Chapter 19

Ten Pivotal Operations Management Developments

In This Chapter

Tracing the innovations that led to modern-day operations management

Recognizing some pioneers who changed production and manufacturing methods

What’s currently called operations management evolved from a long line of discoveries, inventions, and revolutions. You may find it hard to believe that there was a time when products weren’t mass-produced and available on command. If a person wanted something, she had to make it or persuade someone to make it for her. In this chapter we highlight ten human developments that shaped operations management into what it is today and credit the people behind these developments.

Logistics

Beginning before the Roman legions, armies have always “marched on their stomachs” and developed increasingly robust methods to quickly move large quantities of food and supplies where needed. Thanks to those military needs, civilizations throughout the world have what’s known today as logistics. UPS, a wildly successful shipping service, even hangs its sales and marketing hat on its highly refined level of logistics. And one might say that logistics is the foundation of what has become known as supply chain management (covered in Chapter 10).

Today, the Council of Logistics Management defines logistics as “the process of planning, implementing, and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements.”

Now, that’s quite the definition when you consider that all the Roman legions wanted to do was position their troops and supplies near enough to their enemies to kill them!

Division of Labor

In his book, The Wealth of Nations, published in 1776, Adam Smith expounded the virtues of the division of labor. Up to this point, a single craftsperson would execute all the steps to produce a finished item, from sawing a log into boards to applying the final coat of varnish on a cabinet — a slow and costly process. This movement away from craft production fueled the Industrial Revolution. Division of labor helped workers become highly specialized and led to increased productivity. This division of labor was the foundation upon which Henry Ford built his empire, and the increased productivity is what allows humankind access to the wide array of affordable products and services available today.

Interchangeable Parts

The idea of using interchangeable parts — that one part could be substituted for another — made the concept of the assembly line possible. Previously, you couldn’t even repair a broken machine with a part from another (same) machine without filing and adjusting the part. Each machine and its components were slightly different. Now, companies could place bins of identical components near an assembly line and use any of them to make the end product as it moved by. Eli Whitney popularized this concept when he applied it to the manufacturing of muskets in the late 1700s and early 1800s for the United States military.

Scientific Management

Scientific management is the study and analysis of processes and workflows. Frederick Winslow Taylor is regarded as the father of scientific management because he focused on industrial efficiency by breaking work into well-defined tasks with specific assigned times. His efforts were complemented by the work of Frank and Lillian Gilbreth, who studied exactly how tasks should be completed to remove any waste in effort and motion. Now standards could be set for ideally efficient production. The concept of scientific management reached its peak influence in the early 1900s and laid the foundation for mass production, which would revolutionize manufacturing. To see how craft production evolved into mass manufacturing and eventually into lean production, take a look at Chapter 11.

Mass Production

Combining logistics, division of labor, and interchangeable parts into standardized output, Henry Ford started the mass-production revolution when he implemented the moving assembly line in his plant in Highland Park, Michigan, to produce the Model T automobile. Mass production was further advanced by interchangeable parts and the use of standardized gauges to quickly measure the dimensions and quality of those parts. For more on mass production, see Chapter 11.

Statistical Quality Control

After World War II, consumers were flooded with mass-produced goods that were incredibly affordable thanks to mass production. The goods were so affordable that consumers could forgive the often shoddy quality and short life of the finished product. American manufacturers were forced to embrace quality only because of international competition. The high quality that Western consumers have come to expect in nearly everything they buy is the result of statistical quality control (a method of quality control that uses statistics). Walter Shewhart, an American physicist, engineer, and statistician, was at the heart of the application of statistical quality control, developing the process control chart (a method for monitoring process performance) and the concepts of common and special cause variation (variation that occurs in a process) in the early 1900s. (For more on these concepts, see Chapter 12.)

Inspired by Shewhart, W. Edwards Deming, after being shunned by American industry, took these principles to Japan after World War II. He introduced these statistical methods to Japanese industries, teaching them to countless Japanese engineers. Statistical quality control methods were pivotal to the success of Japanese manufacturing after World War II.

Deming also created the plan-do-check-act cycle (often referred to as the Deming cycle), upon which most other quality initiatives (including Six Sigma) are built. Today, the prestigious Deming Prize is awarded to companies for significant contributions to quality. See Chapters 12 and 13 for more on these quality topics.

Lean Manufacturing

Henry Ford’s low-cost, mass-production revolution also created a legacy of large manufacturing runs and difficult model changeovers, particularly in the automobile industry. Lean manufacturing started with the Toyota Motor Company and is often referred to as the Toyota Production System. The revolution began when Kiichiro Toyoda was looking for a way to save his failing company after World War II. Taiichi Ohno, inspired by the American grocery store, took the idea of providing frequent replenishment of small lots of inventory to the production floor, thus creating just-in-time manufacturing. Shigeo Shingo further enhanced lean manufacturing in the 1950s by developing the idea of quick changeover, where equipment could rapidly be changed from producing one product to another. See Chapter 11 for more on lean manufacturing principles.

Scientific Project Planning

The modern project-planning tools that operations managers use to plan and manage projects originally developed out of the work of several men:

Frederick Winslow Taylor, in the early 1900s, produced the work breakdown structure, which separates a project into discrete tasks.

Henry Gantt, in the 1910s, created what has come to be known as the Gantt chart, a bar chart that shows a project’s schedule and helps identify where resource constraints exist.

Morgan Walker and James Kelley Jr. identified the concept of the critical path, or those activities in a project that determine the project’s overall timing for completion, in the 1950s.

The major impact of these tools was to introduce a far greater measure of control over the progress of complex projects, greatly enhancing the project manager’s ability to anticipate and plan for future developments rather than having to react to a crisis when it occurred.

See Chapters 14, 15, and 16 for details on project management and how these tools improve scientific project planning.

Electronic Data Interchange

Electronic data interchange (EDI) is responsible for the transmission of data from one computer to another, allowing people to communicate digitally and enabling e-commerce. Perhaps the first known use of e-commerce was in 1910 by a group of florists who started the Florists’ Telegraph Delivery Association to transmit flower orders throughout the country. The group, FTD, Inc., still brightens the days of many as it sends flowers throughout the world using modern EDI.

The standards of EDI in use today originated with the Berlin Airlift. Tracking the supplies sent into West Berlin by air was nearly impossible because of the lack of standardized documents and a common language. U.S. Army Master Sergeant Edward Guilbert, along with other logistics officers, invented a standard system that could be transmitted by several methods that reliably tracked the movement of supplies. Guilbert took this knowledge to DuPont after the war and developed a method to effectively communicate with suppliers. This evolved into the system that’s used today to stock shelves and enable people to place an order with Amazon for the latest For Dummies book.

Supply Chain Management

The elements that make up what today is called supply chain management were started at Ford and Toyota. At his assembly plants, Henry Ford integrated an array of vertically integrated suppliers, and Toyota extended the management principles to include independent suppliers.

However, the term supply chain management wasn’t coined until 1982 by Keith Oliver. The term didn’t catch on until the 1990s, as companies really began in earnest to recognize the importance of the supply chain for success, something that Toyota had known for some time.

Supply chain management has become a management buzzword, but its importance to profitable business can’t be underestimated. The complexity of managing a supply chain has increased significantly over the last few decades, as the number of suppliers to an individual company has increased and as these suppliers have become globally dispersed. Check out Chapter 10 for much more information on supply chains.