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chapter 4 The Role of Technology

in Operations PowerPoint
Presentation
by
Charlie
Cook
The McGraw-Hill Companies, Inc., 2003
 Chapter Objectives
Introduce the different ways in which technology can
add value to the operations function within an
organization.
Identify the various ways in which technology can be
used in a manufacturing company.
Describe enterprise resource planning (ERP) systems
and how they impact an organization.
Demonstrate the different ways in which technology
can be integrated into service operations.
Present a framework for defining the different types of
e-services that are currently being offered.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 42

 Managerial Issues
Advances in technology are changing the way in
which both manufacturing and service operations are
designed.
Technology is a tool, not an end in itself.
Importance of maintaining compatibility between
technology and the organizations other elements.
The need for continuous training in the use of
technology.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 43

 How Technology Affects Operations
Traditional Tradeoffs
Low costs
Speed of delivery
Quality of product/service
Customization
Technologys Impact on Traditional Tradeoffs
Tradeoffs are no longer validtechnology
allows firms compete on several dimensions at
once.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 44

 How Technology Impacts
Operational Performance

Exhibit 4.1
Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 45
 Technology in Manufacturing
Automation Development
Machining centers Operations where tools are change
automatically as part of the process.

Numerically controlled Manufacturing equipment that is directly

(NC) machines controlled by a computer.

Industrial robots Programmable machines that can

perform multiple functions.

Computer-aided Designing a product using a specially

(or assisted) design equipped computer.

Computer-assisted Integration of design and production of a

design and product through use of a computer.
manufacturing system
(CAD/CAM)

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 46

 Technology in Manufacturing (contd)
Automation Development
Flexible manufacturing Manufacturing facility that is
system (FMS automated to some extent and
produces a wide variety of products.

Computer-integrated Integration of all aspects of

manufacturing (CIM) manufacturing through computers.

Islands of automation Automated factories or portions which

include NC equipment, automated
storage/retrieval systems, robots, and
machining centers.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 47

 Major Categories of Software Systems
in Manufacturing

Exhibit 4.2
Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 48
 Information Technology

Software Systems
Enterprise Resource Provides a common software
Planning (ERP) infrastructure and database.

Supply Chain Controls interaction with suppliers in

Management (SCM) the overall supply chain.

New Product Links the engineering function with

Development (NPD) the operations function.

Customer Relationship Manages the interface between the

Management (CRM) firm and its customer.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 49

 Functional Areas as Independent Operations

Exhibit 4.3a
Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 410
 ERP Systems Link Functional Areas with a
Common Software Platform and Database

Exhibit 4.3b
Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 411
 Example of How
SAPs R/3 System
Integrates an
Organization

Exhibit 4.4
Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 412
 Leading ERP Software Companies and
Respective Market Shares

Total ERP Software and

Services Revenue =
$18.2 billion

Exhibit 4.5
Source: AMR Research
Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 413
 Evolution of ERP Systems
ERP Systems Origins
An outgrowth of Materials Requirements
Planning (MRP) systems in the 1960s70s
Adoption of ERP systems updated the entire
information technology infrastructure of firms.
Benefits of ERP Systems
Reduction in database errors
Faster customer response
Faster order fulfillment
Better overall communication

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 414

 Evolution of ERP Systems (contd)
Why ERP Systems Fail
Lack of top management commitment
Lack of adequate resources
Lack of proper training
Lack of communication
Criticisms of ERP Systems
Constraints of a single ERP system versus a
mixture of Best of Breed software products
Inflexibility of the built-in business model of ERP
systems

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 415

 Technology Trends in Services
Increase in Self-Service
Reduces labor costs
Speeds up service
Decrease in the Importance of Location
Lower costs for delivery of products and
services increases remote points of access and
reduces the need for specific service locations

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 416

 Methods of Pricing to Encourage Self-Service

Source: Exhibit 4.6

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 417
 Technology Trends in Services (contd)
Shift from Time-dependent (Synchronous) to
Non-time Dependent (Asynchronous)
Transactions
More economical (for the firm) and efficient (for
the customer) forms of service
Increase in Disintermediation
Technology brings buyers and sellers closer
together, eliminating intermediate steps or
organizations.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 418

 Integrating Technology into Services
Integration Benefits
Efficiency in operations
Effectiveness in serving customers
Areas for Integration
Strategic planning
Improved performance
Faster service
Improved customer
knowledge
Increased product
customization

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 419

 Integrating Technology into Services
(contd)
Areas for Integration (contd)
Increased efficiency
Economies of scale in consolidating operations.
Reduced labor costs through replacement of
manpower and increased labor productivity.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 420

 Categories of E-Services
Category Function
Internet World-wide web presence with open
access to all.

Intranet Internal network providing limited access

by individuals within an organization.

Extranet A resource-limited network open only to

specified internal and external users

Electronic Data Interchange A network designed to support the

(EDI) exchange of data between the
organization and its vendors and
suppliers.

Value-added network (VAN) A third party service that is used in

conjunction with EDI to provide the link to
customers and suppliers.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 421

 The Role of the Internet, Intranet,
Extranet and EDI in an Organization

Exhibit 4.7
Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 422
 Types of E-Services

Broad Categories Specific Service Types

Business-to-Consumer
E-tailers (Goods and Services)
(B2C)

Consumer-to-Consumer
Customer Support
(C2C)

Business-to-Business
Network Providers
(B2B)

Government-to-Business
Information Providers
(G2B)

Government-to-Consumer Application Service Providers

(G2C) (ASPs)

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 423

 Challenges for E-Tailers
Infrastructure
Developing the structure to efficiently and
quickly deliver goods to customers.
Lack of tangibility
Having no physical presence to which
customers can turn with problems.
Differentiation
Creating a unique on-line presence that sustains
growth.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 424

 Technology Issues
Overcoming Barriers to Entry (Customer)
Fear of the unknown
Lack of knowledge by the customer
Training and Support
Worker skill development through hands-on
training in the new technology.
Customer familiarization with technology.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 2003 425