Copyright © 2003 by South-Western. All Rights Reserved. CHAPTER TWELVE CREATING AND PRODUCING WORLD-CLASS GOODS AND SERVICES Text by Profs. Gene Boone

Copyright © 2003 by South-Western. All Rights Reserved.

CHAPTER TWELVECHAPTER TWELVE

CREATING AND PRODUCING CREATING AND PRODUCING WORLD-CLASS GOODS AND WORLD-CLASS GOODS AND

SERVICESSERVICES

Text by Profs. Gene Boone & David KurtzText by Profs. Gene Boone & David KurtzMultimedia Presentation byMultimedia Presentation byProf. Milton PressleyProf. Milton PressleyThe University of New OrleansThe University of New Orleans

[email protected]@uno.edu


• Outline the importance of production Outline the importance of production and operations managementand operations management

• Explain the roles of computers and Explain the roles of computers and related technologies in productionrelated technologies in production

• Identify the factors involved in a plant Identify the factors involved in a plant location decisionlocation decision

• Identifying briefly explain the major Identifying briefly explain the major tasks of production and operations tasks of production and operations managersmanagers

LEARNING GOALSLEARNING GOALSLEARNING GOALSLEARNING GOALS


• Compare the alternative layouts for Compare the alternative layouts for production facilitiesproduction facilities

• List the steps in the purchasing processList the steps in the purchasing process• Compare the advantages and Compare the advantages and

disadvantages of maintaining large disadvantages of maintaining large inventoriesinventories

• Identify the steps in the production-Identify the steps in the production-control processcontrol process

• Explain the benefits of quality controlExplain the benefits of quality control

LEARNING GOALSLEARNING GOALSLEARNING GOALSLEARNING GOALS


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CHAPTER OVERVIEWCHAPTER OVERVIEWCHAPTER OVERVIEWCHAPTER OVERVIEW

• Businesses can create or Businesses can create or enhance four basic kinds ofenhance four basic kinds of utilityutility: time, place, ownership, : time, place, ownership, and formand form

• Marketing creates time, place, Marketing creates time, place, and ownership utilityand ownership utility

• Production creates form utilityProduction creates form utility


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• Production:Production: application of application of resources such as people and resources such as people and machinery to convert materials into machinery to convert materials into finished goods or servicesfinished goods or services

• Production and operations Production and operations management:management: managing people managing people and machinery in converting and machinery in converting materials and resources into materials and resources into finished goods and servicesfinished goods and services


Figure 12.1 The Production Process: Converting Inputs to Outputs

Figure 12.1 The Production Process: Converting Inputs to Outputs


Figure 12.2 Typical Production Systems

Figure 12.2 Typical Production Systems


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• Describes the process of producing Describes the process of producing goods and servicesgoods and services

• Looks at the importance of production Looks at the importance of production and operations managementand operations management

• Discusses new technologies that are Discusses new technologies that are transforming the production processtransforming the production process

• Discusses the tasks of the production Discusses the tasks of the production and operations manager, the and operations manager, the importance of quality, and methods importance of quality, and methods businesses use to insure high-qualitybusinesses use to insure high-quality


STRATEGIC IMPORTANCE OF STRATEGIC IMPORTANCE OF THE PRODUCTION FUNCTIONTHE PRODUCTION FUNCTIONSTRATEGIC IMPORTANCE OF STRATEGIC IMPORTANCE OF THE PRODUCTION FUNCTIONTHE PRODUCTION FUNCTION

• Without production, none of the Without production, none of the other functions would operateother functions would operate

• Production function adds value to a Production function adds value to a company’s inputs by converting company’s inputs by converting them into marketable outputsthem into marketable outputs


Mass ProductionMass ProductionMass ProductionMass Production

• Mass production:Mass production: system for manufacturing system for manufacturing products in large amounts through effective products in large amounts through effective combinations of employees with specialized combinations of employees with specialized skills, mechanization, and standardizationskills, mechanization, and standardization

• Assembly line: Assembly line: manufacturing technique that manufacturing technique that carries the product on a conveyor system past carries the product on a conveyor system past several workstations, where workers perform several workstations, where workers perform specialized tasks specialized tasks

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Flexible ProductionFlexible ProductionFlexible ProductionFlexible Production• Flexible production:Flexible production: cost- cost-

effective system of producing effective system of producing small batches of similar itemssmall batches of similar items

