Lecture outline

 What do operations managers do?

 Operations function
 Evolution of operations management
 Primary topics in operations management
 Learning objectives for this course
What Do Operations
Managers Do?
 What is operations?
 a function or system that transforms inputs into
outputs of greater value
 What 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 eliminated
 What is operations management?
 design, operation, and improvement of productive
systems
Transformation Process
 Physical: as in manufacturing operations
 Locational: as in transportation operations
 Exchange: as in retail operations
 Physiological: as in health care
 Psychological: as in entertainment
 Informational: as in communication
Operations as a
Transformation Process

INPUT
•Material
OUTPUT
•Machines TRANSFORMATION
•Goods
•Labor PROCESS
•Services
•Management
•Capital

Feedback
Operations Function
 Operations
 Marketing
 Finance and
accounting
 Human
resources
 Outside
suppliers
How is operations relevant to my major?
 Accounting  “As an auditor you must
understand the fundamentals of
operations management.”
 Information  “IT is a tool, and there’s no better
Technology place to apply it than in
operations.”
 Management  “We use so many things you learn
in an operations class—scheduling,
lean production, theory of
constraints, and tons of quality
tools.”
How is operations relevant to my major?
 Economics  “It’s all about processes. I live
by flowcharts and Pareto
analysis.”
 “How can you do a good job
 Marketing marketing a product if you’re
unsure of its quality or delivery
status?”
 Finance  “Most of our capital budgeting
requests are from operations,
and most of our cost savings,
too.”
Evolution of Operations
Management
 Craft production
 process of handcrafting products or services
for individual customers
 Division of labor
 dividing a job into a series of small tasks each
performed by a different worker
 Interchangeable parts
 standardization of parts initially as
replacement parts; enabled mass production
Evolution of Operations
Management (cont.)
 Scientific management
 systematic analysis of work methods
 Mass production
 high-volume production of a standardized
product for a mass market
 Lean production
 adaptation of mass production that prizes
quality and flexibility
Historical Events in
Operations Management

Era Events/Concepts Dates Originator

Steam engine 1769 James Watt
Industrial
Division of labor 1776 Adam Smith
Revolution
Interchangeable parts 1790 Eli Whitney
Principles of scientific
1911 Frederick W. Taylor
management
Frank and Lillian
Scientific Time and motion studies 1911 Gilbreth
Management Activity scheduling chart 1912 Henry Gantt
Moving assembly line 1913 Henry Ford
 Historical Events in Operations
Management (cont.)
Era Events/Concepts Dates Originator
Hawthorne studies 1930 Elton Mayo
Human 1940s Abraham Maslow
Relations Motivation theories 1950s Frederick Herzberg
1960s Douglas McGregor
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, waiting
Operations Operations research
line theory, decision 1950s
Research groups
theory, PERT/CPM
1960s, Joseph Orlicky, IBM
MRP, EDI, EFT, CIM
1970s and others
 Historical Events in Operations
Management (cont.)

Era Events/Concepts Dates Originator

JIT (just-in-time) 1970s Taiichi Ohno (Toyota)
TQM (total quality W. Edwards Deming,
1980s
management) Joseph Juran
Quality
Strategy and Wickham Skinner,
Revolution 1990s
operations Robert Hayes
Business process Michael Hammer,
1990s
reengineering James Champy
 Historical Events in Operations
Management (cont.)

Era Events/Concepts Dates Originator

Globalization WTO, European Union, 1990s Numerous countries
and other trade 2000s and companies
agreements
Internet Internet, WWW, ERP, 1990s ARPANET, Tim
Revolution supply chain Berners-Lee SAP,
management i2 Technologies,
ORACLE,
PeopleSoft
E-commerce 2000s Amazon, Yahoo,
eBay, and others
Continuum from Goods to
Services

Source: Adapted from Earl W. Sasser, R. P. Olsen, and D. Daryl Wyckoff,

Management of Service Operations (Boston: Allyn Bacon, 1978), p.11.
Competitiveness and
Productivity
 Competitiveness
 degree to which a nation can produce goods and services
that meet the test of international markets
 Productivity
 ratio of output to input
 Output
 sales made, products produced, customers served, meals
delivered, or calls answered
 Input
 labor hours, investment in equipment, material usage,
or square footage
Competitiveness and
Productivity (cont.)

Measures of Productivity
Primary Topics in
Operations Management
An Integrated Value Chain
 Value chain: set of activities that create and deliver
products to customer

Customer Manufacturer Supplier

Flow of information (customer order)

Flow of product (order fulfillment)
Primary Topics in Operations
Management (cont.)
Operations Strategy
 Strategy:
 Maintaining an operations strategy to support firm’s
competitive advantage
 Quality:
 Focusing on quality in operational decision making
 Product and Services:
 Designing quality products and services
 Processes, Technologies, and Capacity:
 Setting up process so that it works smoothly and
efficiently
Operations Strategy (cont.)
 Facilities:
 Setting up facility so that it works smoothly and
efficiently
 Human Resources:
 Designing jobs and work to produce quality products
 Project Management:
 Managing complex projects
Supply Chain Management
 Supply Chain:
 Managing supply chain
 Forecasting:
 Predicting customer demand
 Aggregate Planning:
 How much to produce and when to produce it
 Inventory Management:
 How much to order and when to order
Supply Chain Management (cont.)
 Resource Planning:
 Planning capacity and other resources
 Lean Production:
 Designing efficient production lines
 Scheduling:
 Job and task assignments
 Waiting Lines:
 Minimizing waiting time of customers and products
Learning Objectives of this Course
 Gain an appreciation of strategic importance of
operations in a global business environment
 Understand how operations relates to other
business functions
 Develop a working knowledge of concepts and
methods related to designing and managing
operations
 Develop a skill set for quality and process
improvement
Ten OM Strategy Decisions
 Product design
 Quality management
 Process design
 Location
 Layout design
 Human resources
 Supply chain management
 Inventory management
 Scheduling
 Maintenance
Groupings
 Food
 Health
 Technology
 Fashion