Chapter 1 Introduction to Operations and Competitiveness To

Chapter 1 Introduction to Operations and Competitiveness To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved. To Accompany Russell and Taylor, Operations Management, 4 th Edition, 2003 Prentice-Hall, Inc. All rights reserved.

The Operations Function ü Operations as a transformation process ü Operations as a basic function ü Operations as the technical core To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Operations as a Transformation Process INPUT Material Machines Labor Management Capital To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Operations as a Transformation Process INPUT Material Machines Labor Management Capital TRANSFORMATION PROCESS To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Operations as a Transformation Process INPUT Material Machines Labor Management Capital TRANSFORMATION PROCESS OUTPUT Goods Services To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Operations as a Transformation Process INPUT Material Machines Labor Management Capital TRANSFORMATION PROCESS OUTPUT Goods Services Feedback To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Transformation Processes ü Physical (manufacturing) ü Locational (transportation/ warehouse) ü Exchange (retail) ü Physiological (health care) ü Psychological (entertainment) ü Informational (communications) To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Operations as the Technical Core To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Operations as the Technical Core Finance/Accounting Suppliers Budgets Cost analysis Capital investments Stockholder requirements Operations Material availability Quality data Delivery schedules Designs Personnel needs Skill sets Performance evaluations Job design/work measurement Product/Service Availability Lead-time estimates Status of order Delivery schedules Hiring/firing Training Legal requirements Union contract negotiations Sales forecasts Customer orders Customer feedback Promotions Marketing Production and Inventory data Capital budgeting requests Capacity expansion and Orders for materials Technology plans Production and delivery Schedules Quality Requirements Design/ Performance specs Human Resources To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Historical Events in OM ü Industrial Revolution ü Scientific Management ü Human Relations ü Management Science ü Quality Revolution ü Globalization ü Information Age/Internet Revolution To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Historical Events in OM Industrial Revolution Steam engine 1769 James Watt Division of labor 1776 Adam Smith Interchangeable parts 1790 Eli Whitney Scientific Management Principles 1911 Frederick W. Taylor Time and motion studies 1911 Frank & Lillian Gilbreth Activity scheduling chart 1912 Henry Gant Moving assembly line 1913 Henry Ford To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Historical Events in OM Human Relations Hawthorne studies 1930 Elton Mayo Motivation theories 1940 s Abraham Maslow 1950 s Frederick Hertzberg 1960 s Douglas Mc. Gregor Management Science Linear programming 1947 George Dantzig Digital computer 1951 Remington Rand Simulation, PERT/CPM, 1950 s Operations research Waiting line theory groups MRP 1960 s Joseph Orlicky, IBM To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Historical Events in OM Quality Revolution JIT 1970 s Taiichi Ohno, Toyota TQM 1980 s W. Edwards Deming, Joseph Juran, et. al. Strategy and operations Skinner, Hayes Reengineering 1990 s Hammer, Champy World Trade Organization 1990 s Numerous countries and companies Globalization European Union and 1970 s IBM and others other trade agreements EDI, EFT, CIM 1980 s To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Historical Events in OM Information Age/ Internet Revolution Internet, WWW, ERP 1990 s ARPANET, Tim Supply chain Berners-Lee, SAP, i 2 management, Technologies, ORACLE, E-commerce People. Soft, Amazon, Yahoo, e. Bay, and others To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Categories of E-Commerce To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Categories of E-Commerce Business Consumer Business B 2 B Commerceone. com B 2 C Amazon. com Consumer C 2 B Priceline. com C 2 C e. Bay. com To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

A New Value Chain (a) Traditional Value Chain Manufacturer Wholesaler/ distributor Retailer Consumer To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

A New Value Chain (a) Traditional Value Chain Manufacturer Wholesaler/ distributor Retailer Consumer (b) Intermediaries Eliminated (Deintermediation) Manufacturer Wholesaler/ distributor Retailer Consumer To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

A New Value Chain (a) Traditional Value Chain Manufacturer Wholesaler/ distributor Retailer Consumer (b) Intermediaries Eliminated (Deintermediation) Manufacturer Wholesaler/ distributor Retailer Consumer (b) New Intermediaries Introduced (Reintermediation) Manufacturer Infomediary E-Retailer Aggregator Portal Consumer To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

An Integrated Value Chain To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

An Integrated Value Chain Customer Manufacturer Supplier Flow of information (customer order) To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

An Integrated Value Chain Customer Manufacturer Supplier Flow of information (customer order) Flow of product (order fulfillment) To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

The Growth of E-Commerce Trillions of Dollars 8000 – 6000 – 4000 – 2000 – 0 |– 2000 | 2001 | 2002 Year | 2003 | 2004 To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

