Chapter 1

Introduction to Operations and

Supply Chain Management

1-1
 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

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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

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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
OUTPUT
Machines TRANSFORMATION
Goods
Labor PROCESS
Services
Management
Capital

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 As an auditor you must understand the
fundamentals of operations
management.
Information IT is a tool, and theres no better place to
Technology 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.

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 How is Operations Relevant
to my Major?
Economics Its all about processes. I live by
flowcharts and Pareto analysis.
Marketing How can you do a good job marketing a
product if youre unsure of its quality or
delivery status?
Finance 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
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

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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
Green Global warming, An Today Numerous
Revolution Inconvenient Truth, Kyoto 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

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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

1-18
GDP per Capita

1-19
 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

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

Corporate
Strategy

Marketing Operations Financial

Strategy Strategy 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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 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

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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

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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

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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

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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 Dashboard

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 Operations Strategy

Services Process
and
Products
Technology

Human
Resources Quality
Capacity

Facilities Sourcing Operating

Systems

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

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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

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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

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 Copyright 2011 John Wiley & Sons, Inc.
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