MENG 420
Engineering Management
1-1
Course Intended Learning Outcomes
• Appraise the importance of operations, how they can provide a
competitive advantage, and develop alternative planning horizons
and strategies.
• Design and analyze products, processes, and facility layouts.
• Distinguish
and utilize forecasting methods, materials
management and inventory control concepts and tools.
• Survey and analyze the operations and project planning and
scheduling tools and techniques.
• Identify impact of quality on performance, and be able to design
and utilize control charts.
1-2
1
Primary Topics in Operations Management
1-3
Primary Topics in Operations Management
1-4
2
Course Organization
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Introduction to Operations Management (Ch. 1)
Products Design (Ch. 4)
Services Design (Ch. 5)
Processes Design (Ch. 6)
Process Capability and Statistical Process Control (Ch. 3)
Capacity and Facilities Planning (Ch. 7)
Supply Chain Management (Ch. 10)
Forecasting (Ch. 12)
Inventory Management (Ch. 13)
Resource Planning Systems (Ch. 15)
Project Management (Ch. 9)
Scheduling (Ch. 17)
Quality Management (Ch. 2)
1-5
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 continuous improvement
1-6
3
Chapter 1
Operations and
Supply Chain Management Introduction
Operations Management - 7th Edition
1-7
Lecture Outline
• Operations Function
• Evolution of Operations and Supply Chain
Management
• Globalization
• Productivity and Competitiveness
• Strategy and Operations
1-8
4
Operations Functions
• 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
• What do operations and supply chain managers do? (Page 3)
1-9
Transformation Process
INPUT
•Material
•Machines
•Labor
•Management
•Capital
TRANSFORMATION
PROCESS
OUTPUT
•Goods
•Services
Feedback & Requirements
1-10
5
Transformation Process
Examples:
• 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
1-11
Operations Function as the Technical Core
Primary functional areas
• Operations
• Marketing
• Finance and Accounting
• Human Resources
• Outside Suppliers
1-12
6
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
1-13
Evolution of Operations and Supply
Chain Management
• 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
1-14
7
Historical Events in Operations Management
Era
Industrial
Revolution
Scientific
Management
Events/Concepts
Dates
Originator
Steam engine
Division of labor
Interchangeable parts
Principles of scientific
management
1769
1776
1790
James Watt
1911
Frederick W. Taylor
Time and motion studies
1911
Frank and Lillian
Gilbreth
Activity scheduling chart
Moving assembly line
1912
1913
Henry Gantt
Adam Smith
Eli Whitney
Henry Ford
1-15
Historical Events in Operations Management
Era
Human
Relations
Operations
Research
Events/Concepts
Dates
Originator
Hawthorne studies
1930
1940s
1950s
1960s
1947
1951
Elton Mayo
Abraham Maslow
Frederick Herzberg
Douglas McGregor
George Dantzig
Remington Rand
1950s
Operations research
groups
1960s,
1970s
Joseph Orlicky, IBM
and others
Motivation theories
Linear programming
Digital computer
Simulation, waiting
line theory, decision
theory, PERT/CPM
MRP, EDI, EFT, CIM
1-16
8
Historical Events in Operations Management
Era
Events/Concepts
Dates Originator
1970s
Quality
Revolution
JIT (just-in-time)
TQM (total quality
management)
Strategy and
operations
1980s
1980s
Reengineering
1990s
Six Sigma
1990s
Taiichi Ohno (Toyota)
W. Edwards Deming,
Joseph Juran
Wickham Skinner,
Robert Hayes
Michael Hammer,
James Champy
GE, Motorola
1-17
Historical Events in Operations Management
Era
Events/Concepts
Internet
Revolution
Internet, WWW, ERP,
1990s
supply chain management
E-commerce
Globalization WTO, European Union,
Global supply chains,
Outsourcing, Service
Science
Dates Originator
2000s
1990s
2000s
ARPANET, Tim
Berners-Lee SAP,
i2 Technologies,
ORACLE, Dell
Amazon, Yahoo,
eBay, Google, and
others
China, India,
emerging
economies
1-18
9
Historical Events in Operations Management
Era
Events/Concepts
Green
Revolution
Global warming, An
Today
Inconvenient Truth, Kyoto
Dates Originator
