IntrotoOprations Management

OPERATIONS MANAGEMENT
Prof N. Balasubramanian
Intro to OM MMS I
OPERATIONS MANAGEMENT
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Intro to OM MMS I
OPERATIONS MANAGEMENT Lecture Outline
What Operations and Supply Chain Managers Do Operations Function Evolution of Operations and Supply Chain Management Globalization and Competitiveness Operations Strategy and Organization of the Text Learning Objectives for This Course
Intro to OM MMS I
What Operations and Supply Chain Managers What Operations and Supply ChainManagers DoDo
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
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Transformation Process Transformation Process
Physical: as in manufacturing operations Location: as in transportation or warehouse operations Exchange: as in retail operations Physiological: as in health care Psychological: as in entertainment Informational: as in communication
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Operations a a Transformation Process Operations as as TransformationProcess
INPUT Material Machines Labor Management Capital
TRANSFORMATION PROCESS
OUTPUT Goods Services
Feedback & Requirements
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Operations Function Operations Function
Operations Marketing Finance and Accounting Human Resources Outside Suppliers
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How is Operations Relevant to my Major?
Accounting
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.
Information Technology Management
Intro to OM MMS I

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 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
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Evolution of Operations and Supply Chain Management 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
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Historical Events in Operations Management Historical Events in Operations
Management
Era
Industrial Revolution
Events/Concepts
Steam engine Division of labor Interchangeable parts Principles of scientific management
Time and motion studies Activity scheduling chart Moving assembly line
Dates
1769 1776 1790
1911 1911 1912 1913
Originator
James Watt
Adam Smith
Eli Whitney
Frederick W. Taylor
Scientific Management
Frank and Lillian Gilbreth Henry Gantt

Henry Ford
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Historical Events in Operations Management Historical Events in
Operations Management
Era
Human Relations
Events/Concepts
Hawthorne studies Motivation theories Linear programming Digital computer Simulation, waiting line theory, decision theory, PERT/CPM
Dates
1930 1940s 1950s 1960s 1947 1951
Originator
Elton Mayo Abraham Maslow Frederick Herzberg Douglas McGregor George Dantzig Remington Rand Operations research groups
Operations Research
1950s 1960s, 1970s
MRP, EDI, EFT, CIM
Joseph Orlicky, IBM and others
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Era Events/Concepts
JIT (just-in-time) TQM (total quality management) Strategy and operations Reengineering Six Sigma
Dates Originator
1970s 1980s 1980s 1990s 1990s Taiichi Ohno (Toyota) W. Edwards Deming, Joseph Juran Wickham Skinner, Robert Hayes Michael Hammer, James Champy GE, Motorola
Quality Revolution
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Era
Internet Revolution
Events/Concepts
Dates Originator
ARPANET, Tim Berners-Lee SAP, i2 Technologies, ORACLE, Dell Amazon, Yahoo, eBay, Google, and others China, India, emerging economies
Internet, WWW, ERP, 1990s supply chain management
E-commerce
2000s
Globalization
WTO, European Union, Global supply chains, Outsourcing, Service Science
1990s 2000s
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Era
Green Revolution
Events/Concepts
Global warming, An Inconvenient Truth, Kyoto
Dates Originator
Today Numerous scientists, statesmen and governments
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Evolution of Operations and Supply Evolutionof Operations and Supply Chain Management Chain Supply chain management Management
management of the flow of information, products, and services across a network of customers, enterprises, and supply chain partners
Copyright 2011 John Wiley N.Sons, Inc. Prof & Balasubramanian
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Globalization 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 Hourly Compensation
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GDP per Capita

GDP per Capita
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Trade in in Goods,% of GDP Trade Goods, % of GDP
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Productivity and Competitiveness

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
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Measures of Productivity Measures of Productivity
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Example Osborne Industries
C5*C7 C6*C8
C4/C5 C4/C6 C4/C14

Prof N. Balasubramanian Intro to OM MMS I
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Strategy and Operations 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
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Business/Functional Strategy
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Strategy Formulation Strategy Formulation

1. Defining a primary task What is the firm in the business of doing? 2. Assessing core competencies What does the firm do better than anyone else? 3. Determining order winners and order qualifiers What qualifies an item to be considered for purchase? What wins the order? 4. Positioning the firm How will the firm compete? 5. Deploying the strategy
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Strategic Planning Strategic Planning
Mission and Vision
Corporate Strategy
Marketing Strategy
Operations Strategy
Financial Strategy
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Operations Strategy Designing the Operations Function
Operations Strategy Designing the Operations Function
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Positioning the Firm Positioning the Firm

Cost Speed Quality Flexibility
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Positioning the Firm:- Cost 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
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Positioning the Firm: Speed Positioning the Firm: 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 and efficient supply chains
Fashion industry
two-week design-to-rack lead time of leading retail chain
35
Intro to OM MMS I
Positioning the Firm: Quality Positioning the Firm: Quality Minimizing defect rates or conforming to design specifications
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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Positioning the Firm: Flexibility 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
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Translating to Production Requirements
Specific Operation requirements include two general categories

Structure decisions related to the production process, such as characteristics of facilities used, selection of appropriate technology, and the flow of goods and services Infrastructure decisions related to planning and control systems of operations
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Translating to Production Requirements
Dell Computer example structure & infrastructure They focus on customer service, cost, and speed ERP system developed to allow customers to order directly from Dell Product design and assembly line allow a make to order strategy lowers costs, increases turns Suppliers ship components to a warehouse within 15 minutes of the assembly plant - VMI Dell set up a shipping arrangement with UPS
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Strategic Role of Technology
Technology should support competitive priorities Three Applications: product technology, process
technology, and information technology

