OPERATIONS MANAGEMENT: HISTORY

The first step in understanding and identifying the key issues in Operation Management(OM)
situations is to review the historical perspectives that dominated management thought since the
19th century. Many aspects of earlier viewpoints, philosophies and schools of thought remain
relevant today and can provide the careful observer with valuable insight into present day OM
situations. An understanding of the foregoing would help one appreciate the many insights, ideas
and scientific underpinning which preceded the upsurge of OM during recent years. Familiarity
with the history of management thought may also help to avoid rediscovering previously known
ideas. Historical development in essence gives a picture of, where we have come from, are and
are going.

Since 1900, the major schools of thought, have fallen within one of historical perspectives, of
management thought: The structural perspective, generally held at the turn of the 19 th century,
evolved from that time to encompass the theory of scientific management, classical theory,
bureaucracy, decision theory and systems theory. The human perspective, which first appeared
in the 1920s, eventually included schools of thought focused on human relations, group
dynamics, and leadership research.

The development of management theory dates back to the days of ancient civilizations of Egypt,
Greece, Rome and the Biblical time, when people first attempted to accomplish goals by working
together in groups. The Bible for example explains organizational problems faced by Moses in
leading his people. He is credited with having employed the first management consultant, his
father-in-law, to help design the organization through which he governed the Hebrews. The Greek
and Roman Empires developed much thought to the organizational problems. The basic
organizational models were the Military and the Roman Catholic Church.

Management
Traditionally management has been defined as Forecast and Plan, Organize, Command,
Coordinate and Control.

Management is the process of designing & maintaining an environment in which individuals

working together, in-groups, efficiently to accomplish selected aims:
 As managers, people carry out the function of planning, organizing, staffing, leading and
controlling
 Management applies to any kind of organization & managers at all levels
 The aim of all managers is the same: to create a surplus
 Managing is concerned with productivity; effectiveness & efficiency

Management has also been defined as a form of work that involves coordinating an
organization’s resources – land, labor, capital and information – towards accomplishing
organization objectives. An entrepreneur conceives the idea of what product or service to
produce, starts the organization and builds it to a point where additional people are required. At
this time, the entrepreneur can either make the transformation to a professional manager or can
hire one.

OM may be defined as the design, operation & improvement of the production systems that
create the firm’s primary products/services. “It is a functional field of business with clear line
management responsibilities’ Operations Management; Schonberger and Edward (1997).

“Operations Strategy specifies how the firm will employ its production capabilities to support its
corporate strategy”. Production and Operations Management, Chase Aquilano and Jacobs
(1998).
INDUSTRIAL REVOLUTION
Historically, the field of Operations Management has evolved in a very shot span of time. Its roots
go back to the Industrial Revolution, which started in the 1770s with the following important
developments:
 The division of labour concept, espoused by Adam Smith
 The steam engine invented by James Watt
 The interchangeable parts’, concept developed by Eli Whitney

Despite a lack of formal theory, economists such as Adam Smith sowed the seeds of labour
theory. In his book An Inquiry into the Nature and Cause of wealth of Nations 1776, Smith
included a chapter on the division of labor that laid the groundwork for the later introduction of
assembly line processes. Smith spoke approvingly of a pin manufacturer who divided the work
into a number of branches’, causing the separation of pin manufacturing into 18 different
operations. This separation of activities permitted workers to concentrate on only one task & thus
radically increased the quality of pins that could be manufactured in a day. Smith also
emphasized the importance of proper machinery to facilitate labor. However, management prior
to 1900 can be best described as using the rule of thumb.

Adam smith is given much of the credit for the theoretical development of the economics of
modern production. In his book, The Wealth of Nations, he pointed out that where workers are
organized to produce large quantities of an item, the labor required should be divided into
discrete tasks. He believed that this division of labor would produce several benefits such as.
 Workers who continually performed the same task would acquire skill at it.
 Time normally lost in switching from one task to another, would be saved
 A worker’s increased concentration on a task would lead to the development of special tools
& techniques for its easier/faster accomplishment.

Division of labor characteristic described by Adam Smith has continued its evolution and
refinement all the way to the factories, hospitals, schools, government agencies, stores, libraries,
restaurants and other organizations.
In 1832 a mathematician, Charles Babbage, extended Smith’s work by recommending the use of
scientific methods to analyse problems. In particular he suggested the use of time study, unit
costing, research & development, economic location analysis, bonus payments & pay on the
basis of skill requirements.

Babbage is also known for his ‘difference engine’, and his ‘analytical engine’ the forerunners of
today’s computer. Both were never completed because, difference engine was faced by lack of
tooling technology & financial backing was withdrawn for the analytical engine by the Chancellor
of the Exchequer since it was believed to be indefinitely expensive.

