CHAPTER

The Role of Technology

3 in Operations

PowerPoint Presentation by Charlie Cook

The University of West Alabama
Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
CHAPTER OBJECTIVES
• Present the different types of information systems that
exist in an organization.
• Introduce the ways technology can add value to the
operations function within an organization.
• Identify the ways technology can be used in a
manufacturing company.
• Describe enterprise resource planning (ERP) systems
and how they can affect an organization.
• Demonstrate the ways technology can be integrated into
service operations.
• Present a framework for defining the types of e-services
currently being offered.
Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
Managerial Issues
• Advances in technology are changing the way in
which both manufacturing and service operations
are designed.
• Technology is a tool, not an end in itself.
• Importance of maintaining compatibility between
technology and the organization’s other elements.
• The need for continuous training in the use of
technology.

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 Types of Computer Information Systems

Management
Management Finance
Financeand
and
Information
Information Accounting
Accounting

Types
Typesof
of
Artificial
Artificial Computer
Computer Decision
Decision
Intelligence
Intelligence Information Support
Support
Information
Systems
Systems

Executive
Executive Marketing
Marketing
Information
Information Information
Information

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Types of Computer Information Systems
• Management Information Systems
– Reporting on operational effectiveness and
productivity to support routine decision
making
• Finance and Accounting Systems
– Transaction processing systems that provide
sales and revenue information
• Decision Support Systems
– Help managers develop satisficing and
optimization models for suitable alternatives
and best solutions.
– Data mining: translating patterns and
relationships
Copyright in
© 2005data into
The McGraw-Hill decision-making
Companies. All rights reserved.
Types of Computer Information
Systems (cont’d)
• Marketing Information Systems
– Provide reports and research on consumer
trends and preferences.
• Executive Information Systems (EIS)
– Give top management the ability to “drill down”
into the operations of the firm
• Artificial Intelligence
– Speech recognition
– Artificial vision for visual recognition systems

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How Technology Affects
Operational Performance

Exhibit 3.1
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Technology in Manufacturing
Automation
Machining centers Operations where tools are change
automatically as part of the process.

Numerically controlled Manufacturing equipment that is directly

(NC) machines controlled by a computer.

Industrial robots Programmable machines that can

perform multiple functions.

Computer-aided Designing a product using a specially

(or –assisted) design equipped computer.

Computer-assisted Integration of design and production of a

design and product through use of a computer.
manufacturing system
(CAD/CAM)

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Technology in Manufacturing (cont’d)
Automation (cont’d)
Flexible manufacturing Manufacturing facility that is
system (FMS automated to some extent and
produces a wide variety of products.

Computer-integrated Integration of all aspects of

manufacturing (CIM) manufacturing through computers.

Islands of automation Automated factories or portions which

include NC equipment, automated
storage/retrieval systems, robots, and
machining centers.

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Information Technology

Software Systems
Enterprise Resource Provides a common software
Planning (ERP) infrastructure and database.

Supply Chain Controls interaction with suppliers in

Management (SCM) the overall supply chain.

New Product Links the engineering function with

Development (NPD) the operations function.

Customer Relationship Manages the interface between the

Management (CRM) firm and its customer.

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Major Categories of Software Systems
in Manufacturing

Exhibit 3.2
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 Functional Areas as
Independent Operations

Exhibit 3.3A
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ERP Systems Link Functional Areas with a
Common Software Platform and Database

Exhibit 3.3B
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Evolution of ERP Systems
• ERP Systems Origins
–An outgrowth of Materials Requirements Planning
(MRP) systems in the 1960s–70s
–Adoption of ERP systems updated the entire
information technology infrastructure of firms.
• Benefits of ERP Systems
–Reduction in database errors
–Faster customer response
–Faster order fulfillment
–Better overall communication

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 Example of
How SAP’s R/3
System
Integrates an
Organization

Exhibit 3.4
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Leading ERP Software Companies and Respective
Revenue Shares

Source: AMR Research, “The Enterprise Resource Planning Report, 2003–2008,” May 2004. Used with permission. Exhibit 3.5
Copyright © 2005 The McGraw-Hill Companies. All rights reserved.
Evolution of ERP Systems (cont’d)
• Why ERP Systems Fail
–Lack of top management commitment
–Lack of adequate resources
–Lack of proper training
–Lack of communication
• Criticisms of ERP Systems
–Constraints of a single ERP system versus a
mixture of Best of Breed software products
–Inflexibility of the built-in business model of ERP
systems

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Technology Trends in Services

• Increase in Self-Service
–Reduces labor costs
–Speeds up service
• Decrease in the Importance of Location
–Lower costs for delivery of products and
services increases remote points of access and
reduces the need for specific service locations

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 Methods of Pricing to
Encourage Self-Service

Exhibit 3.6
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Technology Trends in Services (cont’d)
• Shift from Time-dependent (Synchronous) to
Non-time Dependent (Asynchronous)
Transactions
– More economical (for the firm) and efficient (for
the customer) forms of service
• Increase in Disintermediation
– Technology brings buyers and sellers closer
together, eliminating intermediate steps or
organizations (intermediaries).

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Integrating Technology into Services
• Integration Benefits
–Efficiency in operations
–Effectiveness in serving customers
• Areas for Integration
–Strategic planning
–Improved performance
• Faster service
• Improved customer
knowledge
• Increased product
customization

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 Lands’ End’s
website
allows the
customer
to create a
likeness of
him- or herself
and “try on”
clothing for a
custom fit.

Copyright © 2005 The McGraw-Hill Companies. All rights reserved.

Integrating Technology into Services (cont’d)

• Areas for Integration (cont’d)

–Increased efficiency
• Economies of scale in consolidating operations.
• Reduced labor costs through replacement of
manpower and increased labor productivity.

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Categories of E-Services
Category Function
Internet World-wide web presence with open
access to all.

Intranet Internal network providing limited access

by individuals within an organization.

Extranet A resource-limited network open only to

specified internal and external users

Electronic Data Interchange A network designed to support the

(EDI) exchange of data between the
organization and its vendors and
suppliers.

Value-added network (VAN) A third party service that is used in

conjunction with EDI to provide the link to
customers and suppliers.

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The Role of the Internet, Intranet, Extranet,
and EDI in an Organization

Exhibit 4.7
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Types of E-Services
Broad Categories Specific Service Types
Business-to-Consumer E-tailers
(B2C) (Goods and Services)

Consumer-to-Consumer
Customer Support
(C2C)

Business-to-Business
Network Providers
(B2B)

Government-to-Business Information Providers

(G2B) (Infomediary)

Government-to-Consumer Application Service Providers

(G2C) (ASPs)

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Challenges for E-Tailers
• Infrastructure
–Developing the structure to efficiently and
quickly deliver goods to customers.
• Lack of tangibility
–Having no physical presence to which
customers can turn with problems.
• Differentiation
–Creating a unique on-line presence that
sustains growth.

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Technology Issues
• Overcoming Barriers to Entry (Customer)
–“Fear of the unknown”
–Lack of knowledge by the customer
• Training and Support
–Worker skill development through hands-on
training in the new technology
–Customer familiarization with technology

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Ethics and Privacy Issues
• Ethical Issues
– Inappropriate access to information
– Violations in accounting standards
– Failure to disclose information
– Nonconformance with health and safety
guidelines.
• Privacy Issues
– How much discretion and privacy will
employees have in the use of their company’s
cyber-resources.
• Organizations have a legal responsibility to control
computer usage that results in abuse by their
employees.
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