1Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternOperations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern1Technology and Operations ManagementCHAPTER 5DAVID A. COLLIERANDJAMES R. EVANSOPERATIONS MANAGEMENTGoods, Services and Value Chains2Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern1.To gain a basic understanding of diferent types of technology and their role in manufacturing and service operations.2.To understand how manufacturing and service technology is changing the role of business relationships and strengthening the value chain.3.To understand the nature of an integrated operation system (IO! and e"amine some common e"amples of such systems that play signi#cant roles in operations management.$hapter % &earning Ob'ectives3Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern(.To understand the advantages that technology ofers in operations and its impact on productivity.%.To understand the processes of technology development and adoption and the role of operations in these processes.).To understand how scalability afects technology decisions and to be able to apply simple scoring and decision models to technology decisions.$hapter % &earning Ob'ectives4Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagement+nderstanding technology in operations is critical for several reasons. ,irtually everything that is done in a business depends on some type of technology. Technology is evolving at an e"tremely rapid pace.Technological innovation in goods- services- manufacturing- and service delivery is a competitive necessity.5Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagement.Hard technology refers to e/uipment and devices that perform a variety of tas0s in the creation and delivery of goods and services..Soft technology is the application of the Internet- computer software- and information systems to provide data- information- and analysis and to facilitate the accomplishment of creating and delivering goods and services.6Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementManufacturing Technology Tours.*a0ing 'igsaw pu11les2 consists of three ma'or steps2 ma0ing pu11le pieces- ma0ing pu11le bo"es- and #nal assembly..*anufacturing motorcycle transmission gears2 *a1a0 machining center can operate unattended for hours3highly automated production..*any manufacturing industries used speciali1ed technology.7Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.1 "roduction "rocess #or $igsa% "u&&le Ma'ing8Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.2 ()amples o# Machining TechnologyPhotos courtesy of Andres Products, Inc!9Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementService Technology.ervice technologies are used behind the scenes to facilitate your e"perience as a customer..E-service refers to using the Internet and technology to provide services that create and deliver time- place- information- entertainment- and e"change value to customers and4or support the sale of goods.10Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.3 ()amples o# Ser*ice Technology11Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementService Technology.Technology has been used e"tensively in #nancial services to facilitate the large number of transactions and processing activities that must occur each day..*any health care facilities are adopting electronic medical record (5*6! systems that can be easily integrated with medical records- billing- patient scheduling- and accounting..Technology at +7 such as handheld devices- +7net- +7 *ail- etc.12Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.4 The (lectronic Chec' "rocessSource: M! M! Anderson, "The Electronic Chec# Architecture,$ %inancial Services Technolo&y Consortiu', ())* +htt,-..!echec#!or&.li/rary.,.inde0!ht'l1!13Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.5 $" Morgan Chase +an',s Cash Mo*ement "rocess14Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementTechnology in Value ChainsThree *a'or Types of 8usiness 6elationshipsB2B: Business to BusinessB2C: Business to CustomerC2C: Customer to Customer5lectronic transaction capability allows allparts of the value chain to immediately0now and react to changes in demandand supply.15Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.6 (Commerce -ie% o# the -alue Chain16Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.7 ()ample eCommerce -alue Chain "layers17Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementBusiness Intelligence Systems in Value Chains.Business intelligence systems (BIS) consolidate data from across the organi1ation and allow companies to integrate information into a common database for easy access and analysis..*any 8I incorporate data mining, sophisticated statistical analysis tools and automated search algorithms to sift through large amounts of data to identify meaningful relationships.18Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementBusiness Intelligence Systems in Value Chains.8ene#ts include increased revenues by identifying customer interests- improving customer satisfaction- and support for strategic decision9ma0ing through data analysis.19Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementIntegrated Operating System (IOS1. :n IO focus is on the main problem structure and processes of a speci#c industry- such as home insurance- airlines- family practice medical doctors- or automobile manufacturers.2. :n IO addresses 0ey decisions that need to be made to serve the customer in the best possible way.20Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementIntegrated Operating System (IOS.:n IO involves the collection- storage- analysis- and dissemination of data and information via information technology to improve decision9ma0ing within the organi1ation..:n IO is capable of ma0ing 0ey decisions in a synchronous and timely way anywhere along the value chain.21Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementIntegrated Operating System (IOS.Supply chain management (SCM) systems focuses on producing the right product- in the right /uantity- at the right time- in the right location- to the right customer- at the right price. 22Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementIntegrated Operating System (IOS.Computer-integrated manufacturing systems (CIMS) represent the union of hardware- software- and communications to automate and control production activities.: root is a programmable machine designed to handle materials or tools in the performance of a variety of tas0s.23Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementIntegrated Operating System (IOSComputer-Integrated Manufacturing Systems (CIMS) ContinuedC!"