Operations Management
Professor Beril Toktay
Operations Management Group
College of Management
Georgia Tech
Who Am I?
• BS in Industrial Engineering & Math from Bosphorus
University
• MS in Industrial Engineering from Purdue University
• PhD in Operations Research from MIT
• Taught at INSEAD until last year
What Will We Do Today?
• How is this course organized?
• Why Operations Management?
The First Industrial Revolution (c. 1850)
• Textile manufacturing innovations
“Flying shuttle” and “Spinning Jenny”
• J. Watt: The steam engine
Substituting labor with machines
small scale
production
• A. Smith: Free markets – division of labor
Free markets would enhance “quest” for profit
Specialization could increase productivity
The American System of Manufacturing
• Vertical Integration
Consolidating different operations under one roof
• Interchangeable parts
Mass-produce parts to tight tolerance & assemble
1801 contract for 10,000 muskets for the government
• Unskilled workers
The Second Industrial Revolution (c. 1910)
• 1832: 36 enterprises in 10 states with > 250 workers
Reliance on water power & local distribution system
• Transportation innovations
Railroads are built in western world
large scale
production
• Communication innovations
The telegraph is established
• Big retailers come to power
Sears & Roebuck’s sales soar to $38M in 10 years
• Mass Production: the first vehicles arrive…
Henry Ford starts producing Model T
1910-1920: The Scientific Method (Taylorism)
• Principles of Scientific Management
Book published in 1911 by Fredrick Taylor
• Time and Motion studies
How much time do workers need to do a task?
• Incentive systems
What is the best payment scheme?
Efficiency is
the key!
• Study how systems can be efficient
Developed a set of principles that serve efficiency.
Planning versus doing.
1920’s - 1930’s: Taylorism Spreads
• Application of Taylor’s methods
The DuPont Powder company
• More importance to the human element
Studies at the Western Electric Hawthorne plant to
understand ergonomics: the human element in
manufacturing
• Investment in management education
Between 1914 and 1940 B-schools grew a lot
1940’s - 1960’s: The Golden Era in the U.S.
• Operations Research tools are “born”
G.B. Dantzig devises simplex algorithm
• Effort to study complex systems
The importance of teamwork is introduced
• Mathematical analysis becomes the norm
Scientific methods are applied throughout the
organization
• Mathematics solidify the scientific method
Simulation based models, computer usage, scheduling
1970’s: Computers and MRP take over
Production
Schedule
Bill of
materials
Inventory
status
Forecasted
Demand
MRP
(Materials
Requirement
Planning)
MRP automated production…
But, someone has to tell the computers what to analyze!
1980’s: The Japanese Challenge
American manufacturing led until the late 70’s, but then…
TQC: Total Quality Control
Higher quality
Less cost
JIT: Just-In-Time
The methods introduced by
Japanese manufacturing firms
outperformed the US …
1990’s: The U.S. rises to the challenge
Entrepreneurship and the ability to change
and re-invent themselves allowed American
firms to move into new areas.
•
U.S. firms improve productivity and quality.
•
U.S. firms focus on emerging technologies, R&D.
•
Growth of the service industry.
•
Examples in OM….
Why Operations Management?
Operations Management = Strategy Execution
Time
Quality
Flexibility
Cost
OM = Designing, operating, and improving
the systems that deliver
the firm’s primary products and services
Strategy Execution
1. What is our strategy?
2. How do we design our operations to support it?
Product / Service
Development
Process Design
and Management
Supply Chain
Management
Strategy Execution
What’s their strategy? How do they execute it?
Dell
Southwest
Walmart
Toyota
Amazon
Organization of Course
• Class web site (can link from Webct)
http://www.prism.gatech.edu/~bt71/mgt3501/course-page.htm
• Recommended text: Operations Management for Competitive
Advantage, 11th Edn, by Chase, Jacobs, and Aquilano.
• Grading: 2 Midterms (20% each), Final (40%), 2 mini-case
write-ups (20%). Participation can bump you up if borderline.
• 4-5 person groups for write-ups: Form by Jan 24.
• Attendance: Voluntary
• Homework: For your own practice.
• On-time arrival to class: grade cutoff will drop by 0.04 for each
time that at most 2 people are late to class.
• Office hours, T/Th 11-12: Use them!!