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THE FUTURE OF BUSINESSGitman & McDaniel
5th Edition
THE FUTURE OF BUSINESSGitman & McDaniel
5th Edition
Chapter
Achieving World-ClassOperations ManagementAchieving World-Class
Operations Management
Prepared byDeborah Baker
Texas Christian University
Prepared byDeborah Baker
Texas Christian University
12
Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 2Ch
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1 Why is production and operations management important in both manufacturing and service firms?
2 What types of production processes are used by manufacturers and service firms?
3 How do organizations decide where to put their production facilities? What choices must be made in designing the facility?
4 Why are resource-planning tasks like inventory management and supplier relations critical to production?
Learning Goals
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5 How do operations managers schedule and control production?
6 How can quality management and lean manufacturing techniques help firms improve production and operations management?
7 What roles do technology and automation play in manufacturing and service industry operations management?
8 What key trends are affecting the way companies manage production and operations?
Learning Goals
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Learning Goal 1
Why is production and operationsmanagement important in both
manufacturing and service firms?
1
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Production and Operations Management1
The creation of products and services by turning
inputs into outputs, which are products
and services
The creation of products and services by turning
inputs into outputs, which are products
and services
ProductionProduction
Management of theproduction process
Management of theproduction process
Operations Management
Operations Management
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The Production Process1
Raw materials
Raw materials
Natural resources
Natural resources
Human resources
Human resources CapitalCapital
Inputs
Conversionprocess
Conversionprocess
ProductsProducts
ServicesServices
Outputs
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Production and Operations Management1
Main Main Types ofTypes of
DecisionsDecisions
Main Main Types ofTypes of
DecisionsDecisions
1. Production Planning
2. Production Control
3. Improving production and operations
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1 Production Planning
Site selectionSite selection
Facility layoutFacility layout
Resource planningResource planning
Type of Production ProcessType of Production Process
DecisionsDecisionsin in
ProductionProductionPlanningPlanning
DecisionsDecisionsin in
ProductionProductionPlanningPlanning
Long-TermMedium-Term
1 Year1 Year 2 Years2 Years 3-5 Years3-5 Years
Short-Term
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2 Learning Goal 2
What types of production processesare used by manufacturers and
service firms?
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2 Types of Production
MassCustomization
MassCustomization
CustomizationCustomization
Goods are mass-produced up to a point, then custom tailored to
the needs of individual customers.
Goods are mass-produced up to a point, then custom tailored to
the needs of individual customers.
The production of goods or services one at a time according to theneeds of individual customers.
The production of goods or services one at a time according to theneeds of individual customers.
MassProduction
MassProduction
The ability to manufacture manyidentical goods at once.
The ability to manufacture manyidentical goods at once.
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2Classification of Production
Processes
2) By the timing of the process2) By the timing of the process
1) By how inputs are converted into outputs 1) By how inputs are converted into outputs
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2Classification of Production
Processes
Assembly Process
Assembly Process
The basic inputs are combined or transformed into the output.
The basic inputs are combined or transformed into the output.
ProcessManufacturing
ProcessManufacturing
The basic input is broken down into one or more outputs.
The basic input is broken down into one or more outputs.
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2 Production Timing
Intermittent Process
Intermittent Process
A production process that uses short production runs to make batches of
different products.
A production process that uses short production runs to make batches of
different products.
ContinuousProcess
ContinuousProcess
A production process that uses long production runs without
equipment shutdowns.
A production process that uses long production runs without
equipment shutdowns.
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3 Learning Goal 3
How do organizations decide whereto put their production facilities?
What choices must be made indesigning the facility?
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3Factors in Facility Location
Decisions
Make-or-buy decisionsMake-or-buy decisions
Marketing factorsMarketing factors
Manufacturing environmentManufacturing environment
Local incentivesLocal incentives
Process layoutProcess layout
Availability of production inputsAvailability of production inputs
International location considerations
International location considerations
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3 Types of Facility Layouts
ProductLayout
ProductLayout
Workstations or departments are arranged in a line with products
moving along the line
Workstations or departments are arranged in a line with products
moving along the line
Fixed-PositionLayout
Fixed-PositionLayout
The product stays in one place and workers and machinery
move to it as needed
The product stays in one place and workers and machinery
move to it as needed
ProcessLayout
ProcessLayout
Work flows according to theproduction process
Work flows according to theproduction process
Cellular Manufacturing
Cellular Manufacturing
Technique uses small, self-contained production units each performing all
or most of the tasks necessary
Technique uses small, self-contained production units each performing all
or most of the tasks necessary
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3 Types of Facility Layouts
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4
Why are resource-planning tasks like inventory
management and supplier relations critical to
production?