SCIENTIFIC MANAGEMENT

Frederick Winslow Taylor

Almost half a century passed after Babbage before anyone addressed the problem of managing
factories. In 1898, a US National Tennis Champion, Frederick Winslow Taylor, turned his
attention to the factories and began a movement that eventually earned him the title, ‘father of
scientific management’. He gave up going to college and started as an apprentice pattern maker
and machinist in 1875. In 1878, he began working for the Midvale Steel Company whose
president, William Sellers, was an advocate of experimentation in factory methods. Taylor
adopted some of Sellers’ ideas among many other of common knowledge, and organized them to
form a unique philosophy of management.

He worked as a machinist (apprentice/common laborer), foreman, master mechanic and finally as

Chief Engineer after earning a degree through evening study. He invented high-speed steel –
cutting tools. These gave him ample experience and opportunity to know first-hand the problems
and attitudes of workers & saw the great opportunities for improving management quality.
Always looking for the best way to do things, he developed techniques to systemize & improve
economies of work motion. He established a complete management philosophy that included
time analysis, wage incentives, infrastructure to separate the responsibilities of management
(planning) and workers (doing), an accounts system & principles for running business on a
scientific basis.

Taylor was an imaginative engineer and insightful observer of organizational activities. Briefly, his
philosophy was that successful management was not a result of applying individual management
‘techniques’ to the job but rather of a comprehensive approach to business operations. Its
essence was that improved efficiency in a business could be obtained by:
 Using managers as work planners by gathering traditional knowledge about the work and
reducing it to standardized procedures for the workers.
 Methodically selecting, training & developing each worker on an individual basis
 Striving for co-operation between management & workers to simultaneously obtain both
maximum production and high worker wages
 Dividing work between management workers ensured each is working on what they are most
proficient in doing.

Although Taylor added his own contributions to the field, his most significant accomplishment was
the massive amount of attention he focused on the field of management through determination &
zeal. He described his new management philosophy in the book, “The Principles of Scientific
Management’, Published in 1911. In this classical book, Taylor offered the following definition of
the Scientific Management “The kind of management, which conducts business or affairs by
standards established by facts or truths gained through systematic observation, experiment or
reasoning”. Scientific management was mainly concerned with improved methods of production.
It was a rebellion against the old managerial problem solving through trial & error, the rule of
thumb. The advent of scientific management around the turn of the 20 th century is probably the
major historical landmark for the field. Therefore, this event more than any other can be
considered as the beginning of the field of Operations Management.

Taylor was convinced that, the scientific method, which provides a logical framework for the
analysis of problems, could be applied to the management process. The method consists of
defining the problem, gathering data, analyzing data, developing alternatives & selecting the best
alternative. He believed that use of scientific method would direct the manager to the most
efficient way work could be performed. Taylor sincerely believed that scientific management
practices would benefit employer through increased output and workers, who would receive more
income. But he stressed that scientific management would require both manager & employees to
undergo a revolution in thinking.

The greater part of Taylor’s work was oriented towards improving management of production
operations. The classic case of the pig iron experiment at Bethlehem Steel Company where
laborers would pick up 92 pounds pigs in the car. In a group of 75 laborers, Taylor determined the
average output was about 12.5 tons per man per day. By applying the scientific method, he
developed;
o An improved method of work
o A prescribed amount of rest on the job
o A specific standard of output and
o Payment by the unit of output

After Taylor’s recommendations were implemented, the average output per worker rose from 12.5
to 48 tons per day, and the daily pay rose form $1,15 to $1,85 under the incentive system. He
concluded that the problem of productivity arose from ignorance of both management and
workers. Part of this ignorance was due to the fact that both the managers and the workers did
not know what constituted a ‘fair day’s work’ and a ‘fair day’s wage’. Also both the managers and
workers were concerned with how they would divide the profit, rather than increasing the profit so
that both owners & workers could get more. Taylor’s patterns for high-speed steel-cutting tools &
other inventions as well as his early engineering consulting works made him very well off. As
such he reretired from paid work in 1901at the age of 45 & spent the remaining 14 years of his life
as an unpaid consultant & lecturer to promote his ideas on scientific management.

Taylor’s dedication to systematic planning and study of processes of all kinds pervaded his life.
With a specially designed tennis racket, he played on a national doubles, tennis championship
team. When playing golf, he used clubs designed individually to achieve a predictable lie; his
friends reportedly refused to play with him when he used a particular putter because of its
accuracy. Legend has it that Taylor died of Pneumonia in a hospital with his stopwatch in his
hands.

