Operations and Competitiveness

Operations and CompetitivenessBeni AsllaniUniversity of Tennessee at ChattanoogaOperations Management - 5th EditionChapter 1Roberta Russell & Bernard W. Taylor, III

Copyright 2006 John Wiley & Sons, Inc.

Lecture OutlineWhat Do Operations Managers Do?Operations FunctionEvolution of Operations ManagementOperations Management and EbusinessGlobalization and CompetitivenessPrimary Topics in Operations ManagementLearning Objectives for this Course


What Do Operations Managers Do?What is Operations?

a function or system that transforms inputs into outputs of greater valueWhat 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 eliminatedWhat is Operations Management?

design, operation, and improvement of productive systems


.


Transformation ProcessPhysical: as in manufacturing operationsLocational: as in transportation operationsExchange: as in retail operationsPhysiological: as in health carePsychological : as in entertainmentInformational: as in communication


Operations as a Transformation Process

Feedback


Operations FunctionOperationsMarketingFinance and AccountingHuman ResourcesOutside Suppliers


How is Operations Relevant to my Major?Accounting

Information Technology

Management

As an auditor you must understand the fundamentals of operations management.IT is a tool, and theres no better place to apply it than in operations. We use so many things you learn in an operations classscheduling, lean production, theory of constraints, and tons of quality tools.


How is Operations Relevant to my Major?Economics

Marketing

Finance

Its all about processes. I live by flowcharts and Pareto analysis.How can you do a good job marketing a product if youre unsure of its quality or delivery status?Most of our capital budgeting requests are from operations, and most of our cost savings, too.


Evolution of Operations ManagementCraft production

process of handcrafting products or services for individual customersDivision of labor

dividing a job into a series of small tasks each performed by a different workerInterchangeable parts

standardization of parts initially as replacement parts; enabled mass production


handcrafting


Evolution of Operations Management (cont.)Scientific management

systematic analysis of work methodsMass production

high-volume production of a standardized product for a mass marketLean production

adaptation of mass production that prizes quality and flexibility


Historical Events in Operations Management

EraEvents/ConceptsDatesOriginatorIndustrialRevolutionSteam engine1769James WattDivision of labor1776Adam SmithInterchangeable parts1790Eli WhitneyScientific ManagementPrinciples of scientificmanagement1911Frederick W. TaylorTime and motion studies1911Frank and Lillian GilbrethActivity scheduling chart1912Henry GanttMoving assembly line1913Henry Ford


Historical Events in Operations Management (cont.)

EraEvents/ConceptsDatesOriginatorHuman RelationsHawthorne studies1930Elton MayoMotivation theories1940sAbraham Maslow1950sFrederick Herzberg1960sDouglas McGregorOperations ResearchLinear programming1947George DantzigDigital computer1951Remington RandSimulation, waitingline theory, decisiontheory, PERT/CPM1950sOperations research groupsMRP, EDI, EFT, CIM1960s, 1970sJoseph Orlicky, IBMand others



EraEvents/ConceptsDatesOriginatorQualityRevolutionJIT (just-in-time)1970sTaiichi Ohno (Toyota)TQM (total qualitymanagement)1980sW. Edwards Deming, Joseph JuranStrategy andoperations1990sWickham Skinner, Robert HayesBusiness processreengineering1990sMichael Hammer,James Champy



EraEvents/ConceptsDatesOriginatorGlobalizationWTO, European Union, and other trade agreements1990s2000sNumerous countriesand companiesInternet RevolutionInternet, WWW, ERP, supply chain management1990sARPANET, TimBerners-Lee SAP,i2 Technologies,ORACLE,PeopleSoftE-commerce2000sAmazon, Yahoo, eBay, and others


Continuum from Goods to Services


Operations Management and E-Business


An Integrated Value ChainValue chain: set of activities that create and deliver products to customer


Impact of E-Business on Operations ManagementComparison shopping by customers

Direct contact with customers

Business processes conducted online

Customer expectations escalate; quality must be maintained and costs loweredNo more guessing about demand is necessary; inventory costs go down; product and service design improves; build to-order products and services is made possibleTransaction costs are lower; customer support costs decrease; e-procurement saves big bucks

Benefits of E-BusinessImpact on Operations


Impact of E-Business on Operations Management (cont.)Access to customers worldwide

