Presentation on theme: "Producing Quality Goods and Services"— Presentation transcript:
1 Producing Quality Goods and Services Chapter EightProducing Quality Goods and Services
2 Learning Objectives Explain the nature of production Outline how the conversion process transforms raw materials, labor, and other resources into finished products or servicesDescribe how research and development lead to new products and servicesDiscuss the components involved in planning the production processExplain how purchasing, inventory control, scheduling, and quality control affect productionSummarize how productivity and technology are related
3 Current Events Article Title: In Design, Chair and Chair AlikeAuthor: Anjali AthavaleySource: The Wall Street JournalLink:
4 What Is Production? Operations management Operations manager Planning All of the activities that managers engage in to produce goods and servicesOperations managerA person who manages systems that convert resources into goods and servicesManagers concern themselves with the control of operations to ensure that the organization’s goals are achievedPlanningPlanning takes place before anything is produced and during the production process
5 Competition in the Global Marketplace The U.S. was the most productive country after World War IICompetitors in European and Asian countries eventually recovered and began to compete with the U.S. firmsU.S. firms have had to refocus on quality and customer needsThe most successful U.S. firms have focused on:Motivating employees to improve productivityReducing production costs by carefully selecting suppliersRevamping their facilities with state-of-the-art equipmentUsing computer-aided and flexible manufacturing systemsImproving control procedures to lower manufacturing costsBuilding foreign manufacturing facilities where labor costs are lower
6 Careers in Operations Management Operations managers must appreciate the manufacturing processMass production: a process that lowers the cost required to produce a large number of identical or similar products over a long period of timeAnalytic process: a process that breaks raw materials into different component partsSynthetic process: a process that combines raw materials or components to create a finished productSuccessful operations managers must:Be able to motivate and lead peopleUnderstand how technology can make a manufacturer more productive and efficientAppreciate the control processes that lower production costs and improve product qualityUnderstand the relationship between the customer, the marketing of a product, and the production of a product
7 The Conversion Process The purpose of the resources conversion process is to provide utility to customersUtility: the ability of a good or service to satisfy a human needFour types of utility: form, place, time, and possessionForm utility: utility created by the converting raw materials, people, finances, and information into finished products
9 The Increasing Importance of Services Service economyAn economy in which more effort is devoted to services than to the production of goodsThe production of services varies from the production of goodsServices are consumed immediately and cannot be storedServices are provided when and where the customer desiresServices are usually labor intensiveServices are intangible, making it difficult to evaluate customer satisfaction
10 Service IndustriesSource: U.S. Bureau of Labor Statistics website, accessed September 20, 2008.
11 Where Do New Products and Services Come From? Research and DevelopmentA set of activities intended to identify new ideas that have the potential to result in new goods and servicesBasic researchUncovering new knowledge; scientific advancement without regard for its potential useApplied researchDiscovering new knowledge with some potential useDevelopment and implementationActivities undertaken to put new or existing knowledge to use in producing goods and services
12 Where Do New Products and Services Come From? Product extension and refinementProduct life cycleThe rise and fall pattern of sales associated with the introduction and acceptance of a product in the market placeProduct refinementImproving a product’s performance characteristics to increase its utility to consumersProduct extensionImproving and adding additional performance features that extend the want-satisfying capability of the product and its life cycle in the market
13 Planning for Production Design planningThe development of a plan for converting a product idea into an actual productProduct lineA group of similar products that differ only in relatively minor characteristicsProduct designCreating a set of specifications from which a product can be producedCapacityThe amount of products or services that an organization can produce in a given timeRequired capacity must meet product demand
14 Planning for Production Insert new Figure 9.3, 9e, p. 284
15 Planning for Production Facilities planning and site selectionThe process of determining where products or services are to be producedFactors influencing the decision either to use an existing facility or to construct a new facilityDoes the existing facility have the capacity to handle the increased demand for production?Is the cost of refurbishing or expanding the existing facility less than constructing a new facility?
