Ch. 1: Introduction to the Field

1
CHASE AQUILANO JACOBS
Operations Management
For Competitive Advantage
Chapter 1
Introduction to the Field
2
Chapter 1 INTRO TO OPERATIONS MANAGEMENT

• SESSION OUTLINE
• Definition and overview of operations management
• Goods or service?
• The open systems perspective
• Historical development of the field
• Current challenges ....

3
U.S. VS. JAPAN QUALITY AND PRODUCTIVITY!

• CAR 1980 1990 2000
• JAPAN 2.0 1.2 1.15
• GM 7.4 1.7 1.46
• CHRYSLER 8.1 1.8 1.54
• FORD 6.7 1.5
  1.62
• DIFF IN COST 2000 500
• Problems per 100 vehicles, J.D. Powers and
  Associates. Toyota, In 2000, Honda 1.33,
  Nissan 1.45, Volkswagen, 1.59

4
QUASAR TV PLANT PRODUCTIVITY

• MOTOROLA
  MATSUSHITA
• DIRECT EMPLOYEES 1000 1000
• INDIRECT EMPLOYEES 600 300
• TOTAL EMPLOYEES 1600 1300
• OUTPUT (TVs) 1000 2000
• ASSEM. REPAIRS 130
  6
• ANNUAL WARRANTY 16MIL 2MIL
• 2 YEARS LATER, SAME PEOPLE

5
Operations ManagementDefinition - POSDC

• OM can be defined as the planning, organizing,
  staffing, directing, and controlling the 6ps
  that create the firms primary products and
  services ....

6
OM Manages Transformations
HIGH PROFIT/ROI LOW COST HIGH QUALITY FIRST TO
MKT FLEXIBILITY SERVICE
LAND LABOR CAPITAL MANAGEMENT TECHNOLOGY

• People
• Plants
• Parts
• Processes
• Planning and Control
• Productive Technology

Transformation using The 6 Ps of OM
7
Transformations

• Physical--manufacturing
• Locational--transportation
• Exchange--retailing
• Storage--warehousing
• Physiological--health care
• Informational--telecommunications
• Psychological-- Mental Clinic, Restaurant....

8
Strategic Use of OM
Marketplace
Corporate Strategy
Operations Strategy
Marketing Strategy
Finance Strategy
Operations management
Inputs Materials Customers
Outputs Products Services
People
Plants
Parts
Processes
Planning control systems
Productive Technology
Production System
....
9
What about McDonalds?

• Service or Product Organization?
• The Company Produces Tangible Products
• Why IS McDonalds a service business? ....

10
Closed Systems View of Operations - The
Non-Service View!

• Buffer operations from customers
• physical buffers
• organizational buffers
• Benefits
• minimize disturbance caused by customers
• de-couple processes from customer whims
• maintain efficiencies of continuous flow ?....

11
Closed Systems View of Operations (continued)

• Disadvantages
• Interferes with Good Customer Service
• Buffering reduces flexibility
• us vs. them attitude
• Lack of interaction with the customer
• Solution
• Progressive Organizations have adopted an Open
  Systems perspective and a Service orientation ....

12
Strategic OM MeasuresHow we Compete!

• Cost
• Quality
• Speed
• Flexibility
• Service
• Greenness ....

13
Value-Added Organizational Services(Open Systems
View)

• Information
• Problem Solving
• Sales Support
• Field Support
• Field Service

14
Historical Development of OM

• Scientific Management
• Frederick W. Taylor (early 1900s)
• Scientific laws govern how much a worker can
  produce.
• Only Management Understands These Scientific
  Laws?
• Labor is too Ill Prepared to Understand Develop
  These!
• Was Taylor the root of management evil?
• Frank and Lillien Gilbreth
• Time and motion studies
• Moving Assembly Line
• Henry Ford (1913) ....

15
Historical Development (continued)

• Activity Scheduling - Precursor to CPM/PERT
  Project Management GANTT Charts
• Henry L. Gantt (1914)
• Economic Lot Size Model - Scientific Inv. Man.
• F. W. Harris (1917)
• Statistical Quality Control Sampling
• Walter Shewhart (Bell Labs, 1931)
• Hawthorne Studies - Human Relations School
• Elton Mayo (Western Electric, 1927-1933) ....

16
Historical Development (continued)

• Team Approaches to Complex System Problems
• (England, 1940s) - Integration
• Simplex Method of Linear Programming
• George Dantzig, US, 1947)
• Proliferation of Operations Research
  1950s-1960s ?....

