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Chapter 1
Operations and
Supply Chain Management
Introduction
1-1
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Lecture Outline
What Operations and Supply Chain Managers Do Operations Function
Evolution of Operations and Supply ChainManagement
Globalization and Competitiveness Operations
Strategy and Organization of the Text
Learning Objectives for This Course
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What Operations and Supply Chain
Managers Do
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 Transformation Process?
a series of activities along a value chain extending from supplierto customer
activities that do not add value are superfluous and should be
eliminated
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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
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Operations as a
Transformation Process
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INPUT
Material
Machines
Labor
Management
Capital
TRANSFORMATION
PROCESS
OUTPUT
Goods
Services
Feedback & Requirements
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Copyright 2011 John Wiley & Sons, Inc.Copyright 2011 John Wiley & Sons, Inc.
Operations Function
Operations Marketing
Finance and
Accounting
Human
Resources
Outside
Suppliers
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How is Operations Relevant
to my Major?
Accounting
InformationTechnology
Management
As an auditor you must understand the
fundamentals of operations
management.
IT is a tool, and theres no better place toapply it than in operations.
We use so many things you learn in an
operations classscheduling, leanproduction, theory of constraints, and
tons of quality tools.
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How is Operations Relevant
to my Major?
Economics
Marketing
Finance
Its all about processes. I live by
flowcharts and Pareto analysis.
How can you do a good job marketing a
product if youre unsure of its quality or
delivery status?
Most of our capital budgeting requests
are from operations, and most of our
cost savings, too.
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Evolution of Operations and
Supply Chain Management
Craft production process of handcrafting products or services for
individual customers
Division of labor
dividing a job into a series of small tasks eachperformed by a different worker
Interchangeable parts standardization of parts initially as replacement parts;
enabled mass production
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Evolution of Operations and
Supply Chain Management
Scientific management
systematic analysis of work methods
Mass production
high-volume production of a standardized product fora mass market
Lean production
adaptation of mass production that prizes quality and
flexibility
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Historical Events in
Operations Management
Era Events/Concepts Dates Originator
Industrial
Revolution
Steam engine 1769 James Watt
Division of labor 1776 Adam Smith
Interchangeable parts 1790 Eli Whitney
ScientificManagement
Principles of scientificmanagement
1911 Frederick W. Taylor
Time and motion studies 1911Frank and LillianGilbreth
Activity scheduling chart 1912 Henry Gantt
Moving assembly line 1913Henry Ford
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Historical Events in
Operations Management
Era Events/Concepts Dates Originator
HumanRelations
Hawthorne studies 1930 Elton Mayo
Motivation theories
1940s Abraham Maslow
1950s Frederick Herzberg
1960s Douglas McGregor
Operations
Research
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, waiting
line theory, decision
theory, PERT/CPM
1950sOperations research
groups
MRP, EDI, EFT, CIM1960s,1970s
Joseph Orlicky, IBM
and others
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Historical Events in
Operations Management
Era Events/Concepts Dates Originator
QualityRevolution
JIT (just-in-time) 1970s Taiichi Ohno (Toyota)
TQM (total quality
management)1980s
W. Edwards Deming,
Joseph Juran
Strategy andoperations
1980s Wickham Skinner,Robert Hayes
Reengineering 1990sMichael Hammer,
James Champy
Six Sigma 1990s GE, Motorola
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Historical Events in
Operations Management
Era Events/Concepts Dates OriginatorInternetRevolution
Internet, WWW, ERP,supply chain management
1990s ARPANET, Tim
Berners-Lee SAP,
i2 Technologies,
ORACLE, DellE-commerce 2000s Amazon, Yahoo,
eBay, Google, andothers
Globalization WTO, European Union,Global supply chains,Outsourcing, ServiceScience
1990s
2000s
China, India,emergingeconomies
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Historical Events in
Operations Management
Era Events/Concepts Dates OriginatorGreenRevolution
Global warming, AnInconvenient Truth, Kyoto
Today Numerousscientists,statesmen and
governments
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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
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Hourly Compensation
1-18
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GDP per Capita
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Trade in Goods, % of GDP
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Productivity and Competitiveness
Competitiveness degree to which a nation can produce goods andservices 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
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Measures of Productivity
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Osborne Industries
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C6*C8
C7*C9
C5/C6
C5/C7
C5/C13
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Percent Change in Input and Output
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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
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Strategic Planning
1-28
Missionand Vision
CorporateStrategy
OperationsStrategy
MarketingStrategy
FinancialStrategy
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Order Winners
and Order Qualifiers
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Source:Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and AlanBetts, Operations and Process Management, Prentice Hall, 2006, p. 47
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Positioning the Firm: Quality
Minimizing defect rates or conforming to designspecifications
Ritz-Carlton - one customer at a time
Service system designed to move heaven and earth
to satisfy customer
Employees empowered to satisfy a guests wish
Teams set objectives and devise quality action plans
Each hotel has a quality leader
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Positioning the Firm: Flexibility
Ability to adjust to changes in product mix,production volume, or design
Mass customization: the mass production ofcustomized parts
National Bicycle Industrial Company offers 11,231,862 variations delivers within two weeks at costs only 10% above
standard models
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Policy Deployment
Policy deployment translates corporate strategy into measurableobjectives
Hoshins
action plans generated from the policydeployment process
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Policy Deployment
Derivation of an Action Plan Using Policy Deployment
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Balanced Scorecard
Balanced scorecard measuring more than financial performance
1.finances
2.customers
3.processes
4.learning and growing
Key performance indicators
set of measures to help managers evaluateperformance in critical areas
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O i i f Thi T
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Organization of This Text:
Part IISupply Chain Management
10.Strategic Supply Chain Management and Design
11.Supply Chain Procurement and Distribution
Globalization
12.Forecasting
13.Role of Inventory Management
14.Aggregate Sales and Operations Planning
15.Resource Planning Systems
16.Lean System Methods17.Scheduling
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Copyright 2011 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this
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information herein.