ch01 - introduction to operations management rev.01

8/12/2019 CH01 - Introduction to Operations Management Rev.01

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Introduction to Operations

Management01Compile by

Shukri Mohamed Salleh

Production and Operations ManagementPPB 26304 / 23203


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Historical Development of OM

Prior to 1900Cottage industry produced custom-made goods.

Watts steam engine in 1785.

Whitneys standardized gun parts in 1801.

Industrial Revolution began at mid-century.


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Historical Development of OM (cont.)

Scientific Management (Frederick W. Taylor)Systematic approach to increasing worker productivity

through time study, standardization of work, andincentives.

Viewed workers as an interchangeable asset. Other Management Pioneers

Frank and Lillian Gilbreth

Motion study and industrial psychology

Henry L. Gantt

Scheduling and the Gantt chart


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Moving Assembly Line (1913)Labor specialization reduced assembly time.

Hawthorne Studies

Yielded unexpected results in the productivity of

Western Electric plant workers after changes in theirproduction environment.

Led to recognition of the importance of work designand employee motivation.


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Operations Research (Management Science)Outgrowth of WWII needs for logistics control and

weapons-systems design.

Seeks to obtain mathematically optimal (quantitative)

solutions to complex problems. OM Emerges as a Field

19501960, OM moved beyond industrial engineeringand operations research to the view of the production

operation as a system.


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OM Emerges as a Field (contd)19501960, OM moved beyond industrial engineering

and operations research to the view of the productionoperation as a system.

The Marriage of OM and ITIntegrated solutions approaches

Business process reengineering

Supply chain management

Systems integration (SAP)


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Operations Management in ServicesOM concepts can apply to both manufacturing and

service operations.

Integration of Manufacturing and Services

Conducting world class operations requires compatiblemanufacturing and service operations.


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Historical Events in

Operations Management

Era Events/Concepts Dates Originator

Industrial

Revolution

Steam engine 1769 James Watt

Division of labor 1776 Adam Smith

Interchangeable parts 1790 Eli Whitney

ScientificManagement

Principles of scientificmanagement

1911 Frederick W. Taylor

Time and motion studies 1911Frank and LillianGilbreth

Activity scheduling chart 1912 Henry Gantt

Moving assembly line 1913 Henry Ford


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HumanRelations

Hawthorne studies 1930 Elton Mayo

Motivation theories

1940s Abraham Maslow

1950s Frederick Herzberg

1960s Douglas McGregor

Operations

Research

Linear programming 1947 George Dantzig

Digital computer 1951 Remington Rand

Simulation, waiting

line theory, decision

theory, PERT/CPM

1950sOperations research

groups

MRP, EDI, EFT, CIM1960s,1970s

Joseph Orlicky, IBM

and others


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QualityRevolution

JIT (just-in-time) 1970s Taiichi Ohno (Toyota)

TQM (total quality

management)1980s

W. Edwards Deming,

Joseph Juran

Strategy andoperations

1980s Wickham Skinner,Robert Hayes

Reengineering 1990sMichael Hammer,

James Champy

Six Sigma 1990s GE, Motorola


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Era Events/Concepts Dates OriginatorInternetRevolution

Internet, WWW, ERP,supply chain management

1990s ARPANET, Tim

Berners-Lee SAP,

i2 Technologies,

ORACLE, DellE-commerce 2000s Amazon, Yahoo,

eBay, Google, andothers

Globalization WTO, European Union,Global supply chains,Outsourcing, ServiceScience

1990s

2000s

China, India,emergingeconomies


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Era Events/Concepts Dates OriginatorGreenRevolution

Global warming, AnInconvenient Truth, Kyoto

Today Numerousscientists,statesmen and

governments


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Evolution of Operations and

Supply Chain Management

Scientific management

systematic analysis of work methods

Mass production

high-volume production of a standardized product fora mass market

Lean production

adaptation of mass production that prizes quality and

flexibility


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Evolution of Operations and Supply

Chain Management

Supply chain management

management of the flow of information, products, and services across a

network of customers, enterprises, and supply chain partners


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What Is Operations Management?

Operations ManagementManagement of the conversion process which

transforms inputs such as raw material and labor intooutputs in the form of finished goods and services.

Transformation Process

(components)

Inputs

(customers

and/or

materials)

Outputs

(goods

and

services)


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Role of OM within an Organization


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Top-down Approach to OM Strategy

Operations Strategy DecisionsStrategic (long-range)

Needs of customers

(capacity planning)

Tactical (medium-range)

Efficient scheduling of

resources

Operational planningand control (short-range)

Immediate tasks and

activities


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OM Focus Areas

Cost Speed

Quality

Flexibility


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Cost

Waste elimination relentlessly pursuing the removal of all waste Examination of cost structure

looking at the entire cost structure for reduction potential

Lean production providing low costs through disciplined operations


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Speed

Fast moves, Fast adaptations, Tight linkages

Internet

Customers expect immediate responses

Service organizations

always competed on speed (McDonalds, LensCrafters,and Federal Express)

Manufacturers

time-based competition: build-to-order production andefficient supply chains

Fashion industry two-week design-to-rack lead time of Spanish retailer,

Zara


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Quality

Minimizing defect rates or conforming to designspecifications

Ritz-Carlton - one customer at a time

Service system designed to move heaven and earth

to satisfy customer

Employees empowered to satisfy a guests wish

Teams set objectives and devise quality action plans

Each hotel has a quality leader


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Flexibility

Ability to adjust to changes in product mix,production volume, or design

Mass customization: the mass production ofcustomized parts

National Bicycle Industrial Company offers 11,231,862 variations

delivers within two weeks at costs only 10% abovestandard models


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An Operational-Level OM Perspective

OMs function focuses on adding value throughthe transformation process (technical core) of

converting inputs into outputs.

Physical: manufacturing

Locational: transportation

Exchange:retailing

Storage: warehousing

Physiological: health care

Informational: telecommunications


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The Transformation Process within OM

Exhibit 1.2


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Exhibit 1.3

Input-Transformation-Output Relationships

for Typical Systems


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OMs Contributions to Society

Higher Standard of LivingAbility to increase productivity

Lower cost of goods and services

Better Quality Goods and Services

Competition increases quality

Concern for the Environment

Recycling and concern for air and water quality

Improved Working ConditionsBetter job design and employee participation


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Copyright 2005 The McGraw-Hill Companies. All rights reserved. McGraw-Hill/Irwin 128


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The Emergence of OM

Operations management has been gainingincreased recognition in recent years for several

reasons, including

a) the application of OM concepts in service

operations,b) an expanded definition of quality,

c) the introduction of OM concepts to other functionalareas such as marketing and human resources,

andd) the realization that the OM function can add value

to the end product.


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1-6

Differences Between

Goods and Services

Goods

Tangible

Can be inventoriedNo interaction

between customerand process

Services

Intangible

Cannot beinventoried

Direct interactionbetween customer

and process

Exhibit 1.7


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Most Products Are a Bundle

of Goods and Services

Exhibit 1.8


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A New Paradigm for OM

Post-War U.S. Dominance in ManufacturingAvailable capacity built to support the war effort

Pent-up demand for consumer goods

Destruction of overseas production capabilities

Proactive Operations Function (Skinner)Add value to products, increase profit margins.

Compete on dimensions other than costs:

Quality

Speed of delivery

Process flexibility


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Exhibit 1.9Source: From Joseph E. Stiglitz, Principles of Micro-economics, 2nd ed. (New

York: W. W. Norton and Company, 1997), p. 58. Reprinted with permission.

Fords Global Network to Support

the Manufacturing of the Escort


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Linking OM to Customers and Suppliers

Benefits of Buffering the Transformation Process The process not disturbed by environmental

interaction.

The process was often more efficient than input and

distribution processes. Productivity was maximized when processes operated

at continuous rates.

Process management skills were different from those

of other functional activities.


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(contd)

Disadvantages of Buffering the Transformation

Process

Information lag in interaction with other functional

activities. Lack of communication between customers and the

shop floor for problem solving.


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(contd)

Value Chain

Steps an organization requires to produce a good ora service regardless of where they are performed.

Virtual enterprises: fully integrated and interlockednetworks of interdependent companies.

Outsourcing Offshore

Jobs are now outsourced worldwide.

Originally outsourcing involved primarilymanufacturing jobs; increases in technology nowallow the outsourcing of white collar jobs.


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The Value Chain and

Its Support Functions

Exhibit 1.10


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Line and Staff Jobs in OM

Exhibit 1.11


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Inputs Provided by OM to

Other Functional Areas

Exhibit 1.11


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Reference

Davis, M. and Heineke, J., 2005, OperationsManagement : Integrating Manufacturing and

Services, McGraw-Hill Companies Inc. Fifth Ed.

Russell, R. and Taylor B., 2011, OperationsManagement: Creating Value Along the Supply

Chain, Jon Wiley & Sons, Sixth Ed.

Chase, R. et al, 2006, Operation Management for

Competitive Advantages, McGraw-Hill Companies

Inc. 11th Ed.

ch01 - introduction to operations management rev.01

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