Copyright 2006 John Wiley & Sons, Inc. Beni Asllani University of Tennessee at Chattanooga Introduction to Operations and Supply Chain Management – Part 1 Operations Management - 6 th Edition Chapter 1 Roberta Russell & Bernard W. Taylor, III
Copyright 2006 John Wiley & Sons, Inc.1-2 Lecture Outline What Do Operations Managers Do? Operations Function Evolution of Operations Management Operations Management and E– business
Copyright 2006 John Wiley & Sons, Inc.1-3 What Do Operations Managers Do? What is Operations? a function or system that transforms inputs into outputs of greater value 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. 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 activities that do not add value are superfluous and should be eliminated What is Operations Management? design, operation, and improvement of productive systems design, operation, and improvement of productive systems
Copyright 2006 John Wiley & Sons, Inc.1-4 INPUT Material Machines Labor Management Capital TRANSFORMATION PROCESS OUTPUT Goods Services Feedback Operations as a Transformation Process
Copyright 2006 John Wiley & Sons, Inc.1-5 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 Transformation Process
Copyright 2006 John Wiley & Sons, Inc.1-6 An Integrated Value Chain Value chain: set of activities that create and deliver products to customer ManufacturerSupplierCustomer Flow of information (customer order) ManufacturerSupplierCustomer Flow of information (customer order) Flow of product (order fulfillment)
Copyright 2006 John Wiley & Sons, Inc.1-7 Operations Function Operations Marketing Finance and Accounting Human Resources Outside Suppliers
Copyright 2006 John Wiley & Sons, Inc.1-8 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 Adam Smith’s Wealth of Nations: freely available at
Copyright 2006 John Wiley & Sons, Inc.1-9 Historical Events in Operations Management (cont.) 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
Copyright 2006 John Wiley & Sons, Inc.1-10 Historical Events in Operations Management (cont.) EraEvents/ConceptsDatesOriginator Quality Revolution JIT (just-in-time)1970sTaiichi Ohno (Toyota) TQM (total quality management) 1980s W. Edwards Deming, Joseph Juran Strategy and operations 1990s Wickham Skinner, Robert Hayes Business process reengineering 1990s Michael Hammer, James Champy
Copyright 2006 John Wiley & Sons, Inc.1-11 Historical Events in Operations Management (cont.) EraEvents/ConceptsDatesOriginator GlobalizationWTO, European Union, and other trade agreements 1990s 2000s Numerous countries and companies Internet Revolution Internet, WWW, ERP, supply chain management 1990sARPANET, Tim Berners-Lee SAP, i2 Technologies, ORACLE, PeopleSoft E-commerce2000sAmazon, Yahoo, eBay, and others
Copyright 2006 John Wiley & Sons, Inc.1-12 Operations Management and E-Business Categories of E-Commerce Business Consumer BusinessConsumer B2B Commerceone.com B2C Amazon.com C2B Priceline.com C2C eBay.com
Copyright 2006 John Wiley & Sons, Inc.1-13 Impact of E-Business on Operations Management Comparison shopping by customers Direct contact with customers Business processes conducted online Customer expectations escalate; quality must be maintained and costs lowered No more guessing about demand is necessary; inventory costs go down; product and service design improves; build to-order products and services is made possible Transaction costs are lower; customer support costs decrease; e-procurement saves big bucks Benefits of E-BusinessImpact on Operations
Copyright 2006 John Wiley & Sons, Inc.1-14 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 overseas Logistics change from delivering to a store or distribution center to delivering to individual homes; consumer demand is more erratic and unpredictable than business demand Outsourcing increases; more alliances and partnerships among firms are formed; supply is less certain; global supply chain issues arise Benefits of E-BusinessImpact on Operations
Copyright 2006 John Wiley & Sons, Inc.1-15 Impact of E-Business on Operations Management (cont.) Online auctions and e- marketplaces Better and faster decision making Competitive bidding lowers cost of materials; supply needs can be found in one location More 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 Benefits of E-BusinessImpact on Operations
Copyright 2006 John Wiley & Sons, Inc.1-16 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 partners Order fulfillment, logistics, warehousing, transportation and delivery become focus of operations management; risk is spread out; trade barriers fall Benefits of E-BusinessImpact on Operations