Middlemen are eliminated

Access to suppliers worldwide

Demand increases; order fulfillment and logistics become major issues; production moves overseasLogistics change from delivering to a store or distribution center to delivering to individual homes; consumer demand is more erratic and unpredictable than business demandOutsourcing increases; more alliances and partnerships among firms are formed; supply is less certain; global supply chain issues arise



Impact of E-Business on Operations Management (cont.)Online auctions and e-marketplacesBetter and faster decision making

Competitive bidding lowers cost of materials; supply needs can be found in one locationMore timely information is available with immediate access by all stakeholders in decision-making process; customer orders and product designs can be clarified electronically; electronic meetings can be held; collaborative planning is facilitated



Impact of E-Business on Operations Management (cont.)IT synergy

Expanded supply chains

Productivity increases as information can be shared more efficiently internally and between trading partnersOrder fulfillment, logistics, warehousing, transportation and delivery become focus of operations management; risk is spread out; trade barriers fall



Globalization and CompetitivenessFavorable costAccess to international marketsResponse to changes in demandReliable sources of supply14 major trade agreements in 1990sPeak: 26% in 2000


Globalization and Competitiveness (cont.)

Germany: $26.18USA: $21.33Taiwan: $5.41Mexico: $2.38China: $0.50


Globalization and Competitiveness (cont.)Trade with China: Percent of each countrys trade Source: Share of China in Exports and Imports of Major Traders, 2000 and 2002, International Trade Statistics 2003, World Trade Organization, www.wto.org


Risks of GlobalizationCultural differencesSupply chain logisticsSafety, security, and stabilityQuality problemsCorporate image Loss of capabilities


Competitiveness and ProductivityCompetitiveness

degree to which a nation can produce goods and services that meet the test of international marketsProductivity

ratio of output to inputOutput

sales made, products produced, customers served, meals delivered, or calls answeredInput

labor hours, investment in equipment, material usage, or square footage


Competitiveness and Productivity (cont.)Measures of Productivity


Changes in Productivity for Select CountriesInternet-enabled productivity- Dot com bust- 9/11 terrorist attacksSource: International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002, Bureau of Labor Statistics, U.S. Department of Labor, September 2003. U.S. figures for 20022003 from Major Sector Productivity and Costs Index, Bureau of Labor Statistics, U.S. Department of Labor, March 2004


Productivity IncreaseBecome efficient

output increases with little or no increase in inputExpand

both output and input grow with output growing more rapidlyAchieve breakthroughs

output increases while input decreasesDownsize

output remains the same and input is reducedRetrench

both output and input decrease, with input decreasing at a faster rate


Competitiveness and ProductivityBreakthrough PerformanceMore EfficientRetrench


Global Competitiveness Ranking FinlandUnited StatesSwedenDenmarkTaiwanSingaporeSwitzerlandIcelandNorwayAustraliaSource: Global Competitiveness Report 20032004, World Economic Forum, January 2004, www.weforum.org


Operationsoriented Barriers to Entry Economies of ScaleCapital InvestmentAccess to Supply and Distribution ChannelsLearning Curve


Primary Topics in Operations Management


Primary Topics in Operations Management (cont.)


Operations StrategyStrategy: Chapter 2

Maintaining an operations strategy to support firms competitive advantageQuality: Chapters 3 and 4

Focusing on quality in operational decision makingProduct and Services: Chapter 5

Designing quality products and servicesProcesses, Technologies, and Capacity: Chapter 6

Setting up process so that it works smoothly and efficiently


Operations Strategy (cont.)Facilities: Chapter 7

Setting up facility so that it works smoothly and efficientlyHuman Resources: Chapter 8

Designing jobs and work to produce quality productsProject Management: Chapter 9

Managing complex projects


Supply Chain ManagementSupply Chain: Chapter 10

Managing supply chainForecasting: Chapter 11

Predicting customer demandAggregate Planning: Chapter 12

How much to produce and when to produce it Inventory Management: Chapter 13

How much to order and when to order


Supply Chain Management (cont.)Resource Planning: Chapter 14

Planning capacity and other resourcesLean Production: Chapter 15

Designing efficient production linesScheduling: Chapter 16

Job and task assignmentsWaiting Lines: Chapter 17

Minimizing waiting time of customers and products


Learning Objectives of this CourseGain an appreciation of strategic importance of operations in a global business environmentUnderstand how operations relates to other business functionsDevelop a working knowledge of concepts and methods related to designing and managing operationsDevelop a skill set for quality and process improvement


Copyright 2006 John Wiley & Sons, Inc.All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.


Operations and Competitiveness

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