Lecture Fundamentals of operations management (4/e): Chapter 1 - Davis, Aquilano, Chase

Chapter 1 - Introduction to operations management. After studying this chapter you will be able to: Introduce and define operations management (OM) in terms of its contribution and the activities it involves, describe how operations contributes to the overall betterment of society, present operations as a function that addresses issues in both manufacturing and services,...

DAVIS F   O   U   R   T   H       E   D   I   T   I   O   N AQUILANO CHASE chapter Introduction to Operations  Management © The McGraw-Hill Companies, Inc., 2003 PowerPoint Presentation by Charlie Cook Chapter Objectives Chapter Objectives • Introduce and define operations management (OM) in terms of its contribution and the activities it involves • Describe how operations contributes to the overall betterment of society • Present operations as a function that addresses issues in both manufacturing and services • Show how operations management is gaining more recognition both internally and externally to an organization Fundamentals of Operations  Management4e âTheMcGrawưHill Companies,Inc.,2003 12 ChapterObjectives(contd) ChapterObjectives(contd) ã Demonstrate how the operations management function interacts with the other functional areas within an organization • Present a brief history of operations management as a field and its evolution to its current role in an organization Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 1–3 Managerial Issues Managerial Issues • Shift in balance of power to consumers –Globalization of business and markets –E-commerce • Achieving higher levels of productivity –Creating higher quality products –Delivering better customer service –Achieving shorter delivery times –Reducing labor and material costs Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 1–4 What Is Operations Management? What Is Operations Management? • Operations Management –Management of the conversion process which transforms inputs such as raw material and labor into outputs in the form of finished goods and services Inputs (customers and/or materials) Transformation Process (components) Fundamentals of Operations  Management 4e  Outputs (goods and services) © The McGraw­Hill  Companies, Inc., 2003 1–5 Role of OM within an Organization Role of OM within an Organization Fundamentals of Operations  Management4e âTheMcGrawưHill Companies,Inc.,2003 Exhibit 1.1 16 TopưdownApproachtoOMStrategy TopưdownApproachtoOMStrategy ã Operations Strategy Decisions –Strategic (long-range) • Needs of customers (capacity planning) –Tactical (medium-range) • Efficient scheduling of resources –Operational planning and control (short-range) ã Immediate tasks and activities FundamentalsofOperations Management4e âTheMcGrawưHill Companies, Inc., 2003 1–7 An Operational­Level OM Perspective An Operational­Level OM Perspective • OM’s function focuses on adding value through the transformation process (technical core) of converting inputs into outputs –Physical: manufacturing –Locational: transportation –Exchange:retailing –Storage: warehousing –Physiological: health care –Informational: telecommunications © The McGraw­Hill  Fundamentals of Operations  Management 4e  Companies, Inc., 2003 1–8 The Transformation Process within OM The Transformation Process within OM Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 1.2 1–9 Input­Transformation­Output Input­Transformation­Output Relationships for Typical Systems Relationships for Typical Systems Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 1.3 1–10 An Expanded Definition of Quality An Expanded Definition of Quality • Quality is important in all functional areas of an organization • Quality is now much more than the technical requirements for manufactured goods • Service quality (customer relationships) is equally important Quality Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 1–18 A New Paradigm for OM A New Paradigm for OM • Post-War U.S Dominance in Manufacturing –Available capacity built to support the war effort –Pent-up demand for consumer goods –Destruction of overseas production capabilities • Proactive Operations Function (Skinner) –Add value to products, increase profit margins –Compete on dimensions other than costs: • Quality • Speed of delivery • Process flexibility FundamentalsofOperations Management4e âTheMcGrawưHill Companies,Inc.,2003 119 TheEverưChangingWorldofOM TheEverưChangingWorldofOM ã Increased Global Competition –Transformation into a global economy –Pressure to excel on multiple competitive dimensions –Increased emphasis on logistics • Advances in Technology –Information technology (IT) –Internet email and commerce (B2B) –Automation and robotics Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 1–20 Ford’s Global Network to Support Ford’s Global Network to Support the Manufacturing of the Escort the