Chapter 1 Introduction to Operations and Supply Chain Management Russell and Taylor Operations and Supply Chain Management, 8th Edition

Welcome to ISQS 3344 Instructor: Dr. Burns 2016 Summer I SEMESTER Telephone: Off hrs: by appointment Website: burns.ba.ttu.edu

1-3 My web site From there you can navigate to the ISQS 3344 WEBPAGE

1-4 Prerequisites STATISTICS Basic Statistical Concepts COMPUTER LITERACY MS Excel MS Word

1-5 Seating The seat you sit in on the second session of class will be your seat for the duration of the class A seating chart will be ‘made-up’ then Attendance will be taken every day Attendance/Participation will be worth 10% of your course grade

1-6 Requirements/Pedagogy Two EXAMS and a comprehensive FINAL EXAM Three homework sets TO GET US READY TO TAKE THE EXAMS Three Reviews Performed the day before we take the exams TO GET US READY TO TAKE THE EXAMS

1-7 Grading The homework is worth a total of 30% (10, 10, 10) Each EXAM is worth 20% {There are two EXAMS} The FINAL EXAM is worth 20% Attendance and participation is worth 10%

1-8 Grades A B C 97.5-on up---A A A-

1-9 Class Pedagogy Won’t show any movies Video clips are OK, however PowerPoint Simulations, where possible Lectures--more informal Interactive discussions

About your professor… Have taught this course for more than 20 years Find the content of this course fascinating …my view of this course and the world… Is the cognitive lens through which I will view and interpret these concepts/principles to you The principle of work The principle of value The principle of cost The principle of productivity The principle of maturity 1-10

Lecture Outline The Operations Function The Evolution of Operations and Supply Chain ManagementThe Evolution of Operations and Supply Chain Management Globalization Productivity and Competitiveness Strategy and Operations Organization of the Text Learning Objectives of this Course 1-11 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Learning Objectives Describe what the operations function is and how it relates to other business functions. Discuss the key factors that have contributed to the evolution of operations and supply chain management. Discuss how and why businesses operate globally, and the importance of globalization in supply chain management. Calculate and interpret productivity measures used for measuring competitiveness. Discuss the importance of operations and supply chain management to a firm’s strategy, and the process of developing, aligning and deploying strategy © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Operations Management What is Operations Management? design, operation, and improvement of productive systems What is Operations? a function or system that transforms inputs into outputs of greater value What is a Value Chain? a series of activities from supplier to customer that add value to a product or service 1-13 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

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 1-14 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Transformation Process Physical: as in manufacturing operations Locational: as in transportation or warehouse operations Exchange: as in retail operations Physiological: as in health care Psychological: as in entertainment Informational: as in communication 1-15 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Operations as a Transformation Process 1-16 INPUT Material Machines Labor Management Capital TRANSFORMATION PROCESS OUTPUT Goods Services Feedback & Requirements © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

The Operations Function Organizing work Selecting processes Arranging layouts Locating facilities Designing jobs Measuring performance Controlling quality Scheduling work Managing inventory Planning production 1-17 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Operations Function Operations Marketing Finance and Accounting Human Resources Suppliers 1-18 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Sample Organizational Structure 1-19 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e CEO Chief Executive Officer CIO Chief Information Officer CFO Chief Financial Officer COO Chief Operating Officer VP Human Resources VP Operations VP Supply Chain Management VP Marketing

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 there’s no better place to apply it than in operations.” “We use so many things you learn in an operations class—scheduling, lean production, theory of constraints, and tons of quality tools.” © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 1-20

How is Operations Relevant to my Major? Economics Marketing Finance “It’s all about processes. I live by flowcharts and Pareto analysis.” “How can you do a good job marketing a product if you’re unsure of its quality or delivery status?” “Most of our capital budgeting requests are from operations, and most of our cost savings, too.” © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 1-21

Historical Events in Operations Management EraEvents/ConceptsDatesOriginator Industrial Revolution Steam engine1769 James Watt Division of labor1776 Adam Smith Interchangeable parts1790 Eli Whitney Scientific Management Principles of scientific management 1911 Frederick W. Taylor Time and motion studies1911 Frank and Lillian Gilbreth Activity scheduling chart1912 Henry Gantt Moving assembly line1913 Henry Ford © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 1-22

Historical Events in Operations Management EraEvents/ConceptsDatesOriginator Human Relations Hawthorne studies1930Elton Mayo Motivation theories 1940sAbraham Maslow 1950sFrederick Herzberg 1960sDouglas McGregor Operations Research Linear programming1947George Dantzig Digital computer1951Remington Rand Simulation, waiting line theory, decision theory, PERT/CPM 1950s Operations research groups MRP, EDI, EFT, CIM 1960s, 1970s Joseph Orlicky, IBM and others © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 1-23

Historical Events in Operations Management EraEvents/Concepts DatesOriginator Quality Revolution JIT (just-in-time)1970sTaiichi Ohno (Toyota) TQM (total quality management) 1980s W. Edwards Deming, Joseph Juran Strategy and operations 1980s Wickham Skinner, Robert Hayes Reengineering1990s Michael Hammer, James Champy Six Sigma1990sGE, Motorola © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e 1-24

