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Chapter 1

Chapter 1. Introduction. John Butler. Ph.D. University of Texas Previously at Ohio State Office GWI 550 jbutler5@tulane.edu 865-5442 Office Hours Tuesday & Thursday 2:00 – 3:00 pm By appointment. Operations Management (OM).

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Chapter 1

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  1. Chapter 1 Introduction

  2. John Butler • Ph.D. University of Texas • Previously at Ohio State • Office • GWI 550 • jbutler5@tulane.edu • 865-5442 • Office Hours • Tuesday & Thursday 2:00 – 3:00 pm • By appointment

  3. Operations Management (OM) • The design, operation, and improvement of the systems that create and deliver the firm’s primary products and services • The “M” is important • Not just tools or engineering • We’re talking about decisions • Strategic (long term) • Tactical (intermediate) • Operational (short term)

  4. Why bother? Lloyd • Part of Business Education • Cross Functional Applications • Systematic View of Organizational Processes • Job Opportunities

  5. Key Terms • Efficiency • Do it with the least number of resources • Effectiveness • Do it right • Maximize value to the firm • Tradeoff? • Value  Quality / Price • How can we increase value?

  6. Managing the Value Chain

  7. Transformation Process • A use of resources to transform inputs into desired outputs • Physical - manufacturing • Locational – transportation • Exchange – retailing • Storage – warehousing • Physiological – health care • Informational – telecommunications

  8. Tulane • Resources • Teachers • Books • Classrooms • Transformation • Process • Impart knowledge & skills Example : Tulane Outputs Educated Individuals Inputs High School Grads

  9. Goods & Services • Tangible vs. Intangible • Services rely on interaction with customer to produce • McDonalds makes “stuff” but is classified in service industry • Customers are on the shop floor • Shades of gray

  10. Where Do We “Operate”? • Manufacturing • Typically group operations in one department • Vertical • Service Firm • Operations scattered throughout firm • Bank, Airlines • Horizontal

  11. Operations as Service • Every company is really in the service business • Core services • basic things that customers want from products they purchase • Value-added services • differentiate the organization from competitors • build relationships that bind customers to the firm in a positive way

  12. Core Services • Traditional OM performance measures • Quality • Flexibility • Speed • Price (Cost reduction)

  13. Value-added Services • Information • Support internal or external group • Problem Solving • Support internal or external group • Sales Support • Helping marketing close the deal • Field Support • Fix items or replenish inventory

  14. OM’s Role in A Company • Not perceived as glamorous • Many C-level execs are not OM literate • But … • Operations account for 60-80% of the direct expenses that burden a firm’s profit • Synergies must exist with other functional areas of the organization for firm to succeed

  15. 1ST Industrial Revolution • 1776: US Democracy, Law & Culture • Adam Smith: Wealth of Nations • James Watt: 1st Steam Engine Sold • Automation • 1790: First Advanced Textile Mill • 1801: Eli Whitney • Interchangeable Parts • England becomes the 1st industrial nation.

  16. OM History: 2nd Industrial Revolution • 1840+ • Use of Coal • Iron Mfg. • Mass Production/ Distribution / Communication • Railroad • Evolution of Managers, Accounting • Standards • Scientific Management: Frederick Tayor, Henry Ganntt

  17. Steel, Andrew Carnegie & Scale • I believe the true road to preeminent success in any line is to make yourself master in that line • Focus: Details/Steel • Horizontal/Vertical Integration

  18. The Model-T, Henry Ford & Speed • 1908: Moving Assembly Line • work specialization • Labor time/car from 12.5 to 1.5 hours, price from $850 to $290

  19. Post WWII • Multidisciplinary team approach to complex problems: • Dupont: a centrally governed multi-departmental structure for effective integration • GM: Alfred Sloan reorganizes GM into a multi-divisional, decentralized structure; effective market segmentation, demand forecasting & inventory tracking • market share increase

  20. New Practices in OM • JIT/Lean Manufacturing • Manufacturing Strategy Paradigm • Use as a strategic lever • TQM • Business Process Reengineering • Supply Chain Management • E-commerce

  21. Going Forward • Effectively consolidating the operations resulting from mergers • Developing flexible supply chains to enable mass customization of products and services • Managing global supplier, production and distribution networks • Increased “commoditization” of suppliers • Make efficient use of Internet technology

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