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Operations and CompetitivenessBeni Asllani University of
Tennessee at ChattanoogaOperations Management - 5th EditionChapter
1Roberta Russell & Bernard W. Taylor, III
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Lecture OutlineWhat Do Operations Managers Do?Operations
FunctionEvolution of Operations ManagementOperations Management and
EBusinessGlobalization and CompetitivenessPrimary Topics in
Operations ManagementLearning Objectives for this Course
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What Do Operations Managers Do?What is Operations?a function or
system that transforms inputs into outputs of greater valueWhat is
a Transformation Process?a series of activities along a value chain
extending from supplier to customeractivities that do not add value
are superfluous and should be eliminatedWhat is Operations
Management?design, operation, and improvement of productive
systems
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Transformation ProcessPhysical: as in manufacturing
operationsLocational: as in transportation operationsExchange: as
in retail operationsPhysiological: as in health carePsychological:
as in entertainmentInformational: as in communication
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Operations as a Transformation ProcessFeedback
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Operations FunctionOperationsMarketingFinance and
AccountingHuman ResourcesOutside Suppliers
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How is Operations Relevant to my Major?Accounting
Information Technology
Management
As an auditor you must understand the fundamentals of operations
management.IT is a tool, and theres no better place to apply it
than in operations. We use so many things you learn in an
operations classscheduling, lean production, theory of constraints,
and tons of quality tools.
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How is Operations Relevant to my Major?Economics
Marketing
Finance
Its all about processes. I live by flowcharts and Pareto
analysis.How can you do a good job marketing a product if youre
unsure of its quality or delivery status?Most of our capital
budgeting requests are from operations, and most of our cost
savings, too.
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Evolution of Operations ManagementCraft productionprocess of
handcrafting products or services for individual customersDivision
of labordividing a job into a series of small tasks each performed
by a different workerInterchangeable partsstandardization of parts
initially as replacement parts; enabled mass production
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Evolution of Operations Management (cont.)Scientific
managementsystematic analysis of work methodsMass
productionhigh-volume production of a standardized product for a
mass marketLean productionadaptation of mass production that prizes
quality and flexibility
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Historical Events in Operations Management
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Historical Events in Operations Management (cont.)
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Historical Events in Operations Management (cont.)
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Historical Events in Operations Management (cont.)
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Continuum from Goods to Services
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Operations Management and E-Business
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An Integrated Value ChainValue chain: set of activities that
create and deliver products to customer
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Impact of E-Business on Operations ManagementComparison shopping
by customers
Direct contact with customers
Business processes conducted onlineCustomer expectations
escalate; quality must be maintained and costs loweredNo more
guessing about demand is necessary; inventory costs go down;
product and service design improves; build to-order products and
services is made possibleTransaction costs are lower; customer
support costs decrease; e-procurement saves big bucksBenefits of
E-BusinessImpact on Operations
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Impact of E-Business on Operations Management (cont.)Access to
customers worldwide
Middlemen are eliminated
Access to suppliers worldwideDemand increases; order fulfillment
and logistics become major issues; production moves
overseasLogistics change from delivering to a store or distribution
center to delivering to individual homes; consumer demand is more
erratic and unpredictable than business demandOutsourcing
increases; more alliances and partnerships among firms are formed;
supply is less certain; global supply chain issues ariseBenefits of
E-BusinessImpact on Operations
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Impact of E-Business on Operations Management (cont.)Online
auctions and e-marketplacesBetter and faster decision
makingCompetitive bidding lowers cost of materials; supply needs
can be found in one locationMore 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 facilitatedBenefits of E-BusinessImpact on
Operations
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Impact of E-Business on Operations Management (cont.)IT
synergy
Expanded supply chainsProductivity increases as information can
be shared more efficiently internally and between trading
partnersOrder fulfillment, logistics, warehousing, transportation
and delivery become focus of operations management; risk is spread
out; trade barriers fallBenefits of E-BusinessImpact on
Operations
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Globalization and CompetitivenessFavorable costAccess to
international marketsResponse to changes in demandReliable sources
of supply14 major trade agreements in 1990sPeak: 26% in 2000
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Globalization and Competitiveness (cont.)Germany: $26.18USA:
$21.33Taiwan: $5.41Mexico: $2.38China: $0.50
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Globalization and Competitiveness (cont.)Trade with China:
Percent of each countrys trade Source: Share of China in Exports
and Imports of Major Traders, 2000 and 2002, International Trade
Statistics 2003, World Trade Organization, www.wto.org
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Risks of GlobalizationCultural differencesSupply chain
logisticsSafety, security, and stabilityQuality problemsCorporate
image Loss of capabilities
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Competitiveness and ProductivityCompetitivenessdegree to which a
nation can produce goods and services that meet the test of
international marketsProductivityratio of output to
inputOutputsales made, products produced, customers served, meals
delivered, or calls answeredInputlabor hours, investment in
equipment, material usage, or square footage
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Competitiveness and Productivity (cont.)Measures of
Productivity
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Changes in Productivity for Select CountriesInternet-enabled
productivity- Dot com bust- 9/11 terrorist attacksSource:
International Comparisons of Manufacturing Productivity and Unit
Labor Cost Trends, 2002, Bureau of Labor Statistics, U.S.
Department of Labor, September 2003. U.S. figures for 20022003 from
Major Sector Productivity and Costs Index, Bureau of Labor
Statistics, U.S. Department of Labor, March 2004
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Productivity IncreaseBecome efficientoutput increases with
little or no increase in inputExpandboth output and input grow with
output growing more rapidlyAchieve breakthroughsoutput increases
while input decreasesDownsizeoutput remains the same and input is
reducedRetrenchboth output and input decrease, with input
decreasing at a faster rate
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Competitiveness and ProductivityBreakthrough PerformanceMore
EfficientRetrench
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Global Competitiveness RankingFinlandUnited
StatesSwedenDenmarkTaiwanSingaporeSwitzerlandIcelandNorwayAustraliaSource:
Global Competitiveness Report 20032004, World Economic Forum,
January 2004, www.weforum.org
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OperationsOriented Barriers to EntryEconomies of ScaleCapital
InvestmentAccess to Supply and Distribution ChannelsLearning
Curve
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Primary Topics in Operations Management
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Primary Topics in Operations Management (cont.)
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Operations StrategyStrategy: Chapter 2Maintaining an operations
strategy to support firms competitive advantageQuality: Chapters 3
and 4Focusing on quality in operational decision makingProduct and
Services: Chapter 5Designing quality products and
servicesProcesses, Technologies, and Capacity: Chapter 6Setting up
process so that it works smoothly and efficiently
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Operations Strategy (cont.)Facilities: Chapter 7Setting up
facility so that it works smoothly and efficientlyHuman Resources:
Chapter 8Designing jobs and work to produce quality productsProject
Management: Chapter 9Managing complex projects
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Supply Chain ManagementSupply Chain: Chapter 10Managing supply
chainForecasting: Chapter 11Predicting customer demandAggregate
Planning: Chapter 12How much to produce and when to produce it
Inventory Management: Chapter 13How much to order and when to
order
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Supply Chain Management (cont.)Resource Planning: Chapter
14Planning capacity and other resourcesLean Production: Chapter
15Designing efficient production linesScheduling: Chapter 16Job and
task assignmentsWaiting Lines: Chapter 17Minimizing waiting time of
customers and products
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Learning Objectives of this CourseGain an appreciation of
strategic importance of operations in a global business
environmentUnderstand how operations relates to other business
functionsDevelop a working knowledge of concepts and methods
related to designing and managing operationsDevelop a skill set for
quality and process improvement
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