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18 - 1 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or.

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Presentation on theme: "18 - 1 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or."— Presentation transcript:

1 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 18 Operations Management

2 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. After reading this chapter, you should be able to: List the elements of an operating system. Describe how manufacturers and service providers use operations management. Explain how to measure productivity. Recount the methods of scheduling operations. Discuss the role of quality in operations management. Identify the three ways to control operations.

3 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Basic Elements of Operations Management Inputs (Physical and Intangible) Control Systems (Problem Identification) Transformation (Value-Adding) Processes Operations Management Outputs (Tangible and Intangible) Feedback (Communication Tools)

4 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 18.1: Control Systems

5 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Operations Management Production Broadly describes what businesses of all types do in creating goods and services Productivity Is the measure of outputs according to the inputs needed to product them; a way to determine the efficiency of a business Is measured in output per worker Digital Vision at Getty Images®

6 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Operations Management Analytic SystemsSynthetic Systems Types of Manufacturing Operations Manufacturing system that reduces inputs into component parts to extract products. Manufacturing system that combines inputs to create a finished product or change it into a different product.

7 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Output Per Hour According to the Bureau of Labor Statistics, productivity changes for 2009 were: -3.3 percent in wholesale trade +1.5 percent in retail trade +1.0 percent in foodservice and drinking places Source:

8 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Operations Management Continuous ProcessIntermittent Process Types of Production Processes A production process that operates for long periods of time without interruption. A production process that operates in short cycles so that it can change products.

9 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Automation Allows quick retooling of production machines so that shorter batches (product runs) can be produced profitably. Flexible Production Allows products to be produced specifically to meet the needs of individual customers. Mass Customization

10 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Small Business Mass Customization ShirtsMyWay - Peter Crawfurd and Michael Young - Offers more than 7 trillion designs for men’s dress shirts Smart Furniture - Stephen Culp - Custom shelves, entertainment centers, and furniture 1154 LILL Studio - Jennifer Velarde - Custom handbag retailer Source:

11 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Operations Management for Service Businesses Operations processes differ from one product and service to another, and some overlap. Traditionally, service businesses are seen as intermittent- process businesses. Today, in an effort to increase productivity, some service businesses are adopting continuous processes. A notable difference between service and manufacturing operations is the amount of customer contact involved.

12 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Table 18.1: Product and Service Operations Systems

13 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What Is Productivity? The measure of output per worker; can be described numerically as the ratio of inputs used to outputs produced, such as output per labor-hour Productivity Look for more efficient ways to increase outputs while keeping inputs constant. Keep outputs constant while decreasing inputs. Increasing Productivity

14 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What Is Productivity? (cont’d) Measurement of Productivity Total productivity Total Productivity Ratio =Total Outputs Total Inputs Outputs Labor + Capital + Raw Materials + All Other Inputs Materials productivity Materials Productivity =Outputs Materials

15 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What Is Productivity? (cont’d) Changing processes used by the business Technology that speeds production Sources of Manufacturing Productivity Improvements Employees accomplishing more

16 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Service Productivity Technological Innovation Ergonomics Management Style Ways to Measure Service Productivity

17 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What About Scheduling Operations? Forward SchedulingBackward Scheduling Scheduling Methods Materials and resources are allocated for production when a job order comes in. Arranging production activities around the due date for the product.

18 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 18.2: The Gantt Chart

19 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What About Scheduling Operations? (cont’d) RoutingDispatching Scheduling Sequencing

20 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quality Centered Management Customer PerspectiveBusiness Perspective What Does Quality Mean? How well a good or service satisfies their needs. The degree to which a firm’s product conforms to the standards you have set.

21 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quality Centered Management (cont’d) Six Sigma The tolerance range in which only 3.4 defects per million are allowed ( % in specification) The term that has come to signify the quality movement Defect Rate The number of goods produced that were out of the firm’s accepted tolerance range Tolerance Range The boundaries that managers set in determining acceptable product quality

22 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Table 18.2: Sigma Levels and Defect Rates

23 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Basic Components of a Six-Sigma Program 1. Define products and services by describing the actual products or services that are provided to customers. 2. Identify customer requirements for products or services by stating them in measurable terms. 3. Compare products with requirements by identifying gaps between what the customer expects and what the customer is actually receiving. 4. Describe the process by providing explicit details. 5. Improve by simplification and mistake-proofing. 6. Measure quality and productivity by establishing baseline values and then tracking improvement.

24 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Six-Sigma Program Measurements Statistical Analysis Descriptive stats (mean, median, mode) Inferential stats Statistical Tools Analysis of variance (ANOVA) Regression analysis Challenge is implementation Digital Vision at Getty Images®

25 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Six-Sigma Quality Activities and Tools Management Processes Participative management Short-cycle manufacturing Designing for manufacturing benchmarking Statistical process control Supplier qualification

26 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Six-Sigma Quality Activities and Tools (cont’d) Improvement Tools and Analytical Techniques Flowcharts Pareto charts Histograms Cause-and-effect diagrams Experimental design Quality Circles

27 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Six-Sigma Program Ultimate Goals Improved Manufacturing Increased Customer Satisfaction Six Sigma Goals

28 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. How Do You Control Operations? Feedforward Quality Control (Inputs) Feedback Quality Control (Output) Types of Controls Concurrent Quality Control (Process)

29 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Concurrent Quality Controls Compliance with ISO 9000 Standards Certifies that a business is using processes and principles in order to ensure the production of quality products Does not address the quality of specific products Shows customers how a firm tests its products, how its employees are trained, how it keeps records, and how it fixes defects

30 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Concurrent Quality Controls (cont’d) Negotiate consultant prices. Request customer subsidies. Look for consultant alternatives. Consider the need for full certification. Handling ISO Certification Costs

31 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Concurrent Quality Controls (cont’d) Statistical Process Control (SPC) The process of gathering, plotting, and analyzing data to isolate problems in a specified sample of products Uses statistical analysis to determine the probability of a deviation’s being a simple, random, unimportant variation or a sign of a problem in the production process that must be corrected

32 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Concurrent Quality Controls (cont’d) Customer Service Goods and services availability Returns, repair, and replacement Warranties and guarantees Feedback mechanisms (surveys, toll- free numbers) Cost considerations Production Process Methodology Facility needs Equipment needs Personnel needs Assembly time Quality control Inspection Cost considerations Parts availability Repair and returns Benchmarking –The process of comparing key points within your business with comparable points in another external entity Benchmarking Opportunities

33 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 18.3: The Control Chart


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