Post on 17-Nov-2015
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Chapter 1
Introduction to Operations Management
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Lecture Outline
What Operations and Supply Chain Managers DoOperations FunctionEvolution of Operations and Supply Chain ManagementGlobalization and CompetitivenessOperationsStrategy and Organization of the TextLearning Objectives for This Course
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What Operations and Supply Chain Managers Do
What is Operations Management?design, operation, and improvement of productive systemsWhat is Operations?a function or system that transforms inputs into outputs of greater valueWhat is a Transformation Process?a series of activities along a value chain extending from supplier to customeractivities that do not add value are superfluous and should be eliminated
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Transformation Process
Physical: as in manufacturing operationsLocational: as in transportation or warehouse operationsExchange: as in retail operationsPhysiological: as in health carePsychological: as in entertainmentInformational: as in communication
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Operations as a Transformation Process
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INPUT MaterialMachinesLaborManagementCapital
TRANSFORMATIONPROCESS
OUTPUT GoodsServices
Feedback & Requirements
Operations Function
Operations Marketing Finance and
Accounting Human
Resources Outside
Suppliers
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How is Operations Relevant to my Major?
Accounting
Information Technology
Management
As an auditor you must understand the fundamentals of operations management.IT is a tool, and theres no better place to apply it than in operations.
We use so many things you learn in an operations classscheduling, lean production, theory of constraints, and tons of quality tools.
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How is Operations Relevant to my Major?
Economics
Marketing
Finance
Its all about processes. I live by flowcharts and Pareto analysis.How can you do a good job marketing a product if youre unsure of its quality or delivery status?Most of our capital budgeting requests are from operations, and most of our cost savings, too.
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Evolution of Operations and Supply Chain Management
Craft productionprocess of handcrafting products or services for individual customersDivision of labordividing a job into a series of small tasks each performed by a different workerInterchangeable partsstandardization of parts initially as replacement parts; enabled mass production
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Evolution of Operations and Supply Chain Management
Scientific managementsystematic analysis of work methodsMass productionhigh-volume production of a standardized product for a mass marketLean productionadaptation of mass production that prizes quality and flexibility
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Historical Events in Operations Management
Era Events/Concepts Dates Originator
IndustrialRevolution
Steam engine 1769 James WattDivision of labor 1776 Adam SmithInterchangeable parts 1790 Eli Whitney
Scientific Management
Principles of scientificmanagement
1911 Frederick W. Taylor
Time and motion studies 1911 Frank and Lillian GilbrethActivity scheduling chart 1912 Henry GanttMoving assembly line 1913 Henry Ford
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Historical Events in Operations Management
Era Events/Concepts Dates Originator
Human Relations
Hawthorne studies 1930 Elton Mayo
Motivation theories1940s Abraham Maslow1950s Frederick Herzberg1960s Douglas McGregor
Operations Research
Linear programming 1947 George DantzigDigital computer 1951 Remington RandSimulation, waitingline theory, decisiontheory, PERT/CPM
1950s Operations research groups
MRP, EDI, EFT, CIM 1960s, 1970sJoseph Orlicky, IBMand others
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Historical Events in Operations Management
Era Events/Concepts Dates Originator
QualityRevolution
JIT (just-in-time) 1970s Taiichi Ohno (Toyota)TQM (total qualitymanagement)
1980sW. Edwards Deming, Joseph Juran
Strategy andoperations
1980sWickham Skinner, Robert Hayes
Reengineering 1990sMichael Hammer,James Champy
Six Sigma 1990s GE, Motorola
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Historical Events in Operations Management
Era Events/Concepts Dates OriginatorInternet Revolution
Internet, WWW, ERP, supply chain management
1990s ARPANET, TimBerners-Lee SAP,i2 Technologies,ORACLE, Dell
E-commerce 2000s Amazon, Yahoo, eBay, Google, and others
Globalization WTO, European Union, Global supply chains, Outsourcing, Service Science
1990s2000s
China, India, emerging economies
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Historical Events in Operations Management
Era Events/Concepts Dates OriginatorGreen Revolution
Global warming, An Inconvenient Truth, Kyoto
Today Numerous scientists, statesmen and governments
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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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Globalization
