Chapter 1 Introduction
John Butler Ph.D. University of Texas Previously at Ohio State Office GWI Office Hours Tuesday & Thursday 2:00 – 3:00 pm By appointment
Operations Management (OM) The design, operation, and improvement of the systems that create and deliver the firm’s primary products and services The “M” is important Not just tools or engineering We’re talking about decisions Strategic (long term) Tactical (intermediate) Operational (short term)
Why bother? LloydLloyd Part of Business Education Cross Functional Applications Systematic View of Organizational Processes Job Opportunities
Key Terms Efficiency Do it with the least number of resources Effectiveness Do it right Maximize value to the firm Tradeoff? Value Quality / Price How can we increase value?
Managing the Value Chain
Transformation Process A use of resources to transform inputs into desired outputs Physical - manufacturing Locational – transportation Exchange – retailing Storage – warehousing Physiological – health care Informational – telecommunications
Example : Tulane Tulane Resources Teachers Books Classrooms Transformation Process Impart knowledge & skills Inputs High School Grads Outputs Educated Individuals
Goods & Services Tangible vs. Intangible Services rely on interaction with customer to produce McDonalds makes “stuff” but is classified in service industry Customers are on the shop floor Shades of gray
Where Do We “Operate”? Manufacturing Typically group operations in one department Vertical Service Firm Operations scattered throughout firm Bank, Airlines Horizontal
Operations as Service Every company is really in the service business Core services basic things that customers want from products they purchase Value-added services differentiate the organization from competitors build relationships that bind customers to the firm in a positive way
Core Services Traditional OM performance measures Quality Flexibility Speed Price (Cost reduction)
Value-added Services Information Support internal or external group Problem Solving Support internal or external group Sales Support Helping marketing close the deal Field Support Fix items or replenish inventory
OM’s Role in A Company Not perceived as glamorous Many C-level execs are not OM literate But … Operations account for 60-80% of the direct expenses that burden a firm’s profit Synergies must exist with other functional areas of the organization for firm to succeed
1 ST Industrial Revolution 1776: US Democracy, Law & Culture Adam Smith: Wealth of Nations James Watt: 1 st Steam Engine Sold Automation 1790: First Advanced Textile Mill 1801: Eli Whitney Interchangeable Parts England becomes the 1 st industrial nation.
OM History: 2 nd Industrial Revolution Use of Coal Iron Mfg. Mass Production/ Distribution / Communication Railroad Evolution of Managers, Accounting Standards Scientific Management: Frederick Tayor, Henry Ganntt
Steel, Andrew Carnegie & Scale I believe the true road to preeminent success in any line is to make yourself master in that line Focus: Details/Steel Horizontal/Vertical Integration
The Model-T, Henry Ford & Speed 1908: Moving Assembly Line work specialization Labor time/car from 12.5 to 1.5 hours, price from $850 to $290
Post WWII Multidisciplinary team approach to complex problems: Dupont: a centrally governed multi- departmental structure for effective integration GM: Alfred Sloan reorganizes GM into a multi-divisional, decentralized structure; effective market segmentation, demand forecasting & inventory tracking market share increase
New Practices in OM JIT/Lean Manufacturing Manufacturing Strategy Paradigm Use as a strategic lever TQM Business Process Reengineering Supply Chain Management E-commerce
Going Forward Effectively consolidating the operations resulting from mergers Developing flexible supply chains to enable mass customization of products and services Managing global supplier, production and distribution networks Increased “commoditization” of suppliers Make efficient use of Internet technology