Goods & Services

Manufacturing
Tangible product
Product can be
inventoried
Low customer contact
Longer response time
Capital intensive

Services
Intangible product
Product cannot be
inventoried
High customer contact
Short response time
Labor intensive

Wiley 2010

 Production: Application of resources such as people and

machinery to convert materials into finished goods and services.
Production and Operations Management: Managing people
and machinery in converting materials and resources into finished
goods and services.

What Operations and Supply Chain

Managers Do
What is Operations Management?
design, operation, and improvement of
productive systems

What is Operations?
a function or system that transforms inputs
into outputs of greater value

What is a Transformation Process?

a series of activities along a value chain
extending from supplier to customer
activities that do not add value are superfluous
and should be eliminated

Transformation Process
Physical: as in manufacturing operations
Locational: as in transportation or warehouse
operations
Exchange: as in retail operations
Physiological: as in health care
Psychological: as in entertainment
Informational: as in communication

Copyright 2011 John Wiley & Sons, Inc.

1-4

Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital

TRANSFORMATION
PROCESS

OUTPUT
Goods
Services

Feedback & Requirements

Copyright 2011 John Wiley & Sons, Inc.

1-5

How is Operations Relevant

to my Major?
Accounting

As an auditor you must understand the

fundamentals of operations
management.

Information
Technology

IT is a tool, and theres no better place to

apply it than in operations.

Management

We use so many things you learn in an

operations classscheduling, lean
production, theory of constraints, and
tons of quality tools.

Copyright 2011 John Wiley & Sons, Inc.

1-6

How is Operations Relevant

to 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.

Copyright 2011 John Wiley & Sons, Inc.

1-7

Evolution of Operations and

Supply Chain Management

Craft production
process of handcrafting products or
services for individual customers

Division of labor
dividing a job into a series of small tasks
each performed by a different worker

Interchangeable parts
standardization of parts initially as
replacement parts; enabled mass
production
Copyright 2011 John Wiley & Sons, Inc.

1-8

Evolution of Operations and

Supply Chain Management
Scientific management
systematic analysis of work methods

Mass production
high-volume production of a standardized product for
a mass market

Lean production
adaptation of mass production that prizes quality and
flexibility

Copyright 2011 John Wiley & Sons, Inc.

1-9

Todays run down

Copyright 2011 John Wiley & Sons, Inc.

1-10

Historical Events in
Operations Management
Era

Events/Concepts

Dates Originator

1769
Industrial Steam engine
1776
Revolutio Division of labor
Interchangeable parts 1790
n
Principles of scientific
management
Scientific Time and motion
studies
Managem Activity scheduling
ent
chart
Moving assembly line
Copyright 2011 John Wiley & Sons, Inc.

James Watt
Adam Smith
Eli Whitney

1911

Frederick W. Taylor

1911

Frank and Lillian

Gilbreth

1912

Henry Gantt

1913

Henry Ford
1-11

Historical Events in
Operations Management
Era
Human
Relations

Operations
Research

Events/Concepts

Dates

Originator

Hawthorne studies

1930

Elton Mayo

1940s

Abraham Maslow

1950s

Frederick Herzberg

1960s

Douglas McGregor

Linear programming

1947

George Dantzig

Digital computer

1951

Remington Rand

Simulation, waiting
line theory, decision
theory, PERT/CPM

1950s

Operations research
groups

Motivation theories

Copyright 2011 John Wiley & Sons, Inc.

1-12

Historical Events in
Operations Management
Era

Events/Concepts

JIT (just-in-time)
TQM (total quality
management)
Strategy and
Quality
Revolution operations

Dates Originator
1970s
1980s
1980s

Reengineering

1990s

Six Sigma

1990s

Copyright 2011 John Wiley & Sons, Inc.

Taiichi Ohno (Toyota)

W. Edwards Deming,
Joseph Juran
Wickham Skinner,
Robert Hayes
Michael Hammer,
James Champy
GE, Motorola

1-13

Historical Events in
Operations Management
Era

Events/Concepts

Internet
Revolution

Internet, WWW, ERP,

1990s
supply chain management

Globalization

Dates Originator

E-commerce

2000s

WTO, European Union,

Global supply chains,
Outsourcing, Service
Science

1990s
2000s

Copyright 2011 John Wiley & Sons, Inc.

ARPANET, Tim
Berners-Lee SAP,
i2 Technologies,
ORACLE, Dell
Amazon, Yahoo,
eBay, Google, and
others
China, India,
emerging
economies

1-14

Historical Events in
Operations Management

Era

Events/Conce Dat
Originator
pts
es

Green
Global warming, Toda Numerous
Revoluti An Inconvenient y
scientists,
on
Truth, Kyoto
statesmen
and
government
s
Copyright 2011 John Wiley & Sons, Inc.

1-15

Todays OM Environment

Customers demand better quality, greater

speed, and lower costs
Companies implementing lean system
concepts a total systems approach to
efficient operations
Recognized need to better manage
information using ERP and CRM systems
Increased cross-functional decision making
Wiley 2010

16

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

Copyright 2011 John Wiley & Sons, Inc.

1-17

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

Copyright 2011 John Wiley & Sons, Inc.

1-18

Productivity and Competitiveness

Competitiveness
degree to which a nation can produce goods and
services that meet the test of international markets

Productivity
ratio of output to input

Output
sales made, products produced, customers served,
meals delivered, or calls answered

Input
labor hours, investment in equipment, material usage,
or square footage

Copyright 2011 John Wiley & Sons, Inc.

1-19

Strategy and Operations

How the mission of a company is

accomplished
Provides direction for achieving a
mission
Unites the organization
Provides consistency in
decisions
Keeps organization moving in the
right direction
Copyright 2011 John Wiley & Sons, Inc.

1-20

Strategic Planning
Mission
and Vision

Corporate
Strategy

Marketing
Strategy

Copyright 2011 John Wiley & Sons, Inc.

Operations
Strategy

Financial
Strategy

1-21

Positioning the Firm

Cost
Speed
Quality
Flexibility
1-22

Positioning the Firm: 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
Copyright 2011 John Wiley & Sons, Inc.

1-23

Positioning the Firm: Flexibility

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

Mass customization: the mass

production of customized parts
National Bicycle Industrial Company
offers 11,231,862 variations
delivers within two weeks at costs only 10%
above standard models

Copyright 2011 John Wiley & Sons, Inc.

1-24

Production control creates a well-defined

set of procedures for coordinating
people, materials, and machinery.
1) Planning
2) Routing
3) Scheduling

4) Dispatching
5) Follow-up

 International Organization for Standardization (ISO) mission is to promote the development of standardized
products to facilitate trade and cooperation across
national borders.
Representatives from more than 146 nations.
ISO 9000 series of standards sets requirements for
quality processes.
Nearly half a million ISO 9000 certificates have been
awarded to companies around the world.
ISO 14000 series also sets standards for operations that
minimize harm to the environment.