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The History of Operations Management

February 27, 2017 • admin

The field of Operations emerged in the 1800??™s but with each decade has grown and developed into the technologically advanced field it is today, committed to producing innovative quality products and services. According to Heizer & Render (2008) Operations Management is ???the set of activities that creates value in the form of goods and services by transforming inputs into outputs.???
This paper examines the evolution of Operations management and its various contributors, from the early concepts where the focus was on cost and includes, the scientific and mass production era to focusing on quality and the lean production era. The final section of this paper focuses on customization in the mass customization era.

EARLY CONCEPTS 1776-1800

Agriculture was the predominant industry in most countries worldwide for many centuries. At the end of the 18th century, advances began to be made in various agricultural techniques that resulted in increases in food and raw material. There were also changes in industrial organization and advances in technology which resulted in increased production, efficiency and profits. These and other conditions resulted in the industrial revolution. As a result some individuals began to look at more efficient way to increase production and profits. These include the following:

LABOR SPECIALIZATION:

Labor specialization refers to the dividing up of tasks so that they are completed by a larger number of persons who perform specialized skills as opposed to one person completing the entire job.

Adam Smith (1723-1790)

Adam Smith was a philosopher and economist who is one of the individuals credited with recognizing the importance of labor specialization.
He illustrated its importance in his book The Wealth of Nations (1776), using pin making to establish his point.
Smith states:
???One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it; to make the head requires two or three distinct operations, to put it on is another peculiar business, to whiten the pin is another, it is even a trade by itself to put them into paper???.(as cited in Beardshaw & Brewster et al (2001)
Smith noted that with specialization each labourer is able to produce 2400 time as much as each working separately without specialization and separation. (Niederhoffer, 2006) He believed that specialization led to:
a. increased skill in workers who with repetition of one particular task became expert in that area.
b. time saved since the person who becomes skilled will be able to perform the task more quickly.
c. An increase in the use of machinery
d. Increased skill and time saved would lead to an increase in productivity.

STANDARDIZED PARTS (Eli Whitney 1765-1825)

Standardized parts are almost identical, made that way so that they are interchangeable and can fit into any device of the same type. This was developed around 1798 by Eli Whitney who recognized that if one part can replace another, allowing for easy assembly of the new part without each replacement or new part having to be custom made to fit the device, the time and skill needed to do this task would be greatly minimized. Whitney used the concept of standardized parts to build ten guns which contained the same parts and mechanism. He took the parts to the US congress where he reassembled them. The congress was so impressed that an order was given for all US equipment to have these interchangeable parts.

SCIENTIFIC MANAGEMENT ERA 1880 – 1910

Kreitner & Kinicki ( 2008) describes scientific management as: ???using research and experimentation to find the most efficient way to perform a job???. It was conceptualized by Frederick Taylor and involves five steps:

Use time and motion studies to develop standard methods for performing tasks.

Select employees with the necessary abilities to perform these tasks

Train the employees in the standard methods

Lend support to the workers and reduce any interruptions that would prevent the workers from performing the tasks.

Provide incentives that would help to reinforce performance.

Contributions to this era which are Gantt Charts, Motion and Time Studies, Process Analysis and The Queuing Theory.

GANTT CHARTS (Charles Gantt: (1861 ??“ 1919)

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Henry Gantt, an American mechanical engineer and management consultant, developed the Gantt charts in the 1910??™s. The charts were designed to show the progression of a project. The horizontal axis of the chart shows the time scale for the expected completion of the project and the vertical refers to the tasks to be done or that have already been complete. The horizontal rows of bars show the beginning and ending date of each task in the project.

MOTION & TIME STUDIES (Frank B. Gilbreth (1868 -1924)

Frank B. Gilbreth was born July, 7 1868 in Fairfield, Maine U.S.A. His professions included bricklayer, building contractor and management engineer. In his capacity as a bricklayer he observed that other bricklayers had their individual ways of working that were not duplicated by another worker. He also noted that people did not always employ the same motions while doing their work. He determined that some time was lost in the movements or motions of these individuals. These observations caused Gilbreth to seek a better way to perform tasks. The studies conducted came to be known as motion and time studies and are usually only appropriate for repetitive tasks.

Time and motion studies is the method for establishing employee productivity standards in which a complete task is broken down into small simple steps. The sequence of movements taken by the employee in performing those steps is carefully observed to detect and eliminate redundant or wasteful motion and precise time taken for each movement is measured. From these measurements, production and delivery times and prices can be computed and incentive times devised (???Time and motion studies,??? n.d.).

