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Chapter 1

Introduction to the Field

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OBJECTIVES
Operations Management  Why Study Operations Management?  Transformation Processes Defined  Operations as a Service  The Importance of Operations Management  Historical Development of OM  Current Issues in OM

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What is Operations Management? Defined
Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services

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Why Study Operations Management?
Systematic Approach to Org. Processes

Business Education

Operations Management

Career Opportunities

Cross-Functional Applications

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What is a Transformation Process? Defined
A transformation process is defined as a user of resources to transform inputs into some desired outputs

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Operations as a Transformation Process
INPUT Material Machines Labor Management Capital

TRANSFORMATION PROCESS

OUTPUT Goods Services

Feedback

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Transformations

Physical--manufacturing


Locational--transportation
Exchange--retailing


Storage--warehousing
Physiological--health care

Informational--telecommunications

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What is a Service and What is a Good?

“If you drop it on your foot, it won’t hurt you.” (Good or service?)

“Services never include goods and goods never include services.” (True or false?)

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OM in the Organization Chart
Finance

Operations

Marketing

Plant Manager

Operations Manager

Director

Manufacturing, Production control, Quality assurance, Engineering, Purchasing, Maintenance, etc

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Core Services Defined Core services are basic things that customers want from products they purchase

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Core Services Performance Objectives
Quality

Flexibility

Operations Managemen t

Speed

Price (or cost Reduction)

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Value-Added Services Defined Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way

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Value-Added Service Categories
Problem Solving

Information

Operations Management

Sales Support

Field Support

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The Importance of Operations Management
Synergies

must exist with other functional areas of the organization Operations account for 60-80% of the direct expenses that burden a firms profit.

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Historical Development of OM
 JIT

and TQC

 Manufacturing
 Service  Total

Strategy Paradigm

Quality and Productivity

Quality Management and Quality Certification

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Historical Development of OM (cont’d)
 Business

Process Reengineering

 Supply

Chain Management Commerce

 Electronic

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Historical Events in OM
Industrial Revolution
Steam engine Division of labor Interchangeable parts 1769 James Watt 1776 Adam Smith 1790 Eli Whitney

Scientific Management
Principles Time and motion studies Activity scheduling chart Moving assembly line 1911 1911 1912 1913 Frederick W. Taylor Frank & Lillian Gilbreth Henry Gant Henry Ford

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Historical Events in OM
Human Relations
Hawthorne studies Motivation theories 1930 1940s 1950s 1960s Elton Mayo Abraham Maslow Frederick Hertzberg Douglas McGregor

Management Science
Linear programming Digital computer Simulation, PERT/CPM, Waiting line theory MRP 1947 George Dantzig 1951 Remington Rand 1950s Operations research groups 1960s Joseph Orlicky, IBM

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Historical Events in OM
Quality Revolution
JIT TQM Strategy and operations Reengineering World Trade Organization 1970s Taiichi Ohno, Toyota 1980s W. Edwards Deming, Joseph Juran, et. al. Skinner, Hayes 1990s Hammer, Champy 1990s Numerous countries and companies

Globalization
European Union and other trade agreements EDI, EFT, CIM 1970s IBM and others 1980s

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Historical Events in OM
Information Age/ Internet Revolution
Internet, WWW, ERP Supply chain management, E-commerce 1990s ARPANET, Tim Berners-Lee, SAP, i2 Technologies, ORACLE, PeopleSoft, Amazon, Yahoo, eBay, and others

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Current Issues in OM

Coordinate the relationships between mutually supportive but separate organizations. Optimizing global supplier, production, and distribution networks. Increased co-production of goods and services

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Current Issues in OM (cont’d)
 Managing

the customers experience during the service encounter
the awareness of operations as a significant competitive weapon

 Raising

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Question Bowl
A major objective of this book is to show how smart managers can do which of the following? a. Improve efficiency by lowering costs b. Improve effectiveness by creating value c. Increasing value by reducing prices d. Serving customers well e. All of the above

Answer: e. All of the above

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Question Bowl
In the Input-Transformation-Output Relationship, a typical “input” for a Department Store is which of the following? a. Displays b. Stocks of goods c. Sales clerks d. All of the above e. None of the above

Answer: e. None of the above (The above are considered “Resources” of a department store. The correct answer is “Shoppers”.)

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Question Bowl
In which of the following decades did the concept of quality control originate? a. 1920’s b. 1930’s c. 1940’s Answer: b. 1930’s (Tools such d. 1950’s as sampling inspection and e. 1970’s

statistical tables where first developed by Walter Shewhart, H. F. Dodge, and H. G. Romig.)

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