HISTORICAL DEVELOPMENT OF OPERATIONS MANAGEMENT

Although history is full of amazing production feats- the pyramids of Egypt, the Great Wall of China, the
Roads and Aqueducts of Rome- the wide spread production of consumer goods – and thus, operations
management- did not begin until the industrial revolution in the 1700s.

Prior to that time, skilled crafts persons and their apprentices fashioned goods for individual customers
from studios in their own homes. Every piece was unique, hand fitted, and made entirely by one person, a
process known as craft production. Craft production had major shortcomings. Because products were
made of skilled craftsmen who custom fitted parts, production was slow and costly. And when parts
failed, the replacements had also to custom made, which was also slow and costly. Another shortcoming
was that production costs did not decrease as volume increased; there were no economies of scale, which
would have provided a major incentive for companies to expand. Instead, many companies emerged, each
with its own set of standards. Craft production still exists today.

Industrial revolution
The availability of ample supplies of coal, iron ore, and steam power set into motion a series of industrial
inventions that revolutionized the way work was performed. Great mechanically powered machines
replaced the laborer as the primary factor of production and brought workers to a central location to
perform tasks under the direction of an “overseer” in a place called a “factory.” The Spinning Jenny and
the Power Loom revolutionized the textile industry. Other industries where this effect spread were grain
mills, metal working, and machine making facilities. The new machines made of iron, were much
stronger and more durable than the simple wooden machines they replaced.

Around the same time Adam smith’s Wealth of Nations (1776) proposed the division of labor, in which
the production process was broken down into a series of small tasks, each performed by a different
worker. The specialization of the worker on limited, repetitive tasks allowed him or her to become very
proficient at those tasks and further encouraged the development of specialized machinery. With division
of labour, the tasks were so narrow that virtually no skill was required. Therefore, factories began to
spring up and grow rapidly, providing jobs for countless people who were attracted in large numbers from
rural areas.

The introduction of interchangeable parts by Eli Whitney (1790s) allowed the manufacture of firearms,
clocks, watches, sewing machines, and other goods to shift from customized one-at-a- time production to
volume production of standardized parts. This meant the factory needed a system of measurements and

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inspection, a standard method of production, and supervisors to check the quality of the workers
production.

Advances in technology continued through the 1800s. Cost accounting and other control systems were
developed, but management theory and practice were virtually nonexistent.

Scientific Management
In the early 1900s an enterprising laborer (and later chief engineer) at Midvale steel works named
Frederick Winslow Taylor approached the management of work as a science. Taylor believed in “science
of management” and based on observation, measurement, and analysis, he identified the best method for
performing each job. Once determined the methods were standardized for all workers and economic
incentives were established to encourage workers to follow the standards and improve their work
methods. Taylor also believed that management should be responsible for planning, carefully selecting
and training workers, and separating management activities from work activities. He also encouraged
cooperation between management and workers.

Taylor’s methods emphasized maximizing output. They were not always popular with workers, who
sometimes thought the methods were used to unfairly increase output without a corresponding increase in
compensation. Certainly some companies did abuse workers in their quest for efficiency. Eventually, the
public outcry reached the halls of congress, and hearings were held on the matter. Taylor himself was
called to testify in 1911, the same year in which his classic book, the Principles of Scientific Management,
was published. The publicity from those hearings actually helped scientific management principles to
achieve wide acceptance in industry.

Taylor’s ideas were embraced and extended by a number of other pioneers. The most notable ones
include the following;
Frank Gilbreth was an industrial engineer who is often referred to as the father of motion study. He
developed principles of motion economy that could be applied to incredibly small portions of task.
Henry Gantt recognized the value of nonmonetary rewards to motivate workers, and develop a widely
used system for scheduling, called Gantt chart.
Harrington Emerson applied Taylor’s ideas to organization structure and encouraged the use of experts to
improve organizational efficiency. He testified in a congressional hearing that railroads could save
million of dollars a day by applying principles of scientific management.

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One of Taylor’s biggest advocates was Henry Ford. Henry ford applied scientific management to the
production of the model T in 1913. During the early part of the 20th century, automobiles were just
coming into vogue in the United States. Ford’s model T was such a success that the company had trouble
keeping up with orders for the cars. In an effort to improve the efficiency of operations, Ford adopted the
scientific management principles espoused by Fredrick Winslow Taylor. He also introduced the moving
assembly line. A model T chassis moved slowly down a conveyor belt with six workers walking
alongside it, picking up parts from carefully spaced piles on the floor and fitting them to the chassis.
Among Fords many contributions was the introduction of mass production to the automobile industry, a
system of production in which large volumes of standardized goods are produced by low- skilled or
semiskilled workers using highly specialized, and often costly, equipment. Ford was able to do this by
taking advantage of a number of important concepts. Perhaps the key concept that launched mass
production was interchangeable parts. The basis for interchangeable parts was to standardize parts so
any part in a batch of parts would fit any automobile coming down the assembly line. This meant that
parts did not have to be custom fitted, as they were in craft production. The standardized parts could also
be used for replacement parts. The result was a tremendous decrease in assembly time and cost. Ford
accomplished this by standardizing the gauges used to measure parts during production and by using
newly developed process to replace uniform parts.

A second concept used by Ford was the division of labor, which Adam Smith wrote about in the wealth
of nations in 1776. In his case, assembling an automobile is divided up into a series of many small tasks,
and individual workers are assigned to one of those tasks. Unlike craft production where each worker was
responsible for doing many tasks and thus required skill with division of labor the tasks were so narrow
that virtually no skill was required.

By applying these principles, Ford was able to reduce the time required to assemble a car from a high of
728 hours to 1½ hours. The short assembly time per car allowed the model T to be produced in high
volumes, or “en masse,” yielding the name mass production.

