Operations managemnt

Hellriegel, Jackson, and SlocumMANAGEMENT, 8ESouth-Western College PublishingCopyright © 1999

PPT

Operations ManagementOperations Management Systematic direction, control, and evaluation of

the entire range of processes that transform inputs into finished goods or services.

Environmental factors-culture, political, and market influences

Inputs-HR, capital, materials, land, energy, information, customer

Transformations-convert inputs into outputs


PPT

O.M. (cont)O.M. (cont) Outputs-goods or services, and waste Customer Contact-customers actively

participate in transformation processes, self-service

Performance Feedback-repair records, customer comments


PPT

Operations ManagementOperations ManagementOperations ManagementOperations Management

Refers to the management of the production system that transforms inputs into finished goods and services.

Production system: the way a firm acquires inputs then converts and disposes outputs.

Operations managers: responsible for the transformation process from inputs to outputs.

Operations management seeks to increase the quality, efficiency, and responsiveness of the firm.

Seeks to provide a competitive advantage.


PPT

Operations Management ConceptsOperations Management ConceptsOperations Management ConceptsOperations Management Concepts Quality: goods and services that are reliable and

perform correctly. Quality allows customers to receive the performance that they

expect.

Efficiency: the amount of input to produce a given output.

Less input required lowers cost and waste.

Responsiveness to customers: actions taken to respond to customer needs.

Firm can react quickly and correctly to customer needs as they arise.


PPT

Differences Between Services and Differences Between Services and GoodsGoods Information Asymmetry Intangible Inventory Customer Contact Response Time Labor Intensity


PPT

Typical Characteristics of Services and Goods ProducersTypical Characteristics of Services and Goods Producers

Adapted from Table 21.1

Primarily Service Primarily Service ProducersProducers

Primarily Primarily GoodsGoodsProducersProducers

Continuum of Continuum of CharacteristicsCharacteristics

Intangible, nondurable

Output can’t be inventoried

High customer contact

Short response time

Labor intensive

Tangible, durable

Output can be inventoried

Low customer contact

Long response time

Capital intensive

MixedMixed

21.3


PPT

Positioning Strategies-approach Positioning Strategies-approach selected for transformational selected for transformational processesprocesses Process Focus-layout of

plant and equipment around each production unit custom made Low Volume Norwegian Ship Building

Product Focus-arranging plant and equipment around one or a few output types

many of one product high-volume, highly

automated low flexibility Factory Lines

Intermediate Strategy-plant and equipment layout reflects some of both strategies batches of products Kinkos, Ball Homes

Agile Strategy-mass customization


PPT

FlexibilityFlexibility Product Flexibility-speed with which products

are created, ability to customize, ability to modify products for special needs

Volume Flexibility-ability to respond to sudden changes in demand, change from small to full scale

Process Flexibility-ability to manufacture a variety of goods in a short time, adjust to product mix over time, ability to accommodate changes in raw materials


PPT

Core Positioning StrategiesCore Positioning Strategies

Adapted from Figure 21.2

Sources: Adapted from Brown, H.K., Clark, K.B., Holloway, C.A., and Wheelwright, S.C. The Perpetual Enterprise Machine: Seven Keys to Corporate Renewal Through Successful Product and Process Development. New York: Oxford University Press, 1994; Upton, D.M. “The management of manufacturing flexibility.” California Management Review, Winter 1994, 72–89.

Process focus

Space shuttleLegal practice

Product focus

Auto assembly plant

Mail processingIntermediate

Garment

industryBranch banks

Product volumeProduct volume

Custom products,low volume

Standard products,high volume

Mixture of custom and standard products, moderate volume

Continuous process(stable)

Re

so

urc

e f

low

sR

es

ou

rce

flo

ws

Massproduction

Largebatch

Sporadic(unstable)

21.5


PPT

Improving Responsiveness to CustomersImproving Responsiveness to CustomersImproving Responsiveness to CustomersImproving Responsiveness to Customers Without customers, organizations cease to exist.

Non-profit and for-profit firms all have customers. Managers need to identify who the customer is and their

needs.

What do customers want? Usually customers prefer: A lower price to a higher price. High quality over low quality. Fast service over slow service.

Also good after sale support. Many features over few features. Products tailored to their specific needs.


PPT

Quality-how well a product does Quality-how well a product does what the customer expectswhat the customer expects Internal View-within the organization

External View-value customers expect

Value-the relationship between quality and price


PPT

Competitiveness Value MapCompetitiveness Value Map

Relative QualityRelative QualitySuperiorInferior

Higher

Lower

Poorvalue


Rel

ativ

e P

rice

Rel

ativ

e P

rice

Economyvalue Outstanding

value

Premiumvalue

Averagevalue

Source: Adapted from Gale, B.T., and Buzzell, R.D. “Market perceived quality: Key strategic concept.” Planning Review, March-April, 1989, 10.