16 Planning for Production Factors influencing the location decision for a production facilityLocations of major customersGeographic location of suppliers and raw materialsAvailability of skilled and unskilled laborQuality of life for employees and managementCost of land and constructionTaxes, environmental regulations, zoning lawsFinancial incentives from local and state governmentsSpecial requirements for resources
17 Planning for Production Human resourcesHuman resources manager and operations manager must work togetherThe appropriate skills must be identifiedEmployees with the right skills must be recruitedOr training programs must be developedThe HR manager should provide information such as the availability of skilled workers and wage rates
18 Planning for Production Plant layoutThe process layout is used when small batches of different products are created or worked on in a different operating sequence
19 Planning for Production Plant layoutThe product layout (assembly line) is used when all products undergo the same operations in the same sequence
20 Planning for Production Plant layoutThe fixed position layout is used in producing a product that is too large to move
21 Operational Planning Four steps in operational planning Step 1: Selecting a planning horizonThe period during which a plan will be in effect; commonly one yearStep 2: Estimating market demandThe quantity that customers will purchase at the going priceDemand is estimated for the planning horizonStep 3: Comparing market demand with capacityIf market demand and the facility’s capacity are not equal, adjustments may be necessaryStep 4: Adjusting products or services to meet demandIncrease capacity to meet demandIgnore excess demandEliminate excess capacity
23 Three Types of ControlSource: Robert Kreitner, Management, 10th ed. (Boston: Houghton Mifflin, 2007), p. 503
24 Operations Control Purchasing All the activities involved in obtaining required materials, supplies, and parts from other firmsObjective: to ensure that the required materials are available when needed, in the proper amounts, and at minimum costFactors affecting the choice of suppliersPriceQualityReliabilityCredit termsShipping costs
25 Operations Control Inventory control The process of managing inventories in such a way as to minimize inventory costs, including both holding costs and potential stock-out costsTypes of inventoryRaw materials: materials that will become part of the product during the production processWork-in-process: partially completed productsFinished-goods: completed goodsCosts of inventoryHolding costs: the investment and storage costs of inventoryStock-out costs: the costs of not having inventory available when needed
26 Operations Control Inventory control methods Just-in-time inventory systemA system that ensures that materials or supplies arrive at the facility just when they are needed so that storage and holding costs are minimized
27 Debate Issue: Should the Just-In-Time Inventory System Be Used to Reduce Inventory Costs? YESJust-in-time ensures that materials or supplies arrive at a facility when they are needed.Just-in-time reduces a firm’s inventory storage costs because suppliers must deliver goods when they are needed.Storage space that was used for inventory can be diverted to other more productive activities, like manufacturing.NOA firm using just-in-time can encounter stock-out costs if a supplier doesn’t deliver.If the supplier stores the goods, the supplier just passes on the cost of storage in the form of higher prices.If suppliers don’t deliver goods on time, the manufacturer may have to shut down the assembly line.
28 Operations Control Quality control The process of ensuring that goods and services are produced in accordance with specificationsObjective: to see that the organization lives up to the standards it has set for itselfInspectionThe examination of the quality of work in process
29 Operations Control Quality control (cont’d) Improving quality through employee participationTotal Quality Management (TQM)Six SigmaQuality circles: groups of employees who meet on company time to solve problems of product quality
30 Management of Productivity and Technology The average level of output per worker per hourProductivity trendsThe U.S. rate of productivity growth lags behind other nationsCauses of U.S. productivity declinesEconomic slowdown; reduction in investment in new equipment and technologyThe amount of time required to implement and learn new technologyGrowth of the service sector without a corresponding increase in the rate of productivity growthIncreased government regulation
31 Management of Productivity and Technology Improving productivityEliminate or modify government policies hindering productivity growthIncrease cooperation between management and laborIncrease employee motivation and participationChange the incentives for work by paying for what employees contribute, not just for their timeMore investment by business in facilities, equipment, and employee training
32 The Impact of Computers and Robotics on Production AutomationThe total or near total use of machines to do workRoboticsThe use of programmable machines to perform a variety of tasks by manipulating materials and toolsRobots work quickly, accurately, and steadilyRobots are effective in tedious, repetitious, and hazardous tasks
33 The Impact of Computers and Robotics on Production Computer manufacturing systemsComputer-aided design (CAD)The use of computers to aid in the development of productsComputer-aided manufacturing (CAM)The use of computers to plan and control manufacturing processesComputer-integrated manufacturing (CIM)a computer system that helps design products and controls the machinery in the manufacturing process
34 Chapter QuizA(n) __________ process breaks raw materials into different component parts.mechanicalanalyticsynthetictechnologicalproductiveIn the manufacturing process, the resource or resources that comprise the major or most important input is referred to asnumber of technologies.magnitude of change.focus of the conversion process.resource utilization process.resource manufacturing process.
35 Chapter QuizToday, approximately __________ percent of American workers are employed by service industries.9283764028A __________ layout is used when different operations are required for creating small batches of different products or working on different parts of a product.labor intensivecapital intensiveprocessproductfixed
36 Chapter Quiz The average level of output per worker per hour is the definition for productivity.is the focus of the production process.applies only to a synthetic manufacturing process.applies only to an analytic manufacturing process.can be improved if the magnitude of the change is eliminated.
37 Answers to Chapter Quiz A(n) __________ process breaks raw materials into different component parts.mechanicalanalytic (Correct)synthetictechnologicalproductiveIn the manufacturing process, the resource or resources that comprise the major or most important input is referred to as thenumber of technologies.magnitude of change.focus of the conversion process. (Correct)resource utilization process.resource manufacturing process.
38 Answers to Chapter Quiz Today, approximately __________ percent of American workers are employed by service industries.9283 (Correct)764028A __________ layout is used when different operations are required for creating small batches of different products or working on different parts of a product.labor intensivecapital intensiveprocess (Correct)productfixed
39 Answers to Chapter Quiz The average level of output per worker per houris the definition for productivity. (Correct)is the focus of the production process.applies only to a synthetic manufacturing process.applies only to an analytic manufacturing process.can be improved if the magnitude of the change is eliminated.