Operations and
Supply Chain Management
Lecturer: Assoc. Prof. Ho Thanh Phong
Textbook: Operations Management 6th edition. Roberta
Russel & Bernard W. Taylor
Grading:
Midterm 30%
Homeworks: 10%
Project: 30%
Final: 40%
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Chapter 1
Introduction to Operations and
Supply Chain Management
Operations
Operations Management
Management -- 6
6thth Edition
Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2009 John Wiley & Sons, Inc.
Lecture Outline
What Operations and Supply Chain
Managers Do
Operations Function
Evolution of Operations and Supply Chain
Management
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
supplier to 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
INPUT
•Material
TRANSFORMATION OUTPUT
•Machines
•Goods
•Labor PROCESS
•Services
•Management
•Capital
Feedback & Requirements
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Operations Function
Operations
Marketing
Finance and
Accounting
Human
Resources
Outside
Suppliers
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How is Operations Relevant to my
Major?
“As an auditor you must
Accounting
understand the fundamentals of
operations management.”
Information “IT is a tool, and there’s no better
place to apply it than in operations.”
Technology “We use so many things you learn
in an operations class—scheduling,
Management lean production, theory of
constraints, and tons of quality
tools.”
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How is Operations Relevant to my
Major? (cont.)
“It’s all about processes. I live
Economics
by flowcharts and Pareto
analysis.”
Marketing “How can you do a good job
marketing a product if you’re
unsure of its quality or delivery
status?”
Finance “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
each performed 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 (cont.)
Scientific management
systematic analysis of work methods
Mass production
high-volume production of a standardized
product for a 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
Steam engine 1769 James Watt
Industrial
Division of labor 1776 Adam Smith
Revolution
Interchangeable parts 1790 Eli Whitney
Principles of scientific
1911 Frederick W. Taylor
management
Frank and Lillian
Scientific Time and motion studies 1911 Gilbreth
Management Activity scheduling chart 1912 Henry Gantt
Moving assembly line 1913 Henry Ford
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Historical Events in
Operations Management (cont.)
Era Events/Concepts Dates Originator
Hawthorne studies 1930 Elton Mayo
Human 1940s Abraham Maslow
Relations Motivation theories 1950s Frederick Herzberg
1960s Douglas McGregor
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, waiting
Operations Operations research
line theory, decision 1950s
Research groups
theory, PERT/CPM
1960s, Joseph Orlicky, IBM
MRP, EDI, EFT, CIM
1970s and others
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Historical Events in
Operations Management (cont.)
Era Events/Concepts Dates Originator
JIT (just-in-time) 1970s Taiichi Ohno (Toyota)
TQM (total quality W. Edwards Deming,
1980s
management) Joseph Juran
Quality Strategy and Wickham Skinner,
1980s
Revolution operations Robert Hayes
Business process Michael Hammer,
1990s
reengineering James Champy
Six Sigma 1990s GE, Motorola
Copyright 2009 John Wiley & Sons, Inc. 1-14
Historical Events in
Operations Management (cont.)
Era Events/Concepts Dates Originator
Internet Internet, WWW, ERP, 1990s ARPANET, Tim
Revolution supply chain management Berners-Lee SAP,
i2 Technologies,
ORACLE
E-commerce 2000s Amazon, Yahoo,
eBay, Google, and
others
Globalization WTO, European Union, 1990s Numerous countries
and other trade 2000s and companies
agreements, global supply
chains, outsourcing, BPO,
Services Science
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Evolution of Operations and
Supply Chain Management (cont.)
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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Globalization and
Competitiveness
Why “go global”?
favorable cost
access to international markets
response to changes in demand
reliable sources of supply
latest trends and technologies
Increased globalization
results from the Internet and falling trade
barriers
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Globalization and
Competitiveness (cont.)
Hourly Compensation Costs for Production Workers
Source: U.S. Bureau of Labor Statistics, 2005.
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Globalization and
Competitiveness (cont.)
World Population Distribution
Source: U.S. Census Bureau, 2006.
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Globalization and
Competitiveness (cont.)
Trade in Goods as % of GDP
(sum of merchandise exports and imports divided by GDP, valued in U.S. dollars)
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Productivity and
Competitiveness
Competitiveness
degree to which a nation can produce goods and
services 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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Productivity and
Competitiveness (cont.)
Measures of Productivity
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Productivity and
Competitiveness (cont.)
Average Annual Growth Rates in Productivity, 1995-2005.
Source: Bureau of Labor Statistics. A Chartbook of
International Labor Comparisons. January 2007, p. 28.
