Appendix N People have two thinking processes–one visual and intuitive

APPENDIX

MANAGING THE VALUE CHAIN, WEB 2.0, AND E-BUSINESS

CHAPTER OUTLINE

Which Side of Your Brain Do You Use?

I. The Organization as a Value Chain

A. Service and Manufacturing Operations

B. Supply Chain Management

II. Facilities Layout

A. Process Layout

IV. Inventory Management

A. The Importance of Inventory

B. Just–in-Time Inventory

V. Information Technology has Transformed Management

A. Boundaries Dissolve; Collaboration Reigns

LECTURE OUTLINE

WHICH SIDE OF YOUR BRAIN DO YOU USE?

People have two thinking processes–one visual and intuitive, which is often referred to as right-

brained thinking, and the other verbal and analytical, referred to as left-brained thinking. The

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I. THE ORGANIZATION AS A VALUE CHAIN Exhibit A.1

In Chapter 1, the organization was described as a system used for transforming inputs into

Operations management refers to using various tools and techniques to ensure that goods and

services are delivered successfully to customers or clients. Operations managers are concerned

with activities that convert inputs into outputs, including decisions about locating facilities and

installing equipment. These managers must instill the necessary attitudes, such as concern for

quality and a desire to innovate.

A. Service and Manufacturing Operations Exhibit A.2

1. The term operations management applies to both manufacturing and service

organizations. More than half of all businesses today are service organizations, and

two-thirds of the U.S. workforce is employed in services.

2. Although manufacturing and service firms differ, they face similar operational

problems. Both kinds organizations are concerned with scheduling, both must obtain

Discussion Question #1: What are the major differences between manufacturing and service

organizations? Give examples of how each type might benefit from using Web 2.0 tools such as

microblogging and social networks.

NOTES________________________________________________________________________

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B. Supply Chain Management Exhibit A.3

1. Supply chain management is the term for managing the sequence of suppliers and

2. The most recent advances in supply chain management involve using Internet

technologies to achieve the right balance of low inventory levels and customer

3. Enterprise integration through the use of electronic linkages is creating a level of

II. FACILITIES LAYOUT Exhibit A.4

A. Process Layout

1. In a process layout, all machines that perform a similar function are grouped

together. The advantage this layout has is its potential for economies of scale and

1. In a product layout, machines and tasks are arranged according to the progressive

steps in producing a single product. The product layout is efficient when the

1. A cellular layout is based on group-technology principles in which machines

dedicated to sequences of operations are grouped into cells. Grouping technology

1. In a fixed-position layout, the product remains in one location and employees and

equipment are brought to it. This layout is used to create a product or service that is

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III. TECHNOLOGY AUTOMATION

A. Radio-Frequency Identification (RFID)

1. Radio-Frequency Identification (RFID) uses electronic tags that can identify and

track individual items such as books, jugs of laundry detergent, automobiles, or even

people. One of the best-known uses of RFID is OnStar, which is a satellite-based

B. Digital Manufacturing Systems

1. The ultimate automated factories are referred to as digital factories. They are also

called flexible manufacturing systems, computer integrated manufacturing, smart

2. Digital manufacturing also enables mass customization, a process by which products

C. Lean Thinking

1. Lean thinking basically means combining advanced technology and innovative

management processes and using highly trained employees to solve problems, cut

waste, improve the productivity, quality, and efficiency of products and services, and

IV. INVENTORY MANAGEMENT

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A large portion of the operations manager’s job consists of inventory management. Inventory is

the goods the organization keeps on hand for use in the production process and generally consists

of three types.

Raw materials inventory—the basic inputs to the organization’s production process. This

inventory is of least value because the organization has not yet invested labor and other holding

and processing costs.

A. The Importance of Inventory Exhibit A.5

1. Inventory management is vitally important to organizations because idle inventory

costs money. Inventory is recognized as an unproductive asset in cost-conscious

operations processes are revealed. When inventory can be kept at a minimum,

1. Just-in-time (JIT) inventory systems are designed to reduce the level of an

organization’s inventory and its associated costs, aiming to push to zero the amount

2. In JIT, suppliers deliver materials only at the exact moment needed, thereby reducing

raw material inventory to zero. Work-in-process inventory is kept to a minimum as

3. The coordination required by JIT demands that information be shared among everyone

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V. INFORMATION TECHNOLOGY HAS TRANSFORMED MANAGEMENT

Information technology (IT) consists of the hardware, software, telecommunications, database

management, and other technologies used to store data and make it available in the form of

