Chapter 1

Introduction to Operations and

Supply Chain Management

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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

Copyright 2011 John Wiley & Sons, Inc.

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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

Copyright 2011 John Wiley & Sons, Inc.

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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

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Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital

TRANSFORMATION
PROCESS

OUTPUT
Goods
Services

Feedback & Requirements

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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.

Copyright 2011 John Wiley & Sons, Inc.

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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.

Copyright 2011 John Wiley & Sons, Inc.

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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
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.

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Historical Events in
Operations Management
Era
Industrial
Revolution

Scientific
Management

Events/Concepts

Dates

Originator

Steam engine
Division of labor
Interchangeable parts
Principles of scientific

1769
1776
1790

James Watt

1911

Frederick W. Taylor

Time and motion studies

1911

Frank and Lillian

Gilbreth

Activity scheduling chart

1912

Henry Gantt

Moving assembly line

1913

Henry Ford

management

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Adam Smith
Eli Whitney

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Historical Events in
Operations Management
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

Motivation theories
Linear programming
Digital computer
Simulation, waiting
line theory, decision
theory, PERT/CPM
MRP, EDI, EFT, CIM

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1960s,
1970s

Joseph Orlicky, IBM

and others
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Historical Events in
Operations Management
Era

Events/Concepts

Dates Originator

JIT (just-in-time)
TQM (total quality

1970s

Quality

management)
Strategy and

Revolution

operations

1980s
1980s

Reengineering

1990s

Six Sigma

1990s

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Taiichi Ohno (Toyota)

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

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Historical Events in
Operations Management
Era

Events/Concepts

Dates Originator

Internet
Revolution

Internet, WWW, ERP,

1990s
supply chain management

ARPANET, Tim
Berners-Lee SAP,
i2 Technologies,

E-commerce

Globalization

WTO, European Union,

Global supply chains,
Outsourcing, Service
Science

Copyright 2011 John Wiley & Sons, Inc.

2000s

1990s
2000s

ORACLE, Dell
Amazon, Yahoo,
eBay, Google, and
others
China, India,
emerging
economies
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Historical Events in
Operations Management
Era

Events/Concepts

Dates Originator

Green
Revolution

Global warming, An
Inconvenient Truth, Kyoto

Today

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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

Copyright 2011 John Wiley & Sons, Inc.

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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

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

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Osborne Industries

C6*C8
C7*C9
C5/C6
C5/C7
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C5/C13

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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 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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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
Mission
and Vision
Voice o
f th
Busines e
s

Marketing
Strategy

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Corporate
Strategy

Operations
Strategy

he
Voice of t r
Custome

Financial
Strategy

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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

Copyright 2011 John Wiley & Sons, Inc.

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Positioning the Firm

Cost
Speed
Quality
Flexibility

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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.

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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 Spanish retailer, Zara

Copyright 2011 John Wiley & Sons, Inc.

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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

Copyright 2011 John Wiley & Sons, Inc.

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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.

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Policy Deployment
Policy deployment
translates corporate strategy into measurable
objectives

Hoshins
action 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 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

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Balanced Scorecard

Radar Chart

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Dashboard

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Operations Strategy
Services
Products

Capacity

Facilities

Copyright 2011 John Wiley & Sons, Inc.

Human
Resources

Sourcing

Process
and
Technology

Quality

Operating
Systems

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Organization of 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

Copyright 2011 John Wiley & Sons, Inc.

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Organization of This Text:

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

Copyright 2011 John Wiley & Sons, Inc.

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Learning Objectives of this Course

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

Copyright 2011 John Wiley & Sons, Inc.

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Copyright 2011 John Wiley & Sons, Inc.

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information herein.

Copyright 2011 John Wiley & Sons, Inc.

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