Taylor’s philosophy was not greeted with approval by all of his contemporaries. Some unions
resented or feared scientific management, with some justification. In too many instances,
managers of the day were quick to embrace the mechanisms of Taylor’s Philosophy, time study,
incentive plans and so forth, but ignored their responsibility to organize and standardize the work
to be done. Hence there were numerous cases of rate cutting, labor overwork & poorly designed
work methods. Taylor’s ideas were however widely accepted in contemporary Japan where his
books, the Principles of Scientific Management, The Secrete of Saving Lost Motion, translated
into Japanese, sold more than two million copies. To date there is a strong legacy of Taylorism in
Japanese approaches to manufacturing management (Chase Aqilano & Jacobs).

Taylor inspired legions of contemporaries, colleagues and followers who were many and included
the following; Frank & Lillian Gilbreth, Henry Ford, Henry Gantt whose works are well known to
management scholars.

Morris Cooke
Pioneered application of scientific management to educational and municipal organizations.

Frank and Lillian Gilbreth

Among the earliest proponents of eliminating waste were husband and wife team of Frank (1868
– 1924) and Lillian (1878 – 1972) Gilbreth. They extended Taylor’s time study to detailed analysis
of motion. Their philosophy of work smarter and not harder meant that every task had to be
carefully studied and all wasted motion should be eliminated to arrive at the one best way to do
the job. During their lifetimes, they applied this philosophy to almost every conceivable kind of
work. Frank owned a construction company that specialized in speed building. Applying one-best
way philosophy to the task of bricklaying, he reduced the number of basic motions for laying a
brick from 8 to 6. At a time when bricklayers were laying about 500 bricks a day his bricklayers
averaged 2600.

Frank, is considered by most people, as the father of motion study. He stressed the application of
principles of motion economy to the most, minute details of tasks in an attempt to identify the ‘one
best way’ of performing a given task. He also developed the well-known motion study technique
involving the use of ‘therbligs’ and chronocyclegraphs. He introduced new detailed techniques of
analyzing job from the point of view of time, motion and fatigue.

Lillian is known for human relation work in the field. Her book, “The Psychology of Management”,
is one of the earliest works concerning the human factor in business organizations. From her
studies dealing with worker fatigue and psychology, she gained the title of the ‘first lady of
management’.

Though important contributors to management thought, they could hardly be called the parents of
TQM or JIT since these go far beyond their thinking & in some instances stand counter to it.
 They were specifically interested in the waste of motion while there are many types of
waste;
  In any process, there is no such a thing as one-best-way, if there ever was, it would only
be temporary & superseded by still better way CI;
 JIT/TQM stand by the premise that seeking out waste and finding better ways is the
responsibility of everyone not just managers

Henry Gantt: 1913

Henry Gantt’s best known contribution to management is the charting system he developed for
the Work Scheduling in Production. However he also developed some original incentive pay
systems and emphasized the importance of worker psychology in areas such as morale. He
advocated efficiency and argued, that workers should be given bonuses to ensure that they
completed jobs on time. Gantt also emphasized that corporations should publicly state the social
responsibility of management and business.

Henry Ford, 1912 – 1930

Ford utilized Eli Whitney’s idea of interchangeable parts and a continuous workflow concept he
saw in Switzerland to bring ‘mass production’ to large scale industry. He arranged, workstations
into an assembly line with a moving belt for parts, each worker performing a specialized task on
the parts as they went by.

Ford is known for his concern for human elements in production, with his first ‘sociological
departments’ being the framework for today’s HR departments.

Moving assembly line: the year 1913 saw the introduction of one of the machine age’s greatest
technological innovations, the moving assembly line for the manufacture of Ford Cars. Before the
line was introduced, in August of that year one worker assembled each autoworker performing a
small unit of work and the chassis being moved mechanically, the average labor time per chassis
was 93 minutes. This technological breakthrough, coupled with concepts of scientific
management, represents the classic application of labor specialization.

Harrington Emerson – 1913:

Harrington Emerson took Taylor’s ideas and applied them to the organization structure with an
emphasis on the firm’s objectives. He emphasized, in a set of organizational ‘principles’ that he
developed the use of experts in organizations to improve organizational efficiency.

Ideas about work measurement, analysis and management all contributed to the Theory of
Scientific Management. One consequence of this theory was to take skills & most thinking from
the shop floor (de-skill-jobs) & give them to legions of managers/specialists. As this happened,
work on the shop floor began to loose its appeal. Advocates of de-skilling factory work by dividing
it into narrow repetitive tasks & taking all control away from workers failed to see the long term
consequences of these practices on worker motivation & organizational flexibility.

It is significant to note that the Japanese never felt comfortable with Taylor’s system of
specialization & its rigid rules separating responsibilities among workers & between workers &
managers. In Japan, factory workers continued to develop broad-based skills that would enable
them to rotate freely among a number of tasks. This continuing emphasis on skill development,
as well as delegation of authority & the expectation that workers would both plan & do work tasks,
resulted in a level of worker commitment virtually unseen in western manufacturing.
Consequences of these were not seen until half a century later.