Both Taylor and Ford were despised by many workers, because they held workers in such low regard,
expecting them to perform like robots. This paved the way for the human relations movement.

The Human Relations Movement

Whereas the scientific management movement heavily emphasized the technical aspects of work design,
the human relation movement emphasized the importance of the human element in a job design. Lillian

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Gilbreth, a psychologist and the wife of Frank Gilbreth, worked with her husband. Focusing on the human
factor in work. (The Gilbreths were subject of a classic 1950s film, cheaper by the dozen.) Many of her
studies in the 1920s dealt with workers fatigue. In the following decades, there was much emphasis on
motivation. During the 1930s Elton Mayo conducted studies on the Hawthorne division of western
electrics. His studies revealed that in addition to the physical and technical aspects of work, worker
motivation is critical for productivity.

During the 1940s, Abraham Maslow developed motivational theories, which Fredrick Hertzberg refined
in the 1950s. Douglas McGregor added Theory X and Theory Y in the 1960s. These theories represented
the two ends of the spectrum of how employees view work. Theory X, on the negative end, assumed that
workers do not like to work and to be controlled-rewarded and punished-to get them to do good work.
This attitude was quite common in the automobile industry and in some other industries, until the threat
of global competition forced them to rethink the approach. Theory Y, on the other end of the spectrum,
assumed that workers enjoy the physical and mental aspects of work and become committed to work. The
Theory X approach resulted in an adversarial environment, whereas the Theory Y approach resulted in
empowered workers and a more cooperative spirit. In the 1970s, William Ouchi added Theory Z, which
combined the Japanese approach with such features as lifetime employment, employee problem solving,
and consensus building, and traditional western approach that features short-term employment, specialists
and individual decision making and responsibility.

American manufactures became adept at mass production over the next 50 years and easily dominated
manufacturing worldwide. Quantitative models and techniques spawned by the operations research
groups of World War 2 continued to develop and were applied successfully to manufacturing and
services. Computers and automation led still another upsurge in technological advancements applied to
operations.

From the industrial revolution through the 1900s, the United States was the world’s greatest producer of
goods and services, as well as the major source of managerial and technical expertise. But in the 1970s
and 1980s, industry by industry, U.S. manufacturing superiority was challenged by lower costs and higher
quality from foreign manufactures, led by Japan.

Several studies published during those years confirmed what consumers already knew- U.S. - made
products of that era were inferior and could not compete in the world market. Early rationalizations that
the Japanese success in manufacturing was a cultural phenomenon were disapproved by success of

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Japanese –owned plants in the united states, such as the Matsushita purchase of a failing quasar television
plant in Chicago from Motorola. Part of the purchase contract specified that Matsushita had to retain the
entire hourly workforce of 1000 persons. After only two years, with the identical workers, half the
management staff, and little or no capital investment, Matsushita doubled production, cut assembly
repairs from 130 percent to 6 percent, and reduced warranty cost from $16 million a year to $2 million a
year. You can bet Motorola took notice, as did the rest of American industry.

How did this come about? How did a country that dominated manufacturing for most of the 20th century
suddenly become no good at it? Quite simply, U.S. companies weren’t paying attention. They thought
mass production had solved the “problem” of production, so they delegated the function of manufacturing
to technical specialists who ignored changes in the consumer environment and the strategic importance of
operations. Decisions were made based on short term financial goals rather than long term strategic
initiatives.

Mass production can produce large volumes of goods quickly, but it cannot adapt very well to changes in
demand. Today’s environment is characterized by product proliferation, shortened product life cycles,
shortened product development times, changes in technology, more customized products, and segment
markets. Mass production does not “fit” the type of environment. Using a concept known as just- in- time
Japanese manufacturers changed the rules of production from mass production to lean production. Lean
production prizes flexibility (rather than efficiency) and quality (rather than quantity). The total quality
mantra has since spread across the globe and is the underlying force for successful operations today.
The renewed emphasis on quality and the strategic importance of operations made U.S. companies
competitive again. Technology together with changing political and economic conditions prompted an era
industrial globalization in which companies competed worldwide for both market access and production
resources. The emergence of internet has energized this trend toward globalization.

Decision Models and Management Science

The factory movement was accompanied by the development of several quantitative techniques. F. W
Harris developed one of the first models in 1915: a mathematical model of inventory management. In the
1930s, three coworkers at Bell Telephone Labs, H. F. Dodges, H. G. Romig, and W. Shewhart, developed
statistical procedures for sampling and quality control. In 1935, L. H. C. Tippet conducted studies that
provided the groundwork for statistical-sampling theory.

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At first, these quantitative models were not widely used in industry. However, the onset of World War II
changed that. The war generated tremendous pressure on manufacturing output, and specialists from
many discipline combined efforts to achieve advancements in the military and in manufacturing. After the
war, efforts to develop and refine quantitative tools for decisions making continued, resulting in decision
models for forecasting, inventory management, project management, and other areas of operations
management.

During the 1960s and 1970s, management science techniques were highly regarded; in the 1980s, they
lost some favour. However, the widespread use of personal computers and user-friendly software in the
workplace contributed to resurgence in the popularity of these techniques.

The Influence of Japanese Manufacturers

A number of Japanese manufacturers developed or refined management practiced that increased the
productivity of their operations and the quality of their products. This made them very competitive,
sparking interest in their approaches by companies outside Japan. Their approaches emphasized quality
and continual improvement, worker teams and empowerment, and achieving customer satisfaction. The
Japanese can be credited with spawning the “quality revolution” that occurred in industrialized countries,
and with generating widespread interest in time-based management (just-in-time production).
The influence of the Japanese on US manufacturing and service companies has been enormous and
promises to continue for the foreseeable future.