Chapter14Chapter14 PowerPoint Presentation by Charlie Cook © Copyright The McGraw-Hill Companies, Inc., 2004. All rights reserved. Operations Management:

ChapterChapter

1414ChapterChapter

1414

PowerPoint Presentation by Charlie Cook© Copyright The McGraw-Hill Companies, Inc., 2004. All rights reserved.

Operations Management: Operations Management: Managing Vital Operations and Managing Vital Operations and

ProcessesProcesses

Operations Management: Operations Management: Managing Vital Operations and Managing Vital Operations and

ProcessesProcesses

Essentials ofContemporary Management

© Copyright 2004 McGraw-Hill. All rights reserved. 14–2

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

• After studying the chapter, you should be able to:After studying the chapter, you should be able to:Explain the Explain the role of operations managementrole of operations management

in achieving superior quality, efficiency, and in achieving superior quality, efficiency, and responsiveness to customers.responsiveness to customers.

Describe Describe what customers wantwhat customers want, and explain , and explain why it is so important for managers to be why it is so important for managers to be responsive to their needs.responsive to their needs.

Explain why achieving Explain why achieving superior qualitysuperior quality in an in an organization’s operations and processes is so organization’s operations and processes is so important.important.

Explain why achieving Explain why achieving superior efficiency superior efficiency is so is so important.important.


Learning Objectives (cont’d)Learning Objectives (cont’d)Learning Objectives (cont’d)Learning Objectives (cont’d)

Differentiate among Differentiate among facilities layout, facilities layout, flexible manufacturing, just-in-time flexible manufacturing, just-in-time inventory, and process reengineeringinventory, and process reengineering..


Operations Management ConceptsOperations Management ConceptsOperations Management ConceptsOperations Management Concepts

• Operations ManagementOperations ManagementThe management of any aspect of the The management of any aspect of the

production system that transforms inputs production system that transforms inputs into finished goods and services.into finished goods and services.

Production systemProduction system

• The system used to acquire inputs, convert the The system used to acquire inputs, convert the inputs into outputs, and dispose of the outputs.inputs into outputs, and dispose of the outputs.

Operations managerOperations manager

• Responsible for managing the firm’s production Responsible for managing the firm’s production system and for determining where operating system and for determining where operating improvements are to be made.improvements are to be made.


Operations Management and Operations Management and Competitive AdvantageCompetitive Advantage

Operations Management and Operations Management and Competitive AdvantageCompetitive Advantage

Concepts

Quality Goods and services that are reliable, dependable, or psychologically satisfying to customers.

Efficiency The amount of input needed to produce a given output. Less input required lowers cost and waste.

Responsiveness to customers

Actions taken to respond to customer needs. Firms can react quickly and correctly to customer needs as they arise.


The Purpose of Operations ManagementThe Purpose of Operations ManagementThe Purpose of Operations ManagementThe Purpose of Operations Management

Figure 14.1


Improving Responsiveness to Improving Responsiveness to CustomersCustomers


• Without customers, organizations would cease Without customers, organizations would cease to exist.to exist.Non-profit and for-profit firms all have Non-profit and for-profit firms all have

customers.customers.Managers need to identify who the customer Managers need to identify who the customer

is and their needs.is and their needs.




• What do customers want?What do customers want?Usually customers prefer:Usually customers prefer:

• A lower price to a higher price.A lower price to a higher price.

• High-quality products to low-quality products.High-quality products to low-quality products.

• Quick service to slow service (also prefer good Quick service to slow service (also prefer good after-sale support).after-sale support).

• Many features over few features.Many features over few features.

• Products that are customized or tailored to their Products that are customized or tailored to their specific needs.specific needs.


Improving QualityImproving QualityImproving QualityImproving Quality

• The concept of quality applies to the products The concept of quality applies to the products of both manufacturing and service firms.of both manufacturing and service firms.A firm that provides higher quality than A firm that provides higher quality than

others at the same price is more responsive others at the same price is more responsive to customers.to customers.

Higher quality can also lead to better Higher quality can also lead to better efficiency through lower waste levels and efficiency through lower waste levels and operating costs.operating costs.


Impact of Increased Quality on Impact of Increased Quality on Organizational PerformanceOrganizational Performance

Impact of Increased Quality on Impact of Increased Quality on Organizational PerformanceOrganizational Performance

Figure 14.2


Improving EfficiencyImproving EfficiencyImproving EfficiencyImproving Efficiency

• The fewer the inputs required to produce a The fewer the inputs required to produce a given output, the higher the efficiency of a given output, the higher the efficiency of a production system.production system. A measure of the organization’s efficiency in A measure of the organization’s efficiency in

turning all of its inputs into outputs is:turning all of its inputs into outputs is:

inputs all

outputs typroductivi factor Total

A measure of a single input (such as labor) A measure of a single input (such as labor) to total output (i.e., partial productivity):to total output (i.e., partial productivity):

labordirect

outputs typroductivi Labor


Facilities Layout, Flexible Facilities Layout, Flexible Manufacturing, and EfficiencyManufacturing, and Efficiency

Facilities Layout, Flexible Facilities Layout, Flexible Manufacturing, and EfficiencyManufacturing, and Efficiency

• Facilities LayoutFacilities LayoutThe operations management technique The operations management technique

whose goal is to design the machine-worker whose goal is to design the machine-worker interface to increase production system interface to increase production system efficiency.efficiency.

