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CHAPTER 5
TECHNOLOGY AND OPERATIONS MANAGEMENT
DAVID A. COLLIER AND JAMES R. EVANS
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Chapter 5 Learning Outcomes
l e a r n i n g o u t c o m e s
LO1 Describe different types of technology and
their role in manufacturing and service
operations. LO2 Explain how manufacturing and
service technology is strengthening the
value chain. LO3 Describe different types of
integrated operating systems (IOS). LO4
Explain the benefits and challenges of using
technology. LO5 Describe the processes of
technology development and adoption.
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Chapter 5 Technology and Operations Management

• man had his head blown off, said
  John Brodbeck, who was 5 years old
  in 1930 when the steam engine blew up at his farm
  in Michigan. In the early
  1900sthe height of steam-powered tractor
  useexplosions were common, averaging two a day
  in the United States in 1911, according to
  Diotima Booraem of the Smithsonian Institution in
  Washington D.C. The new technology of the 1910s
  was not safe and few people knew how to truly
  operate steam engines. The first agricultural
  steam engines arrived in the 1850s and were
  pulled by horses. By the 1890s, a steam-engine
  tractor could plow up to 75 acres per day, more
  than 20 times the productivity of pulling a plow
  using horses. By the 1920s, production of steam
  engines dwindled and none were sold by the end of
  the decade, replaced by gas-powered engines and
  tractors.

What do you think? In what ways has technology
benefited your life and work as a student?
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Chapter 5 Technology and Operations Management

• 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.

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Chapter 5 Technology and Operations Management

• 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.

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Chapter 5 Technology and Operations Management

• Manufacturing Technology Tours
• Making jigsaw puzzles consists of three major
  steps making puzzle pieces, making puzzle boxes,
  and final assembly (see diagram on next slide).
• Manufacturing motorcycle transmission gears
  Mazak machining center can operate unattended for
  hourshighly automated production (see diagram on
  slide 8).
• Many manufacturing industries use specialized
  technology.

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Production Process for Jigsaw Puzzle Making
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Examples of Machining Technology
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Chapter 5 Technology and Operations Management

• 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.

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Examples of Service Technology
Exhibit Extra
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Chapter 5 Technology and Operations Management

• Service Technology
• Many health care facilities are adopting
  electronic medical record (EMR) systems that can
  be easily integrated with medical records,
  billing, patient scheduling, and accounting (see
  text box).
• Technology at UPS such as handheld devices,
  UPSnet, UPS Mail, etc. (see text box).

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Chapter 5 Technology and Operations Management

• 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 immediately know and
  react to changes in demand and supply.

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E-Commerce View of the Value Chain
Exhibit 5.1
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Chapter 5 Technology and Operations Management

• Integrated Operating System (IOS)
• 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.
• An IOS addresses key decisions that need to be
  made to serve the customer in the best possible
  way.

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Chapter 5 Technology and Operations Management

• Integrated Operating System (IOS)
• An IOS involves the collection, storage,
  analysis, and dissemination of data and
  information via information technology to improve
  decision-making within the organization.
• An IOS is capable of making key decisions in a
  synchronous and timely way anywhere along the
  value chain.

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Chapter 5 Technology and Operations Management

• Integrated Operating System (IOS)
• Computer-integrated manufacturing systems (CIMS)
  represent the union of hardware, software,
  database management, 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.

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Chapter 5 Technology and Operations Management

• 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.

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Chapter 5 Technology and Operations Management

• Integrated Operating System (IOS)
• Enterprise Resource Planning (ERP) systems
  integrate all aspects of a businessaccounting,
  customer relationship management, supply chain
  management, manufacturing, sales, human
  resourcesinto a unified information system and
  provide more timely analysis and reporting of
  sales, customer, inventory, manufacturing, human
  resource, and accounting data.

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Chapter 5 Technology and Operations Management

• Enterprise Resource Planning (ERP)
• Two prominent vendors of ERP software are SAP and
  Oracle.
• ERP allows departments to share information and
  communicate with each other easily.
• ERP is not about software, but about changing the
  way the organization and its operations are
  managed.

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Chapter 5 Technology and Operations Management

• 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.

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Chapter 5 Technology and Operations Management

• 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

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Chapter 5 Technology and Operations Management
Integrated Operating System (IOS) A revenue
management system (RMS) consists of dynamic
methods to forecast demand, allocate perishable
assets across market segments, decide when to
overbook and by how much, and determine what
price to charge different customer (price)
classes.
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Chapter 5 Technology and Operations Management

• Four Components of RMS
• Forecasting
• Allocation
• Overbooking
• Pricing
• Modern RMS software simultaneously makes changes
  in these decisions in a real-time operating
  system.
• RMS is used to determine price for hotel rooms,
  airline seats, rental cars, sporting events or
  concert seats, cruise line rooms, broadcast
  advertising, power generation, and so on.

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Example Benefits and Challenge of Adopting
Technology
Exhibit 5.2
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Chapter 5 Technology and Operations Management

• 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 (e.g., Monster.com).
• Low scalability implies that serving additional
  customers requires high incremental variable
  costs (see WebVan).
• Many of the dot.coms that failed in the year 2000
  had low scalability and unsustainable demand.

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Chapter 5 Technology and Operations Management

• How Intel describes the history of technology
• revolutions
• Stage I. Birth
• Stage II. Turbulence
• Stage III. Build-out
• Examples
• Global Digital Revolution (see text box)
• U.S. Railroad Industry

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Basic Manufacturing Technology
Exhibit 5.3
Case Contrasting Manufacturing Technology