A. Boundaries Dissolve; Collaboration Reigns

1. Information technology enhances collaboration both within the organization and with

customers, suppliers, and partners. Intranets and other networks, knowledge

1. Knowledge management refers to the efforts to systematically gather knowledge,

organize it, make it widely available throughout the organization, and foster a culture

2. Expert-locator systems identify and catalog experts in a searchable database so

people can quickly identify who has knowledge they can use. Many organizations

3. Many of today’s companies also incorporate the use of new technologies collectively

referred to as Web 2.0 to support knowledge sharing. Web 2.0 encompasses a range

1. Another key IT component for many companies is an approach to information

management called enterprise resource planning. Enterprise resource planning

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(ERP) systems integrate and optimize all the various business processes across the

entire firm. An enterprise resource planning system can become the backbone of an

organization’s operations. It collects, processes, and provides information about an

VI. THE INTERNET AND E-BUSINESS Exhibit A.7

E-business can be defined as any business that takes place by digital processes over a computer

network rather than in physical space. E-commerce is a more limited term that refers

specifically to business exchanges or transactions that occur electronically. Today, e-commerce

is transforming into m-commerce, which simply means the ability to conduct business

transactions through a mobile device.

An intranet is an internal communications system that uses the technology and standards of the

A. E-Business Strategy: Market Expansion Exhibit A.8, Exhibit A.9

1. An in-house Internet division offers direct links to customers and allows a company

to expand into new markets. The organization can provide access around the clock to

1. With this approach, the e-business initiative is seen as a way to improve the bottom

line by increasing productivity and cutting costs. An automaker might use e-business

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Answers to End-of-Chapter Discussion Questions

1. What are the major differences between manufacturing and service organizations? Give

examples of how each type might benefit from using Web 2.0 tools such as wikis and social

networks.

Manufacturing organizations produce physical goods such as automobiles, toys, or clothing.

Service organizations produce nonphysical goods such as medical, educational, or transportation

Internal blogs can serve as superb horizontal and bottom-up communication tools, enabling

people to get a better picture of what’s going on in a firm. Blogs contribute to collaboration and

knowledge sharing as well. The simplicity of blogs makes them an easy and comfortable

medium for people to share ideas. An entire industry is springing up to help companies navigate

2. Boeing’s 787 Dreamliner was seriously delayed because of slow deliveries from suppliers

who were responsible for large chunks of the jet. Outsourcing has become an important

aspect of supply chain management as companies strive to cut costs, yet the practice gives

managers less control, as at Boeing, and may decrease speed and flexibility. As an

operations manager, how would you decide if a multinational supply chain is a better

approach than trying to manufacture as much as possible in-house?

Some of the factors to be considered include differences between the multinational supply chain

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3. What type of production layout do you think would work best in a car dealership? What type

would work best for an insurance company that provides customers with auto, home, health,

and life insurance products? Discuss reasons for your answers.

The process layout would work best for a car dealership by grouping sales people in one area,

4. What are the three types of inventory? Which of these is most likely to be affected by the JIT

inventory system? Explain.

The three types of inventory are raw materials inventory, work-in-process inventory, and

finished-goods inventory. Raw material inventory includes basic inputs such as steel, wire, or

glass that have not been worked on. Work-in-process inventory includes materials moving

5. Some companies are using both lean manufacturing and Six Sigma (discussed in Chapter 19)

methods simultaneously to improve their operations. How do you think the two approaches

might complement or conflict with each other? Explain.

The two approaches would probably complement each other quite will. Lean manufacturing

uses highly trained employees at every stage of the production process who take a painstaking

approach to details and problem solving to cut waste and improve quality and productivity.

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6. Critics argue that RFID can potentially jeopardize consumer privacy by making it possible to

link purchases to individuals or even to track the movements of individuals. Should this

concern prevent companies from adopting RFIDs? Explain.

It’s probably a little late to be worrying about companies linking purchases to individuals or their

movements. Companies have been linking purchases to individuals for some time, though

7. How might the organizers of an upcoming Olympics use an extranet to get all the elements of

the event up and running on schedule?

The organizers of an upcoming Olympics event would use the extranet to permit users at a

8. Do you think it makes sense for a company such as Sears Holdings Corp., which has

numerous shabby Sears and Kmart stores in need of makeovers, to focus resources on

building the online business at the expense of its bricks-and-mortar business? Discuss.

Sears and Kmart may be able to attract younger customers who have not traditionally shopped at

9. The openness of wikis is both their strength and their weakness. As a business owner, why

might you want to take advantage of this new technology? How might you guard against its

potential problems, such as vulnerability to mistakes, pranks, self-serving posts, and

cybervandalism?

A wiki might be a useful tool to give employees voice in the organization, especially in allowing

them to access and edit ideas for improvement in processes and products or services.