Operations Management BUSN 6110/PROC 5820. Syllabus Class 1: (Aug 19) Introduction, Strategy, case...
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Transcript of Operations Management BUSN 6110/PROC 5820. Syllabus Class 1: (Aug 19) Introduction, Strategy, case...
Operations ManagementOperations Management
BUSN 6110/PROC 5820BUSN 6110/PROC 5820
SyllabusSyllabus• Class 1: (Aug 19) Introduction, Strategy, case studyClass 1: (Aug 19) Introduction, Strategy, case study• Class 2: (Aug 26) Decision Making, Product and Service Design; Class 2: (Aug 26) Decision Making, Product and Service Design;
Processes and Technologies, case studyProcesses and Technologies, case study• Class 3: (Sep 2) Facility Planning, Project Management, (Take home Class 3: (Sep 2) Facility Planning, Project Management, (Take home
exam)exam)• Class 4: (Sep 9) Supply Chain Management and ForecastingClass 4: (Sep 9) Supply Chain Management and Forecasting• Class 5: (Sep 16) Capacity and Aggregate Planning, Inventory Class 5: (Sep 16) Capacity and Aggregate Planning, Inventory
Management, The Beer GameManagement, The Beer Game• Class 6: (Sep 23) Just-in-Time, Reverse Logistics – need “The Class 6: (Sep 23) Just-in-Time, Reverse Logistics – need “The
Forklifts Have Nothing To Do!” Available in the Lewis and Clark Forklifts Have Nothing To Do!” Available in the Lewis and Clark BookstoreBookstore
• Class 7: (Sep 30) Resource planning, scheduling, qualityClass 7: (Sep 30) Resource planning, scheduling, quality• Class 8: (Oct 7) Group PresentationsClass 8: (Oct 7) Group Presentations• Other requirements: Other requirements:
→→visit Harley-Davidson Plant in Kansas City to see visit Harley-Davidson Plant in Kansas City to see operations management in practice and write a 3-5 page paper operations management in practice and write a 3-5 page paper comparing the class slides and readings to the Harley operationscomparing the class slides and readings to the Harley operations
→ → Group Presentation – on some aspect of Operations Group Presentation – on some aspect of Operations ManagementManagement
Additional Text Additional Text
The #2 SellingWarehousingand Distribution Bookand #1Non-text book Warehousing Book Book as of Apr 1, 2009
GradesGrades
• Group Presentation/Class Group Presentation/Class Participation – 5%Participation – 5%
• Mid Term – 45%Mid Term – 45%
• Final Exam – 45%Final Exam – 45%
• Harley Paper – 5%Harley Paper – 5%
Contact InformationContact Information
• [email protected]• (760) 447-3651(760) 447-3651• Personal backgroundPersonal background
Class Slides and Class Slides and InformationInformation
• www.supplychainresearch.com
• Slides will be posted/updated week Slides will be posted/updated week prior to class – therefore the slides prior to class – therefore the slides currently on the website may change currently on the website may change as new materials come availableas new materials come available
Chapter 1Chapter 1
Introduction to Introduction to Operations Operations ManagementManagement
Operations as a transformation Operations as a transformation processprocess
Operations as a Operations as a basic functionbasic function
Operations as the Operations as the technical coretechnical core
The Operations The Operations FunctionFunction
Operations as a Operations as a Transformation ProcessTransformation Process
INPUT MaterialMachinesLaborManagementCapital
Operations as a Operations as a Transformation ProcessTransformation Process
INPUT MaterialMachinesLaborManagementCapital
TRANSFORMATIONPROCESS
Operations as a Operations as a Transformation ProcessTransformation Process
INPUT MaterialMachinesLaborManagementCapital
OUTPUT GoodsServices
TRANSFORMATIONPROCESS
Operations as a Operations as a Transformation ProcessTransformation Process
FeedbackFeedback
INPUT MaterialMachinesLaborManagementCapital
OUTPUT GoodsServices
TRANSFORMATIONPROCESS
Transformation Transformation ProcessesProcesses
PhysicalPhysical ((manufacturingmanufacturing))LocationalLocational (transportation/ (transportation/
warehouse) warehouse)ExchangeExchange (retail)(retail)PhysiologicalPhysiological (health care)(health care)PsychologicalPsychological (entertainment)(entertainment)InformationalInformational (communications)(communications)
Impacts on Operations Impacts on Operations Management Management
