Operations ManagementOperations Management
Professor Beril ToktayProfessor Beril ToktayOperations Management GroupOperations Management Group
College of ManagementCollege of ManagementGeorgia TechGeorgia Tech
Who Am I?Who Am I?
• BS in Industrial Engineering & Math from Bosphorus University
• Taught at INSEAD until last year
• MS in Industrial Engineering from Purdue University
• PhD in Operations Research from MIT
What Will We Do Today?What Will We Do Today?
• How is this course organized?• Why Operations Management?
The First Industrial Revolution (c. 1850)The First Industrial Revolution (c. 1850)
• Textile manufacturing innovations“Flying shuttle” and “Spinning Jenny”
• J. Watt: The steam engine Substituting labor with machines
• A. Smith: Free markets – division of laborFree markets would enhance “quest” for profit Specialization could increase productivity
small scale production
The American System of ManufacturingThe American System of Manufacturing
• Vertical IntegrationConsolidating different operations under one roof
• Interchangeable partsMass-produce parts to tight tolerance & assemble1801 contract for 10,000 muskets for the government
• Unskilled workers
• 1832: 36 enterprises in 10 states with > 250 workersReliance on water power & local distribution system
• Transportation innovationsRailroads are built in western world
• Communication innovationsThe telegraph is established
• Big retailers come to powerSears & Roebuck’s sales soar to $38M in 10 years
• Mass Production: the first vehicles arrive… Henry Ford starts producing Model T
The Second Industrial Revolution (c. 1910)The Second Industrial Revolution (c. 1910)
large scale production
• Principles of Scientific ManagementBook published in 1911 by Fredrick Taylor
• Time and Motion studiesHow much time do workers need to do a task?
• Incentive systemsWhat is the best payment scheme?
• Study how systems can be efficientDeveloped a set of principles that serve efficiency.Planning versus doing.
1910-1920: The Scientific Method (Taylorism)1910-1920: The Scientific Method (Taylorism)
Efficiency is the key!
• Application of Taylor’s methodsThe DuPont Powder company
• More importance to the human elementStudies at the Western Electric Hawthorne plant to understand ergonomics: the human element in manufacturing
• Investment in management educationBetween 1914 and 1940 B-schools grew a lot
1920’s - 1930’s: Taylorism Spreads1920’s - 1930’s: Taylorism Spreads
• Operations Research tools are “born”G.B. Dantzig devises simplex algorithm
• Effort to study complex systemsThe importance of teamwork is introduced
• Mathematical analysis becomes the normScientific methods are applied throughout the organization
• Mathematics solidify the scientific methodSimulation based models, computer usage, scheduling
1940’s - 1960’s: The Golden Era in the U.S.1940’s - 1960’s: The Golden Era in the U.S.
1970’s: Computers and MRP take over1970’s: Computers and MRP take over
ProductionSchedule
ForecastedDemand
Bill of materials
Inventorystatus
MRP (Materials
RequirementPlanning)
MRP automated production…
But, someone has to tell the computers what to analyze!
1980’s: The Japanese Challenge1980’s: The Japanese Challenge
American manufacturing led until the late 70’s, but then…
The methods introduced byJapanese manufacturing firms
outperformed the US …
TQC: Total Quality Control
JIT: Just-In-Time
Higher quality
Less cost
1990’s: The U.S. rises to the challenge1990’s: The U.S. rises to the challenge
Entrepreneurship and the ability to change and re-invent themselves allowed American
firms to move into new areas.
• U.S. firms improve productivity and quality.
• U.S. firms focus on emerging technologies, R&D.
• Growth of the service industry.
• Examples in OM….
Why Operations Management?Why Operations Management?
OM = Designing, operating, and improving the systems that deliver
the firm’s primary products and services
Operations Management = Strategy Execution
Time
FlexibilityQuality
Cost
Strategy ExecutionStrategy Execution
1. What is our strategy?
2. How do we design our operations to support it?
Product / Service Development
Supply Chain Management
Process Design and Management
Strategy ExecutionStrategy Execution
Dell
Southwest
Walmart
Toyota
Amazon
What’s their strategy? How do they execute it?
Organization of CourseOrganization of Course
• Class web site (can link from Webct) http://www.prism.gatech.edu/~bt71/mgt3501/course-page.htm
• Recommended text: Operations Management for Competitive Advantage, 11th Edn, by Chase, Jacobs, and Aquilano.
• Grading: 2 Midterms (20% each), Final (40%), 2 mini-case write-ups (20%). Participation can bump you up if borderline.
• 4-5 person groups for write-ups: Form by Jan 24.• Attendance: Voluntary• Homework: For your own practice.• On-time arrival to class: grade cutoff will drop by 0.04 for each
time that at most 2 people are late to class. • Office hours, T/Th 11-12: Use them!!