Scientific management described management as a science with employees having specific but
different responsibilities; encouraged the scientific selection, training & development of workers &
equal division of work between workers and management.

Eiji Toyoda and Taichi Ohno at Toyota Motor Company pioneered JIT. The economic rise of
Toyota, as well as other companies and industries in Japan and elsewhere that adopted JIT was
a consequence.
H. F. Dodge, H.G . Roming and W. Shewhart, 1931
The three were co-workers at Bell Telephone Laboratories. Together, they developed the
procedures of ‘sampling inspection’ for the control of quality. To aid in this process they published
statistical sampling tables, now in extensive use, which utilized statistical inferences and
probability theory.

L. H. C. Tippett, 1935
Known for his work in sampling statistical theory. His studies although not fully utilized until much
later, provided industry with a method of determining standards for work times, idle times, and
other such work activities.

With no much attention being devoted to the management of factories, the special area of
management came to be known by the 1950s as ‘manufacturing management’. Other terms such
as industrial management and the factory management were used synonymously.

To many in manufacturing management, increased Productivity was the central concern.

Increased productivity meant, less human labor was required to produce a given product, which
in turn increased the available quantity and decreased the cost of many products. In developed
countries, factories and the ‘industrial machine’ meant increases in the standard of living and
availability of consumer goods, unheard of in most other parts of the world. However, in some
instances, it also meant pollution, dehumanization of the workplace, and boredom due to
repetitive meaningless tasks.

The 1950s saw the development of systems theory, operations research, and the computer each
of which furthered the cause of manufacturing management. Systems theory emphasized the
interrelationships existing in problems and pointed out the futility of considering problems in a
vacuum.

CLASSICAL SCHOOL OF MANAGEMENT

Scientific management provided a major input into a set of theories jointly known as the ‘classical’
approach to management. This emphasizes formal rules, specialization of functions, clear
division of responsibilities and the application of common principles to all management duties.

Mark Parker Follett:

Mark Parker Follett studied the role of group leadership in industrial management, focusing on
group co-ordination and the factors that cause the authority of a group leader to be accepted by
members of a working group. Follett, suggested that work groups were most effective when the
personal authority of senior managers, the formal authorities vested in them as individuals, was
replaced by functional authority, i.e. the authority necessary for particular activities to function
efficiently, according to a given workplace situation. ‘ Management, therefore, could be defined as
the ‘art of getting things done through people’.

Follett adopted a ‘holistic’ approach to management, emphasizing the need to:

o Recognize the complexity of the human workplace behavior and
o Interconnect the human and mechanical aspects of industrial situations

She was therefore an important precursor of both the human relations and the systems
approaches to management. Her views were particularly influential in Japan, where a Follett
Society was setup to propagate her ideas among Japanese companies.
HUMAN RELATIONS SCHOOL
Elton Mayo, 1933
Mathematical and statistical developments, dominated the evolution of OM from Taylor’s time up
to around the 1940s. An exception was the Hawthorne studies, conducted in the 1930s by a
research from the Harvard Graduate School of Business administered and supervised by
sociologist Elton Mayo. These experiments were designed to study the effects of certain
environmental changes on assembly workers’ outputs at the Western Electric Plant in Hawthorne,
Illinois. The unexpected finding, reported in Management and the worker (1939) by F. J.
Roethlisberger and W. J. Dickson, intrigued sociologists & students of traditional scientific
management. To the surprise of the researchers, changing the level of illumination for example
had much less effect on output than did the way in which the changes were introduced to the
workers. I.e. reduction in illumination, in some instances led to increased output because workers
felt an obligation to their group to keep output high. Discoveries such as these had tremendous
implications for work design & motivation and ultimately led many organizations to establish
personnel management & human relations departments.

Mayo emphasized the human & social factors in work. The emphasis on human relations in
management for so many years following this study gave birth to the term the human relations
school of management thinking. Mayo felt that ‘scientific management’ often emphasized
technical skills at the expense of adaptive skills.

Further research established prepositions of the human relation school, such as:
 Employee’s behavior depends primarily on the social and organizational circumstances of
work
 Leadership style, group cohesion and job satisfaction are major determinants of the
output of working groups
 Employees work better if they are given a wide range of tasks to complete
 Standards set internally by a working group influence employees attitudes and
perspectives more than standards set by management.
 Application of the division of labor can make work so boring, trivial and meaningless that
productivity actually goes down.

