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Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada CHAPTER 11 Producing Goods and Services.

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Presentation on theme: "Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada CHAPTER 11 Producing Goods and Services."— Presentation transcript:

1 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada CHAPTER 11 Producing Goods and Services

2 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 11-2 Learning Objectives Explain the meaning of the term production and operations Describe the four kinds of utility provided by production and explain the two classifications of operations processes. Identify the characteristics that distinguish service operations from goods production and explain the main differences in the service focus. Describe the factors involved in operations planning. Explain some factors in operations scheduling and describe some activities involved in operations control, including materials management and the use of certain operation control tools.

3 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 11-3 Goods and Services Services Operations production activities that yield tangible and intangible service products entertainment transportation education food preparation Goods Production production activities that yield tangible products things you can see and touch

4 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 11-4 Utility: Adding Value Time Utility Satisfying because of when the product is available Place Utility Satisfying because of where the product is available Ownership (Possession) Utility Satisfying during its consumption or use Form Utility Satisfying because of the products form (the transformation of raw materials into a finished product)

5 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 11-5 Operations/Production Management Systematic direction and control of the processes that transform resources into finished goods Production Managers are responsible for creating utility for consumers regardless of industry

6 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 11-6 The Transformation System Production Manager s Plan Organize Schedule Control Resources Land Capital Transformation Human Resources Activities Products and Services Materials

7 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 11-7 Operations Processes methods and technologies used in the production of a good or service classified by: type of transformation technology type of process (analytic or synthetic) amount of customer contact

8 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 11-8 Goods-Producing Processes Transformation Technology Chemical processes Fabrication processes Assembly processes Transport processes Clerical processes

9 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada 11-9 Analytic vs. Synthetic Processes Analytic resources are broken down in production process extracting minerals from ore Synthetic resources are combined in the production process Paint production

10 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Service-Producing Processes Customer are involved in and can affect the transformation process Low-contact system customers do not need to be physically present to receive the service electric power, automatic bank transfers High-contact system customers need to be physically present haircuts, medical examinations, bus transportation

11 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Differences Between Goods and Services Services are performed to meet the needs of customers Focus on the customers themselves Haircut Focus on their possessions Investments or auto repairs Services are more customized, intangible, and perishable than goods consumers evaluate services differently than goods the focus is on the service process and outcome

12 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Focus on Performance Customer-oriented performance is the key in measuring the effectiveness of a service firm More complex than in a goods firm Link between production and consumption, and between process and outcome Services are more intangible, more customized and less storable than goods Quality must be well defined Managing a service firm is different than managing a goods firm

13 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Focus on Process and Outcome Most services have some goods attached to them Focus on both the transformation process and its outcome Need different skills from manufacturing interpersonal skills

14 Business Sixth Canadian edition, Griffin, Ebert & Starke © 2008 Pearson Education Canada Inc Focus on Service Characteristics Intangibility Services cannot be touched, tasted, smelled, or seen Customization Each service is performed to the customers needs dental work, veterinary services Unstorability Most services must be taken when offered or the opportunity is gone Plane flight

15 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada E-Commerce: The Virtual Presence of the Customer In a regular service environment, customers are physically present In an e-commerce environment, the customers are virtually present, with 7/24 access Unique opportunity to build customer relationships

16 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Operations Planning Successful operations are carefully planned and implemented Key issues include Forecasting Planning Capacity Location Layout Quality Methods planning

17 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Forecasting Estimating future demand for new and existing products May be short to long term (2 to 5 years) Qualitative Methods based on judgment and experience obtained from experts or groups of experts Quantitative Methods based on statistical projections obtained by extrapolating from historical sales levels

18 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Capacity Planning The amount of a product that a firm can produce under normal conditions capacity should slightly exceed normal demand accommodate seasonal changes and peak times address ways to use excess capacity

19 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Location Planning The decision of where to place a production facility is crucial and is based on: location of customers and suppliers availability of labour proximity to raw materials transportation costs taxes community attractiveness

20 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Layout Planning Productive facilities are used for transforming raw materials workstations, equipment Nonproductive facilities do not transform storage & maintenance areas Support facilities support the organization cafeteria, parking lot, restrooms

21 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Process Layout Resources are grouped based on their function in the production process tasks are performed in specialized locations suitable for job shops (custom work) in a bakery, areas are dedicated to mixing, baking, decorating, and packaging