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Productivity and
Competitiveness (cont.)
Average Annual Growth Rates in Output and Input, 1995-2005 Dramatic
Dramatic Increase
Increase in
in
Source: Bureau of Labor Statistics. A Chartbook of International Output
Output w/
w/ Decrease
Decrease in in
Labor Comparisons, January 2007, p. 26. Labor
Labor Hours
Hours
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Productivity and
Competitiveness (cont.)
Retrenching
productivity is increasing, but both output and input
decrease with input decreasing at a faster rate
Assumption that more input would cause
output to increase at the same rate
certain limits to the amount of output may not be
considered
output produced is emphasized, not output sold;
increased inventories
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Strategy and Operations
Strategy
Provides direction for achieving a mission
Five Steps for Strategy Formulation
Defining a primary task
What is the firm in the business of doing?
Assessing core competencies
What does the firm do better than anyone else?
Determining order winners and order qualifiers
What qualifies an item to be considered for purchase?
What wins the order?
Positioning the firm
How will the firm compete?
Deploying the strategy
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Strategic Planning
Mission
Mission
and
and Vision
Vision
V
Vooiiccee oof t e ooff tthhee
f thhee V
Vooic
ic e
B u
Bussiinneesss meerr
s Corporate
Corporate CCuussttoom
Strategy
Strategy
Marketing
Marketing Operations
Operations Financial
Financial
Strategy
Strategy Strategy
Strategy Strategy
Strategy
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Order Winners
and Order Qualifiers
Source: Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan
Betts, Operations and Process Management , Prentice Hall, 2006, p. 47
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Positioning the Firm
Cost
Speed
Quality
Flexibility
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Positioning the Firm:
Cost
Waste elimination
relentlessly pursuing the removal of all waste
Examination of cost structure
looking at the entire cost structure for
reduction potential
Lean production
providing low costs through disciplined
operations
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Positioning the Firm:
Speed
fast moves, fast adaptations, tight linkages
Internet
conditioned customers to expect immediate responses
Service organizations
always competed on speed (McDonald’s, LensCrafters, and
Federal Express)
Manufacturers
time-based competition: build-to-order production and
efficient supply chains
Fashion industry
two-week design-to-rack lead time of Spanish retailer, Zara
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Positioning the Firm:
Quality
Minimizing defect rates or conforming to design
specifications; please the customer
Ritz-Carlton - one customer at a time
Service system is designed to “move heaven and
earth” to satisfy customer
Every employee is empowered to satisfy a guest’s
wish
Teams at all levels 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
National Bicycle Industrial Company
offers 11,231,862 variations
delivers within two weeks at costs only 10%
above standard models
mass customization: the mass production of
customized parts
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Policy Deployment
Policy deployment
translates corporate strategy into measurable
objectives
Hoshins
action plans generated from the policy
deployment 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
finances
customers
processes
learning and growing
Key performance indicators
a set of measures that help managers evaluate
performance in critical areas
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Balanced Scorecard
Balanced Scorecard Worksheet
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Balanced Scorecard
Radar Chart Dashboard
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Operations Strategy
Services Process
and
Products
Technology
Human
Resources Quality
Capacity
Facilities Sourcing Operating
Systems
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Organization of This Text:
Part I – Operations Management
Intro. to Operations and
Supply Chain Management: Chapter 1 *
Quality Management: Chapter 2 *
Statistical Quality Control: Chapter 3 R
Product Design: Chapter 4 *
Service Design: Chapter 5 *
Processes and Technology: Chapter 6 R
Facilities: Chapter 7 *
Human Resources: Chapter 8 FR
Project Management: Chapter 9 *
Copyright 2009 John Wiley & Sons, Inc. 1-40
Organization of This Text:
Part II – Supply Chain Management
Supply Chain
Strategy and Design: Chapter 10 *
Global Supply Chain
Procurement and Distribution: Chapter 11 P
Forecasting: Chapter 12 *
Inventory Management: Chapter 13 *
Sales and
Operations Planning: Chapter 14 FR
Resource Planning: Chapter 15 R
Lean Systems: Chapter 16 R
Scheduling: Chapter 17 *
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Learning Objectives of
this Course
Gain an appreciation of strategic importance of
operations and supply chain management in a
global business environment
Understand how operations relates to other
business functions
Develop a working knowledge of concepts and
methods related to designing and managing
operations and supply chains
Develop a skill set for quality and process
improvement
Copyright 2009 John Wiley & Sons, Inc. 1-42
Copyright 2009 John Wiley & Sons, Inc.
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