The Growth of E-Commerce Trillions of Dollars 8000 – 6000 – B 2 B B 2 C 4000 – 2000 – 0 |– 2000 | 2001 | 2002 Year | 2003 | 2004 To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Types of B 2 B Transactions Buyer Seller (a) Electronic Storefront Sellers (b) Seller’s Auction Buyers Sellers Buyer (c) Buyer’s Auction (d) Exchange or E-Marketplace To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

E-Business Promotes: ü Better customer relations ü More efficient processes ü Lower cost of materials ü Information technology synergy ü Better and faster decision making To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

E-Business Promotes: ü New forms of organizations ü Expanded supply chain ü Higher customer expectations ü New ways of doing business ü Globalization To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

An International Comparison of Hourly Wage Rates $ 35 – $ 30 – $ 25 – $ 20 – $ 15 – $ 10 – $5– $0– | 1975 | 1980 | 1985 | 1990 | 1995 | 2000 To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

An International Comparison of Hourly Wage Rates $ 35 – $ 30 – $ 25 – Germany Japan United States EU $ 20 – $ 15 – $ 10 – $5– $0– | 1975 | 1980 | 1985 | 1990 | 1995 Asian NIEs Mexico | 2000 To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Multinational Corporations Company Nestlé Nokia Philips Bayer ABB SAP Exxon Mobil Royal Dutch/Shell IBM Mc. Donald’s Country of Origin Foreign Sales as % of Total Switzerland Finland Netherlands Germany United States Netherlands United States 98. 2 97. 6 94. 0 89. 8 87. 2 80. 0 79. 6 73. 3 62. 7 61. 5 To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Competitiveness The degree to which a nation can produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens. To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Productivity Output Productivity = Input To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Productivity Output Productivity = Input Productivity improves when firms: ü Become more efficient ü Downsize ü Expand ü Retrench ü Achieve breakthroughs To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Productivity in the ‘ 90 s – 7– 6– 5– 4– 3– 2– 1– 0– -1 – -2 – -3 – | ‘ 90 | ‘ 91 | ‘ 92 | ‘ 93 | ‘ 94 | ‘ 95 | ‘ 96 | ‘ 97 | ‘ 98 | ‘ 99 | | ‘ 00 2001 To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Productivity in the ‘ 90 s – 7– 6– 5– 4– 3– 2– 1– 0– -1 – -2 – -3 – | ‘ 90 United States Germany Japan | ‘ 91 | ‘ 92 | ‘ 93 | ‘ 94 | ‘ 95 | ‘ 96 | ‘ 97 | ‘ 98 | ‘ 99 | | ‘ 00 2001 To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Measures of Competitiveness ü Productivity ü GDP (Gross domestic product) growth ü Market capitalization ü Technological infrastructure ü Quality of education ü Efficiency of government To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Competitiveness of Selected Countries 100 80 60 40 20 0 US Singapore Finland Ireland Germany UK Japan Mexico Russia To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Competitiveness of Selected Countries 100 80 60 40 20 0 US Singapore Finland Ireland Germany UK Japan Mexico Russia To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Barriers to Entry ü Economies of scale ü Capital investment ü Access to supply and distribution channels ü Learning curves To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Competition Within Industries Increases When ü Firms are relatively equal in size and resources ü Products and services are standardized ü Industry growth is slow or exponential To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Primary Topics in Operations Management ü Strategy ü Products and services ü Processes and technologies ü Facilities ü Project management ü Managing the supply chain ü Forecasting demand for products and services ü Production planning and scheduling ü Ensuring quality To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Purpose of the Text ü To gain an appreciation of the strategic importance of operations and how operations relates to other business functions ü To develop a working knowledge of the concepts and methods related to designing and managing operations ü To develop a skill set for organizing activities as a part of a process To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.

Organization of the Text The Strategic Importance of Operations 1. Introduction to Operations and Competitiveness 2. Operations Strategy Designing the Operating System 3. Products and Services 4. Processes and Technologies 5. Facilities 6. Project Management Managing the Supply Chain Ensuring Quality 7. Supply Chain Management 8. Forecasting 9. Capacity and Aggregate Planning 10. Inventory Management 11. Just-in-Time and Lean Production 12. Enterprise Resource Planning 13. Scheduling 14. Quality Management 15. Statistical Process Control 16. Waiting Line Models for Service Improvement 17. Human Resources in Operations Management To Accompany Russell and Taylor, Operations Management, 4 th Edition , 2003 Prentice-Hall, Inc. All rights reserved.