PROCESS ANALYSIS (Frederick Taylor (1856-1915)

Another method of reducing the time taken to produce is by using process analysis. Process analysis is used to analyze a job by looking at the various processes involved in the completing of the job. The process can be analyzed from the top down or from the bottom up. It is broken down into a number of steps that includes an explanation of how these steps are to be carried out in order to complete the task.

QUEUING THEORY (Agner Krarup Erlang (1978-1939)

In 1908, A.K. Erlang, a Danish mathematician, statistician and engineer began studying the problem of telephone congestion in a manually operated telephone system. The study consisted of:

The average time a customer had to wait.

The chance that the customer would get immediate service,

The effect on the customer if there is a change in operators or any other conditions.

Erlang determined that if more operators were employed or the service offered was speeded up the waiting period for the customers would be reduced. However if these measures were implemented the operations would be more expensive to maintain, He indicated that it was important to find a reasonable balance. This theory is used to make decisions about resources needed to provide service.

Examples of uses of the queuing theory are:

First In First Out (FIFO) ??“ customers are served one at a time and the customer that was waiting the longest is served first

Last In First Out (LIFO) ??“ Customers are also served one at a time but the customer who was waiting for the shortest time will be served first.

Process Sharing ??“ Customers are served equally

Priority ??“ Customers are served in order of priority.

MASS PRODUCTION ERA (1910-1980)

Mass production focuses on economies of scale where large quantities of products are produced. Mass production manufactures believe that if large batches of products are produced the machines will be used more efficiently and it will be less time consuming for the machine operators. The productions are based on a forecast of future needs, where the manufacturer seeks to anticipate the market for the goods. This however can cause a surplus of supplies caused by over production, which leads to reduced productivity.

Contributors and contributions to the mass production era include:

MOVING ASSEMBLY LINE (Henry Ford (1863-1947 and

Charles EmilSorenson (1881-1968)

The model T Ford was first produced by Ford Motor Company in1908. It was only affordable by the elite and Henry Ford wanted to find a way to produce the car more efficiently and make it available to the average man. He and his team which included Charles E. Sorenson an employee, did some investigations and deduced that in order to achieve their goal they needed interchangeable parts, continuous flow of the process, specialized labor and reduced wasting of time.

They determined that using interchangeable part meant that any valve could fit any engine and any steering wheel any chassis. It also meant improving machinery and cutting tools used to make these parts and then employing lower-skilled labourers to replace the skilled craftsmen who made the parts by hand. They also realized that the work needed to be arranged so that as soon as one task was completed another could begin, thus reducing time spent in the manufacturing process. Eventually the labor process was broken down into 84 individual steps and each worker was trained to do just one of these steps. Then in 1923 the first moving assembly ever used in large scale manufacturing was introduced at Ford Motors. Cars could now be produced more efficiently, resulting in reduced cost to the customer, while still realizing a profit for the company.

STATISTICAL SAMPLING (Walter A. Shewhart (1891-1967)

Statistical sampling is selecting one or more representative units of a population in an effort to understand the characteristics of the overall population (???Statistical sampling???. n.d.). It is used to draw conclusions about a population without examining all the items comprising the population.

Statistical sampling was engineered by Walter A. Shewhart an American physicist, engineer and statistician. He noted that any variations in the production process could be attributed to a common cause (caused by some unknown factor e.g man power) or a special cause (caused by known factors e.g earthquake). He introduced a control chart to distinguish between the two causes. Shewhart believed that in order to predict future output and maintain an economical process it was important to have the production in a state of statistical control where there is only common-cause variation. (???Walter A. Shewhart??? 2010).

ECONOMIC ORDER QUALITY (F.W. Harris)

The model for calculating the economic order quantity was developed by F.W. Harris in 1913.

It is used by most companies who use large volumes of stock. The Economic order quantity is used to determine the most adequate level of inventory needed for production. At the same time it also calculates the best point at which the cost for holding inventory and ordering is lowest, so that operating managers can determine the number of units of stock that needs to be ordered to adequately restock, without running the risk of overstocking.

LINEAR PROGRAMMING PERT/CPM (DuPont)

Linear programming is a mathematical process of taking certain inequalities relating to a particular situation and finding a way to get the best outcome from the situation. For example a manufacturer may have materials, labor and machinery available but is not sure of the best method to use in production. The company can use linear programming to determine the best production levels and ways in which profits can be maximized under these conditions.

PROGRAM EVALUATION AND REVIEW TECHNIQUE (PERT)

Program Evaluation and Review Technique (PERT) was developed and used in the construction of the Polaris submarine by the U.S. Navy in 1958. It is a management tool for planning, coordinating and controlling large complex projects.

