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CH 01
CH 01
Chapter 1
Lecture Outline
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Learning Objectives
• Describe what the operations function is and how it
relates to other business functions.
• Discuss the key factors that have contributed to the
evolution of operations and supply chain management.
• Discuss how and why businesses operate globally, and
the importance of globalization in supply chain
management.
• Calculate and interpret productivity measures used for
measuring competitiveness.
• Discuss the importance of operations and supply chain
management to a firm’s strategy, and the process of
developing, aligning and deploying strategy.
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Operations Management
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Transformation Process
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Transformation Process
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Operations as a
Transformation Process
INPUT
•Material
TRANSFORMATION OUTPUT
•Machines
PROCESS •Goods
•Labor
•Services
•Management
•Capital
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Operations Function
• Operations
• Marketing
• Finance and
Accounting
• Human
Resources
• Suppliers
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VP Human Resources
VP Operations
VP Supply Chain
Management
VP Marketing
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Historical Events in
Operations Management
Era Events/Concepts Dates Originator
Steam engine 1769 James Watt
Industrial
Division of labor 1776 Adam Smith
Revolution
Interchangeable parts 1790 Eli Whitney
Principles of scientific
1911 Frederick W. Taylor
management
Frank and Lillian
Scientific Time and motion studies 1911 Gilbreth
Management Activity scheduling chart 1912 Henry Gantt
Moving assembly line 1913 Henry Ford
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Historical Events in
Operations Management
Era Events/Concepts Dates Originator
Hawthorne studies 1930 Elton Mayo
Human 1940s Abraham Maslow
Relations Motivation theories 1950s Frederick Herzberg
1960s Douglas McGregor
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, waiting
Operations Operations research
line theory, decision 1950s
Research groups
theory, PERT/CPM
1960s, Joseph Orlicky, IBM
MRP, EDI, EFT, CIM
1970s and others
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Historical Events in
Operations Management
Era Events/Concepts Dates Originator
JIT (just-in-time) 1970s Taiichi Ohno (Toyota)
TQM (total quality W. Edwards Deming,
1980s
management) Joseph Juran
Quality Strategy and Wickham Skinner,
1980s
Revolution operations Robert Hayes
Michael Hammer,
Reengineering 1990s
James Champy
Six Sigma 1990s GE, Motorola
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Historical Events in
Operations Management
Era Events/Concepts Dates Originator
Internet Internet, WWW, ERP, 1990s ARPANET, Tim
Revolution supply chain management Berners-Lee SAP,
i2 Technologies,
ORACLE, Dell
E-commerce 2000s Amazon, Yahoo,
eBay, Google, and
others
Globalization WTO, European Union, 1990s China, India,
Global supply chains, 2000s Emerging
Outsourcing, Service economies
Science
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Historical Events in
Operations Management
Era Events/Concepts Dates Originator
Sustainability Global warming Today Numerous
Carbon footprint companies,
Green products statesmen,
governments,
Corporate social
responsibility (CSR) United Nations,
World Economic
UN Global Compact Forum
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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
16.00
14.99 Figure 1.7 - GDP (in trillions $US)
14.00
12.00
10.00
8.00 7.32
5.87
6.00
4.00 3.60
2.77
2.48 2.44
2.19
1.86 1.85
2.00
0.00
U.S. China Japan Germany France Brazil U.K. Italy Russian India
Federation
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70.0
60.0
Brazil
50.0
China
Percent
Germany
40.0
India
Japan
30.0
Mexico
U.S.
20.0
10.0
0.0
2007 2008 2009 2010 2011
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Manufacturing Output
$2,500.00
$2,000.00
$1,500.00
China
Germany
Japan
$1,000.00 U.S.
$500.00
$0.00
2004 2005 2006 2007 2008 2009 2010 2011
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• 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
B5*B7
B6*B8
B4/B5
B4/B6
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Changes in Productivity
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Strategy Formulation
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Strategic Planning
Mission
and Vision
Corporate
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
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• 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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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
Balanced Scorecard
• Balanced scorecard
• measuring more than financial performance
• finances
• customers
• processes
• learning and growing
• Key performance indicators
• set of measures to help managers evaluate
performance in critical areas
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Balanced Scorecard
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Operations Strategy
Services Process
and
Products Technology
Human
Resources Quality
Capacity
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