CHAPTER ONE
Introduction to
Managing
Operations
Across the
Supply Chain
What is Operations?
• What is Operations?
a function or system that transforms inputs
into outputs of greater value. i.e. a
transformation process.
2
OM is a process oriented discipline
Inputs
Transformation
Outputs
1–3
Transformation process
• Tuna can process
–Inputs and outputs?
• Hospital process
–Inputs and outputs?
4
Why do the Operations
management and Supply Chain
Management matter?
• In early 2005, HP
– New CEO search committee when Carly Fiorina
stepped down as CEO
– New CEO of HP Mark Hurd improved operations
through supply chain
5
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
6
What is Operations Management?
• What is Operations Management (OM)?
–Operations Management is the
management of process used to design,
supply, produce, and deliver valuable
goods and services to customers.
7
Operations Management (OM) is everywhere
Schools
Construction
Restaurants
Banks
Hospitality
Military
Agriculture
Sport Teams
Transportation
Municipalities
Health
Care
Manufacturers
Retail
Gov’t
Services
Not-for-Profit
Organizations
Entertainment
1–8
Operations Management (OM) is everywhere
• Operations
• Marketing
• Finance and
Accounting
• Human
Resources
• Outside
Suppliers
9
Supply Chain Management
• Supply chain: the global network of
organizations and activities involved in
–(1) designing a set of goods and services and
their related processes
– (2) transforming inputs into goods and services
– (3) consuming goods and services
– (4) disposing of these goods and services
• Supply chain management: the design and
execution of relationship and flows that
connect the parties and processes across
supply chain
10
Supply Chain Network Example
Resources and Technology Supply Chain
Financial
Underwriters
Screen Writers
Talent
Agencies
Casting
Company
Director
Product Supply Chain
Raw Materials
Suppliers
Chemical Dye
Manufacturer
DVD
Sales/Rentals
Film
Manufacturer
Wood Pulp
Supplier
Film Maker /
Producer
Stock Film
Wholesaler
Production
Company
Cellulose Acetate
Manufacturer
Distributors
Theaters
Costume
Supplier
Props
Supplier
Tier 4
Tier 3
Tier 2
Upstream Product Supply Chain
Tier 1
Equipment
Supplier
Echelon 1 Echelon 2
Downstream Product Supply Chain
1–11
Characteristics of Goods and Services
Goods
•
•
•
•
•
•
•
Tangible
Can be inventoried
Little customer contact
Long lead time
Often capital-intensive
Quality easily assured
Material is transformed
Services
•
•
•
•
•
•
•
Intangible
Cannot be inventoried
Extensive customer contact
Short lead time
Often labor intensive
Quality harder to assess
Information or customer is
transformed
1–12
Value-Added & Product Packages
• Value-added is the difference between the cost
of inputs and the value or price of outputs.
• Product packages are a combination of goods
and services.
• Product packages can make a company more
competitive.
13
Percent
U.S. Manufacturing vs. Service Employment
02
Year
Mfg. Service
45
79
21
90
Mfg.
50
72
28
80
Service
55
72
28
70
60
68
32
60
65
64
36
50
70
64
36
40
75
58
42
30
80
44
46
20
85
43
57
10
90
35
65
0
95
25
75
45 50 55 60 65 70 75 80 85 90 95 00 02 05
00
30
70
Year
25
75
14
Decline in Manufacturing Jobs
• Productivity
–Increasing productivity allows companies to maintain
or increase their output using fewer workers
• Outsourcing
–Some manufacturing work has been outsourced to
more productive companies
15
Functional activities that connect
Operations managers
• Customer Management: interfaces with
customers and order processing and fulfillment
• Supply Management: processes to identify,
acquire and administer inputs
• Logistics Management: movement of materials
and information within, into and out of the firm
1–16
Historical events in OM
17
Historical events in OM
• Industrial revolution (Before 1800):
–Steam engine: James Watt
–Division of labor: Adam Smith
–Interchangeable parts: Eli Whitney
• Technical capitalist (1800-1850):
–Improved manufacturing technology
–Emerging transportation network
1–18
Historical events in OM
• mass production (1850-1890):
–Emergence of local factory
–Introduction of steam and electrical power
• Scientific management(1890-1920):
–More scientific management
–Moving assembly (Henry Ford)
1–19
Historical events in OM
• Human relations and Demand growth
(1920-1960):
– Hawthorne studies (Elton Mayo)
– Motivation theories (Abraham Maslow and Douglas
Mcgregor)
– Introduction of computer usage and quantitative
methods
– Increased automation
1–20
Historical events in OM
• Global competition (1960-1980):
– Just in time system
– Early outsourcing
• World class manufacturing (1980-2000):
– Increased computerization and information system
– Global sourcing and need for supply chain
coordination
• E-commerce (2000-present):
– Internet revolution
1–21
CWU College of Business
Supply Chain Management specialization
• SCM 310 Supply chain management
• SCM 425 Procurement and supply
management
• SCM 435 Advanced topics in operations and
supply chain management
• SCM 475 Global supply chain management
• SCM 480 Supply chain strategy
1–22
CWU College of Business
Supply Chain Management certificate
• SCM 310 Supply chain management
• SCM 425 Procurement and supply
management
• SCM 435 Advanced topics in operations and
supply chain management
• SCM 475 Global supply chain management
1–23
CWU College of Business
Supply Chain Management certificate
(Choose one from )
• ACCT 305 Cost accounting
• Bus 490 Cooperative education
• MGT 384 Intro. to international business
• MGT 484 international management
• SCM 324 Quality and continuous
improvement
1–24
Chapter 1 homework problems
• Do problems 2, 3(a), 4(c), 7 on page 21 and
22.
1–25