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MANAGING
OPERATIONS
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Introduction
The typical responsibilities of operations
managers include the management of
production systems, product quality,inventory systems, supply chains, and
product and process development.
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By managing operations efficiently and
effectively, managers can lower costs
of organization and increase thedifferentiation of its product, thereby
reaching the efficiency frontier of the
industry.
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Definitions
Operations ± the different activities
involved in creating an organization's
products and service Operations manager ± people who
manage operations
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The quality of production process and of
the end product is an issue of great
importance for both manufacturingand service enterprise .
Improving productivity is a key concern
in both manufacturing and serviceorganizations.
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Productivity and Efficiency
Productivity ± is the output produced by
a given input.
productivity = output/input
Productivity of labor ± is defined as the
unit output divided by some measure
of labor inputs..
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In 2004, it took Toyota 20.6 employee
hours to build a car, comparing to
23.6 hours at General Motors and25.4 hours at Ford and 26 hours at
Chrysler. Thus we can conclude that
Toyota had higher labor productivity
that it/s three rivals, and should have
lower costs and high profitability.
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Productivity of capital
Productivity of capital is the sales
divided by the total capital or money
invested in a business. This is often referred to as capital
turnover, and this measure tells
managers how many dollars of sales
are produced for every dollar of
capital invested.
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The major point to consider is theproductivity rates of labor and capital
are major determinants of efficiencyand thus the cost structure of anenterprise.
The task facing managers to improve
labor and capital productivity over time; thereby lowering costs andboosting performance enterprise.
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Production System
Production system refers to how the
flow of work is configured.
Production can be configured in anumber of different ways, depending
on the nature of product, consumer
requirements and available production
technologies.
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Production systems have been
categorized into four main categories:
job shop, batch production, assemblyline or continuous flow.
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Job shop ± production systems used whenitems are ordered individually.
This system is used when items are orderedindividually and tend to be unique to therequirements of a particular customer.
Many small manufacturing operations areorganized on a job shop basis ± high end
cabinetmaker, for example, may producedspecialized cabinets designed for individualhomes.
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Small batch system are used when
customers order in small batches, but
when each batch is different.
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Assembly line production systems areused to mass-produce large volumes
of a standardized product. Assembly lines involved breaking
down a production process intodiscrete steps and assigning
employees to different work stationson a continually moving line wherethey perform specialized tasks.
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Automobile manufactures use
assembly line systems to mass
produce specific ca models.
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Continuous flow production ± systemscontinuously produce a standardized
output that flows out of the system.Oil refineries are good example. manycontinuous flow systems cannot beeasily shut down; they tend to operate
round the clock, continuouslyproducing a highly standardizedoutput.
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Production Systems,
Flexibility, and CostsProduction systems differ in the degree
to which their output is standardized,
their flexibility and their costs.Job shops and small batch system are
more flexible than assembly line and
continuous flow system because their
outputs are less standardized.
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Assembly-line and continuous flowsystems mass-produce or
continuously produce a standardizedoutput, and by doing so, they canreduce cost in two ways: economiesof scale and learning effects.
Economies of scale are the costadvantages derived from large-volume production.
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Another source of economies of scale is the
ability of the companies producing in large
volumes to achieve a greater division of labor and specialization.
Specialization is said to have a favorable
impact on productivity, mainly because it
enables employees to become skilled in
performing particular task.
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Learning Effects ± are cost savings
that come from learning by doing. For
example, workers learn by repetitionhow best to carry out a task.
In general, labor productivity
increases overtime and unit cost fall
as individuals learn the most efficient
way to perform a particular task.
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Quality Management
An important aspect of product quality
is product reliability.
A product is said to be reliable when itconsistently does the job it was
designed for, does it well and rarely
breaks down.
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Quality management methodologies
try to eliminate defects in the process
of producing a good service, therebyproducing a more reliable end
product.
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Product reliability can be a huge
source of cost savings for several
reasons. First, if defects are reduced, time and
materials are not wasted building
products that later have to be
scrapped or reworked.
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Second, if products performed asadvertised, the company will save onwarranty costs.
Furthermore, if a company¶s products areviewed by customers as more reliable, thanthose of the competitors, this can lead tosuperior pricing, greater demand.
Thus superior product quality, measured byreliability can be a source of competitiveadvantage.