Learning Goal 4
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4 Make-or-Buy Decisions
FactorsFactorsFactorsFactors Size of componentsSize of components
Standard or nonstandard items
Standard or nonstandard items
Quantity of items neededQuantity of items needed
Special design featuresSpecial design features
Quality and reliabilityQuality and reliability
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4 Inventory Management
InventoryManagement
InventoryManagement
The determination of how much inventory a firm will keep on hand,
and the ordering, receiving, storing, and tracking of inventory
The determination of how much inventory a firm will keep on hand,
and the ordering, receiving, storing, and tracking of inventory
InventoryInventory The supply of goods that a firmholds for use in production or for
sale to customers
The supply of goods that a firmholds for use in production or for
sale to customers
PerpetualInventoryPerpetualInventory
A continuously updated list of inventory levels, orders,
sales, and receipts
A continuously updated list of inventory levels, orders,
sales, and receipts
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4 Supply Chain Management
Supply ChainSupply Chain The entire sequence of securing
inputs, producing goods, and delivering goods to customers
The entire sequence of securing inputs, producing goods, and delivering goods to customers
Goal:Satisfying customers with
quality products and services
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How do operations managers How do operations managers schedule and control production?schedule and control production?
How do operations managers How do operations managers schedule and control production?schedule and control production?
5 Learning Goal 5
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5
RoutingRouting Value-stream mapping
Value-stream mapping
SchedulingScheduling
Gantt chartsGantt charts
Critical pathmethod
Critical pathmethod
PERTPERT
Production Control
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5
SchedulingScheduling
DesigningDesigning
OrderingOrdering
Delivering materials
Delivering materialsMachining components
Machining components
AssemblingAssembling
InspectingInspecting
Shipping Shipping
September October14 21 28 5 12 19 26
8
Start
End
Review
Completed
Time not available
Gantt Charts
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5 Critical Path Method
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6
How can quality management andHow can quality management andlean manufacturing techniques lean manufacturing techniques help firms improve production help firms improve production and operations management?and operations management?
How can quality management andHow can quality management andlean manufacturing techniques lean manufacturing techniques help firms improve production help firms improve production and operations management?and operations management?
Learning Goal 6
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6
AutomationAutomation
Lean manufacturingLean manufacturing
Quality management techniques
Quality management techniques
Improving Production and Operations
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6
Total QualityManagementTotal QualityManagement
The use of quality principles in all aspects of a company’s production and
operations.
The use of quality principles in all aspects of a company’s production and
operations.
Quality control
Quality control
The process of creating standards for quality, producing goods that meet them,
and then measuring finished products against them.
The process of creating standards for quality, producing goods that meet them,
and then measuring finished products against them.
ContinuousimprovementContinuous
improvementA commitment to constantly seek better
ways of doing things to maintain and increase quality.
A commitment to constantly seek better ways of doing things to maintain and
increase quality.
Six SigmaSix SigmaA QC process that relies on defining what
needs to be done to ensure quality, measuring and analyzing results, and
ongoing improvement.
A QC process that relies on defining what needs to be done to ensure quality,
measuring and analyzing results, and ongoing improvement.
Putting Quality First
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Given to U.S. companies whose goods and services offer world-class quality
Established by the U.S. Congress in 1987
Promotes awareness of quality
Allows the business community to benchmark effective quality control programs
Malcolm Baldrige National Quality Award
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ISO 14000ISO 14000A set of technical standards to promote
clean production processes to protect the environment.
A set of technical standards to promote clean production processes to
protect the environment.
ISO 9000ISO 9000
A set of five technical standards of quality management to provide a uniform
way of determining whether manufacturing plants and service
organizations conform to sound quality procedures.
A set of five technical standards of quality management to provide a uniform
way of determining whether manufacturing plants and service
organizations conform to sound quality procedures.
International Quality Standards
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Just-in-time(JIT)
Just-in-time(JIT)
A system in which materials arrive exactly when they are needed for production,
rather than being stored on site.
A system in which materials arrive exactly when they are needed for production,
rather than being stored on site.
Leanmanufacturing
Leanmanufacturing
Streamlining production by eliminating steps in the production process that do
not add benefits that customers are willing to pay for.
Streamlining production by eliminating steps in the production process that do
not add benefits that customers are willing to pay for.
Lean Manufacturing
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7
What roles do technology and What roles do technology and automation play in manufacturingautomation play in manufacturing
and service industry and service industry operations management?operations management?
What roles do technology and What roles do technology and automation play in manufacturingautomation play in manufacturing
and service industry and service industry operations management?operations management?
Learning Goal 7
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Computer-Integrated ManufacturingComputer-Integrated Manufacturing
Flexible Manufacturing SystemsFlexible Manufacturing Systems
RoboticsRobotics
Computer-Aided Design andManufacturing Systems
Computer-Aided Design andManufacturing Systems
Technology
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What key trends are affecting theWhat key trends are affecting theway companies manageway companies manage
production and operations?production and operations?
What key trends are affecting theWhat key trends are affecting theway companies manageway companies manage
production and operations?production and operations?
Learning Goal 8
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Modular productionModular production
Designs for production efficiencyDesigns for production efficiency
Asset managementAsset management
Trends in Operations Management
