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To understand the environment of operations management today, it helps to have a bit of an understanding of where it's been. In the late 1700s and early 1800s Europe, and eventually the United States, was involved in the Industrial Revolution. During the Industrial Revolution, products were produced by individuals who had highly developed skills working with iron and wood. This type of production, known as craft productionProduction of goods by highly skilled and specialized artisans., was capable of producing high-quality products, but since products were produced individually, no two were exactly alike. Since products were not exactly alike, repairs and replacement parts had to be custom produced. Producing products individually did not take advantage of the scale economies of producing in higher volumes. The concept of interchangeable parts was first introduced in the late 1700s, and the production of some products shifted from one-at-a-time to more efficient and economical volumes. Managing work in a more sophisticated way was not introduced until the early 1900s, when Frederick W. Taylor promoted an approach that came to be known as scientific management. Scientific management embraces the idea that the best way for performing a task could be determined, and once determined, all workers should perform the task in that way. Others extended Taylor's theory. Taylor's views radically changed manufacturing in the United States. High-volume production and standardized work methods evolved into the mass productionHigh-volume production of standardized products. that characterized U.S. manufacturing until well after World War II. As efforts to increase wartime production of goods reached a peak, various quantitative tools were developed to optimize production. These tools, which include linear programming, simulation, and other modeling approaches, began to see common usage for decision making. Following World War II, several experts in process quality assisted Japan in its reconstruction efforts. These experts included Walter Shewhart and W. Edwards Deming. The work of Shewhart and Deming transformed the quality of Japanese products to the point where by the early 1980s Japanese auto imports were far superior to those manufactured in the United States. The quality deficiency of U.S. products relative to those of Japan triggered an increasing emphasis on quality in the United States. This quality revolution shifted to include other aspects of Japanese production known as just-in-time (JIT). The high-quality, low-inventory production systems have remained popular in U.S. manufacturing as proven ways of increasing value and reducing costs. By the 1980s the U.S. economy had become more service oriented as manufacturing began to shift out of the United States toward countries with lower labor costs. Increasingly, through the 1980s and 1990s, services became a greater part of the U.S. economy. By the late 1990s the Internet was realizing its potential to change the way businesses communicate with each other and with customers. As technologies for information sharing improved, businesses began to recognize the effects that individual decisions had on their suppliers and customers, and so was born the concept of supply chain management. Today business embraces mass production in services and manufacturing, but technology is making inroads into the “holy grail”—mass customization. Products and services designed and delivered to meet an individual's needs, quickly and at low cost, constitute the latest attainable goal. Corporate characteristics have changed substantially in the last century. These differences define the New Economy and are contrasted in Exhibit 1.2.
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