Human behavior theorists, notably Douglas McGregor and A. H. Maslow made significant
contributions to the theories of leadership, motivation and organizational design. The school
explicitly recognized the role of interpersonal relations in determining workplace behavior, and
this demonstrated that factors other than pay, can motivate workers. The approach however:
 Over estimates the commitment, motivation and desire to participate in decision making of
many employees. Not everyone wants to exercise initiative or control his/her work
 Fails to recognize the inevitability of fundamental conflicts of interest
 Ignores influences of wider environmental conditions
 Gives excessive weight to small group behavior while neglecting the wider social structures
within which groups operate
 Is politically naïve, simplistic and excessively altruistic

OPERATIONS RESEARCH
Scientists & engineers have been involved with military activities for as long as the recorded
history. World War II, with its complex problems of logistics control & weapons systems design,
provided the impetus for the development of the interdisciplinary, mathematically oriented field of
operations research (OR). It brings together practitioners in such diverse fields as mathematics,
psychology & economics. Specialists in those disciplines form a team to structure & analyze a
problem in quantitative terms so they can obtain a mathematically optimal solutions. It provides
many of the quantitative tools used in OM as well as other management disciplines.

OR is the application of scientific methods to study & devise solutions to managerial problems.
Employing a decision focus, the systems approach, & mathematical models, OR has helped
solve allocation, scheduling, planning, inventory, layout, control and location problems.
OPERATION MANAGEMENT’S EMERGENCE AS A FIELD:
In the late 1950s scholars & researchers in the field began to generalize the problems &
techniques for manufacturing management to other productive organizations, such as petroleum
& chemical processors and wholesalers and the name for the field evolved into ‘production
management’. The intent of this term was to stress the fact that the field had become a functional
management discipline in itself and not just a set of manufacturing techniques.

In the late 1950s & early 1960s, scholars began to deal specifically with OM as opposed to
industrial engineering or OR. Writers such as Edward Bowman and Robert Fetter. (Analysis for
Production and Operations Management (1957) and Elwoord S. Buffa (Modern Production (1961)
noted the commonality of problems faced by all productive systems and emphasized the
importance of viewing production operations as a system. They also emphasised the useful
applications of waiting line theory, simulation & linear programming that are now standard topics
in the field.

In later 1960s the field expanded even further to embrace the service sector of the economy.
Since the word production seemed to connote product organizations, the more general term
‘operations” was substituted to emphasize the general basis of the field. Transition from
production to operations is ongoing.

The marked increase in demand for services has been mainly, negative, lack of productivity
growth. The inefficiency of services is evidenced by the constant and often bitter criticism of for
instance, railroads, public schools, health care & many other such systems. Only in recent
years(Jack, Meridith) have service sector organizations received the same attention from
researchers, as had been paid to manufacturers. Many of the concepts and ideas developed for
the manufacturing sector can be modified & applied to service industries. For example, the
problem of school bus routing, health centre scheduling & layout have been addressed with
modification of manufacturing management methods with encouraging results.

In 1973 Chase Aquillano’s first edition of operations management, stressed the need “to put the
management back into operations management” & suggested the lifecycle as means of
organizing the subject.

SUPPLY CHAIN MANAGEMENT

The Origins & Roots of purchasing & Supply Management: Purchasing has been considered one
of the basic functions common to an organization. Charles Babbage addressed the topic in his
book, on the Economy of the Machinery and Manufacturing, 1832.

There are few historical records on the origin of purchasing. This is due to the fact that in the dim
past people bought materials of suppliers to make articles for sale and not for use. Before 1900
there were few instances of purchasing departments separate and distinct from production and
other operating departments. The first book dealing specifically with the purchasing function was
published in 1887. These were railroad publications, written by railroad personnel. This can be
explained by the predominance, at that time, of the railroad organizations.

At about the same time, occasional articles began to appear in some trade publications dealing
with some purchasing aspects. James M. Cremer, ‘ the engineer as a purchasing agent, August
1908 issue of Cassier’s Magazine. John C. Jay, Jr., general manager of sales of Pennsylavia
steel Corporation: Iron Age: January 1913: suggested the organization of a group to promote the
interests of purchasing agents through more publicity regarding their activities. This did not result
in the formation of National Association of Purchasing Agents immediately, but it indicated an
emerging interest in the purchasing function. The National Association of Purchasing Agents of
America was founded in 1915. Purchasing came of age during the early part of World War 1,
under the impact of expanded production brought about by the war. At its fifty second annual
convention in Washington, D. C in May 1967, the association voted to change its name to “The
National Association of Purchasing Management” in recognition of the managerial status that
purchasing had attained.

Many of the scholarly principles on which purchasing & supply are built are taken from
economics. The principles of determining the organization’s requirements, selecting the optimal
source, establishing a far & reasonable price & establishing & maintaining mutually beneficial
relationships with the most desirable supplier provide the conceptual backbone of the purchasing
and supply function. The evolutionary nature of management in this field is such that continued
study and self improvement are necessary.

