operations management busn 6110 fa1 2013. syllabus class 1 (aug 21): chap 1; chap 2, case study...
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Operations ManagementOperations Management
BUSN 6110BUSN 6110
FA1 2013FA1 2013
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SyllabusSyllabus• Class 1 (Aug 21): chap 1; chap 2, case study (Introduction, Strategy, Class 1 (Aug 21): chap 1; chap 2, case study (Introduction, Strategy,
Decision Making)Decision Making)• Class 2: (Aug 28):Chap 9/10, Chap 6 (Supply Chain, Quality)Class 2: (Aug 28):Chap 9/10, Chap 6 (Supply Chain, Quality)• Class 3: (Sep 4): Chap 4 , Supplemental readings (Product and Service Class 3: (Sep 4): Chap 4 , Supplemental readings (Product and Service
Design, Processes and Technologies)Design, Processes and Technologies)• Class 4: (Sep 11): Case Study, The Beer Game, Mid Term ExamClass 4: (Sep 11): Case Study, The Beer Game, Mid Term Exam• Class 5: (Sep 18):Chap 7, Chap 13 (Facility Planning ,Project Management, Class 5: (Sep 18):Chap 7, Chap 13 (Facility Planning ,Project Management,
Capacity and Aggregate Planning)Capacity and Aggregate Planning)• Class 6: (Sep 25): Chap 11 (Inventory Management , Forecasting)Class 6: (Sep 25): Chap 11 (Inventory Management , Forecasting)• Class 7: (Oct 2): Supplemental Readings (Reverse Logistics – need “The Class 7: (Oct 2): Supplemental Readings (Reverse Logistics – need “The
Forklifts Have Nothing To Do!” Available in the Lewis and Clark Bookstore)Forklifts Have Nothing To Do!” Available in the Lewis and Clark Bookstore)Chap 10 (Lean/Just in Time/TOC)Chap 10 (Lean/Just in Time/TOC)
• Class 8: (Oct 9) Supply Chain Security, Topics in Supply Chain Management, Class 8: (Oct 9) Supply Chain Security, Topics in Supply Chain Management, Review for Final Exam, Case Study Review Review for Final Exam, Case Study Review
• Class 8: (Oct 16) End of Course Critique, Final ExamClass 8: (Oct 16) End of Course Critique, Final Exam
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Additional Text Additional Text
The # 20 SellingWarehousingand Distribution Bookand #1Non-text book Warehousing Book Book on May 23, 2013
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GradesGrades
• Attendance/Participation– 20%Attendance/Participation– 20%
• Mid Term – 40%Mid Term – 40%
• Final Exam – 40%Final Exam – 40%
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Contact InformationContact Information
• [email protected]• (760) 447-3651(760) 447-3651• Personal backgroundPersonal background
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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
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Chapter 1Chapter 1
Introduction to Introduction to Operations Operations ManagementManagement
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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
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Operations as a Operations as a Transformation ProcessTransformation Process
INPUT MaterialMachinesLaborManagementCapital
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Operations as a Operations as a Transformation ProcessTransformation Process
INPUT MaterialMachinesLaborManagementCapital
TRANSFORMATIONPROCESS
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Operations as a Operations as a Transformation ProcessTransformation Process
INPUT MaterialMachinesLaborManagementCapital
OUTPUT GoodsServices
TRANSFORMATIONPROCESS
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Operations as a Operations as a Transformation ProcessTransformation Process
FeedbackFeedback
INPUT MaterialMachinesLaborManagementCapital
OUTPUT GoodsServices
TRANSFORMATIONPROCESS
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Transformation Transformation ProcessesProcesses
PhysicalPhysical ((manufacturingmanufacturing))LocationalLocational (transportation/ (transportation/
warehouse) warehouse)ExchangeExchange (retail)(retail)PhysiologicalPhysiological (health care)(health care)PsychologicalPsychological (entertainment)(entertainment)InformationalInformational (communications)(communications)
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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
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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
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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
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Quality EmphasisQuality EmphasisJITJIT 1970s1970s Taiichi Ohno, ToyotaTaiichi Ohno, ToyotaTQMTQM 1980s1980s W. Edwards Deming,W. Edwards Deming,
Joseph Juran, et. al.Joseph Juran, et. al.Strategy and operationsStrategy and operations Skinner, HayesSkinner, HayesReengineeringReengineering 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
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Information Age/Information Age/Internet RevolutionInternet Revolution
Internet, WWW, ERPInternet, WWW, ERP 1990s1990sSupply chainSupply chain SAP, i2 SAP, i2 management,management, Technologies, Technologies,
ORACLE,ORACLE,E-commerceE-commerce PeopleSoft, Amazon,PeopleSoft, Amazon,
Yahoo, eBay,Yahoo, eBay,and othersand others
Key EventsKey Events
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Categories of Categories of E-CommerceE-Commerce
BusinessBusiness
ConsumerConsumer
BusinessBusiness ConsumerConsumer
B2BCommerceone.com
B2CAmazon.com
C2BPriceline.com
C2CeBay.com
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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
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In Theory: In Theory: 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
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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
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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.
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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
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ProductivityProductivity
Become more efficientBecome more efficient DownsizeDownsize ExpandExpand Retrench Retrench Achieve breakthroughsAchieve breakthroughs
Productivity =Productivity =OutputOutput
InputInput
Productivity improves when firms:Productivity improves when firms:
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Barriers to EntryBarriers to Entry
Economies of scaleEconomies of scaleCapital investmentCapital investmentAccess to supply and distribution Access to supply and distribution
channelschannelsLearning curvesLearning curves
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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
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Chapter 2Chapter 2
Operations Operations StrategyStrategy
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The Importance of Clearly The Importance of Clearly Stated Missions/VisionsStated Missions/Visions
“ “one who is confused in purpose one who is confused in purpose cannot respond to his enemy” Sun cannot respond to his enemy” Sun Tzu, Tzu, The Art of WarThe Art of War
• 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.