#C!E enables engineers to design- analy1e- test- simulate- and ;manufacture< products before they physically e"ist.C!M involves computer control of the manufacturing process.$le%ile manufacturing systems ($MS) consist of two or more computer9controlled machines lin0ed by automated handling devices.24Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementIntegrated Operating System (IOS.Enterprise &esource 'lanning (E&') systems integrate all aspects of a business3accounting- customer relationship management- supply chain management- manufacturing- sales- human resources3into a uni#ed information system and provide more timely analysis and reporting of sales- customer- inventory- manufacturing- human resource- and accounting data.25Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementEnterprise &esource 'lanning (E&')Two prominent vendors of 567 software are:7 and Oracle..567 allows departments to easily share information and communicate with each other..567 is not about software- but about changing the way the organi1ation and its operations are managed. 26Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.8 S."s (/" +usiness Map27Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementIntegrated Operating System (IOS.Customer relationship management (C&M) is a business strategy designed to learn more about customers= wants- needs- and behaviors in order to build customer relationships and loyalty and ultimately enhance revenues and pro#ts.28Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementIntegrated Operating System (IOS$6* helps #rms gain and maintain a competitiveadvantage by.egmenting mar0ets based on characteristics-.Trac0ing sales trends and advertising efectiveness-.>orecasting customer retention rates and providing feedbac0 as to why customers leave the company-.tudying which goods and services are purchased together-.&in0ing the information to competitive priorities by mar0et segment and process and value chain performance.29Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementIntegrated Operating System (IOS: revenue management system (&MS)consists of dynamic methods to forecastdemand- allocate perishable assets cross6ate classes- decide when to overboo0 andby how much- and determine what price to$harge diferent customer (price! classes.30Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagement.>our $omponents of 6*2>orecasting:llocationOverboo0ing7ricing.*odern 6* software simultaneously ma0es changes in these decisions in a real9time operating system..6* used to determine price for hotel rooms- airline seats- rental car- sporting event or concert seat- cruise line room- broadcast advertising- power generation- and so on. 31Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementBene!ts of Technology.Improves productivity and product /uality..$reates new industries and 'ob opportunities..:llows for unparalleled opportunities for innovation..?rives improvements in time- cost- and /uality.32Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementChallenges of Technology.$ustomer concerns- such as online security and privacy issues..&ogistical costs for manufactured goods are e"pensive for online businesses..&ogistical costs for information intensive services are much cheaper for online businesses..7roduct returns to a virtual store.33Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.9 ()ample +ene#its and Challenge o# .dopting Technology34Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagement@ow Intel describes the history of technologyrevolutionsStage I BirthStage II Tur"ulenceStage III Build#out.5"amples2$igital %evolution&'S' %ailroad Industry35Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!estern$hapter % Technology and Operations *anagementMa(ing )echnology "ecisions.Scalaility is a measure of the contribution margin re/uired to deliver a good or service as the business grows and volumes increase..High scalaility is the capability to serve additional customers at 1ero or e"tremely low incremental costs.(*onster.com!.*o+ scalaility implies that serving additional customers re/uires high incremental variable costs. (Aebvan!.Many of the dot'coms that failed in the year 2((( had lo) scala"ility and unsustaina"le demand'36Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternChapter * Solved +ro"lem ,-terling 5/uipment $orporation is contemplating the purchase of an industrial robot from four suppliers.The management team needs this robot in a hurry and re/uires rapid service from the supplier when brea0downs occur.Therefore- the company considers these factors far more important than the others.5"hibits %.1B- %.11- and %.12 provide the necessary data for decision9ma0ing.Based on this information. )hat decision do you thin/ the company should ma/e037Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.10(conomic .nalysis #or (0uipment Selection38Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.111oneconomic 2actor (*aluation #or (0uipment Selection39Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.121umerical Scores #or 1oneconomic 2actors in (0uipment Selection40Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternChapter * Solved +ro"lem ,-1ns)er:.upplier 1 clearly has signi#cant lower economic costs..If installation lead time and supplier service are the most important factors- we might consider weighing these factors to reCect the importance..If these factors are weighed by a factor of 3- upplier 3 is the best on the non9economic factors.The ultimate decision rests )ith the company management2 should the company spend an additional net cost of 3-(.*(( for faster installation and "etter service or sacri!ce these attri"utes for a lo)er cost0The analysis and scoring model provides information on )hich to de"ate the issues and ma/e a rational decision'41Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.13+asic Manu#acturing TechnologyCase: Contrasting Manufacturing Technology42Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.1434C Car !ash Ser*ices56n*estment Costs7*Note that Drew and Caroline put down $4! o" their own #one$ to redu%e the total net in&e't#ent %o't'.Case: $4C Car 5ash Services43Operations Management, 2e/Ch. 5 Technology and Operations Management2007 Thomson South!esternExhibit 5.1534C Car !ash Ser*ices5Operating CostsCase: $4C Car 5ash Services