Products - Teflon, CDs, fiber optic cable Processes flexible automation, CAD Information Technology POS, EDI, ERP, B2B
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Technology for Competitive Advantage
Technology has positive and negative potentials

Positive
Improve processes Maintain up-to-date standards Obtain competitive advantage
Negative
Costly Risks such as overstating benefits
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The Need for Trade-offs
Decisions must emphasis priorities that support business strategy Decisions often required trade offs Decisions must focus on order qualifiers and order winners Which priorities are Order Qualifiers? e.g. Must have excellent quality since everyone expects it Which priorities are Order Winners? e.g. Dell competes on all four priorities Southwest Airlines competes on cost McDonalds competes on consistency FedEx competes on speed Custom tailors compete on flexibility
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Order Winners and Order Qualifiers
Source: Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan Betts, Operations and Process Management, Prentice Hall, 2006, p. 47
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Policy Deployment Policy Deployment Policy deployment

translates corporate strategy into measurable objectives action plans generated from the policy deployment process
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Policy Deployment Policy Deployment
Derivation of an Action Plan Using Policy Deployment

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Balanced Scorecard Balanced Scorecard
Balanced scorecard
measuring more than financial performance 1. finances 2. customers 3. processes 4. learning and growing
Key performance indicators

set of measures to help managers evaluate performance in critical areas
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Balanced Scorecard Worksheet Balanced Scorecard -Worksheet
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Balanced Scorecard Balanced Scorecard
Radar Chart
Dashboard
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Operations Strategy Operations Strategy
Services Products Human Resources
Process and Technology
Capacity
Quality
Facilities
Sourcing
Operating Systems
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Organization of This Text: Organization ofManagement Part I Operations This Text:
Part I Operations Management

1. 2. 3. 4. 5. 6. 7. 8. 9. Intro. to Operations and Supply Chain Management Quality Management Statistical Quality Control Product Design Service Design Processes and Technology Capacity and Facilities Design Human Resources Project Management
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Part II Supply Chain Management

10. Supply Chain Strategy and Design 11. Global Supply Chain Procurement and Distribution 12. Forecasting 13. Inventory Management 14. Sales and Operations Planning 15. Resource Planning 16. Lean Systems 17. Scheduling
Organization of This Text: Organization ofManagement This Text: Part I Operations
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Learning Objectives of this Course Learning Objectives

Gain an appreciation of strategic importance of operations and supply chain management in a global business environment Understand how operations relates to other business functions Develop a working knowledge of concepts and methods related to designing and managing operations and supply chains Develop a skill set for continuous improvement
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Intro to OM MMS I
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OPERATIONS MANAGEMENT

DHL Shipping English.htm

OPERATIONS MANAGEMENT Lecture Outline

What is a Transformation Process?

Transformation Process Transformation Process

Operations a a Transformation Process Operations as as TransformationProcess

INPUT Material Machines Labor Management Capital

OUTPUT Goods Services

Feedback & Requirements

Operations Function Operations Function

Operations Marketing Finance and Accounting Human Resources Outside Suppliers

How is Operations Relevant to my Major?

Information Technology Management

How is Operations Relevant to my Major?

How is Operations Relevant to my Major?

Evolution of Operations and Supply Chain Management Evolution of Operations and

Supply Chain Management

Evolution of Operations and Supply Chain Management Evolution of Operations and

Supply Chain Management

Historical Events in Operations Management Historical Events in Operations

Frank and Lillian Gilbreth Henry Gantt

Historical Events in Operations Management Historical Events in

1950s 1960s, 1970s

MRP, EDI, EFT, CIM

Joseph Orlicky, IBM and others

Historical Events in Operations Management Historical Events in

Historical Events in Operations Management Historical Events in

Internet, WWW, ERP, 1990s supply chain management

WTO, European Union, Global supply chains, Outsourcing, Service Science

Historical Events in Operations Management Historical Events in

Copyright 2011 John Wiley N.Sons, Inc. Prof & Balasubramanian

Globalization Globalization Why go global?

Hourly Compensation Hourly Compensation

GDP per Capita

Trade in in Goods,% of GDP Trade Goods, % of GDP

Productivity and Competitiveness

Measures of Productivity Measures of Productivity

Example Osborne Industries

C4/C5 C4/C6 C4/C14

Strategy and Operations Strategy and Operations

Strategy Formulation Strategy Formulation

Strategic Planning Strategic Planning

Mission and Vision

Operations Strategy Designing the Operations Function

Operations Strategy Designing the Operations Function

Positioning the Firm Positioning the Firm

Examination of cost structure

Positioning the Firm: Speed Positioning the Firm: Speed

Fast moves, Fast adaptations, Tight linkages Internet

Ritz-Carlton - one customer at a time

Positioning the Firm: Flexibility Positioning the Firm: Flexibility

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

Mass customization: the mass production of customized parts

Translating to Production Requirements

Specific Operation requirements include two general categories

Translating to Production Requirements

Strategic Role of Technology

technology, and information technology

Technology for Competitive Advantage

Technology has positive and negative potentials

The Need for Trade-offs

Order Winners and Order Qualifiers

Policy Deployment Policy Deployment Policy deployment