CHAPTER NINE Operations Management (Production) Manufacturing Service

CHAPTER CHAPTER NINENINE

Operations Operations Management Management (Production)(Production)ManufacturingManufacturing ServiceService

What’s Had The What’s Had The Biggest Biggest Effect on Effect on

Productivity?Productivity?

0 20 40 60 80

Computers & Technology

Quality & Customer Satisfaction

Empowering Workers

Hiring Part-Time Workers

Downsizing

Percentage of Workforce

Leading U.S. Leading U.S. Manufacturing StatesManufacturing States

0 100 200 Miles

WASHINGTON

OREGON

IDAHO

MONTANA

WYOMING

NEVADA

CALIFORNIA

UTAH

ARIZONA

COLORADO

NEW MEXICO

KANSAS

OKLAHOMA

MISSOURI

ARKANSAS

TEXAS

LOUISIANA

MISSISSIPPI

ILLINOIS

NORTH DAKOTA

SOUTH DAKOTA

MINNESOTA

WISCONSIN

IOWA

NEBRASKA

MICHIGAN

MICHIGAN

INDIANA

OHIO

WESTVIRGINIA

PENNSYLVANIA

NEW YORK

VIRGINIA

DC

KENTUCKY

VTNH

MAINE

RI

MASS

CONN

NEWJERSEY

DELAWARE

MARYLAND

NORTH CAROLINA

TENNESSEE

ALABAMA GEORGIA

SOUTHCAROLINA

FLORIDA

HAWAII

ALASKA

0 600 Miles0 200 Miles

CaliforniCaliforniaa

New YorkNew York

IllinoisIllinois

OhiOhioo

PennsylvaniPennsylvaniaa

TexaTexass

The Americans and the Japanese decided to engage in a competitive boat race.

Both teams practiced hard and long to reach their peak performance.

On the big day they felt they were ready

The Japanese won by a mile.

Afterwards the American team was discouraged by the loss. Morale sagged.

Corporate management decided that the reason for the crushing defeat had to be found, so a consulting firm was hired to investigate the problem and recommend corrective action

The consultants finding:

The Japanese team had eight people rowing and one person steering;

the American team had one person rowing and eight people steering..

After a year of study and millions spent analyzing the problem,

the consultant firm concluded that too many people were steering and not enough were rowing on the American team

So as race day neared again the following year, the American team’s management structure was completely reorganized.

Four steering managers, three area steering managers, and a new performance review system for the person rowing the boat to provide work incentive.

The next year, the Japanese won by TWO miles

The new structure:

Humiliated, the American corporation laid off the rower for poor performance and gave the managers a bonus for discovering the problem.

What has the US done What has the US done to regain a competitive to regain a competitive

edge?edge? Customer focusCustomer focus Cost savings through site Cost savings through site

selectionselection New manufacturing techniquesNew manufacturing techniques Reliance on the InternetReliance on the Internet Total Quality ManagementTotal Quality Management

ISO 9000/ISO 140000ISO 9000/ISO 140000

Using land, labor, capital, entrepreneurship, knowledge to produce goods and services.

Transforms resources into goods and services.inventory

managementquality control follow-up services

production scheduling

The ProductionThe Production & Operations & Operations

ProcessProcessInputsInputs Conversion Conversion ProcessProcess

OutpuOutputt

ManufacturiManufacturingng

ServiceService

UB’s Dry UB’s Dry CleanersCleaners

1. Facility location

a. Near resourcesb. Near markets

2. Facility layout

a. For services: customer friendlyb. For manufacturing

- customer focused work cells - away from assembly lines

c. Outsourcing

3. Quality Control

a. Measurement of products and services against set requirements

b. Often at the end of the linec. Now quality becomes everyone’s

concern

Quality Control Quality Control StandardsStandards

Six Sigma (Six Sigma () Quality (3.4)) Quality (3.4) Statistical Quality Control (SQC)Statistical Quality Control (SQC) Statistical Process Control (SPC)Statistical Process Control (SPC) Deming Cycle Deming Cycle (Plan, Do, Check, Act) (Plan, Do, Check, Act)

(Eliminate mistakes)(Eliminate mistakes) Quality Function Deployment (QFD) Quality Function Deployment (QFD)

(maximize customer satisfaction)(maximize customer satisfaction) Baldridge AwardBaldridge Award ISO 9000/14000/9001:2002ISO 9000/14000/9001:2002

1. Baldridge Awards: quality in

a. leadershipb. Strategic planningc. Customer and market focusd. Information and analysise. Human resource focusf. Process managementg. Business results

