Chapter 1

Introduction to Operations and

Supply Chain Management – Part 1
Operations Management - 6th Edition

Roberta Russell & Bernard W. Taylor, III

Beni Asllani
Copyright 2006 John Wiley & Sons, Inc. University of Tennessee at Chattanooga
 Lecture Outline

 What Do Operations Managers Do?

 Operations Function
 Evolution of Operations Management
 Operations Management and E–
business

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 What Do Operations
Managers Do?
 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
 What is Operations Management?
 design, operation, and improvement of productive
systems

Copyright 2006 John Wiley & Sons, Inc. 1-3

 Operations as a
Transformation Process

INPUT
•Material
OUTPUT
•Machines TRANSFORMATION
•Goods
•Labor PROCESS
•Services
•Management
•Capital

Feedback

Copyright 2006 John Wiley & Sons, Inc. 1-4

 Transformation Process

 Physical: as in manufacturing operations

 Locational: as in transportation operations
 Exchange: as in retail operations
 Physiological: as in health care
 Psychological: as in entertainment
 Informational: as in communication

Copyright 2006 John Wiley & Sons, Inc. 1-5

 An Integrated Value Chain
 Value chain: set of activities that create and
deliver products to customer

Customer Manufacturer Supplier

Flow of information (customer order)

Flow of product (order fulfillment)
Copyright 2006 John Wiley & Sons, Inc. 1-6
 Operations Function

 Operations
 Marketing
 Finance and
Accounting
 Human
Resources
 Outside
Suppliers

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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

Adam Smith’s Wealth of Nations: freely available at

http://www.gutenberg.org/etext/3300
Copyright 2006 John Wiley & Sons, Inc. 1-8
 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

Copyright 2006 John Wiley & Sons, Inc. 1-9

 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,
Revolution 1990s
operations Robert Hayes
Business process Michael Hammer,
1990s
reengineering James Champy

Copyright 2006 John Wiley & Sons, Inc. 1-10

 Historical Events in
Operations Management (cont.)
Era Events/Concepts Dates Originator
Globalization WTO, European Union, 1990s Numerous countries
and other trade 2000s and companies
agreements
Internet Internet, WWW, ERP, 1990s ARPANET, Tim
Revolution supply chain Berners-Lee SAP,
management i2 Technologies,
ORACLE,
PeopleSoft
E-commerce 2000s Amazon, Yahoo,
eBay, and others

Copyright 2006 John Wiley & Sons, Inc. 1-11

 Operations Management
and E-Business
Business Consumer
Business

B2B B2C
Commerceone.com Amazon.com
Consumer

C2B C2C
Priceline.com eBay.com

Categories of E-Commerce

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 Impact of E-Business on
Operations Management
Benefits of E-Business
 Comparison shopping
by customers
 Direct contact with
customers
 Business processes
conducted online
Copyright 2006 John Wiley & Sons, Inc.
Impact on Operations
 Customer expectations escalate;
quality must be maintained and
costs lowered
 No more guessing about demand
is necessary; inventory costs go
down; product and service design
improves; build to-order products
and services is made possible
 Transaction costs are lower;
customer support costs decrease;
e-procurement saves big bucks
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 Impact of E-Business on
Operations Management (cont.)
Benefits of E-Business Impact on Operations
 Access to customers  Demand increases; order fulfillment
and logistics become major issues;
worldwide production moves overseas
 Logistics change from delivering to a
store or distribution center to
 Middlemen are delivering to individual homes;
eliminated consumer demand is more erratic and
unpredictable than business demand
 Outsourcing increases; more alliances
 Access to suppliers and partnerships among firms are
worldwide formed; supply is less certain; global
supply chain issues arise

Copyright 2006 John Wiley & Sons, Inc. 1-14

 Impact of E-Business on
Operations Management (cont.)
Benefits of E-Business
 Online auctions and e-
marketplaces
 Better and faster
decision making
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Impact on Operations
 Competitive bidding lowers cost
of materials; supply needs can be
found in one location
 More timely information is
available with immediate access
by all stakeholders in decision-
making process; customer orders
and product designs can be
clarified electronically; electronic
meetings can be held;
collaborative planning is
facilitated
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 Impact of E-Business on
Operations Management (cont.)
Benefits of E-Business Impact on Operations
 IT synergy  Productivity increases as
information can be shared more
efficiently internally and
between trading partners
 Order fulfillment, logistics,
 Expanded supply warehousing, transportation and
chains delivery become focus of
operations management; risk is
spread out; trade barriers fall

Copyright 2006 John Wiley & Sons, Inc. 1-16