Industrial RevolutionIndustrial Revolution Scientific ManagementScientific Management Human Relations or the lack thereofHuman Relations or the lack thereof Advent of Management ScienceAdvent of Management Science Quality EmphasisQuality Emphasis Globalization of Supply ChainsGlobalization of Supply Chains Information Age/Internet RevolutionInformation Age/Internet Revolution
Key EventsKey EventsIndustrial RevolutionIndustrial Revolution
Steam engineSteam engine 17691769 James WattJames WattDivision of laborDivision of labor 17761776 Adam SmithAdam SmithInterchangeable partsInterchangeable parts 17901790 Eli WhitneyEli Whitney
Scientific ManagementScientific ManagementPrinciples Frederick W. Taylor 1911Principles Frederick W. Taylor 1911Activity scheduling chart Henry Gantt 1912Activity scheduling chart Henry Gantt 1912Moving assembly lineMoving assembly line Henry Ford 1913Henry Ford 1913
Human RelationsHuman RelationsHawthorne studiesHawthorne studies 19301930 Elton MayoElton MayoMotivation theoriesMotivation theories 1940s1940s Abraham MaslowAbraham Maslow
1950s1950s Frederick HertzbergFrederick Hertzberg1960s1960s Douglas McGregorDouglas McGregor
Management ScienceManagement ScienceLinear programmingLinear programming 19471947 George DantzigGeorge DantzigDigital computerDigital computer 19511951 Remington RandRemington RandSimulation, PERT/CPM, Simulation, PERT/CPM, 1950s1950s Operations researchOperations researchWaiting line theoryWaiting line theory groupsgroupsMRPMRP 1960s1960s Joseph Orlicky, IBMJoseph Orlicky, IBM
Key EventsKey Events
Quality EmphasisQuality EmphasisJITJIT 1970s1970s Taiichi Ohno, ToyotaTaiichi Ohno, ToyotaTQMTQM 1980s1980s W. Edwards Deming,W. Edwards Deming,
Joseph Juran, et. al.Joseph Juran, et. al.ReengineeringReengineering 1990s1990s Hammer, ChampyHammer, ChampyWorld Trade OrganizationWorld Trade Organization 1990s1990s Numerous countriesNumerous countries
and companiesand companies
GlobalizationGlobalizationEuropean Union andEuropean Union and 1970s1970s IBM and othersIBM and othersother trade agreementsother trade agreementsEDI, EFT, CIMEDI, EFT, CIM 1980s1980s
Key EventsKey Events
Information Age/Information Age/Internet RevolutionInternet Revolution
Internet, WWW, ERPInternet, WWW, ERP 1990s1990sSupply chainSupply chain SAP, SAP, management,management, ORACLE,ORACLE,E-commerceE-commerce Amazon,Amazon,
Yahoo, eBay,Yahoo, eBay,and othersand others
Key EventsKey Events
Categories of Categories of E-CommerceE-Commerce
BusinessBusiness
ConsumerConsumer
BusinessBusiness ConsumerConsumer
B2BCommerceone.com
B2CAmazon.com
C2BPriceline.com
C2CeBay.com
Types of B2B TransactionsTypes of B2B Transactions
Buyer Seller
Buyers
Sellers
Buyer
Sellers Buyers Sellers
(a) Electronic Storefront(a) Electronic Storefront (b) Seller’s Auction(b) Seller’s Auction
(c) Buyer’s Auction(c) Buyer’s Auction (d) Exchange or E-Marketplace(d) Exchange or E-Marketplace
E-Business Promotes:E-Business Promotes:
Better customer relationsBetter customer relationsMore efficient processesMore efficient processesLower cost of materialsLower cost of materialsInformation technology synergyInformation technology synergyBetter and faster decision makingBetter and faster decision making
E-Business Promotes:E-Business Promotes:
New forms of organizationsNew forms of organizationsExpanded supply chainExpanded supply chainHigher customer expectationsHigher customer expectationsNew ways of doing businessNew ways of doing businessGlobalizationGlobalization
Globalization and Globalization and CompetitivenessCompetitiveness
• Favorable costFavorable cost• Access to international Access to international
marketsmarkets• Response to changes Response to changes
in demandin demand• Reliable sources of Reliable sources of
supplysupply• 14 major trade 14 major trade
agreements in 1990sagreements in 1990s• Peak: 26% in 2000Peak: 26% in 2000
World Trade Compared to World GDPSource: “Real GDP and Trade Growth of OECD Countries, 2001–03,” International Trade Statistics 2003, World Trade Organization, www.wto.orgCopyright, 2006, John Wiley and Sons
Globalization and Globalization and Competitiveness (cont.)Competitiveness (cont.)
Hourly Wage Rates for Selected CountriesSource: “International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing,” Bureau of Labor Statistics, U.S. Department of Labor, Updated September 30, 2003.