Manufacturing of the Escort Fundamentals of Operations  Management 4e  Source: From Joseph E Stiglitz, Principles of Micro-economics, 2nd ed (New York: W.W Norton and Company, 1997), p 58 © The McGraw­Hill  Companies, Inc., 2003 Exhibit 1.9 1–21 Linking OM to Customers and Suppliers Linking OM to Customers and Suppliers • Benefits of Buffering the Transformation Process –The process was not disturbed by environmental interaction –The process was often more efficient than input and distribution processes –Productivity was maximized when processes operated at continuous rates –Process management skills were different from those of other functional activities © The McGraw­Hill  Fundamentals of Operations  Companies, Inc., 2003 Management 4e  1–22 Linking OM to Customers and Suppliers Linking OM to Customers and Suppliers • Disadvantages of Buffering the Transformation Process –Information lag in interaction with other functional activities –Lack of communication between customers and the shop floor for problem solving • Value Chain –Steps an organization requires to produce a good or a service regardless of where they are performed © The McGraw­Hill  Fundamentals of Operations  Companies, Inc., 2003 Management 4e  1–23 The Value Chain and Its Support Functions The Value Chain and Its Support Functions Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 1.10 1–24 Line and Staff Jobs in OM Line and Staff Jobs in OM Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 1.11 1–25 Inputs Provided by OM to Inputs Provided by OM to Other Functional Areas Other Functional Areas Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 1.12 1–26 Historical Development of OM Historical Development of OM • Prior to 1900 –Cottage industry produced custom-made goods –Watt’s steam engine in 1785 –Whitney’s standardized gun parts in 1801 –Industrial Revolution began at mid-century FundamentalsofOperations Management4e âTheMcGrawưHill Companies,Inc.,2003 127 HistoricalDevelopmentofOM(cont.) HistoricalDevelopmentofOM(cont.) ã Scientific Management (Frederick W Taylor) –Systematic approach to increasing worker productivity through time study, standardization of work, and incentives –Viewed workers as an interchangeable asset • Other Management Pioneers –Frank and Lillian Gilbreth • Motion study and industrial psychology –Henry L Gantt • Scheduling and the Gantt chart Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 1–28 Historical Development of OM (cont.) Historical Development of OM (cont.) • Moving Assembly Line (1913) –Labor specialization reduced assembly time • Hawthorne Studies –Yielded unexpected results in the productivity of Western Electric plant workers after changes in their production environment –Led to recognition of the importance of work design and employee motivation Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 1–29 Historical Development of OM (cont.) Historical Development of OM (cont.) • Operations Research (Management Science) –Outgrowth of WWII needs for logistics control and weapons-systems design –Seeks to obtain mathematically optimal (quantitative) solutions to complex problems • OM Emerges as a Field –1950–1960, OM moved beyond industrial engineering and operations research to the view of the production operation as a system Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 1–30 Historical Development of OM (cont.) Historical Development of OM (cont.) • OM Emerges as a Field –1950–1960, OM moved beyond industrial engineering and operations research to the view of the production operation as a system • The Marriage of OM and IT –Integrated solutions approaches • Business process reengineering • Supply chain management • Systems integration (SAP) Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 1–31 Historical Development of OM (cont.) Historical Development of OM (cont.) • Operations Management in Services –OM concepts can apply to both manufacturing and service operations • Integration of Manufacturing and Services –Conducting world class operations requires compatible manufacturing and service operations Fundamentals of Operations  Management 4e  © The McGraw­Hill  Companies, Inc., 2003 1–32 ... costs Fundamentals? ?of? ?Operations? ? Management? ?4e  © The McGraw­Hill  Companies, Inc., 2003 1? ??4 What Is? ?Operations? ?Management? What Is? ?Operations? ?Management? • Operations Management ? ?Management of. .. Companies, Inc., 2003 Exhibit 1. 10 1? ??24 Line and Staff Jobs in OM Line and Staff Jobs in OM Fundamentals? ?of? ?Operations? ? Management? ?4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 1. 11 1–25 Inputs Provided by OM to... Most Products Are a “Bundle”  of? ?Goods and Services of? ?Goods and Services Fundamentals? ?of? ?Operations? ? Management? ?4e  © The McGraw­Hill  Companies, Inc., 2003 Exhibit 1. 8 1? ? ?17 An Expanded Definition? ?of? ?Quality An Expanded Definition? ?of? ?Quality