17
Historical Development (continued)

• Computer OR Applications
  1970s
• Manufacturing Strategy Paradigm HBS,
  1980s
• TQM, JIT, CAD/CAM, CIM, FMS, Robots, etc.
• 
  1980s
• Customer Satisfaction, Business Process
  Reengineering, MBNQA
  1990s
• E-Commerce, Global Competition, 6Sigma 2000s

18
PRODUCTIVITY (EFFICIENCY)

• OUTPUT Real GDP
• PROD. ----------------- ------------------
• INPUT LABOR-HR
• 46-68 2.6 2001 .8
• 70S 1.1 2002 1.6
• 80S 2.0 2003 2.7
• 90S 2.5 2004 4.2
• 2000 3.7 2005 4.0

19
(No Transcript)
20
EFFECTIVENESS

• A MEASURE OF GOAL ATTAINMENT
• PROFITS
• ROI
• GROWTH
• EPS
• PSYCHOLOGICAL INCOME
• UTILES an abstract measure of value or returns

21
FIRMS CAN POSSESS 1 of 4 COMBINATIONS

• EFFIC. NOT
  EFFIC.
• --------------------
  ----------------
• EFFECT. BEST
• -------------------
  ---------------
• NOT EFFECT. WORST
• -----------------------
  -------------
• FREE ENTERPRISE
• PREDOMINANTLY COMPETITIVE MARKETS

22
PRODUCTIVITY DRIVERS

• STANDARDIZATION
• SPECIALIZATION
• SIMPLIFICATION
• MOTIVATION
• REWARDS
• RECOGNITION
• RESPONSIBILITY
• ENJOYMENT
• INTELLECTUAL SATISFACTION

23
STANDARDIZATION

• UNIFORMITY OF PARTS, MATERIALS, TOOLS, PROCESSES,
  AND LABOR
• ALLOWS MASS PRODUCTION AND ASSEMBLY
• 1798 ELI WHITNEY - GUN PRODUCTION
• 1913 HENRY FORDS MOVING ASSEMBLY
• 1980 IBM PC - PC-DOS
• 1988 MS WINDOWS
• ON AND ON - NAME SOME

24
SPECIALIZATION

• SPECIALIZED , MACHINERY, TOOLS, MATERIALS (5 PS,
  PEOPLE, PLANTS, PARTS, PROCESSES,
  PLANNINGCONTROL)
• INDIVIDUALS BECOMES MORE EFFECTIVE AND EFFICIENT
  IN FOCUSED TASKS

25
SIMPLIFICATION

• ANALYZE TASK
• DIVIDE TASKS INTO PARTS
• ELIMINATE WASTED MOTION
• STREAMLINE PROCESSES

26
THE WEALTH OF NATIONS

• ADAM SMITH 1776
• PIN FACTORY A - ONE PERSON OPERATION
• WORK METAL, DRAW WIRE, ... CARD PINS
• OUTPUT 10 PINS PER DAY
• PIN FACTORY B - TEN PERSON OPERATION
• METAL WORKERS, WIRE DRAWER, ... , CHILD
  CARDER
• OUTPUT PINS PER DAY

27
PIN FACTORY B VS A

• FACTORY B
• INCREASED DEXTERITY
• LESS HANDLING
• THE INVENTION OF A GREAT NUMBER OF MACHINES
  
• DRAMATIC DECREASE IN TIME COST / UNIT
• STD., SPEC., AND SIMP. ARE KEYS IN ALL INDUSTRIES

28
F. W. TAYLOR, PRINCIPLES OF SCIENTIFIC MANAGEMT,
1911

• TAYLORISM - ITS MANAGEMENTS (THE I.E.S) JOB
  TO SHOW LABOR THE ONE BEST WAY TO DO A TASK.
• LABOR UNIONS RESULTED - EST. WEBBS RULES TO
  DEFINE RESPONSIBILITIES.
• TAYORS CONTEMPORARIES ACCOUNT FOR MUCH OF OUR
  STANDARD OF LIVING.
• HOWEVER, ITS NOT 1900S
• MANAGEMENT AND LABOR MUST CONTINUE TO CHANGE

29
Current Issues in OM

• Fiercely Competitive Global Markets
• Global Outsourcing
• Effectively consolidating the operations
  resulting from mergers.
• Developing flexible supply chains to enable mass
  customization of products and services.
• Managing global supplier, production and
  distribution networks.

30
Current Issues in OM

• Increased commiditization of suppliers.
• Achieving the Service Factory.
• Achieving good service from service firms.
• Developing Effective e-Operations