Harvard University has long recognized the importance of purchasing and supply management.
They offered the first course during 1917 – 1918 academic year. Today, the Harvard Business
Review continues Harvard’s tradition by publishing numerously timely articles on the subject.
Today over forty colleges and universities in the United States offer degree-granting programs in
the area of purchasing and supply management. Similar programs exist in Europe, Australia, Asia
and the rest of the Americas. The impact of procurement professional on the quality, cost and
productivity of their organization is one of the keys to competitiveness in the marketplace and
such competitiveness is the basis of value adding employment.

H. B. Twyford, purchasing: Its Economic Aspects and Proper Methods, 1915, was prophetic when
he wrote “A (purchasing) staff which is entirely unsympathetic with the particular needs of the
user of the material will fail to grasp what is one of the essential things for their department. They
will be dealing with papers and accounts not with men and things.

Howard T. Lewis of Harvard University, Industrial Purchasing 1938. The recent past has
witnessed major events, which have had a direct impact upon the significance of the procurement
function in business and the economy. Some of these events have triggered renewed interest in
developing close vendor relations to minimize safety margins of inventories. In addition,
increased international competition has forced industries to look at foreign purchasing practices,
resulting in a renewed respect for Japanese style of close vendor relations. High interest rates
and expensive inventories have caused increased respect for output-input system, in which
purchased materials would ideally move from the seller’s finished goods line to the buyer’s using
areas.

The 1950’s recession diverted the attention to cost-cutting efforts on purchased supplies. I960s
and 1970s, Purchasing and management frequently used manual systems to manage inventory.
Buyer’s major focus was price reduction and shutdowns prevention. The idea is to apply a total
system approach to managing the flow of information, materials & services from raw material
suppliers, through factories & warehouses to the final customer. Recent trends such as
outsourcing & mass customization are forcing companies to maximize the speed of response to
change in customer expectations.

COMPUTER AND MRP CRUSADE

The computer allowed the fast & relatively inexpensive development of management information,
expedited the solution of OR models that were heretofore too large for manual solution, provided
support for business functions & formed a basis for automation.
The major development of the 1970s was the broad use of computers in operations problems.
For manufacturing, the breakthrough was the application of the Materials Requirement Planning
(MRP) to production control. This approach ties together in a computer program all the parts that
go into complicated products. This program then enables production planners to quickly adjust
production schedules & inventory purchase to meet changing demands for final products. Clearly,
the massive data manipulation required for changing schedules of products with thousands of
parts would be impossible without such programs & the computer capacity to run them. The
promotion of this approach, pioneered by Joseph Orlicky of IBM & consultant Oliver Wight by the
American Production and Inventory Control Society (APICS) is termed the MRP Crusade.
JIT, TQC & FACTORY AUTOMATION
The 1980s show a revolution in the management philosophies and the technologies by which
production is carried out. Just-in-time (JIT) production is the major breakthrough in manufacturing
philosophy. Pioneered by the Japanese, JIT is an integrated set of activities designed to achieve
high-volume production using minimal parts that arrive at the workstation just in time. This
philosophy coupled with TQC, which aggressively seeks to eliminate causes of production
defects, is now a cornerstone in many of manufacturers’ production practices.

As profound as JIT’s impact has been, factory automation in its various forms promises to have
even greater impact on OM in coming decades. Such terms as Computer Integrated
Manufacturing (CIM) Flexible Manufacturing Systems (FMS) and Factory of the Future (FOF) are
already familiar & are becoming everyday concepts to OM practitioners.

Kanban – As a result of JIT revolution against waste, the Japanese introduced Kanban. A system
of pulling inventory through the factory in an ideal lot size.

Poka Yoke – Idea is that each process & each employee treat the next step in the process as the
customer ensuring perfect product to the next ‘customer’ in the assembly line/production process.
Poka Yoke is therefore a foolproof technique that ensures production of units every time through
the use of checklists & controls.

MANUFACTURING STRATEGY PARADIGM

The late 1970s & early 1980s saw the development of the manufacturing strategy paradigm by
researchers at the Harvard Business School. This work by professors William Abernathy Skinner,
emphasized how manufacturing executives could use their factories capabilities as strategic
competitive weapons. The paradigm itself identified how the five Ps of OM can be analyzed as
strategic & tactical decision variables. Central to their thinking was the notion of factory focus &
manufacturing trade-offs. They argued for a strategy of creating a focused factory that does a
limited set of tasks extremely well. This raised the need for making trade-offs among such
performance measures as low cost, high quality & flexibility in designing and managing factories.

