7chapter
Business Essentials, 7th EditionEbert/Griffin
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Operations Management and Quality
Instructor Lecture PowerPointsPowerPoint Presentation prepared by
Carol Vollmer Pope Alverno College
What Does Operations Mean Today?
• Operations (Production)
– All the activities involved in making products—goods and services—for customers
• Service Operations (Service Production)
– Provide intangible and tangible service products
• Goods Operations (Goods Production)
– Produce tangible products
• Operations managers create utility for customers through production, inventory and quality control.
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Creating Value Through Operations• Utility
– The ability of a product to satisfy a want or need• Form utility
• Time utility
• Place utility
• Operations (Production) Management– The systematic direction and control of processes that
transform resources into finished services and goods that create value for and provide benefits to customers
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Differences Between Service and Goods Manufacturing Operations
• Goods are produced, services are performed• Service operations differ from manufacturing
operations in that service operations:1. Involve interacting with consumers.2. Are sometimes intangible and unstorable.3. Involve a customer’s presence in the process.4. Involve certain service quality considerations.
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Operations Processes• Operations Process
– A set of methods and technologies used to produce a good or a service
• Goods Production Processes– Make-to-order processes
– Make-to-stock processes
• Service Production Processes– Extent of Customer Contact
• Low-contact systems: low customer involvement
• High-contact systems: high customer involvement
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Business Strategy as the Driver of Operations
• Businesses with contrasting business strategies choose different operations capabilities—the activities or processes that production must perform especially well, with high proficiency
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TABLE 7.1 Business Strategies That Win Customers for Four Companies
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Operations Planning
• Capacity Planning– Capacity: The amount of a product that a
company can produce under normal conditions
– Planning deals with determining how much can be produced
• Location Planning– Location affects production costs and flexibility
– Planning deals with determining where it will be produced
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Operations Planning (cont’d)
• Layout Planning– The layout of machinery, equipment, and supplies
determines whether a company can respond efficiently to demand for more and different products or whether it finds itself unable to match competitors’ speed and convenience
– Planning deals with determining how the product will be produced
• Process layouts• Product layouts
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FIGURE 7.1 Operations Planning and Control
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Quality Planning• What Is Quality?
– The combination of “characteristics of a product or service that bear on its ability to satisfy stated or implied needs” (American Society for Quality)
– Quality planning begins when products are designed: goals are set for performance and consistency
– Quality planning includes deciding what constitutes a high-quality product and determining how to measure these quality characteristics
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Methods Planning
• Managers identify each production step and methods for performing it.
• They reduce waste and inefficiency by examining procedures in an approach called methods improvement.
• They reduce waste and inefficiency by improving process flows.– A detailed description, often a process flowchart, helps
managers organize and record information.• They attempt to improve customer service.
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Operations Scheduling• Operations Scheduling
– Identifying times when specific production activities will occur
• Kinds of Planning Schedules– Master schedule: Shows which products will be
produced, and when, in upcoming time periods
– Detailed schedule: Shows day-to-day activities that will occur in production
– Staff schedules: Show who and how many employees will be working, and when
– Project schedules: Coordinate completion of large-scale projects
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Project Scheduling
• Gantt Chart– Breaks down projects into steps to be performed– Specifies the time required to complete each step– A Project Manager uses the Gantt chart to:
• List all activities to be performed• Estimate the time required for each step• Record the progress on the chart• Check the progress against the time scale on the report
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Figure 7.4 Gantt Chart
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Operations Control• Operations Control
– Requires managers to monitor performance by comparing results with detailed plans and schedules.
– Follow-up: Checking to ensure that production decisions are being implemented—is a key and ongoing facet of operations.
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Materials Management• Materials Management
– The process by which managers plan, organize, and control the flow of materials from sources of supply through distribution of finished goods
• Materials Management Activities– Supplier selection– Purchasing– Transportation– Warehousing– Inventory control
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Lean Production Systems: Just-in-Time Operations
• Lean Production Systems Goals– Smooth production flows avoid inefficiencies– Elimination of unnecessary inventories– Continuous improvement in production processes
• Just-in-Time (JIT) Production– Bringing together all needed materials only when
they are required, creating fast and efficient responses to customer orders
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Benefits of Just-in-Time Production
1. Reduces the number of goods in process (goods not yet finished)
2. Minimizes inventory costs
3. Reduces inventory storage space requirements
4. Replaces stop-and-go production with smooth movement
5. Disruptions are more visible and get resolved more quickly
6. Continuous improvement of the process© 2009 Pearson Education, Inc.
Quality Control
• Quality Control – Taking action to ensure that operations produces
products that meet specific quality standards– Requires establishment of specific standards and
measurements
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Quality Improvement and Total Quality Management
• Quality Improvement– Building quality into products and services rather than
trying to control quality by inspection
• Total Quality Management (TQM)– All of the activities necessary for getting high-quality goods
and services into the marketplace
• Quality Ownership– Quality belongs to each person who creates it while
performing a job and it requires a focus on quality by all parts of an organization
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Total Quality Management
• Always Delivering High Quality
– Planning for quality
– Organizing for quality
– Directing for quality
– Controlling for quality
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Tools for Total Quality Management• Competitive Product Analysis
– Analyzing competitors’ products to identify improvements• Value-Added Analysis
– Eliminating wasteful and unnecessary activities• Quality Improvement Teams
– Adopting quality circles• Getting Closer to the Customer
– Identifying internal and external customers• ISO 9000 and ISO 14000
– Ensuring certification of quality management in processes• Business Process Reengineering
– Starting over from scratch to improve processes
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Adding Value Through Supply Chains
• Supply Chain (or Value Chain)– The flow of information, materials, and services
that starts with raw-materials suppliers and continues adding value through other stages in the network of firms until the product reaches the end customer
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FIGURE 7.5 Supply Chain for Baked Goods
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The Supply Chain Strategy
• Supply Chain Management (SCM)– Working with the supply chain as a whole to
improve overall flow through a system composed of companies working together
• Supply Chain Reengineering– Improving the process for better results:
• Lower costs, speedier service, and coordinated flows of information and material
• Outsourcing and Global Supply Chains– Paying suppliers and distributors to perform
certain business processes or to provide needed materials or services
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