• Generally involves:Generally involves:• Using information technology to Using information technology to

share the details of customer ordersshare the details of customer orders• Programmable equipment to fill the Programmable equipment to fill the

ordersorders• Skilled people to carry out Skilled people to carry out

whenever tasks are needed to fill a whenever tasks are needed to fill a particular orderparticular order

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Customer-Driven ProductionCustomer-Driven ProductionCustomer-Driven ProductionCustomer-Driven Production• Customer-driven production:Customer-driven production:

system that evaluates customer system that evaluates customer demands in order to link what a demands in order to link what a manufacture makes with what the manufacture makes with what the customers want to buycustomers want to buy

• One method establishes computer One method establishes computer links between factories and links between factories and retailers’ systems, using data retailers’ systems, using data about sales as the basis for about sales as the basis for creating short-term forecasts in creating short-term forecasts in designing production schedulesdesigning production schedules

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Team ConceptTeam ConceptTeam ConceptTeam Concept

• Team concept:Team concept: combines combines employees from various employees from various departments and functions to departments and functions to work together in designing work together in designing and building productsand building products

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PRODUCTION PROCESSESPRODUCTION PROCESSESPRODUCTION PROCESSESPRODUCTION PROCESSES

• Methods of production differ according Methods of production differ according to firms’ means of operating and time to firms’ means of operating and time requirementsrequirements

• Means of operating may involve either Means of operating may involve either an an analyticanalytic or a or a syntheticsynthetic system system

• Time requirements call for either a Time requirements call for either a continuouscontinuous or an or an intermittentintermittent process process

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Figure 12.3Figure 12.3Example of a Synthetic Production SystemExample of a Synthetic Production System


• Robot: reprogrammable machine capable of performing numerous tasks that require manipulations of materials and tools

• More efficient and consistent than humans for many activities

RobotsRobotsRobotsRobots

TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS TECHNOLOGY AND THE TECHNOLOGY AND THE PRODUCTION PROCESS PRODUCTION PROCESS


• Computer-aided design (CAD): system for interactions between a designer and a computer to design a product, facility, or part that meets predetermined specifications

• Enables engineers to design faster and with fewer mistakes than they can achieve working with traditional drafting systems

RobotsRobots

CAD and CAMCAD and CAMCAD and CAMCAD and CAM



• Computer-aided manufacturing (CAM): electronic tools to analyze CAD output and determine necessary steps to implement the design, followed, by electronic transmission of instructions to guide to the activities of production equipment

• Picks up where the CAD system leaves off

RobotsRobots

CAD and CAMCAD and CAMCAD and CAMCAD and CAM



• Flexible manufacturing system (FMS): production facility that workers can quickly modify to manufacture different products

• Typical system consists of computer-controlled machining centers, robots, and remote-controlled carts

RobotsRobots

CAD and CAMCAD and CAM

FMSFMSFMSFMS



• Computer-integrated manufacturing (CIM): protection system that integrates computer tools and human workers to design products, handle materials, and control production• An integration of robots,

CAD/CAM, FMS, computers, and other technologies

• Key to CIM is a centralized computer system that integrates and controls separate processes and functions

RobotsRobots

CAD and CAMCAD and CAM

FMSFMS

CIMCIMCIMCIM



Figure 12.4 Figure 12.4 Example of Example of Computer-Integrated Computer-Integrated ManufacturingManufacturing


THE LOCATION DECISIONTHE LOCATION DECISIONTHE LOCATION DECISIONTHE LOCATION DECISION

• The best locations The best locations provide advantages provide advantages in three categories:in three categories:• TransportationTransportation• PhysicalPhysical• Human factorsHuman factors

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THE LOCATION DECISIONTHE LOCATION DECISIONTHE LOCATION DECISIONTHE LOCATION DECISION

• Environmental impact Environmental impact study: study: analyzes how a analyzes how a proposed plant would proposed plant would affect the quality of life affect the quality of life in the surrounding areain the surrounding area

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TASKS OF PRODUCTION TASKS OF PRODUCTION MANAGERSMANAGERSTASKS OF PRODUCTION TASKS OF PRODUCTION MANAGERSMANAGERS

Figure 12.5 Tasks of Production ManagersFigure 12.5 Tasks of Production Managers


• Marketing research Marketing research studies:studies:• Solicit consumer reactions Solicit consumer reactions

to proposed productsto proposed products• Test prototypes of new Test prototypes of new

itemsitems• Estimate their potential sales Estimate their potential sales

and profitability levelsand profitability levels

Planning the Production ProcessPlanning the Production ProcessPlanning the Production ProcessPlanning the Production Process

