Chap 009

Chapter NineChapter NineProduction andOperations Management

Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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The Nature of Operations Management (OM)

The development and administration of the activities involved in transforming resources into goods and services

Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved

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Key Operations Management Terms

ManufacturingThe activities and processes used in making tangible products; also called production

OperationsThe activities and processes used in making both tangible and intangible products


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The Transformation Process


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Inputs, Outputs, and Transformation Processes in the Manufactureof Oak Furniture


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Operations Management in Service Businesses

Service providers use human and mechanical processes to provide products that are intangible

The transformation process requires inputs such as employees, equipment and supplies

Outputs provide a benefit from a performance, event or type of involvement with the service provider

Approximately 80% of the U.S. economy is based on the service industry


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Different Types of Transformation Processes

Nature and consumption of output

Uniformity of inputs

Uniformity of outputs

Labor required

Measurement of productivity


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The Steps in Planning and Designing Operations Systems

1. Planning the product

2. Designing the operations processa. Standardization

b. Modular design

c. Customization

3. Planning capacity

Did You Know? Hershey’s has the production capacity to make 33 million Hershey’s kisses per day or more than 12 billion per year.


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The Steps in Planning and Designing Operations Systems

4. Planning FacilitiesFacility Location

Facility layout• Fixed-Position Layout

• Project Organization

• Process Layout (intermittent organizations)

• Product Layout (continuous manufacturing organization)


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Facility Layouts

Fixed-Position Layout--Project organizationAll resources needed for a product are brought to a central location

Process Layout--Intermittent organizationLayout is organized into departments that group related processes

Product Layout--Continuous manufacturing organization

Production is broken down into relatively simple tasks assigned to workers positioned along a line


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Technology

CAD (computer-assisted design)

CAM (computer-assisted manufacturing)

Flexible Manufacturing

CIM (computer-integrated manufacturing)

Source: Robotic Industries Association Website, “Robotics Industry Posts Second Best Year Ever,” from http://robotics.org/public/articlesdetails.cfm?id=336 (accessed July 18, 2001).

Did You Know? Robotic Industries Association estimates 100,000 robots work in US factories, making the US the world’s 2nd largest user of robots.

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Managing the Supply Chain

Purchasing Management

Inventory Control Management

Routing and Scheduling

Distribution Management


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Purchasing

ProcurementBuying the right items

Obtaining desired quality

Buying the right quantity

Paying the lowest price

Obtaining inventory at the right time


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Managing Inventory

Three basic types of inventory:Finished-goods inventory

Work-in-process inventory

Raw materials inventory


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Inventory Control Process

Determines how many supplies and goods are needed, and keeps track of:

Quantities on hand

Where each item is

Who is responsible for it


Did You Know? Scholastic, Inc., publisher of Harry Potter books used JIT to deliver 100,000 copies of one book to stores across the US just minutes before midnight on July 8, the book’s official release date.

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Inventory Management Approaches

Economic order quantity model (EOQ)Identifies the optimum number of items to order

Just in time inventory management (JIT)Uses smaller quantities of materials that arrive “just in time”

Material-requirements planning (MRP)Schedules the precise quantity of materials needed to make the product

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Routing and Scheduling

RoutingThe sequence of operations through which a product must pass

Scheduling The assignment of required tasks to departments or specific machines, workers, or teamsProgram Evaluation and Review Technique (PERT)


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Hypothetical PERT Diagram for Making a McDonald’s Big Mac


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Managing Quality

Quality ControlThe process an organization uses to maintain its established quality standards

Malcolm Baldrige National Quality Award

Total Quality Management (TQM)

Statistical Process Control

ISO 9000


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Types and Percentages of Air Travel Complaints in 2003

Source: Office of Aviation Enforcement and Proceedings, Air Travel Consumer Report, February 2004, p. 39, available at http://airconsumer.ost.dot. gov/reports/2004/0402atcr.pdf.

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Malcolm Baldrige Quality Award

The Baldrige criteria are:LeadershipInformation and analysisStrategic planningHuman resource development and managementProcess managementBusiness resultsCustomer focus and satisfaction

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Total Quality Management (TQM)

To regain a competitive edge, a number of firms have adopted a total quality management approach

Uniform commitment to quality in all areas of the organization will promote a culture that meets customers’ perceptions of quality


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Statistical Process Control

A system in which management collects and analyzes information about the production process to pinpoint quality problems in the production system


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Establishing Standards—ISO 9000

Designed to ensure consistent product quality under many conditions

Provides a framework for documenting how a certified business keeps records, trains employees, tests products, and fixes defects

Inspection

Sampling


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Inspection

Purchased items and finished items To determine what the quality level is

Work-in-processTo find defects before the product is completed so that necessary corrections can be made


Did You Know? Quality Pays! The annual median income for a quality assurance/control manager is $65,536.

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Sampling

Whether to inspect 100 percent of the output or only part of it is related to

The cost of the inspection process

The destructiveness of the inspection process

The potential cost of product flaws in terms of human lives and safety


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Solve the Dilemma

1. What mistake did McKing make in approaching the introduction of pizza?

2. How could this product introduction have been coordinated to avoid the problems that were encountered?

3. If you were an executive at McKing, how would you proceed with the introduction of pizza into the restaurants?


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Explore Your Career Options

How can an understanding of total quality management (TQM) or ISO 9000 series certification assist in developing a career?


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Additional Discussion Questions and Exercises

1. What is the purpose of inventory control?

2. PERT charts can show a sequence of activities in days rather than seconds.

Draw a PERT chart for the chairperson of a banquet committee showing the most efficient path for these projected events:


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Additional Discussion Questions and Exercises


January 5 Confirm banquet room reservation.

January 6 Publicize banquet.

January 19 Count number of banquet reservations; phone in total to hotel.

January 20 Phone chairpersons of banquet decorating committee and hospitality committee to review preparations for banquet.

January 27 Decorating committee places decorations on tables.(2-4 p.m.) Hospitality committee prepares registration table and banquet booklets.

January 27 Banquet (6 p.m.)

January 30 Send thank-you notes to all committee persons and hotel staff.

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Chapter 9 Quiz

1. An assembly line is an example ofa. a product layoutb. a process layoutc. a fixed-position layoutd. an intermittent organization

2. Which of the following identifies the optimum number of items to order to minimize the cost of ordering them?

a. just-in-time (JIT)b. material-requirements planning (MRP)c. economic-order quantity modeld. program evaluation and review technique (PERT)


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Chapter 9 Quiz

3. Which of the following characteristics is most typical of a continuous manufacturing organization?a. The firm manufactures customized products.b. The firm has a low volume of production.c. The firm has a relatively low unit cost of production.d. The firm creates many different products with many different

characteristics.

4. Inspection is concerned witha. standards of quality.b. labor and energy.c. routing and scheduling.d. modular design and customization.


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Multiple Choice Questions about the Video

1. New Belgium Brewing Company uses what type of power to reduce waste?

a. Windb. Steamc. Solard. Hydroelectric

2. New Belgium uses all of the following to reduce waste except

a. evaporative cooling.b. sun tubes.c. methane gas from waste water.d. paper recycling.e. air conditioning.


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Chap 009