Germany: $26.18Germany: $26.18
USA: $21.33USA: $21.33
Taiwan: $5.41Taiwan: $5.41
Mexico: $2.38Mexico: $2.38
China: $0.50China: $0.50Copyright, 2006, John Wiley and Sons
Multinational CorporationsMultinational CorporationsCountryCountry Foreign SalesForeign Sales
CompanyCompany of Originof Origin as % of Totalas % of Total
NestléNestlé SwitzerlandSwitzerland 98.298.2NokiaNokia FinlandFinland 97.697.6PhilipsPhilips NetherlandsNetherlands 94.094.0BayerBayer GermanyGermany 89.889.8ABBABB GermanyGermany 87.287.2SAPSAP GermanyGermany 80.080.0Exxon MobilExxon Mobil United StatesUnited States 79.679.6Royal Dutch/ShellRoyal Dutch/Shell NetherlandsNetherlands 73.373.3IBMIBM United StatesUnited States 62.762.7McDonald’sMcDonald’s United StatesUnited States 61.561.5
CompetitivenessCompetitiveness
The degree to which a nation can The degree to which a nation can produce goods and services that produce goods and services that meet the test of international meet the test of international markets while simultaneously markets while simultaneously maintaining or expanding the real maintaining or expanding the real incomes of its citizens.incomes of its citizens.
ProductivityProductivity
Productivity =Productivity =OutputOutput
InputInput
ProductivityProductivity
Become more efficientBecome more efficient DownsizeDownsize ExpandExpand Achieve breakthroughsAchieve breakthroughs
Productivity =Productivity =OutputOutput
InputInput
Productivity improves when firms:Productivity improves when firms:
Changes in Productivity for Changes in Productivity for Select CountriesSelect Countries
Internet-enabled productivityInternet-enabled productivity
- Dot com bust- 9/11 terrorist attacks- Dot com bust- 9/11 terrorist attacks
Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002,” Bureau of Labor Statistics, U.S. Department of Labor, September 2003. U.S. figures for 2002–2003 from “Major Sector Productivity and Costs Index,” Bureau of Labor Statistics, U.S. Department of Labor, March 2004
Copyright, 2006, John Wiley and Sons
Measures of Measures of CompetitivenessCompetitiveness
ProductivityProductivity GDP (Gross domestic product) growthGDP (Gross domestic product) growth Market capitalizationMarket capitalization Technological infrastructureTechnological infrastructure Quality of educationQuality of education Efficiency of governmentEfficiency of government
Barriers to EntryBarriers to Entry
Economies of scaleEconomies of scaleCapital investmentCapital investmentAccess to supply and distribution Access to supply and distribution
channelschannelsLearning curvesLearning curves
Competition Within Competition Within Industries Increases WhenIndustries Increases When
Firms are relatively equal in size Firms are relatively equal in size and resourcesand resources
Products and services are Products and services are standardizedstandardized
Industry growth is slow or Industry growth is slow or exponentialexponential
Chapter 2Chapter 2
Operations Operations StrategyStrategy
To Accompany Russell and Taylor, Operations Management, 4th Edition, 2003 Prentice-Hall, Inc. All rights reserved.
The Importance of Clearly The Importance of Clearly Stated Missions/VisionsStated Missions/Visions
‘ ‘The Grand Duke said “one who is The Grand Duke said “one who is confused in purpose cannot respond confused in purpose cannot respond to his enemy” Sun Tzu, to his enemy” Sun Tzu, The Art of WarThe Art of War (III.23)(III.23)
• To know the purpose – there must be a To know the purpose – there must be a
clearly stated mission and vision.clearly stated mission and vision.
Clearly Stated Mission???Clearly Stated Mission???
““When you come to a fork in the When you come to a fork in the road, take it.”road, take it.”
Example of A Clearly Example of A Clearly Understood MissionUnderstood Mission
COL Rusling on General Grant: COL Rusling on General Grant: “He made certain his “He made certain his subordinates knew exactly what subordinates knew exactly what he wanted, and why and when he he wanted, and why and when he wanted it.”wanted it.”
Example of A Clearly Example of A Clearly Understood MissionUnderstood Mission
““We endeavor to go to the moon and We endeavor to go to the moon and return safely before the end of this return safely before the end of this decade.”decade.”
