OPERATIONS & TECHNOLOGY MANAGEMENT (JMP 5023)

Technology and Integrated Operating

Systems

Understanding technology in operations is critical for several reasons.

Virtually everything that is done in a business depends on some type of technology.

Technology is evolving at an

extremely rapid pace.

Technological innovation in goods, services, manufacturing, and service delivery is a competitive necessity.

Understanding technology in operations is critical for several reasons.

Virtually everything that is done in a business depends on some type of technology.

Technology is evolving at an

extremely rapid pace.

Technological innovation in goods, services, manufacturing, and service delivery is a competitive necessity.

• Hard technology refers to equipment and devices that perform a variety of tasks in the creation and delivery of goods and services.

• Soft technology is the application of the Internet, computer software, and information systems to provide data, information, and analysis and to facilitate the accomplishment of creating and delivering goods and services.

Exhibit 5.1

Production Process for Jigsaw Puzzle Making

Exhibit 5.2

Examples of Machining Technology

Service Technology

• Service technologies are used behind the scenes to facilitate your experience as a customer.

• E-service refers to using the Internet and technology to provide services that create and deliver time, place, information, entertainment, and exchange value to customers and/or support the sale of goods.

Exhibit 5.4

The Electronic Check Process

Source: M. M. Anderson, “The Electronic Check Architecture,” Financial Services Technology Consortium, 1998 (http://www.echeck.org/library/wp/index.html).

Technology in Value Chains

Three Major Types of Business Relationships

B2B: Business to Business B2C: Business to Customer C2C: Customer to Customer

Electronic transaction capability allows all

parts of the value chain to immediatelyknow and react to changes in demandand supply.

Exhibit 5.6

E-Commerce View of the Value Chain

Business Intelligence Systems in Value Chains

• Business intelligence systems (BIS) consolidate data from across the organization and allow companies to integrate information into a common database for easy access and analysis.

• Many BIS incorporate data mining, sophisticated statistical analysis tools and automated search algorithms to sift through large amounts of data to identify meaningful relationships.

Business Intelligence Systems in Value Chains

Benefits include increased revenues by identifying customer interests, improving customer satisfaction, monitoring customer & employee store behavior to improve sales training, reduce value chain cost by real-time tracking of operational metrics and support for strategic decision-making through data analysis.

Integrated Operating System (IOS) has 4 major characteristics:

1. An IOS focus is on the main problem structure and processes of a specific industry, such as home insurance, airlines, family practice medical doctors, or automobile manufacturers.

2. An IOS addresses key decisions that need to be made to serve the customer in the best possible way.

Integrated Operating System (IOS)

3. An IOS involves the collection, storage, analysis, and dissemination of data and information via information technology to improve decision-making within the organization.

4. An IOS is capable of making key decisions in a synchronous and timely way anywhere along the value chain.

Integrated Operating System (IOS)

• Supply chain management (SCM) systems focuses on producing the right product, in the right quantity, at the right time, in the right location, to the right customer, at the right price.

Integrated Operating System (IOS)

• Computer-integrated manufacturing systems (CIMS) represent the union of hardware, software, and communications to automate and control production activities.

A robot is a programmable machine designed to handle materials or tools in the performance of a variety of tasks.

Integrated Operating System (IOS)

Computer-Integrated Manufacturing Systems (CIMS) Continued

CAD/CAE enables engineers to design, analyze, test, simulate, and “manufacture” products before they physically exist.

CAM involves computer control of the manufacturing process.

Flexible manufacturing systems (FMS) consist of two or more computer-controlled machines linked by automated handling devices.

Integrated Operating System (IOS)

• Enterprise Resource Planning (ERP) systems integrate all aspects of a business—accounting, customer relationship management, supply chain management, manufacturing, sales, human resources—into a unified information system and provide more timely analysis and reporting of sales, customer, inventory, manufacturing, human resource, and accounting data.

Enterprise Resource Planning (ERP)

Two prominent vendors of ERP software are

SAP and Oracle.

• ERP allows departments to easily share information and communicate with each other.

• ERP is not about software, but about changing the way the organization and its operations are managed.

Integrated Operating System (IOS)

• Customer relationship management (CRM) is a business strategy designed to learn more about customers’ wants, needs, and behaviors in order to build customer relationships and loyalty and ultimately enhance revenues and profits.

Integrated Operating System (IOS)

CRM helps firms gain and maintain a competitive

advantage by

• Segmenting markets based on characteristics,

• Tracking sales trends and advertising effectiveness,

• Forecasting customer retention rates and providing feedback as to why customers leave the company,

• Studying which goods and services are purchased together,

• Linking the information to competitive priorities by market segment and process and value chain performance.

Integrated Operating System (IOS)

A revenue management system (RMS)

consists of dynamic methods to forecast

demand, allocate perishable assets cross

Rate classes, decide when to overbook and

by how much, and determine what price to

Charge different customer (price) classes.

• Four Components of RMS:

Forecasting Allocation Overbooking Pricing

• Modern RMS software simultaneously makes changes in these decisions in a real-time operating system.

• RMS used to determine price for hotel rooms, airline seats, rental car, sporting event or concert seat, cruise line room, broadcast advertising, power generation, and so on.

Benefits of Technology

• Improves productivity and product quality.

• Creates new industries and job opportunities.

• Allows for unparalleled opportunities for innovation.

• Drives improvements in time, cost, and quality.

Challenges of Technology

• Customer concerns, such as online security and privacy issues.

• Logistical costs for manufactured goods are expensive for online businesses.

• Logistical costs for information intensive services are much cheaper for online businesses.

• Product returns to a virtual store.

Exhibit 5.9

Example Benefits and Challenge of Adopting Technology

Making Technology Decisions

• Scalability is a measure of the contribution margin required to deliver a good or service as the business grows and volumes increase.

• High scalability is the capability to serve additional customers at zero or extremely low incremental costs. (Monster.com)

• Low scalability implies that serving additional customers requires high incremental variable costs. (Webvan)

• Many of the dot.coms that failed in the year 2000 had low scalability and unsustainable demand.