21.7


PPT

Price Price v.v. Attributes AttributesPrice Price v.v. Attributes Attributes

Firms offering high quality, fast service and other customer desires, often must raise price.

Customers must tradeoff price for attributes.

Operations management tries to push the price/attribute curve to the right with better production. Provides more attributes at the same cost.

By enhancing the price/attribute relationship, the firm can increase its competitive position.


PPT

Customer Responsive Production SystemsCustomer Responsive Production SystemsCustomer Responsive Production SystemsCustomer Responsive Production Systems

An output’s attributes is determined by the production system.

Firms must strike a balance between cost and attributes

Improving Quality: can apply to firms producing goods and services.

A firm that provides higher quality than others at the same price is more responsive to customers.

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


PPT

Total Quality ManagementTotal Quality Management The continuous process of ensuring every

aspect of production builds in product quality Traditional Quality-product inspection during or

at the end of the transformation process


PPT

Total Versus Traditional QualityTotal Versus Traditional Quality

Adapted from Table 21.3

Quality is a strategic issue

Plan for quality

Quality is everybody’s responsibility

Strive for zero defects Quality means conformance to

requirements that meet or exceed customers’ expectations

Scrap and reworking are only a small part of the costs of nonconformance

Traditional Quality ControlTraditional Quality ControlTotal Quality ManagementTotal Quality Management

Quality is a tactical issue

Screen for quality

Quality is the responsibility of the

quality control department

Some mistakes are inevitable Quality means inspection

Scrap and reworking are the major costs of poor quality

21.11


PPT

Improving EfficiencyImproving EfficiencyImproving EfficiencyImproving Efficiency Labor productivity allows labor comparisons between

organizations. Improved efficiency leads to lower costs and better

performance.

TQM and Efficiency: TQM can lead to much higher labor productivity.

When quality rises, less time is wasted on scrap.

Flexible manufacturing and efficiency: reduces the set-up costs for production systems.

Facilities layout: seeks to design the machine-worker interface to increase production efficiency.


PPT

Efficient ManufacturingEfficient ManufacturingEfficient ManufacturingEfficient Manufacturing Most firms face major expense when setting up to

produce a product. These costs must be paid before production begins.

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

Flexible Manufacturing reduces setup costs.

Just-in-Time (JIT) inventory, while developed for TQM, also adds to efficient production.

Many costs are reduced including warehousing, holding costs and inventory tracking.

Firm does not have a supply of parts, but can be vulnerable to strikes or supply problems.


PPT

Efficient ManufacturingEfficient ManufacturingEfficient ManufacturingEfficient Manufacturing Self-managed teams boost efficiency by allowing for a

flatter organization structure. The team takes the role of the supervisor. Teams working together often become very skilled at enhancing

productivity.

Kaizen: Japanese term for a management philosophy the stresses the need for continuous improvement.

Better operations can come from many, small, continuous improvements.

Focus on what adds value to the product and try to eliminate steps that do not add value (such as inspection for defects).


PPT

ReengineeringReengineeringReengineeringReengineering Process Reengineering: the fundamental rethinking

and radical redesign of the business process. Can boost efficiency by directing efforts to activities that add

value to the good or service produced. While Kaizen focuses on continuous enhancements, process

reengineering considers wholesale change.

Top managers must support operations enhancement tools for them to be accepted by workers.

Usually, a successful operations change means a complete change in the organizational culture.

Without a supporting culture, change will not succeed.


PPT

Nine Categories of Operations Management DecisionsNine Categories of Operations Management Decisions

Product plans Competitive Priorities Positioning Strategies Location Technological Choices Quality management and control Inventory management and control Materials Management Master production scheduling

21.4


PPT

Inventory CostsInventory Costs What contributes to inventory costs? TOTAL COST = ORDERING + CARRYING

Carrying Costs Warehouse Insurance Obsolescence taxes breakage

Ordering Costs Placing the order Transportation Shortage


PPT

Inventory TermsInventory Terms Lead Time

Elapsed time between placing and receiving an order

EOQ-economic order cost optimum order quantity yielding the lowest total

inventory cost

Just-in-time finished goods to sell sub assemblies to be assembled purchases of raw materials to be transformed


PPT

Quantity (Q)Quantity (Q)

HighHigh

LowLow

Ave

rag

e an

nu

al c

ost

($)

Ave

rag

e an

nu

al c

ost

($) Total cost

Carrying cost

Order cost

SmallSmall LargeLargeQ1


Cost Trade-Offs in Determining Inventory Levels Cost Trade-Offs in Determining Inventory Levels

21.13

Documents

Operations managemnt