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Operations and Value Chain Management
Operations and Value Chain Management
CHAPTER 16CHAPTER 16
2 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Learning ObjectivesLearning Objectives
Define operations management and describe its applications within manufacturing and service organizations.
Discuss the role of operations management strategy in the company’s overall competitive strategy.
Explain the role of e-business in today’s partnership approach to supply chain management.
Summarize considerations in designing an operations system, including product and service design, facilities layout, and capacity planning.
3 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Learning Objectives (contd.)Learning Objectives (contd.)
Explain why small inventories are preferred by most organizations.
Discuss major techniques for the management of materials and inventory.
Describe what is meant by lean manufacturing. Define productivity and explain why and how
managers seek to improve it.
4 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.
Operations and Value Chain ManagementOperations and Value Chain Management
Strategic success depends on efficient operations
Operational concerns take on even greater importance in today’s competitive environment where consumers often want customized products and services delivered immediately
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Operations ManagementOperations Management
The field of management that specializes in the physical production of goods or services and uses quantitative techniques for solving manufacturing problems
Technical core = heart of the organization’s production of its product or service
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The Organization as a Value Chain SystemThe Organization as a Value Chain System
Products & FacilitiesProduct designFacilities layoutCapacity planningFacilities location
StructureReporting relationships
Teams
Control ProcessesInventory managementProductivityQuality
Operations ManagementInputsRaw materialsHuman resourcesLand, buildingsInformationTechnology
InputsRaw materialsHuman resourcesLand, buildingsInformationTechnology
OutputsProductsServices
OutputsProductsServices
Competitive Strategy
The Technical Core
Feedback
Exhibit 16.1
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Manufacturing and Service OrganizationsManufacturing and Service Organizations
Source: Based on Richard L. Daft, Organization Theory and Design (Cincinnati, OH: South-Western College Publishing, 1998), 130; and Byron J. Finch and Richard L. Luebbe, Operations Management (Fort Worth, Texas: The Dryden Press, 1995), 50.
Exhibit 16.2
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Operations StrategyOperations Strategy
The recognition of the importance of operations to the firm’s success and the involvement of operations managers in the organization’s strategic planning.
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Supply Chain ManagementSupply Chain Management
Supply chain management - managing the sequence of suppliers and purchasers, covering all stages of processing from obtaining raw materials to distributing finished goods to final consumers
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The Integrated Enterprise The Integrated Enterprise
daft ch21 insert1.CLP
16.3
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Design for Manufacturabilityand Assembly - DFMA
Design for Manufacturabilityand Assembly - DFMA
Often requires– Restructuring operations– Creating teams of designers,
manufacturers, and assemblers to meet objectives of design
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Product Design ObjectivesProduct Design Objectives
1 Producibility
Cost
Quality
Reliability
2
3
4
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Service Design ObjectivesService Design Objectives
1 Producibility
Cost
Quality
Reliability
2
3
4
Timing5
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ProcurementProcurement
Purchasing supplies, services, and raw materials for use in the production process
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Facilities LayoutFacilities Layout
Process Layout Product Layout Cellular Layout Fixed-position Layout
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Technology AutomationTechnology Automation
Service Technology Restaurants – calculate exact cost and
ingredient needs for each menu item Banking – ATMs Gas stations – pay-at-pump systems Retailing = RFID – radio-frequency
identification (high-tech barcode)
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Technology AutomationTechnology Automation
Flexible Manufacturing Systems, the use of automated production lines that can be quickly adapted to produce more than one kind of product
CAD/CAM● CAD = computer aided design● CAM = computer aided manufacturing● PLM = Product-life cycle management
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Facility LocationFacility Location
Cost-benefit analysis – most common approach to selecting a site for a new location
New location scouting software is helping managers turn facilities location into a science
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Capacity PlanningCapacity Planning
Determination and adjustment of
the organization’s ability to produce
products and services to match
customer demand
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Inventory ManagementInventory Management
Finished goods inventory
Work-in-process inventory
Raw materials inventory
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Techniques for Inventory ManagementTechniques for Inventory Management
Economic order quantity
Material requirements planning
Just-in-Time inventory systems
Logistics & Distribution management
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Material Requirements Planning - MRPMaterial Requirements Planning - MRP
Dependent demand inventory planning and control system
Schedules exact materials required
Is computer based
Based on precise estimates of future needs for production
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Logistics and Distribution ManagementLogistics and Distribution Management
Logistics = activities required to physically move materials into the company’s operations facility and to move finished products to customers
Distribution = moving finished products to customers (order fulfillment)
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Lean Manufacturing and ProductivityLean Manufacturing and Productivity
Lean manufacturing = process using highly trained employees at every stage of the production process to cut waste and improve quality – employee involvement is key
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Measuring ProductivityMeasuring Productivity
Productivity = organization’s output of products and services divided by its inputs
Total factorProductivity
LaborProductivity
Output
Labor + Capital + Materials + Energy=
= Output Labor dollars
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Improving ProductivityImproving Productivity
1. Employee productivity
2. Managerial productivity