14- Managing Service and Manufacturing Operations

8/14/2019 14- Managing Service and Manufacturing Operations

1/30

2004 by Nelson, a division of Thomson Canada Limited1

Chapter 14

Managing Service and

Manufacturing Operations


2/30

2004 by Nelson, a division of Thomson Canada Limited 2

What Would You Do? Newsdayoperates in a highly

competitive environment

Some customers are unhappy that late-breaking stories are not covered

Stories have to be finalized and filedbetween 9:00 and 11:00 p.m.

How can Newsday improve its processesto give better coverage of late-breakingstories?


3/30


Learning Objectives:Managing for Productivity

and Quality

After reading these next twosections, you should be able to:

1. discuss the kinds of productivityand their importance in managing

operations2. explain the role that quality playsin managing operations


4/30


Productivity

A measure of performance thatindicates how many inputs it takesto produce or create an output why productivity matters kinds of productivity


5/30


Why Productivity

MattersHigher productivity Lower costs Lower prices Higher market share

Higher profits Higher standard of living


6/30


Kinds of Productivity

Partial productivity = Outputs_________________Single Kind of Input

Multifactor productivity = Outputs________________________________Labour + Capital + Materials +

Energy


7/30


Growth Across

Industries

Exhibit 14.1


8/30


Quality Quality-related product

characteristics Quality-related service

characteristics ISO 9000Total quality management


9/30


Quality-Related Product

Characteristics Reliability

the average time between

breakdowns Serviceability

how easy or difficult it is to fix a

product Durability

the mean time to failure


10/30


Quality-Related Service

CharacteristicsQuality service

ReliabilityTangibles Responsiveness

Assurance Empathy


11/30


ISO 9000 A series of five international

standards Certifies quality processes Managers often want this to

improve customer satisfaction


12/30


Total Quality

ManagementAn integrated, principle-based,organization-wide strategy for

improving product and servicequality Customer focus

Customer satisfaction Continuous improvement Variation

Teamwork


13/30


Learning Objectives:

Managing OperationsAfter reading these next threesections, you should be able to:

3. explain the essentials of managing aservice business

4. describe the different kinds of

manufacturing operations5. describe why and how companiesshould manage inventory levels


14/30


Service Operations The service-profit

chain

Service recoveryandempowerment


15/30


Service-Profit Chain

Exhibit 14.2


16/30


Service Recovery

and Empowerment Restoring customer satisfaction to

strongly dissatisfied customers Empowering workers is one way to

speed up service recovery

B fit f E i


17/30


Benefits of EmpoweringService Workers for Service

Recovery1. Quicker responses to customer

complaints and problems

2. Employees feel better about their jobsand themselves

3. Employee interaction with customerswill be warm and enthusiastic

4. Employees are more likely to offerideas for improving service orpreventing problems

Adapted from Exhibit 14.3


18/30


os s o mpower ngService Workers for

Service Recovery1. Increased selection costs to find capable

workers

2. Increased training costs3. Higher wages to attract and keep talentedservice workers

4. Focus on recovery might lead to less focus

on reliability5. Empowered workers may cost the company

money by providing too many giveaways

6. Workers may unintentionally treat customers

unfairly to make up for slow service

Adapted from Exhibit 14.3


19/30


ManufacturingOperations

Amount of processing inmanufacturing operations

Flexibility of manufacturingoperations


20/30


in ManufacturingOperations

Make-to-order operation manufacturing does not begin until an

order is received Assemble-to-order operation

used to create semi-customized

products Make-to-stock operation

manufacture standardized products


21/30



Continuous-flow production produces goods at a continuous rate

Line-flow production Pre-established linear processes that

produce one type of product


22/30



Batch production operation that produces goods in large

batches in standard lot sizes Job shops

operation that handles customer orders orsmall batch jobs

Project manufacturing operation that produces large, expensive,

specialized products


23/30



Exhibit 14.4


24/30


Inventory

Types of inventory Measuring inventory Costs of maintaining inventory Managing inventory


25/30


Types of Inventory

Raw materials inventories Component parts inventories Work-in-process inventories Finished goods inventories


26/30


Measuring Inventory

Average aggregate inventory the average overall inventory during a

particular time period Stockout

situation in which a company runs out offinished product

Inventory turnover the number of times per year that a

company sells its average inventory


27/30


Costs of Maintainingan Inventory

Ordering cost costs associated with ordering inventory

Setup cost downtime and lost efficiency when changing

goods produced

Holding cost

cost of keeping inventory until used or sold Stockout costs

cost of running out of inventory


28/30


Managing Inventory

Economic order quantity (EOQ) formulas that help determine how much and

how often inventory should be ordered

Just-in-time inventory system (JIT) parts arrive just as needed at each stage of

production Kanban

ticket-based system that indicate when toreorder Materials requirement planning

(MRP) determines production schedule, batch sizes

and inventories


29/30


Inventory Systems

Independent demand systems the level of one kind of inventory

does not depend on another, forexample EOQ

Dependent demand system the level of inventory depends on the

number of finished goods to be

produced, for example, JIT or MRP


30/30

2004 by Nelson a division of Thomson Canada Limited 30

What Really Happened?

Extended deadlines for sportsscore from 11:20 p.m. to 11:55p.m.

Moved delivery times from 6:00a.m. to 5:30 a.m.

Offered a money-back guaranteefor 5:30 a.m. delivery

Improved printing roomprocesses

Improved flexibility Used JIT and MRP to improve

handling of inventory

Documents

14- Managing Service and Manufacturing Operations