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• Production concerns itself Production concerns itself primarily with:primarily with:• Converting original product Converting original product

concepts into final concepts into final specificationsspecifications

• Designing the most efficient Designing the most efficient facilities to produce the new facilities to produce the new productproduct

Planning the Production ProcessPlanning the Production ProcessPlanning the Production ProcessPlanning the Production Process

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Determining the Facility LayoutDetermining the Facility LayoutDetermining the Facility LayoutDetermining the Facility Layout

• Determining the best Determining the best layout for the facility layout for the facility requires managers to requires managers to consider all phases of consider all phases of production and the production and the necessary inputs at necessary inputs at each stepeach step


Figure 12.6a Basic Facility Layouts: Process LayoutFigure 12.6a Basic Facility Layouts: Process Layout


Figure 12.6b Basic Facility Layouts: Product LayoutFigure 12.6b Basic Facility Layouts: Product Layout


Figure 12.6c Basic Facility Layouts: Fixed-Position LayoutFigure 12.6c Basic Facility Layouts: Fixed-Position Layout


Figure 12.6d Basic Facility Layouts: Customer-Oriented LayoutFigure 12.6d Basic Facility Layouts: Customer-Oriented Layout


Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan Implementing the Production Plan

Making, Buy, Making, Buy, or Leaseor Lease


Selection of Selection of SuppliersSuppliers


Inventory Inventory ControlControl


• Decisions involving Decisions involving these three activities these three activities are involved in the are involved in the implementation of the implementation of the production plan production plan

• This begins after the This begins after the production process is production process is planned and the best planned and the best layout is determined layout is determined





• Make, buy, or lease Make, buy, or lease decision: decision: choosing choosing whether to manufacture a whether to manufacture a needed product or needed product or component in house, component in house, purchase it from an outside purchase it from an outside supplier, or lease itsupplier, or lease it• Factors affecting the Factors affecting the

decision include costs, decision include costs, availability, the need for availability, the need for confidentiality, and short- or confidentiality, and short- or long-term needlong-term need






• Managers compare Managers compare quality, prices, quality, prices, dependability of delivery, dependability of delivery, and services offered by and services offered by competing supplierscompeting suppliers• Final decision often rests Final decision often rests

on factors such as the on factors such as the firm’s experience with the firm’s experience with the supplier, speed of delivery, supplier, speed of delivery, warranties, and other warranties, and other servicesservices


Figure 12.7Figure 12.7Free Trade Zone: Free Trade Zone: Internet Tools for Internet Tools for Selecting SuppliersSelecting Suppliers







• Requires balancing the Requires balancing the need to keep stocks on need to keep stocks on hand to meet demand hand to meet demand against the expenses of against the expenses of carrying the inventorycarrying the inventory

• Perpetual inventory:Perpetual inventory: system that continuously system that continuously monitors the amounts monitors the amounts and location of inventory and location of inventory


Figure 12.8Figure 12.8Automatic Automatic Reordering of Reordering of Electronic Electronic ComponentsComponents







• Vendor-managed Vendor-managed inventory:inventory: system that system that hands over a firm’s hands over a firm’s inventory control inventory control functions to suppliersfunctions to suppliers


Just-in-Time SystemsJust-in-Time SystemsJust-in-Time SystemsJust-in-Time Systems

• Just-in-Time (JIT) Just-in-Time (JIT) system:system: management management philosophy aimed at philosophy aimed at improving profits and improving profits and return on investment by return on investment by minimizing costs and minimizing costs and eliminating waste eliminating waste through minimizing through minimizing inventory on handinventory on hand

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ReengineeringReengineeringReengineeringReengineering

• Reengineering:Reengineering: process of mapping out process of mapping out delivery-chain processes delivery-chain processes in detail to identify in detail to identify potential ways of potential ways of reducing cycle times or reducing cycle times or process errors by process errors by applying technology to applying technology to each step in a processeach step in a process

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of

Materials Requirement PlanningMaterials Requirement PlanningMaterials Requirement PlanningMaterials Requirement Planning

• Materials requirement Materials requirement planning (MRP):planning (MRP): computer-based production computer-based production planning system that lets a planning system that lets a firm ensure that it has all firm ensure that it has all the parts and materials that the parts and materials that it needs to produce goods it needs to produce goods and services at the right and services at the right time and place and in the time and place and in the right amountsright amounts