SERVICE QUALITY AND PRODUCTIVITY

The great diversity of service industries, ranging from airlines to zoos with about 2000 different
types in between, precludes identifying any single pioneer or developer that has made a major
impact across the board in these areas. However, one service company’s McDonald’s unique
approach to quality and productivity has been so successful that it stands as a reference point in
thinking about how to deliver high-volume standardized services. In fact, McDonald’s operating
system is so successful that the president of Chaparral Steel used it as a model in planning the
company’s highly efficient minimills.

TOTAL QUALITY MANAGEMENT AND QUALITY CERTIFICATION

The unquestioned major development in the field of OM, as well as in management practice in
general is TQM. Though practiced by many companies in the 1980s, TQM became truly
pervasive in the 1990s. all operations executives are aware of the quality put forth by the so
called, quality gurus, W. Edward Deming, Joseph M. Juran & Philip Crosby. Helping the quality
movement along is the Baldrige National Quality Award, which was started in 1986 under the
direction the American Society of Quality Control and the National Institute of Standards of
Technology. The Baldrige Award recognizes up to five companies a year for outstanding quality
management systems. The ISO 9000 certification standards put forth the International
Organization for Standardization now play a major role in setting quality standards for global
manufacturers in particular. Many European companies require that their vendors meet these
standards as a condition for obtaining contracts.

The American Society for Quality Control defines quality as the totality of features and
characteristics of a product or service that bear on its ability to satisfy stated in implied needs.
Quality experts, Edward Deming and others are the ones who reinforced the need for quality in
organizations and this is how TQM school of thought emerged. TQM stresses a commitment by
management to have a continuing company wide toward excellence in all aspects of products
and services that are important to the customer. TQM programs rests on:
 Continuous Improvement: TQM requires a never-ending journey of CI. The end goal is
perfection which is always sought. The Japanese call it Kaizen. The Americans call it zero
defects or six stigma.
 Employee Empowerment: Involves employees at every step in the process is key.
Techniques for building employee empowerment networks include:
o Building communication networks that include employees
o Open, supportive supervisors
o Moving responsibility from management to production employees
o Building high morale organizations
o Formal techniques such as team building and quality circles;
 Benchmarking: Involves selecting a demonstrated standard of performance that represents
the very best performance for processes or activities very similar to yours. The steps for
developing benchmarks are:
o Determine what to benchmark
o Form a benchmark team
o Identify benchmark partners
o Collect and analyze benchmarking information
o Take action to match or exceed the benchmark
 Just in time: Reduces the amount of inventory a firm has on hand by establishing quality and
purchasing control that bring inventory to the firm just in time for use. The JIT is related to
quality in 3 ways:
o It cuts the cost of quality
o It improves quality
o Better quality means less inventory
 Knowledge of TQM Tools:
Quality function deployment
o Taguchi Technique
o Pareto Charts
o Process Charts
o Cause and Effect Diagram – Ishikawa
o Statistical Process Control Charts

The leaders in the fight for quality are:

W. Edward Deming – After World War II, Dr. Deming went to Japan to each quality. In his quality
crusade, Deming insisted that management accept responsibility for building good systems. The
employee, he believed, cannot produce products that on the building average exceed the quality
of what the process is capable of producing. Deming’s 14 points of implementing quality
improvement:
o Create consistency of purpose
o Lead to promote change
o Build quality into the product, stop depending on inspections to catch problems
o Build long term relationships based on performance instead of awarding business on the
basis of price
o Continuously improve product, quality, and service
o Start training
o Emphasize leadership
o Drive out fear
o Break down barriers between departments
o Stop haranguing workers
o Support help and improve
o Remove barriers to pride in work
o Institute a vigorous program of education and self improvement
o Put everybody in the company to work on the transformation

J. M. Juran he believed in strong top management commitment, support and involvement in the
quality effort. He is also a believer in teams that continually seek to raise quality standards. Juran
varies from Deming somewhat in focusing on the customer and defining quality as fitness for use,
not necessarily the written specifications.

Philip B. Crosby – quality is free was Crosby’s attention getting book published in 1979. His
traditional view has been “with management and employee commitment great strides can be
made in improving quality. He insists that the cost of poor quality should include all of the things
that are involved in not doing the job right the first time.
Other issues in quality management include the development of international quality standards.
The Japanese established the Industrial Standard z8101-1981. The Europe’s ISO 9000
Standard was developed by EU and is now gaining worldwide acceptance. The American
Quality Control Society has developed specifications equivalent to those of the EU-Q90-Q94. In
1988, the USA established the Malcolm Baldrige National Quality Award for quality
achievement. The award is named after former Secretary Commerce Malcolm Baldridge. Some
of the previous winners include Motorola, Xerox, IBM, Federal Express and AT&T.

