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*Chapter Nine

Production and

Operations Management of Goods and

Services

Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

WHERE ARE WE IN MFG SECTOR ??

• 1. MANUFACTURING IS AT AN ALL TIME LOW

• 2. UNEMP IS AT LOWEST POINT IN YEARS

• **this chapter focuses on what manufacturers and service providers can do to revive economy

• Services are replacing true manufacturing• Service sector is growing• Managers will become more occupied with

service productivity• Focus will become on blending services and

true manufacturing

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*From Production to Operations Management

• Production -- The creation of goods using land, labor, capital, entrepreneurship and knowledge (the factors of production).

PRODUCTION and PRODUCTION MANAGEMENT

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• Production Management -- All the activities managers do to help firms create goods.

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PRODUCTION PROCESS• RAW MATERIALS ---WORK IN PROCESS---FINISHED GOODS

******IF production historically meant this manufacturing process then production mgt would help firms make goods

Transitional time : NOW production includes goods and services

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*From Production to Operations Management

• Operations Management -- A specialized area in management that converts or transforms resources into goods and services.

• Operations management includes:• Inventory management• Quality control• Production scheduling• Follow-up services

OPERATIONS MANAGEMENT

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*Production ProcessesThe PRODUCTION PROCESS

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*Production Processes

• Form Utility -- The value producers add to materials in the creation of finished goods and services.

FORM UTILITY

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• Process Manufacturing -- The part of production that physically or chemically changes materials.

• Assembly Process -- The part of the production process that puts together components.

PROCESS and ASSEMBLY in PRODUCTION

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Production Processes

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• Production processes are either continuous or intermittent.

• Continuous Process -- Long production runs turn out finished goods over time.

• Intermittent Process -- Production runs are short and the producer adjusts machines frequently to make different products.

KEY PRODUCTION PROCESSES

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Production Processes

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*The Need to Improve Production Techniques and Cut Costs

DEVELOPMENTS MAKING U.S. COMPANIES MORE COMPETITIVE

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1. Computer-aided design and manufacturing

2. Flexible manufacturing

3. Lean manufacturing

4. Mass customization

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*Computer-Aided Design and Manufacturing

COMPUTER-AIDED DESIGN and MANUFACTURING

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• Computer-Aided Design (CAD) -- The use of computers in the design of products.

• Computer-Aided Manufacturing (CAM) -- The use of computers in the manufacturing of products.

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*Flexible Manufacturing FLEXIBLE MANUFACTURING

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• Flexible Manufacturing -- Designing machines to do multiple tasks so they can produce a variety of products.

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*Lean Manufacturing LEAN MANUFACTURING

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• Lean Manufacturing -- Using less of everything than in mass production.

• Compared to others, lean companies:• Take half the human effort.

• Have half the defects in finished products.

• Require one-third the engineering effort.

• Use half the floor space.

• Carry 90% less inventory.

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*Mass CustomizationMASS CUSTOMIZATION

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• Mass Customization -- Tailoring products to meet the needs of a large number of individual customers.

• More manufacturers are learning to customize.

• Mass customization exists in the service sector too.

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*Operations Management Planning

• Operations management planning helps solve problems like:

- Facility location

- Facility layout

- Materials requirement planning

- Purchasing

- Inventory control

- Quality control

OPERATIONS MANAGEMENT

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*Facility Location

• Facility Location -- The process of selecting a geographic location for a company’s operations.

FACILITY LOCATION

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• Rising numbers of Internet businesses means brick-and-mortar retailers must find great locations.

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*Facility Location in the Future

• Information technology gives firms increased flexibility in terms of location.

• Telecommuting -- Working from home via computer and modem.

FUTURE FACILITY LOCATION

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*Facility Layout

• Facility Layout -- The physical arrangement of resources, including people, to most efficiently produce goods and provide services.

• Facility layout depends on the processes performed:

- Service: Help customers find products

- Manufacturing: Improve efficiency

SETTING UP the FACILITY

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*Facility Layout

1. Assembly Line Layout – Workers do only a few tasks at a time.

2. Modular Layout – Teams of workers produce more complex units of the final product.

3. Fixed-Position Layout – Allows workers to congregate around the product.

4. Process Layout – Similar equipment and functions are grouped together.

FACILITY LAYOUT OPTIONS

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*Materials Requirement Planning

• Materials Requirement Planning (MRP) -- A computer-based operations management system that uses sales forecasts to make sure parts and materials are available when needed.

• Enterprise Resource Planning (ERP) -- A newer version of MRP, combines computerized functions into a single integrated software program using a single database.

MRP and ERP

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*Purchasing

• Purchasing -- The function that searches for high-quality material resources, finds the best suppliers and negotiates the best price for goods and services.

PURCHASING

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• The Internet has transformed purchasing.

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*Just-in-Time Inventory Control

• Just-in-Time (JIT) Inventory Control -- The production process in which a minimum of inventory is kept and parts, supplies and other needs are delivered just in time to go on the assembly line.

• To work effectively, the process requires excellent coordination with suppliers.

INVENTORY CONTROL

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*Quality Control

• Quality -- Consistently producing what the customer wants while reducing errors before and after delivery.

• Six Sigma Quality -- A quality measure that allows only 3.4 defects per million opportunities.

QUALITY CONTROL

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*ISO 9000 and ISO 14000 Standards

• The International Organization for Standardization (ISO) is a worldwide federation of national standards bodies.

• ISO 9000 -- The common name given to quality management and assurance standards.

• ISO 14000 -- A collection of the best practices for managing an organization’s impact on the environment.

WHAT is the ISO?LG4

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*Control Procedures: PERT and GANTT Charts

• Program Evaluation and Review Technique (PERT) -- A method for analyzing the tasks involved in completing a given project and estimating the time needed.

PERT

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*Control Procedures: PERT and GANTT Charts

1. Analyzing and sequencing tasks

2. Estimating the time needed to complete each task

3. Drawing a PERT network illustrating the first two steps

4. Identifying the critical path

• Critical Path -- The sequence of tasks that takes the longest time to complete.

STEPS INVOLVED in PERT

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*Control Procedures: PERT and GANTT Charts

• Gantt Chart – A bar graph that shows what projects are being worked on and how much has been completed.

GANTT CHARTS

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