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Controlling the Production Controlling the Production ProcessProcessControlling the Production Controlling the Production ProcessProcess• Production control:Production control:

creates a well-defined set creates a well-defined set of procedures for of procedures for coordinating people, coordinating people, materials, and machinery materials, and machinery to provide maximum to provide maximum production efficiencyproduction efficiency

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Figure 12.9 Steps in Production ControlFigure 12.9 Steps in Production Control


Controlling the Production ProcessControlling the Production ProcessControlling the Production ProcessControlling the Production Process

• Production planning:Production planning: determines the determines the amount of resources (including raw amount of resources (including raw materials and other components) a firm materials and other components) a firm needs to produce a certain outputneeds to produce a certain output

• Routing: Routing: determines the sequence of determines the sequence of work throughout the facility and specifies work throughout the facility and specifies who will perform each aspect of who will perform each aspect of production at what locationproduction at what location



• Scheduling:Scheduling: developing timetables that developing timetables that specify how long each operation in the specify how long each operation in the production process takes and when production process takes and when workers should perform itworkers should perform it

• Gantt chart:Gantt chart: tracks projected and actual tracks projected and actual work progress over timework progress over time


Figure 12.10 Sample Gantt ChartFigure 12.10 Sample Gantt Chart



• PERT (Program Evaluation and PERT (Program Evaluation and Review Technique):Review Technique): chart which seeks chart which seeks to minimize delays by coordinating all to minimize delays by coordinating all aspects of the production processaspects of the production process

• Critical Path:Critical Path: sequence of operations sequence of operations that requires the longest time for that requires the longest time for completioncompletion


Figure 12.11 Pert Diagram for Building a HouseFigure 12.11 Pert Diagram for Building a House



• Dispatching:Dispatching: phase of production phase of production control in which the manager instructs control in which the manager instructs each department on what work to do and each department on what work to do and time allowed for its completiontime allowed for its completion

• Follow-Up: Follow-Up: phase of production control phase of production control in which employees and their supervisors in which employees and their supervisors spot problems in the production process spot problems in the production process and determine needed adjustmentsand determine needed adjustments


Manufacturing Resource Manufacturing Resource PlanningPlanningManufacturing Resource Manufacturing Resource PlanningPlanning• Manufacturing Manufacturing

resource planning resource planning (MRP II):(MRP II): production- production-control system that control system that integrates planning data integrates planning data from individual from individual departments to produce a departments to produce a master business planmaster business plan

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IMPORTANCE OF QUALITYIMPORTANCE OF QUALITYIMPORTANCE OF QUALITYIMPORTANCE OF QUALITY• Quality is vital in all areas of Quality is vital in all areas of

business, including the product business, including the product development and production development and production functionsfunctions

• Cost of quality is ultimately Cost of quality is ultimately reduced by investing money up reduced by investing money up front in quality design and front in quality design and developmentdevelopment

• Typical costs of poor quality Typical costs of poor quality include downtime, repair costs, include downtime, repair costs, rework, and employee turnoverrework, and employee turnover

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Figure 12.12Figure 12.12The Importance The Importance of Quality of Quality Control to Control to CustomersCustomers


Quality ControlQuality ControlQuality ControlQuality Control• Quality control:Quality control: involves involves

measuring goods and measuring goods and services against established services against established quality standardsquality standards• Such checks needed to spot Such checks needed to spot

defective products and to defective products and to avoid delivering inferior avoid delivering inferior shipments to customersshipments to customers

• Standards should be set high Standards should be set high enough meet customer enough meet customer expectationsexpectations

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ISO StandardsISO StandardsISO StandardsISO Standards

• International Organization for International Organization for Standardization (ISO):Standardization (ISO): organization’s mission is to promote organization’s mission is to promote the development of standardized the development of standardized products to facilitate trade and products to facilitate trade and cooperation across national borderscooperation across national borders

• Established in Europe in 1947, ISO Established in Europe in 1947, ISO includes representatives from about includes representatives from about 130 nations 130 nations


WHAT’S AHEADWHAT’S AHEADWHAT’S AHEADWHAT’S AHEAD

• Next four chapters explore the Next four chapters explore the many activities involved in many activities involved in customer-driven marketing, customer-driven marketing, including:including:• Product developmentProduct development• PricingPricing• Distribution of products to Distribution of products to

customerscustomers• promotionpromotion

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Copyright © 2003 by South-Western. All Rights Reserved. CHAPTER TWELVE CREATING AND PRODUCING WORLD-CLASS GOODS AND SERVICES Text by Profs. Gene Boone