The Pert technique is made up of a diagram of arrows and circles which represent the series or sequence of activities necessary for the completion of any project. The arrows represent activities or tasks. These activities and tasks require time and resources. On the other hand the circles represent points in time in the project where an activity has been completed. PERT uses three time estimates to compute expected values and standard deviations for each activity.

A PERT CHART

[pic]

CRITICAL PATH METHOD ( duPont)

The Critical Path Method is an important part of PERT. According to Heizer and Render (2008) the ???Critical Path Method (CPM) is a project management technique that uses only one time factor per activity???. It was developed in 1957 by Morgan R. Walker of DuPont and James E. Kelly Jr. of Remington Rand and like PERT is used to help managers schedule, monitor and control large and complex projects. A path is a sequence of activities and a critical path is the route that will require the greatest amount of time. In order to speed up the project, so that it finishes on time, activities along the critical path will have to be shortened.

Heizer and Render states that PERT and CPM follow six basic steps:

Define the project and prepare the work breakdown structure

Develop the relationship among the activities. Decide which activities must precede and which must follow others

Draw the network connecting all the activities

Assign time and/or cost estimates to each activity

Compute the longest timepath through the network. This is called the critical path

Use the network to help plan, schedule, monitor and control projects???.

MATERIAL REQUIREMENTS PLANNING

This is a computerized inventory system that was designed in the 1940??™s and 1950??™s to assist production managers in scheduling and placing orders for what is known as dependent demand items. These are items that are related in to the demand for another item such as raw materials and parts. As soon as management knows or are able to estimate the demand for the final product they are able to order the materials or parts necessary to complete the product in a specified time frame.

Materials requirement planning determines what is needed, how much is needed and when it is needed. The materials or inventory needed are then broken down into planning periods so that production can be completed on time. At the same time inventory levels and other costs can be kept at a minimum.

LEAN PRODUCTION ERA (1980 ??“ 1995)

In the lean production era the focus shifted to quality. It objectives includes

reducing the time between the customer??™s order and shipment, thereby eliminating

waste and reducing cost. This was achieved by producing what the customer

wanted instead of production which was based on a forecast of customer??™s future

needs as was the case in the mass production era. The lean production era also sought

to provide high quality functional products at affordable prices.

JUST-IN-TIME

According to Horngren, Harrison and Bamber (2005), Just-In-Time is ???a system in which a company produces just in time to satisfy needs. Suppliers deliver materials just in time to begin production and finished units are completed just in time for delivery to customers.???

Since supplies are delivered only when needed there is no need for storage or any other costs that it entails. With the Just-in Time system goods are produced on demand and not only is waste eliminated but better quality products are produced at lower costs.

COMPUTER-AIDED DESIGN (CAD) – is the use of computer software for the design and creation of models of products to be tested. Since these are virtual products CAD results in a reduction in the cost of product development as well as a reduction in the time required to run tests using actual products. Any errors in the designs can be modifies as the tests are administered.

ELECTRONIC DATA INTERCHANGE ??“ is used by businesses to exchange information electronically. This exchange of data is between or within an organization where information is transferred from a computer in one location to a computer in another location without having to re-enter the information. The benefits of EDI are:

It saves time and money since transactions can be sent from one system to another, eliminating printing and paper handling.

It is easier for customers and distributors to place orders and the company benefits since being able to cater quickly to stakeholders need means that the customers are more likely to remain with the company instead of going to its competitors.

It eliminates time delays where paper documents transported manually may take many days to reach its destination.

Labor cost usually associated with manual processing is reduced.

Information is more accurate since there are fewer points where errors can be introduced into the system.

A larger numbers of users have access to a great amount of data received in a timely manner.

Less storage space is required.

The use of EDI results in the production of a better product and improved customer service.

TOTAL QUALITY MANAGEMENT

Total Quality Movement is an organizational culture dedicated to training, continuous improvement and customer satisfaction (???Kreitner & Kincki???, 2008). The organization??™s functions are geared specifically towards constantly improving the quality of products, services and business processes

BALDRIGE AWARD – The Malcolm Baldrige National Quality Award was

established by the U.S. congress in 1987 and is presented annually by the president of

the United States to organizations that demonstrate excellence in quality and

performance. It is designed to encourage manufacturers, service businesses, and small

businesses, educational and healthcare institutions to strive for quality and recognizes

those businesses that have successfully implemented quality management systems.

The award is named after the late U.S. Secretary of Commerce Malcolm Baldrige

who was a proponent of quality management. Organizations that apply for the

Baldrige Award are judged in the area of leadership, strategic planning, customer and

market focus, measurement analysis and knowledge, human resource, process

management and business performance results.