Why go global? favorable cost access to international markets response to changes in demand reliable sources of supply latest trends and technologies
Increased globalization results from the Internet and falling trade barriers
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Hourly Compensation
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GDP per Capita
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Trade in Goods, % of GDP
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Productivity and Competitiveness
Competitivenessdegree to which a nation can produce goods and services that meet the test of international marketsProductivityratio of output to inputOutputsales made, products produced, customers served, meals delivered, or calls answeredInputlabor hours, investment in equipment, material usage, or square footage
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Measures of Productivity
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Osborne Industries
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C6*C8
C7*C9
C5/C6
C5/C7
C5/C13
Productivity Growth
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Percent Change in Input and Output
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Strategy and Operations
How the mission of a company is accomplishedProvides direction for achieving a missionUnites the organizationProvides consistency in decisionsKeeps organization moving in the right direction
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Strategy Formulation
1. Defining a primary taskWhat is the firm in the business of doing?
2. Assessing core competenciesWhat does the firm do better than anyone else?
3. Determining order winners and order qualifiersWhat qualifies an item to be considered for purchase?What wins the order?
4. Positioning the firmHow will the firm compete?
5. Deploying the strategy
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Strategic Planning
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Missionand Vision
CorporateStrategy
OperationsStrategy
MarketingStrategy
FinancialStrategy
Voice of theBusinessVoice of th
e
Customer
Order Winnersand Order Qualifiers
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Source: Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan Betts, Operations and Process Management, Prentice Hall, 2006, p. 47
Positioning the Firm
CostSpeedQualityFlexibility
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Positioning the Firm: Cost
Waste eliminationrelentlessly pursuing the removal of all wasteExamination of cost structurelooking at the entire cost structure for reduction potentialLean productionproviding low costs through disciplined operations
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Positioning the Firm: Speed
Fast moves, Fast adaptations, Tight linkagesInternetCustomers expect immediate responses
Service organizationsalways competed on speed (McDonalds, LensCrafters, and Federal Express)
Manufacturerstime-based competition: build-to-order production and efficient supply chains
Fashion industrytwo-week design-to-rack lead time of Spanish retailer, Zara
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Positioning the Firm: Quality
Minimizing defect rates or conforming to design specificationsRitz-Carlton - one customer at a time
Service system designed to move heaven and earth to satisfy customerEmployees empowered to satisfy a guests wish Teams set objectives and devise quality action plansEach hotel has a quality leader
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Positioning the Firm: Flexibility
Ability to adjust to changes in product mix, production volume, or designMass customization: the mass production of customized partsNational Bicycle Industrial Companyoffers 11,231,862 variationsdelivers within two weeks at costs only 10% above standard models
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Policy Deployment
Policy deploymenttranslates corporate strategy into measurable objectivesHoshinsaction plans generated from the policy deployment process
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Policy Deployment
Derivation of an Action Plan Using Policy Deployment
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Balanced Scorecard
Balanced scorecardmeasuring more than financial performance
1. finances2. customers3. processes4. learning and growing
Key performance indicatorsset of measures to help managers evaluate performance in critical areas
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Balanced Scorecard Worksheet
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Balanced Scorecard
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Radar Chart Dashboard
Operations Strategy
Products
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Services Processand
Technology
Capacity
HumanResources Quality
Facilities Sourcing OperatingSystems
Learning Objectives of this Course
Gain an appreciation of strategic importance of operations and supply chain management in a global business environmentUnderstand how operations relates to other business functionsDevelop a working knowledge of concepts and methods related to designing and managing operations and supply chainsDevelop a skill set for continuous improvement
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