Numerous
scientists,
statesmen and
governments
1-19
Supply Chain Management
• managing the flow of information, products, and services
across a network of customers, enterprises, and supply chain
partners
1-20
10
Globalization
• 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
1-21
Hourly Compensation
1-22
11
Globalization
Risks of Globalization






Cultural differences
Supply chain logistics
Safety, security, and stability
Quality problems
Corporate image
Loss of capabilities
1-23
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
[Productivity = Output / Input]
• Output
• sales made, products produced, customers served, meals
delivered, or calls answered
• Input
• labor hours, investment in equipment, material usage, or
square footage
1-24
12
Measures of Productivity
1-25
Osborne Industries
B5*B7
B6*B8
B4/B5
B4/B6
B4/B14
1-26
13
Strategy and Operations
• Strategy
•
•
•
•
•
How the mission of a company is accomplished
Provides direction for achieving a mission
Unites the organization
Provides consistency in decisions
Keeps organization moving in the right direction
1-27
Strategy Formulation
1. Defining a primary task
• What is the firm in the business of doing?
• Example, Batelco is in the business of telecommunication,
not mobile services.
2. Assessing core competencies
• What does the firm do better than anyone else?
3. Determining order winners and order qualifiers
• What qualifies an item to be considered for purchase?
• What wins the order?
4. Positioning the firm
• How will the firm compete?
5. Deploying the strategy
1-28
14
Strategic Planning
Mission
and Vision
Corporate
Strategy
Marketing
Strategy
Operations
Strategy
Financial
Strategy
1-29
Order Winners and Order Qualifiers
• Order qualifiers – characteristics of a product or service that qualify it
to be considered for purchase by a customer.
• Order winner – characteristics of a product or service that wins
orders in the marketplace (final factor in the purchasing decision)
1-30
15
Positioning the Firm
• Is a strategy
• How the firm chooses to
compete in the
marketplace
• Cost
• Speed
• Quality
• Flexibility
1-31
Positioning the Firm: Cost
• Waste elimination
• continual following 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
1-32
16
Positioning the Firm: Speed
• Fast moves, Fast adaptations, Tight linkages
• Internet
• Customers expect immediate responses
• Service organizations
• always competed on speed (McDonald’s)
• 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
1-33
Positioning the Firm: Quality
• Minimizing defect rates or conforming to design
specifications; please the customer
• Example:
• Ritz-Carlton - one customer at a time
• Service system designed to satisfy customer
• Employees empowered to satisfy a guest’s wish
• Teams set objectives and devise quality action plans
• Each hotel has a quality leader
1-34
17
Positioning the Firm: Flexibility
• Ability to adjust to changes in product mix, production
volume, or design
• Mass customization: the mass production of customized
parts
• Example:
• 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
1-35
Strategy Deployment
• Policy deployment
• translates corporate strategy into measurable objectives
• Hoshins (shining metal pointing direction)
• action plans generated from the policy deployment
process
1-36
18
Policy Deployment
Derivation of an Action Plan Using Policy Deployment
1-37
Balanced Scorecard
• Balanced scorecard
• measuring more than financial performance
• Finances – how should we look to our shareholders?
• Customers – how should we look to our customers?
• Processes – at which business process must we excel?
• learning and growing – how will we sustain our ability to
change and improve?
• Key performance indicators
• set of measures to help managers evaluate performance in
critical areas
1-38
19
Balanced Scorecard Worksheet
1-39
Balanced Scorecard
Radar Chart
Dashboard
1-40
20
Operations Strategy
Services
Products
Capacity
Facilities
Human
Resources
Sourcing
Process
and
Technology
Quality
Operating
Systems
1-41
21