Rates

34. $ 35 – $ 30 – $ 25 – $ 20 – $ 15 – $ 10 – $ 5 – $ 0 – Germany Japan United States EU Asian NIEs Mexico | | | | | | 1975 1980 1985 1990 1995 2000 An International Comparison of Hourly Wage Rates

35. 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 Multinational Corporations

36. 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.

37. Output Input Productivity = Productivity

38. Output Input Productivity = Productivity • Become more efficient • Downsize • Expand • Achieve breakthroughs Productivity improves when firms:

39. – 7 – 6 – 5 – 4 – 3 – 2 – 1 – 0 – -1 – -2 – -3 – | | | | | | | | | | | | ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 2001 Productivity in the ‘90s

40. – 7 – 6 – 5 – 4 – 3 – 2 – 1 – 0 – -1 – -2 – -3 – United States Germany Japan | | | | | | | | | | | | ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 2001 Productivity in the ‘90s

41. Measures of Competitiveness • Productivity • GDP (Gross domestic product) growth • Market capitalization • Technological infrastructure • Quality of education • Efficiency of government

42. 100 80 60 40 20 0 US Singapore Finland Ireland Germany UK Japan Mexico Russia Competitiveness of Selected Countries

43. 100 80 60 40 20 0 Competitiveness of Selected Countries US Singapore Finland Ireland Germany UK Japan Mexico Russia

44. Barriers to Entry • Economies of scale • Capital investment • Access to supply and distribution channels • Learning curves

45. Competition Within Industries Increases When • Firms are relatively equal in size and resources • Products and services are standardized • Industry growth is slow or exponential

46. Strategy Products and services Processes and technologies Facilities Project management Managing the supply chain Forecasting demand for products and services Production planning and scheduling Ensuring quality Primary Topics in Operations Management

47. Purpose of the Course • To gain an appreciation of the strategic importance of operations and how operations relates to other business functions • To develop a working knowledge of the concepts and methods related to designing and managing operations • To develop a skill set for organizing activities as a part of a process

48. The Strategic Designing the Importance of Operating Managing the Ensuring Operations System Supply Chain Quality Introduction to Operations and Competitiveness Operations Strategy Products and Services Processes and Technologies Facilities Project Management Supply Chain Management Forecasting Capacity and Aggregate Planning Inventory Management Just-in-Time and Lean Production Enterprise Resource Planning Scheduling Quality Management Statistical Process Control Waiting Line Models for Service Improvement Human Resources in Operations Management Organization of the Text