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Introduction to the Field

C HASE A QUILANO J ACOBS. Operations Management. For Competitive Advantage. Chapter 1. Introduction to the Field. Chapter 1 INTRO TO OPERATIONS MANAGEMENT. SESSION OUTLINE: Definition and overview of operations management Goods or service? The open systems perspective

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Introduction to the Field

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  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 6p’s that create the firm’s primary products and services....

  6. OM Manages Transformations Transformation Process Input Output (Value Adding) • People • Plants • Parts • Processes • Planning and Control • Productive Technology HIGH PROFIT/ROI LOW COST HIGH QUALITY FIRST TO MKT FLEXIBILITY SERVICE LAND LABOR CAPITAL MANAGEMENT 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 Finance Strategy Operations Strategy Marketing Strategy Operations management Inputs: Materials Customers Outputs: Products Services People Plants Parts Processes Planning & control systems Productive Technology Production System ....

  9. What about McDonald’s? • Service or Product Organization? • The Company Produces Tangible Products • Why IS McDonald’s 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% • 70’S 1.1% 2002 1.6% • 80’S 2.0% 2003 2.7% • 90’S 2.5+% 2004 4.2% • 2000 3.7% 2005 4.0%

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

  20. FIRMS CAN POSSESS 1 of 4 COMBINATIONS • EFFIC. NOT EFFIC. • ------------------------------------ • EFFECT. | BEST | | • |-----------------|----------------- | • NOT EFFECT. | | WORST | • ------------------------------------ • FREE ENTERPRISE • PREDOMINANTLY COMPETITIVE MARKETS

  21. PRODUCTIVITY DRIVERS • STANDARDIZATION • SPECIALIZATION • SIMPLIFICATION • MOTIVATION • REWARDS • RECOGNITION • RESPONSIBILITY • ENJOYMENT • INTELLECTUAL SATISFACTION

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

  23. SPECIALIZATION • SPECIALIZED , MACHINERY, TOOLS, MATERIALS (5 P’S, PEOPLE, PLANTS, PARTS, PROCESSES, PLANNING&CONTROL) • INDIVIDUALS BECOMES MORE EFFECTIVE AND EFFICIENT IN FOCUSED TASKS

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

  25. 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

  26. 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

  27. F. W. TAYLOR, PRINCIPLES OF SCIENTIFIC MANAGEM’T, 1911 • TAYLORISM - IT’S MANAGEMENT’S (THE I.E.’S) JOB TO SHOW LABOR THE ONE BEST WAY TO DO A TASK. • LABOR UNIONS RESULTED - EST. WEBB;S RULES TO DEFINE RESPONSIBILITIES. • TAYOR’S CONTEMPORARIES ACCOUNT FOR MUCH OF OUR STANDARD OF LIVING. • HOWEVER, ITS NOT 1900’S • MANAGEMENT AND LABOR MUST CONTINUE TO CHANGE

  28. 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.

  29. Current Issues in OM • Increased “commiditization” of suppliers. • Achieving the “Service Factory.” • Achieving good service from service firms. • Developing Effective e-Operations

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