2. ISO 9000- Sets global measures for the quality of

individual products- Provides a common denominator of

business quality accepted around the world

3. ISO 14000- Concerns managing an

organization’s environmental impact

- Requires targets, policies and reviews of environmental programs

1. Measuring quality- Productivity strong in manufacturing, but

weak in services- Quality versus quantity issues

2. Technological improvements- ATMs improve banking- Universal Price Codes make checkout faster- Computerized airline reservations, meal

selection, and luggage handling (finger printing foreigners)- Interactive services from banks,

stockbrokers, travel agents

1. Form Utility - the value added by the creation of finished

goods and services

2. Types of Production Processes a. Process manufacturing

- physically or chemically changing materials

- making steel, or cooking eggsb. Assembly process

-putting together components - TV, cars

X

X

X

X

X

X

X

X

X

X

X

2. Types of Production Processes a. Continuous

1) one long production run turns out finished goods2) like an assembly line

b. Intermittent1) short production runs where machines are changed to make different products2) custom made furniture3) easier to respond to customer requests.

1. Materials Requirement Planning (MRP) a. Uses sales forecasts to make sure

required parts are available when neededb. Now outdated

2. MRPII – Manufacturing resource planninga. involved more than just materialsb. also has been updated

3. ERP Enterprise resource planninga. Links multiple firms.b. Monitors quality and satisfaction as it’s happening.c. IT has had a major influence

ModernModern Production Production TechniquesTechniques Just-In-Time Just-In-Time

(JIT) Inventory(JIT) Inventory PurchasingPurchasing Flexible Flexible

ManufacturingManufacturing Lean Lean

ManufacturingManufacturing

Mass CustomizingMass Customizing Competing in Competing in

TimeTime Technology Technology

AssistedAssisted Computer-Aided Computer-Aided

Design (CAD)Design (CAD) Computer-Aided Computer-Aided

Manufacturing Manufacturing (CAM)(CAM)

1. Just in time inventory control (JIT)a. Parts and supplies are delivered just as needed in the production processb. Avoids storage charges and damages

2. Internet purchasinga. Reduces purchasing costsb. 3 types

1) trading exchange platforms - assist companies in several

markets2) industry-sponsored exchanges3) Net market makers-host electronic marketplaces

3. Flexible Manufacturinga. Designing machines to do multiple tasksb. Ford makes both V-8 and V-6 engines

4. Lean Manufacturinga. Increasing capacity to produce high-

quality goods while decreasing need for resources

b. Workers perform a cluster of tasks, not one assembly line job.5. Mass customization

- Flexible machines can produce a good as fast as mass-produced goods once could.

6. Competing in Timea. Being as fast or faster than all competition in responding to customer want and needsb. Essential in global marketplace

7. CAD and CAMa. CAD – 3D designingb. CAM – direct computer involvement in

production processc. CIM Computer Integrated

Manufacturing1) software that unites CAD and

CAM2) currently expensive3) cuts 80% of the time needed to program machines to make parts

Just in time inventory controlMass customization

Competing in time

Flexible manufacturingLean

manufacturingThe Daimler-Chrysler plant in Fenton, MO receives shipments about every 4 hours from its seat supplier, and literally hundreds of other parts continually. There is virtually no storage.

Volvo uses modular construction in their plants, where workers are grouped into autonomous teams working on mobile assembly platforms that carry the cars to the workers. Each worker has been trained to do a whole cluster of tasks. This system enabled Volvo to build quality cars with fewer workers in more space efficient plants and has reduced the number of hours to assemble a car.Because of the increases competition from its Japanese counter-parts Xerox implemented a program designed to cut its new product development time in half

Levis markets a service which enables any customer to order a custom-made pair of jeans from any retailer at any time. The jeans cost $10 more than an “off-the-rack” pair.

At Dynalink Industries, 15 machines are used to make, test and package component parts for stereo and quadraphonic sound systems. The parts are never touched by human hands.

Control Control ProceduresProcedures

Program Program Evaluation & Evaluation & Review Techniques Review Techniques (PERT)(PERT)

Critical Path Critical Path Method (CPM)Method (CPM)

Gantt ChartGantt Chart

Program Evaluation & Review Techniques (PERT)Program Evaluation & Review Techniques (PERT)

Designing a PERT ChartDesigning a PERT Chart

1. Analyze and sequence task that need to be 1. Analyze and sequence task that need to be donedone

2. Estimate the time needed to complete each task2. Estimate the time needed to complete each task

3. Draw a PERT network illustrating the two 3. Draw a PERT network illustrating the two previous previous stepssteps

4.4. Identify the critical pathIdentify the critical path- the sequence that takes the longest- the sequence that takes the longest

StartStart

make toast (2

min)

butter toast (1 min)

cook eggs (3

min)

assemble eggs and toast (1 min)

brew coffee 6 min

pour coffee (1

min)

serve