22 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Cellular Layouts A series of areas or cells are created each cell is used to manufacture a product in a family each product in the family goes through a similar process Requires less adjustment of equipment, smaller flow distances, reduced materials handling and transit time clothing pockets (product family) with individual products requiring similar steps in production pants pockets, shirt pockets

23 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Product Layout Resources are moved through a series of steps as they become finished goods Equipment and people are arranged in a production line for each product being produced Often use assembly lines, where products are moved along a conveyor belt or similar equipment Can be efficient and cost-effective streamlined production simplified tasks, can use unskilled labour automobile manufacturing, food processing

24 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Flexible Manufacturing Systems (FMS) Automatic equipment produces small batches of different products on the same production line Linking company information systems and production systems result in an increased ability to plan for changes in consumer tastes and seasonal demand

25 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Soft Manufacturing Emphasis on computer software and networks rather than production equipment does not rely on complete automation, recognizing that human labour can excel in ways that machines cannot Humans can do fine work and do not break down or wear out the way robots do

26 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Layout Planning for Producing Services Differs for low and high contact systems Low-contact systems should be designed to enhance service production High-contact systems should be arranged to meet customers needs and expectations

27 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Methods Planning Must clearly identify: every production step the specific methods for performing them Methods improvement 1.document the current method process flow chart identifies the sequence, movements and tasks 2.analyze to identify wasteful activities, source of delays, and other inefficiencies 3.implement improvements,

28 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Methods Improvement in Services Service Flow Analysis shows the process flows and helps determine which processes are necessary Identifies areas that pose potential problems fail points Design to control employee discretion enhance consistency, perhaps by automating Design for customer contact develop clear procedures

29 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Service Flow Analysis for Quick Photo- Finishing Customers will wait up to 90 minutes for photo- finishing before lowering their evaluation of service quality.

30 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Scheduling Goods Operations Master production schedule (top level) Which products will be produced When will production occur What resources will be used Time periods for resource use Short-term detailed schedule: task assignments order information production specifics to meet incoming orders

31 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Scheduling Service Operations Scheduling work and workers Low-contact services: Scheduling based on desired completion dates and/or arrival Less direct customer involvement reservations and appointment systems High-contact services: Customer is directly involved in the production process Scheduling must revolve around the customer

32 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Scheduling tools Gantt Charts diagram of steps in project and time required for each can be used to check progress PERT Charts specifies the sequence and critical path of steps in a project can identify activities that will cause delay

33 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Gantt Chart

34 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada PERT chart

35 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Operations Control Operations control = monitoring performance by comparing results to original plans and schedules Follow-up = checking to ensure that production decisions are being implemented Materials management Process control

36 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Materials Management Planning, organizing & controlling the flow of materials from purchase to distribution of finished goods transportation warehousing inventory control purchasing Standardization using standard and uniform components in the production process simplifies paperwork reduces storage needs eliminates unnecessary materials flow

37 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Supplier Selection 1) Survey possible suppliers 2) Visit and evaluate each supplier 3) Negotiate terms of service with chosen suppliers 4) Develop an ongoing order routine and maintain a positive buyer-seller relationship

38 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Process Control: Training Workers Staff skills are essential to render high quality goods and services Staff manage both sales and service production human relations skills are vital in high-contact services technical skills are vital in low-contact services

39 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Just-in-Time Production Systems (JIT) Parts and components are delivered precisely when they are needed resources continually flowing reduces goods in progress and saves money disruptions visible and resolved quickly by continuous improvement Makes supply systems more volatile and uncertain

40 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Materials Requirements Planning (MRP) Uses a computerized bill of materials to estimate production needs so resources are acquired and put into production only as needed fewer early arrivals less frequent stock shortages lower storage costs Bill of materials a list of goods that are needed in the production processes, and the method of combining the resources a bill of materials gives requirements for a single production batch

41 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Manufacturing Resource Planning (MRP II) Advanced version of MRP Ties together all parts of the organization into the companys production activities Production Inventory Human resources Marketing Finance

42 Business, Sixth Canadian Edition, by Griffin, Ebert, and StarkeCopyright © 2008 Pearson Education Canada Quality Control The management of the production process so as to manufacture the goods or supply services that meet specific quality standards


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