EMPOWERMENT

In today??™s society it is recognized that human capital is an extremely important resource in an organization. Employees with the right skills, knowledge and motivation can be essential to the growth and development of any organization. The prudent manager must do all in his power to utilize this resource, by empowering the workers, allowing them to be involved in the decision making processes of the organization.

Empowerment includes

Building communication networks that include employees

Developing open, supportive supervisors

Moving responsibility from both managers and staff to production employees

Building high-morale organizations

Creating formal organization structures such as teams and quality circles

KANBAN

Kanban is a system of continuous supply of component parts and supplies, such that workers have what they need, where they need it and when they need it. It is a means of achieving Just-In-Time product and works on the basis that each process on a production line pulls just the right number and type of components that the process requires at just the right time (???What is Kaban??? n.d.).

MASS CUSTOMIZATION ERA (1995 -2010)

Mass customization involves customizing and personalizing of products and services. With the evolution of this era in operations management customers are able through the help of the world-wide web, to interact with a company in almost any part of the world and specify their unique requirements, which are then manufactured by automated systems. Benefits of mass customization include lower costs and higher profits. In addition, because the products are made to customer specifications they are able to compete with other similar products at the same or similar cost.

GLOBALIZATION ??“ is the interaction and integration among peoples, companies and governments of different nations (???Globalization???, n.d). The basis for it is informational technology which allows easy access and makes the world a global village. Globalization affords the prudent manager the opportunity to tap into the vast resources that are available in other countries. Companies are also able with the use of the internet to broaden their customer base. This affords customers the opportunity to customize their orders and be reasonably assured that the products and even services will be made readily available to them.

INTERNET/E-COMMERCE

E-Commerce refers to the ability of businesses to exchange information using the electronic means. The technologies used in E-commerce can cater to almost any situation and includes Electronic Data Interchange, email, electronic bulletin boards, fax transmissions and electronic transfers. It also refers to internet shopping and online stocks and bonds. The internet allows customers controlled access to a company??™s computer system and business is done faster and better.

ENTERPRISE RESOURCE PLANNING ??“ is a process that brings together all the departments and functions in an organization into a single computer system that meets the needs of each department. Since it is a single system all information necessary for decision making is readily available electronically across all departments. This results in efficient customer management and companies are able to deliver goods and services that meet customer expectations.

LEARNING ORGANIZATION

Yukl (2006) notes that

???the term learning organization has been used to describe organizations that learn rapidly and use knowledge to become more effective. In these organizations the values of learning, innovation, experimentation, flexibility and initiative are firmly embedded in the culture of the organization.

Leaders are involved in the development of tools and models for understanding how things work, how to adapt to the environment and how to achieve the organization??™s success. Learning organizations empower workers who are then able to deal with problems and find better ways to do the work??? .

INTERNATIONAL QUALITY STANDARDS ??“ focuses on establishing quality management procedures. The standards are set up based on leadership, detailed documentation, work instructions and recordkeeping. The ISO 9000 which is a set of quality standards developed by the International Organisation of Standardization has international recognition. In order for companies to become ISO 9000 certified, they must go through a process that involves the documentation of quality procedures, an on-site assessment and an ongoing series of audits of their products and services. Companies must also be listed in the ISO directory in order to do business internationally.

FINITE SCHEDULING

Finite scheduling is an approach used by companies to determine how much work can be accomplished in a given time period. The goal is for work to proceed at an even pace at every point in the production process. Types of finite scheduling tools are:

Electronic scheduling board (ESB) ??“ this provides a graphical view of all jobs currently in production. It calculates performance times automatically and gives a warning it a bottleneck occurs.

Order-based scheduling (OBS) ??“ the scheduler, decides which work will be completed first by only selecting the orders that meet the criteria pre-set by the company.

Constraint-based schedulers (CBS) ??“ the bottlenecks in the line are used to determine the schedule for the rest of the components in the system.

Discrete Events Simulation ??“ models random events and predicts the domino effect one event would have on the rest of the system

Genetic algorithms ??“ New schedules are developed using characteristics from previous schedules (???finite capacity scheduling???, n.d.).

SUPPLY CHAIN MANAGEMENT is ???management of activities that procure materials and services, transforming them into intermediate goods and final products, and delivering the products through a distribution system??? (Kreitner & Kiniciki, 2008).

The aim is to increase competitiveness through product customization, high quality, cost reductions and the speed at which the products reach the market. Companies can gain a competitive advantage in the market by having strong relationships with their suppliers.

BUILD TO ORDER- is a production process where products are built as soon as a confirmed order is received. It is used for highly customized or low volume products.

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