- John F. Kennedy- John F. Kennedy
VISIONVISION®®
• Vital to the OrganizationVital to the Organization• Integrated throughout the OrganizationIntegrated throughout the Organization• Sustainable and AchievableSustainable and Achievable• Important from the viewpoint of the Important from the viewpoint of the
employeesemployees• Organization GoalsOrganization Goals• Not necessarily a one size fits all visionNot necessarily a one size fits all vision
Velocity Management in Logistics and Distribution, 2005, Walden
Strategy FormulationStrategy Formulation
• Define a primary taskDefine a primary task• Assess core Assess core
competenciescompetencies• Determine order Determine order
winners & order qualifierswinners & order qualifiers• Positioning the firmPositioning the firm
Core CompetenciesCore Competencies
• Also known as core capabilitiesAlso known as core capabilities
• Skills that differentiate the service or Skills that differentiate the service or manufacturing firm from competitorsmanufacturing firm from competitors
• Those things that the company does Those things that the company does bestbest
Strategy FormulationStrategy Formulation
• Define a primary taskDefine a primary task• Assess core Assess core
competenciescompetencies• Determine order Determine order
winners & order qualifierswinners & order qualifiers• Positioning the firmPositioning the firm
Competing on CostCompeting on Cost
Eliminate all wasteEliminate all wasteInvest inInvest in
Updated facilities & equipmentUpdated facilities & equipment Streamlining operationsStreamlining operations Training & developmentTraining & development
Competitive Competitive Priorities: CostPriorities: Cost
• Southwest AirlinesSouthwest Airlines– one type of airplane facilitates crew one type of airplane facilitates crew
changes, record-keeping, maintenance, changes, record-keeping, maintenance, and inventory costsand inventory costs
– direct flights mean no baggage direct flights mean no baggage transferstransfers
– $30 million annual savings in travel $30 million annual savings in travel agent commissions by requiring agent commissions by requiring customers to contact the airline directlycustomers to contact the airline directly
Copyright, 2006, John Wiley and Sons
Competing on QualityCompeting on Quality
Please the customerPlease the customerUnderstand customer Understand customer
attitudes toward and attitudes toward and expectations of expectations of quality quality Example: Ritz Carlton
Pasadena Ritz-Carlton is sold for $170 million
A Hong Kong real estate investment firm agrees to pay $170 million in cash.
Competing on Competing on FlexibilityFlexibility
Produce wide variety of Produce wide variety of productsproducts
Introduce new productsIntroduce new productsModify existing Modify existing
products quicklyproducts quicklyRespond to customer Respond to customer
needsneeds
Competing on SpeedCompeting on Speed
Fast movesFast movesFast adaptationsFast adaptationsTight linkagesTight linkages
Example: FEDEX, UPS, DHL
Competitive Competitive Priorities: SpeedPriorities: Speed• Citicorp Citicorp
– advertises a 15-minute mortgage approvaladvertises a 15-minute mortgage approval• L.L. Bean L.L. Bean
– ships orders the day they are receivedships orders the day they are received• Wal-Mart Wal-Mart
– replenishes its stock twice a week replenishes its stock twice a week • General Electric General Electric
– reduces time to manufacture circuit-breaker boxes into reduces time to manufacture circuit-breaker boxes into three days and dishwashers into 18 hoursthree days and dishwashers into 18 hours
• Motorola Motorola – needs less than 30 minutes to build to order pagersneeds less than 30 minutes to build to order pagers
Copyright, 2006, John Wiley and Sons
Operations Role in Operations Role in Corporate StrategyCorporate Strategy
Provide support for overall Provide support for overall strategy of a firmstrategy of a firm
Serve as firm’s distinctive Serve as firm’s distinctive competencecompetence
Must be consistentMust be consistentMust be consistent with overall Must be consistent with overall
strategystrategy
Operations and Wall Operations and Wall StreetStreet
• Comparing operations at a firm with Comparing operations at a firm with competitorscompetitors
• ExampleExample
income per employeeincome per employee
revenue per employeerevenue per employee
inventory turnover inventory turnover
customer turnovercustomer turnover
OperationsOperationsStrategy at Strategy at Wal-MartWal-Mart Provide value for our customersProvide value for our customers
Low prices, everydayLow prices, everyday
Low inventory levelsLow inventory levels
Linked communications between stores
Linked communications between stores
Short flow timesShort flow times
Fast transportation system
Fast transportation system
Cross-dockingCross-docking Focused locationsFocused locations
EDI/satellitesEDI/satellites
Wal-MartWal-Mart
MissionMission
Competitive Competitive PriorityPriority
Operations Operations StrategyStrategy
Operations Operations StructureStructure
Enabling Process Enabling Process and Technologiesand Technologies
Strategy and the Strategy and the InternetInternet
Create a distinctive Create a distinctive business strategybusiness strategy
Strengthen existing Strengthen existing competitive advantagescompetitive advantages
Integrate new and Integrate new and traditional activitiestraditional activities
Must provide a unique Must provide a unique value to the customervalue to the customer
Homework Homework
• Motel 6 case study Motel 6 case study
• Chap 3/Chap 5/Chap 6Chap 3/Chap 5/Chap 6