• Flexible ManufacturingFlexible ManufacturingOperations management techniques that Operations management techniques that

attempt to reduce the setup costs associated attempt to reduce the setup costs associated with a production system.with a production system.


Three Facilities Three Facilities LayoutsLayouts

Three Facilities Three Facilities LayoutsLayouts

Figure 14.3


Facilities LayoutFacilities LayoutFacilities LayoutFacilities Layout

• Product layoutProduct layoutMachines are organized so that each Machines are organized so that each

operation is performed at work stations operation is performed at work stations arranged in a fixed sequence.arranged in a fixed sequence.

• Example: mass production systems where Example: mass production systems where workers are stationary and a belt moves work to workers are stationary and a belt moves work to them.them.

• Process LayoutProcess LayoutSelf contained work stations not organized in Self contained work stations not organized in

a fixed sequence.a fixed sequence.

• Provides flexibility in making a wide variety of Provides flexibility in making a wide variety of products tailored to customers.products tailored to customers.


Facilities Layout (cont’d)Facilities Layout (cont’d)Facilities Layout (cont’d)Facilities Layout (cont’d)

• Fixed-Position LayoutFixed-Position LayoutThe product stays in a fixed spot and The product stays in a fixed spot and

components produced at remote stations are components produced at remote stations are brought the product for to final assembly.brought the product for to final assembly.

• Large jet aircraft assembly Large jet aircraft assembly uses this type of layout.uses this type of layout.


Changing a Facilities LayoutChanging a Facilities LayoutChanging a Facilities LayoutChanging a Facilities Layout

Figure 14.4


Flexible ManufacturingFlexible ManufacturingFlexible ManufacturingFlexible Manufacturing

• Most firms face major expenses when setting Most firms face major expenses when setting up to produce a product.up to produce a product.These costs must be paid before production These costs must be paid before production

begins.begins.

• The more often products to be built change, the The more often products to be built change, the higher setup costs become.higher setup costs become.

Flexible manufacturing reduces setup costs by Flexible manufacturing reduces setup costs by reducing the time required to reset the reducing the time required to reset the production line for a different product by:production line for a different product by:

• Using easily replaced manufacturing equipment.Using easily replaced manufacturing equipment.

• Redesigning the production system itself to be Redesigning the production system itself to be more productive.more productive.


Just-in-Time Inventory and EfficiencyJust-in-Time Inventory and EfficiencyJust-in-Time Inventory and EfficiencyJust-in-Time Inventory and Efficiency

• Just-in-Time (JIT) InventoryJust-in-Time (JIT) InventoryBenefit of JITBenefit of JIT

• Reduces inventory holding costs for Reduces inventory holding costs for warehousing, storage, inventory tracking, and the warehousing, storage, inventory tracking, and the cost of capital tied up in inventory.cost of capital tied up in inventory.

Drawback to JITDrawback to JIT

• Firm does not maintain a large buffer stock of Firm does not maintain a large buffer stock of parts which makes the firm vulnerable to strikes parts which makes the firm vulnerable to strikes or supply problems that can quickly deplete on-or supply problems that can quickly deplete on-hand inventories.hand inventories.


Efficient ManufacturingEfficient ManufacturingEfficient ManufacturingEfficient Manufacturing

• Self-managed teams boost efficiency by Self-managed teams boost efficiency by allowing for a flatter organization structure.allowing for a flatter organization structure.

• The team takes on the role of the supervisor.The team takes on the role of the supervisor.

• Teams working together often become very Teams working together often become very skilled at enhancing productivity.skilled at enhancing productivity.


Process Reengineering and EfficiencyProcess Reengineering and EfficiencyProcess Reengineering and EfficiencyProcess Reengineering and Efficiency

• Process ReengineeringProcess ReengineeringA fundamental rethinking and radical A fundamental rethinking and radical

redesign of the business process to achieve redesign of the business process to achieve dramatic improvement in critical measures of dramatic improvement in critical measures of performance.performance.

• Boosts efficiency by directing efforts to activities Boosts efficiency by directing efforts to activities that add value to the good or service produced.that add value to the good or service produced.

• Top managers must support efficiency Top managers must support efficiency improvements for them to be accepted by improvements for them to be accepted by workers.workers.


Operations Management:Operations Management: Some Remaining Issues Some Remaining Issues

Operations Management:Operations Management: Some Remaining Issues Some Remaining Issues

• Quality and Efficiency- Is It Worth It? Quality and Efficiency- Is It Worth It? Achieving superior responsiveness requires Achieving superior responsiveness requires

profound shift change in management profound shift change in management operations and in the culture of an operations and in the culture of an organization.organization.

Without hard work and persistence, change Without hard work and persistence, change will not succeed.will not succeed.

Managers must consider the ethical Managers must consider the ethical implications and human costs of adopting JIT, implications and human costs of adopting JIT, flexible manufacturing, and reengineering.flexible manufacturing, and reengineering.

Documents

Chapter14Chapter14 PowerPoint Presentation by Charlie Cook © Copyright The McGraw-Hill Companies, Inc., 2004. All rights reserved. Operations Management: