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Lecture outline
What Do Operations
Managers Do?
What is operations?
Transformation Process
Physical: as in manufacturing operations
Locational: as in transportation
operations
Exchange: as in retail operations
Physiological: as in health care
Psychological: as in entertainment
Informational: as in communication
Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
TRANSFORMATION
PROCESS
OUTPUT
Goods
Services
Feedback
Operations Function
Operations
Marketing
Finance
and
accounting
Human
resources
Outside
suppliers
Marketing
Finance
Evolution of Operations
Management
Craft production
Division of labor
Interchangeable parts
Evolution of Operations
Management (cont.)
Scientific management
Mass production
high-volume production of a
standardized product for a mass
market
Lean production
Historical Events in
Operations Management
Era
Industrial
Revolution
Events/Concepts
Dates
Originator
Steam engine
Division of labor
Interchangeable parts
Principles of scientific
management
1769
1776
1790
James Watt
1911
Frederick W. Taylor
1911
1912
1913
Adam Smith
Eli Whitney
Historical Events in
Operations Management
(cont.)
Era
Human
Relations
Operations
Research
Events/Concepts
Dates
Originator
Hawthorne studies
1930
1940s
1950s
1960s
1947
1951
Elton Mayo
Abraham Maslow
Frederick Herzberg
Douglas McGregor
George Dantzig
Remington Rand
1950s
Operations research
groups
1960s,
1970s
Motivation theories
Linear programming
Digital computer
Simulation, waiting
line theory, decision
theory, PERT/CPM
MRP, EDI, EFT, CIM
Historical Events in
Operations Management
(cont.)
Era
JIT (just-in-time)
TQM (total quality
management)
Quality
Strategy and
Revolution
operations
Business process
reengineering
1970s
1980s
1990s
1990s
Events/Concepts
Dates Originator
Globalization
1990s
2000s
Numerous countries
and companies
1990s
E-commerce
2000s
ARPANET, Tim
Berners-Lee SAP,
i2 Technologies,
ORACLE,
PeopleSoft
Amazon, Yahoo,
eBay, and others
Internet
Revolution
Continuum from
Goods to Services
Business
Consumer
Business
B2B
Commerceone.com
B2C
Amazon.com
Consumer
Operations Management
and E-Business
C2B
Priceline.com
C2C
eBay.com
Categories of E-Commerce
Customer
Manufacturer
Supplier
Impact of E-Business on
Operations Management
Benefits of E-Business
Comparison shopping
by customers
Direct contact with
customers
Business processes
conducted online
Impact on Operations
Customer expectations escalate;
quality must be maintained and
costs lowered
No more guessing about demand
is necessary; inventory costs go
down; product and service design
improves; build to-order products
and services is made possible
Transaction costs are lower;
customer support costs decrease;
e-procurement saves big bucks
Impact of E-Business on
Operations Management (cont.)
Benefits of E-Business
Impact on Operations
Impact of E-Business on
Operations Management (cont.)
Benefits of E-Business
Impact on Operations
Impact of E-Business on
Operations Management (cont.)
Benefits of E-Business
IT synergy
Expanded supply
chains
Impact on Operations
Productivity increases as
information can be shared more
efficiently internally and
between trading partners
Order fulfillment, logistics,
warehousing, transportation and
delivery become focus of
operations management; risk is
spread out; trade barriers fall
Globalization and
Competitiveness
Favorable cost
Access to international
markets
Response to changes
in demand
Reliable sources of
supply
14 major trade
agreements in 1990s World Trade Compared to World GDP
Source: Real GDP and Trade Growth of OECD Countries, 2001
Peak: 26% in 2000 03, International Trade Statistics 2003, World Trade Organization,
www.wto.org
Globalization and
Competitiveness (cont.)
Germany: $26.18
USA: $21.33
Taiwan: $5.41
Mexico: $2.38
China: $0.50
Globalization and
Competitiveness (cont.)
Risks of Globalization
Cultural differences
Supply chain logistics
Safety, security, and
stability
Quality problems
Corporate image
Loss of capabilities
Competitiveness and
Productivity
Competitiveness
Productivity
Output
Input
Competitiveness and
Productivity (cont.)
Measures of Productivity
Source: International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002, Bureau of Labor
Statistics, U.S. Department of Labor, September 2003. U.S. figures for 20022003 from Major Sector Productivity and
Costs Index, Bureau of Labor Statistics, U.S. Department of Labor, March 2004
Productivity Increase
Become efficient
Expand
Achieve breakthroughs
Downsize
Retrench
Competitiveness and
Productivity
Breakthrough
Performance
More Efficient
Retrench
OperationsOriented Barriers
to Entry
Economies of Scale
Capital Investment
Access to Supply and Distribution
Channels
Learning Curve
Primary Topics in
Operations Management
Operations Strategy
Strategy: Chapter 2
Forecasting: Chapter 11
Scheduling: Chapter 16