© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 1

Producing Quality Producing Quality Goods and ServicesGoods and Services

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 2

What Is Production?What Is Production?

LeadingLeading

Plan

ning

Plan

ning

Organizing

Organizing

Production OperationsProduction OperationsManagement Management

(POM)(POM)

Production OperationsProduction OperationsManagement Management

(POM)(POM)

ControllingControlling

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 3

The Conversion The Conversion ProcessProcess

TransformationTransformation OutputsOutputsInputsInputs

Analytic Systems

The Value Chain

Synthetic Systems

TangibleGoods

IntangibleServices

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 4

Input-Transformation-Output Input-Transformation-Output Relationships for Typical SystemsRelationships for Typical Systems

Department Store

Shoppers, stock of goods

Displays, sales clerks

Attract customers, promote products,

fill orders

Sales to satisfied customers

College or University

High School graduates, books

Teachers, classrooms

Impart knowledge & skills

Educated individuals

Automobile Factory

Sheet steel, engine parts

Tools, equipment, workers

Fabrication & assembly of cars High-quality cars

Restaurant Hungry customers, food

Chef, waitress, environment

Well-prepared & well-served food

Satisfied customers

Hospital Patients, medical supplies

MDs, nurses, equipment Health care Healthy

individuals

Typical Desired Output

Transformation Function

Transformation Components

InputsSystem

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 5

Challenges of Challenges of the Service Industrythe Service Industry

People-IntensivePeople-IntensiveActivitiesActivities

People-IntensivePeople-IntensiveActivitiesActivities

ProductionProductionand Locationand Location

ProductionProductionand Locationand Location

SubjectiveSubjectiveQualityQuality

SubjectiveSubjectiveQualityQuality

CustomerCustomerInvolvementInvolvement

CustomerCustomerInvolvementInvolvement

DeliveryDeliveryTimingTiming

DeliveryDeliveryTimingTiming

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 6

Manufacturing Manufacturing GoodsGoods

Mass Customization

Mass Production

Customized Production

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 7

DisadvantagesDisadvantagesDisadvantagesDisadvantagesAdvantagesAdvantagesAdvantagesAdvantages

Outsourcing the Outsourcing the Manufacturing FunctionManufacturing Function

Capital and ResourcesCapital and ResourcesCapital and ResourcesCapital and Resources

Economies of ScaleEconomies of ScaleEconomies of ScaleEconomies of Scale

Quality and CostQuality and CostQuality and CostQuality and Cost

Privacy IssuesPrivacy IssuesPrivacy IssuesPrivacy Issues

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 8

Production Process Production Process DesignDesign

Forecast Demand

Plan for Capacity

Identify Supply Chain

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 9

Production Process Production Process DesignDesign

Choose Facility Site

Design Facility Layout

Schedule Work

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 10

Establish Establish the Supply Chainthe Supply Chain

Suppliers

Manufacturers

Distributors

Retailers

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 11

Forecast DemandForecast Demand

CustomerCustomerFeedbackFeedback

MarketMarketResearchResearch

SalesSalesFiguresFigures

IndustryIndustryAnalysesAnalyses

EducatedEducatedGuessesGuesses

BusinessBusinessResourcesResources

PlanningPlanning BudgetingBudgetingSchedulingScheduling

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 12

Capacity PlanningCapacity Planning

CustomerCustomerDemandDemand

Level ofLevel ofResourcesResources

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 13

Facility LocationFacility LocationEnergyEnergy

TransportationTransportation

LandLand

Living Living StandardsStandards

ConstructionConstruction

RawRawMaterialsMaterials

Local TaxesLocal Taxes

LaborLabor

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 14

Facility LayoutFacility Layout

Product

Cellular

Fixed-Position

Process

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 15

Process LayoutProcess Layout

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 16

Product LayoutProduct Layout

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 17

Cellular LayoutCellular Layout

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 18

Fixed-Position LayoutFixed-Position Layout

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 19

Production ScheduleProduction Schedule

SchedulingScheduling

DispatchingDispatching

ContingenciesContingencies

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 20

The Gantt ChartThe Gantt Chart

ID Task Name Start Date End Date DurationAugust September

2006

1 Make legs 8/1/06 8/28/06 20d

2 Cut tops 8/22/06 8/28/06 5d

3 Drill 8/29/06 9/4/06 5d

4 Sand 9/5/06 9/11/06 5d

5 Assemble 9/12/06 9/25/06 10d

6 Paint 9/19/06 9/25/06 5d

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 21

Program Evaluation and Program Evaluation and Review Technique (PERT)Review Technique (PERT)