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Vision, Mission, Vision, Mission, StrategyStrategy
• Mission Statement
• Vision
• Strategy
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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.”
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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.”
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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
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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
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Internal and External Internal and External AnalysisAnalysis
• SWOT AnalysisSWOT Analysis– StrengthsStrengths– WeaknessesWeaknesses– Opportunities Opportunities – ThreatsThreats
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STEEPLE AnalysisSTEEPLE Analysis
• SocietySociety
• TechnologyTechnology
• EconomicEconomic
• EnvironmentEnvironment
• PoliticalPolitical
• LegalLegal
• EthicsEthics
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STEEPLE and PMESII-PT
• Social• Technological• Environmental• Economic• Political• Legal • Ethical
• Political• Military• Economic• Social• Information• Infrastructure• Physical environment• Time
© 2011, Joe Walden
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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
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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
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Competing on CostCompeting on Cost
Eliminate all wasteEliminate all wasteInvest inInvest in
Updated facilities & equipmentUpdated facilities & equipment Streamlining operationsStreamlining operations Training & developmentTraining & development
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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
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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
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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 Respond to
customer needscustomer needs
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Competing on SpeedCompeting on Speed
Fast movesFast movesFast adaptationsFast adaptationsTight linkagesTight linkages
Example: FEDEX, UPS
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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
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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
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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
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Strategy and the Strategy and the InternetInternet
Create a distinctive business Create a distinctive business strategystrategy
Strengthen existing competitive Strengthen existing competitive advantagesadvantages
Integrate new and traditional Integrate new and traditional activitiesactivities
Must provide a unique value to the Must provide a unique value to the customer- Zappos/Amazoncustomer- Zappos/Amazon
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Products & ServicesProducts & Services
Make-to-orderMake-to-orderMade to customer specifications Made to customer specifications
after order receivedafter order receivedMake-to-stockMake-to-stock
Made in anticipation of demandMade in anticipation of demandAssemble-to-orderAssemble-to-order
Add options according to Add options according to customer specificationcustomer specification
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Processes & TechnologyProcesses & Technology ProjectProject
One-time production of product to One-time production of product to customer ordercustomer order
Batch productionBatch production Process many jobs at same time in batchProcess many jobs at same time in batch
Mass productionMass production Produce large volumes of standard Produce large volumes of standard
product for mass marketproduct for mass market Continuous productionContinuous production
Very high volume commodity productVery high volume commodity product
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Decisions in Decisions in OperationsOperations
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Capacity & FacilitiesCapacity & FacilitiesHow much capacity to provideHow much capacity to provideSize of capacity changesSize of capacity changesHandling excess demandHandling excess demandHiring/firing Hiring/firing
workersworkersNeed for new Need for new
facilitiesfacilities
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FacilitiesFacilities
Best size for facility?Best size for facility?Large or small facilitiesLarge or small facilitiesFacility focusFacility focusFacility locationFacility locationGlobal facilityGlobal facility
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Human ResourcesHuman Resources Skill levels requiredSkill levels required Degree of autonomyDegree of autonomy PoliciesPolicies Profit sharingProfit sharing Individual or team workIndividual or team work Supervision methodsSupervision methods Levels of managementLevels of management TrainingTraining
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QualityQuality Target levelTarget level MeasurementMeasurement Employee involvementEmployee involvement TrainingTraining Systems needed to ensure qualitySystems needed to ensure quality Maintaining quality awarenessMaintaining quality awareness Evaluating quality effortsEvaluating quality efforts Determining customer perceptionsDetermining customer perceptions
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SourcingSourcingDegree of Degree of vertical integrationSupplier selectionSupplier selectionSupplier relationshipSupplier relationshipSupplier qualitySupplier qualitySupplier cooperationSupplier cooperation
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Operating SystemsOperating Systems Execute strategy dailyExecute strategy daily Information technology supportInformation technology support Effective planning & control Effective planning & control
systemssystems Alignment of inventory levels, Alignment of inventory levels,
scheduling priorities, & reward scheduling priorities, & reward systemssystems
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Policy DeploymentPolicy Deployment
Focuses employees on common Focuses employees on common goals & prioritiesgoals & priorities
Translates strategy into Translates strategy into measurable objectivesmeasurable objectives
Aligns day-to-day decisions with Aligns day-to-day decisions with strategic planstrategic plan
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Balanced ScorecardBalanced Scorecard Finance — Finance — How should we look to our How should we look to our
shareholders?shareholders? Customer — Customer — How should we look to our How should we look to our
customers?customers? Processes — Processes — At which business At which business
processes must we excel?processes must we excel? Learning and Growing — Learning and Growing — How will we How will we
sustain our ability to change and sustain our ability to change and improve?improve?
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Issues and TrendsIssues and Trends
Global markets, Global markets, sourcing, sourcing, operationsoperations
Virtual companiesVirtual companies Greater choiceGreater choice Emphasis on Emphasis on
serviceservice Speed and Speed and
flexibilityflexibility
Supply chainsSupply chains CollaborationCollaboration Technological Technological
advancesadvances KnowledgeKnowledge Environment Environment
and social and social responsibilitiesresponsibilities
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The Dilbert (Dogbert) Solution – Change the Name of the Old Program
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Homework Homework
• case studycase study