BUSINESS PROCESS REENGINEERING

The need to become lean to remain competitive in the global economic recession in the 1990s
pushed organizations to seek major innovations in the processes by which they ran their
operations. The flavour of business process reengineering (BPR) is conveyed in the title of
Michael Hammer’s influential article “Reengineering at Work: Don’t Automate, Obliterate”. The
approach seeks to make revolutionary changes as opposed to evolutionary changes, commonly
advocated in TQM. It does this by taking a fresh look at what the organization is trying to do in all
its business processes, and then eliminating non-value added steps and computerizing the
remaining ones to achieve the desires outcome.

Together with Information Technology other factors that played a significant role in the new
management thinking are:
o Globalization – with the formation of common markets and regional grouping meant that
national boundaries collapse. Companies became exposed to regional or international
competition previously not here. Internationalization of the media also meant that a localized
problem of a company can be internationalized by the media. A good example of this
phenomenon was the recent case of contamination of Coca Cola products in Belgium (a
localized problem) became a hot issue internationally forcing various Coca Cola branches
worldwide to issue statements assuring customers of quality.
o Liberalization – before the fall of Communism, Governments around the world heaving
protected their markets using tariffs and import bans. There was also a lot of subsidy element
in their economies, thereby distorting the operations of various industries. When communism
collapsed in the early 1990s, it set the stage removal of protectionist policies and subsidies.
Under the World Trade Organization (WTO) (earlier referred to as GATT – General
Agreement on Trade and Tariffs) it seeks to harmonize world trade operations although it has
become very challenging to agree on the rules (the Seattle riots of 1999 attests to these
controversies). With the removal of government protection means companies have to stand
on their feet and survive the regional or international competition.
o These rapid and far-reaching changes led to the emergence of BPR. This management
paradigm is defined as the fundamental rethinking and radical redesign of business process
to bring about dramatic improvement in performance. Some of the results were remarkable
for instance: American Express has reported reducing its annual costs by over $1 billion
through reengineering, AT&T’s Global Business Communication Systems Unit turned a nine
figure loss into a nine figure profit by reengineering. Reengineering has enabled the
 semiconductor group of Texas Instruments to reduce the cycle time of its order fulfillment
process for integrated circuits by more than half.

ELECTRONIC ENTERPRISE
The recent quick adoption of the Internet and the World Wide Web during the late 1990s is
amazing. Electronic Enterprise refers to the use of the Internet as an essential element of
business activity. The internet is an outgrowth of a government network called ARPANET, which
was created in 1969 by the Defence Department of the United States Government. The use of
web pages, forms, and interactive search engines is changing the way people collect information,
shop and communicate. Even today, connections to the internet are relatively inexpensive, and
Microsoft and Netscape have led the way by making the “Web browsing” software virtually free.

ENVISIONING THE FUTURE

Businesses have to keep with an alarming rate of change and therefore Operations management
has become a dynamic subject. Evolution of ideas – or the procedures and tools that accompany
them sometimes occurs rather suddenly and at times gradually. The information explosion, rapid
technology innovation, reduced product life cycles, global competition, changes in the
composition of the work force, and new organizational structures contribute to this turbulent
environment.

The rapid change is accompanied by ensuing unpredictability, which dictates that companies
must adopt new perspectives when planning for the future. According to Michael Bommer and
Renee De La Porte thirty-six companies cited as exemplary by Peters and Waterman’s book In
Search for Excellence in 1980 only six retained their status by 1987. The fall from grace by many
of these firms could be attributed to not being sufficiently future-oriented. While there may not be
a precise definition of future orientation, author Burt Nanus described the future – oriented
organization as being; designed for adaptability and change, resists pressures for short-term
results, and values preventive rather than curative action. “Future orientation therefore implies
aligning the organization to face a future environment that has not yet been defined”. This
requires the ability of leadership to develop a vision shared by a culture that is comfortable with
change, and produces innovation.

The strategic planning of the firm should incorporate the perspectives of a future orientation. A
holistic approach, which considers elements of time and space, is the philosophy that leads to
breakthrough thinking and eventual resolutions to an unpredictable future. This approach has
spawned such widely expected management techniques, processes, and philosophies such as:
o Just in time
o Six stigma
o Single source suppliers
o Continuous improvements
o Simultaneous/concurrent engineering
o Benchmarking
o Self directed work teams
o Joint ventures

In determining how future oriented a firm is, it should explore these areas:
- Degree of Functional Integration
Successful firms of the future will integrate such functions as R & D, manufacturing, marketing,
finance and human resources. Integrating new process technologies into existing operating
systems will be essential. In addition, sharing of resources & information within functional groups
will be vital.

- Participation in Strategic Planning

Widespread worker & management participation in the planning process is essential. It is noted
that there is already a growing reliance by first-rank organizations on cross-functional teams for
solving problems & improving processes.