1. Identify activities

2. Determine sequence

3. Establish time frame

4. Diagram activity network

5. Calculate longest completion path

6. Refine timing

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 22

PERT Time PERT Time EstimatesEstimates

OptimisticOptimistic

PessimisticPessimistic

Most LikelyMost Likely

ExpectedExpected

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 23

Simplified PERT Diagram for Store Simplified PERT Diagram for Store OpeningOpening

15 Days

24 Days

3 Days

4 Days

21 Days

21 Days

TrainingCompleted

TrainingCompleted

MerchandiseReceived

MerchandiseReceived

StaffingCompleted

StaffingCompleted

MerchandiseOrdered

MerchandiseOrdered

Staffing PlanStaffing Plan

MerchandisePlan

MerchandisePlan

Ads PlacedAds PlacedAds CreatedAds CreatedPromotionPlan

PromotionPlan

Project Launch

Project Launch

5 Days

5 Days

14 Days

7 Days

OpeningDay

OpeningDay

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 24

Industrial RoboticsIndustrial Robotics

Stamina Stamina Stamina Stamina

Diligence Diligence Diligence Diligence

SpeedSpeedSpeedSpeed

PrecisionPrecisionPrecisionPrecision

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 25

Computerized ProductionComputerized Production

Computer-AidedComputer-AidedManufacturing (CAM)Manufacturing (CAM)

Computer-AidedComputer-AidedManufacturing (CAM)Manufacturing (CAM)

Computer-IntegratedComputer-IntegratedManufacturing (CIM)Manufacturing (CIM)

Computer-IntegratedComputer-IntegratedManufacturing (CIM)Manufacturing (CIM)

Product LifecycleProduct LifecycleManagement (PLM)Management (PLM)

Product LifecycleProduct LifecycleManagement (PLM)Management (PLM)

Computer-AidedComputer-AidedDesign (CAD)Design (CAD)

Computer-AidedComputer-AidedDesign (CAD)Design (CAD)

Computer-AidedComputer-AidedEngineering (CAE)Engineering (CAE)

Computer-AidedComputer-AidedEngineering (CAE)Engineering (CAE)

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 26

Manufacturing Manufacturing SystemsSystems

TraditionalTraditional FlexibleFlexible

Mass ProductionMass Production

Resistant to ChangeResistant to Change

High Set-Up CostsHigh Set-Up Costs

Specialty OperationsSpecialty Operations

Conducive to ChangeConducive to Change

Minimal Set-Up CostsMinimal Set-Up Costs

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 27

Supply Chain Supply Chain Data InterchangeData Interchange

Electronic DataInterchange (EDI)

Extensible Markup Language (XML)

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 28

The Production ProcessThe Production Process

TransformationTransformation OutputsOutputsInputsInputs

Operations Managers

CoordinatingThe Supply Chain

AssuringProduct Quality

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 29

Supply Chain Supply Chain CoordinationCoordination

InventoryInventoryInventoryInventory

PurchasingPurchasingPurchasingPurchasing

Lead TimeLead TimeLead TimeLead Time

Inventory ControlInventory ControlInventory ControlInventory Control

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 30

Inventory ControlInventory Control

Just-In-Time (JIT)

Material RequirementsPlanning (MRP)

ManufacturingResource Planning (MRP)

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 31

Supply Chain Supply Chain ManagementManagement

ImprovedImprovedQualityQuality

Manage RisksManage Risks

Manage RelationshipsManage Relationships

Manage Trade-OffsManage Trade-Offs

IncreasedIncreasedSalesSales

CostCostSavingsSavings

ReducedReducedInventoryInventory

FasterFasterDeliveryDelivery

ImprovedImprovedServiceService

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 32

Assuring Product QualityAssuring Product Quality

Quality AssuranceQuality AssuranceQuality ControlQuality Control

Establishing StandardsEstablishing Standards

Measuring QualityMeasuring Quality

Minimizing DefectsMinimizing Defects

Statistical Quality ControlStatistical Quality Control

Statistical Process ControlStatistical Process Control

Continuous ImprovementContinuous Improvement

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 33

Total Quality Total Quality ManagementManagement

• Management commitment to TQM

• Clear customer focus

• Employee involvement

• Continuous improvement

• Partnering with suppliers

• Meaningful performance standards

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 34

The Six Sigma The Six Sigma ApproachApproach

Define the Problem

Measure Performance

Analyze Root Causes

Improve the Process

Control the Process

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 9 - 35

Global Quality Global Quality StandardsStandards

ISO 9000ISO 9000

ISO 14000ISO 14000