Historical Events in Operations Management EraEvents/ConceptsDatesOriginator Internet Revolution Internet, WWW, ERP, supply chain management 1990sARPANET, Tim Berners-Lee SAP, i2 Technologies, ORACLE, Dell E-commerce2000sAmazon, Yahoo, eBay, Google, and others GlobalizationWTO, European Union, Global supply chains, Outsourcing, Service Science 1990s 2000s China, India, Emerging economies 1-25 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Historical Events in Operations Management EraEvents/ConceptsDatesOriginator SustainabilityGlobal warming Carbon footprint Green products Corporate social responsibility (CSR) UN Global Compact TodayNumerous companies, statesmen, governments, United Nations, World Economic Forum 1-26 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Evolution of Operations and Supply Chain Management Supply chain management –management of the flow of information, products, and services across a network of customers, enterprises, and supply chain partners 1-27 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Globalization Why “go global”? –favorable cost –access to international markets –response to changes in demand –reliable sources of supply –latest trends and technologies Increased globalization –results from the Internet and falling trade barriers 1-28 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Hourly Compensation 1-29 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

GDP per Capita 1-30 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Trade in Goods, % of GDP 1-31 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

GDP 1-32 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Trade in Goods, % of GDP 1-33 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Manufacturing Output C3-34 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Productivity and Competitiveness 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 1-35 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Measures of Productivity 1-36 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Percent Change in Input and Output 1-37 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Changes in Productivity C3-38 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Strategy and Operations How the mission of a company is accomplished Provides direction for achieving a mission Unites the organization Provides consistency in decisions Keeps organization moving in the right direction 1-39 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Strategy Formulation 1.Defining a primary task What is the firm in the business of doing? Represents the purpose of a firm 2.Assessing core competencies What does the firm do better than anyone else? Processes, not products or services 3.Determining order winners and order qualifiers What qualifies an item to be considered for purchase? What wins the order? – that is the order winner 4.Positioning the firm How will the firm compete? 5.Deploying the strategy 1-40 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Strategic Planning 1-41 Mission and Vision Corporate Strategy Operations Strategy Financial Strategy Marketing Strategy Voice of the Business Voice of the Customer © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Order Winners and Order Qualifiers 1-42 Source: Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan Betts, Operations and Process Management, Prentice Hall, 2006, p. 47 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Positioning the Firm Cost Speed Quality Flexibility 1-43 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Positioning the Firm: Cost Waste elimination relentlessly pursuing the removal of all waste Examination of cost structure looking at the entire cost structure for reduction potential Lean production providing low costs through disciplined operations 1-44 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Positioning the Firm: Speed Fast moves, Fast adaptations, Tight linkages Internet Customers expect immediate responses Service organizations always competed on speed (McDonald’s, LensCrafters, and Federal Express) Manufacturers time-based competition: build-to-order production and efficient supply chains Fashion industry two-week design-to-rack lead time of Spanish retailer, Zara 1-45 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Positioning the Firm: Quality Minimizing defect rates or conforming to design specifications Ritz-Carlton - one customer at a time Service system designed to “move heaven and earth” to satisfy customer Employees empowered to satisfy a guest’s wish Teams set objectives and devise quality action plans Each hotel has a quality leader 1-46 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Positioning the Firm: Flexibility Ability to adjust to changes in product mix, production volume, or design Mass customization mass production of customized parts National Bicycle Industrial Company offers 11,231,862 variations delivers within two weeks at costs only 10% above standard models 1-47 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Policy Deployment Policy deployment translates corporate strategy into measurable objectives Hoshins action plans generated from the policy deployment process 1-48 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Policy Deployment Derivation of an Action Plan Using Policy Deployment 1-49 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Balanced Scorecard Balanced scorecard measuring more than financial performance finances customers processes learning and growing Key performance indicators set of measures to help managers evaluate performance in critical areas 1-50 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Balanced Scorecard 1-51 Radar Chart Dashboard © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Operations Strategy Products 1-52 ServicesProcessandTechnology Capacity HumanResources Quality Facilities SourcingOperatingSystems © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Organization of This Text: Part I – Operations Management 1.Intro. to Operations and Supply Chain Management 2.Quality Management 3.Statistical Quality Control 4.Product Design 5.Service Design 6.Processes and Technology 7.Capacity and Facilities Design 8.Human Resources 9.Project Management 1-53 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Organization of This Text: Part II – Supply Chain Management 10.Supply Chain Strategy and Design 11.Global Supply Chain Procurement and Distribution 12.Forecasting 13.Inventory Management 14.Sales and Operations Planning 15.Resource Planning 16.Lean Systems 17.Scheduling 1-54 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

Learning Objectives of this Course Gain an appreciation of strategic importance of operations and supply chain management 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 and creating value along the supply chains Develop a skill set for continuous improvement 1-55 © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e

1-56 Copyright 2014 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. © 2014 John Wiley & Sons, Inc. - Russell and Taylor 8e