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© Prentice Hall, Modern Management 9 th edition.
© Prentice Hall, Objectives Definitions of production, productivity, and quality An understanding of the importance of operations and production strategies, systems, and processes Insights into the role of operations management concepts in the workplace An understanding of how operations control procedures can be used to control production Insights into operations control tools and how they evolve into a continual improvement approach to production management and control.
© Prentice Hall, P RODUCTION Defining Production Productivity productivity = outputs inputs Traditional strategies for increasing productivity: 1. Improving effectiveness of organizational workforce through training 2. Improving production process through automation 3. Improving product design to make products easier to assemble 4. Improving production facility by purchasing more modern equipment 5. Improving quality of workers hired to fill open positions.
© Prentice Hall, P RODUCTION Quality and Productivity Focus on Continual Improvement Focus on Quality and Integrated Operations Quality Assurance Statistical Quality Control "No Rejects" Philosophy Quality Circles Automation Strategies, Systems, and Processes.
© Prentice Hall, P RODUCTION Figure 20.1 Deming’s flow diagram for improving product quality.
© Prentice Hall, P RODUCTION Figure 20.2 The quality circle problem-solving process.
© Prentice Hall, O PERATIONS M ANAGEMENT Defining Operations Management Operations Management Considerations Key notions: Involves managers Takes place within context of objectives and policies Criteria are standards for effectiveness and efficiency Operations strategies.
© Prentice Hall, O PERATIONS M ANAGEMENT Figure 20.3 Major activities performed to manage production.
© Prentice Hall, O PERATIONS M ANAGEMENT Operations Management Considerations (con’t) Capacity Strategy Capacity flexibility Steps in Capacity Decisions: 1. Measure capacity of currently available facilities 2. Estimate future capacity needs on basis of demand forecasts 3. Compare future capacity needs and available capacity 4. Identify ways to accommodate long-range capacity changes 5. Select best alternative based on quantitative and qualitative evaluation.
© Prentice Hall, O PERATIONS M ANAGEMENT Operations Management Considerations (con’t) Location Strategy Factors in a Good Location Nearness to market and distribution centers Nearness to vendors and resources Requirements of federal, state, and local governments The character of direct competition The degree of interaction with the rest of the corporation The quality and quantity of labor pools The environmental attractiveness of the area Taxes and financing requirements Existing and potential transportation The quality of utilities and services.
© Prentice Hall, O PERATIONS M ANAGEMENT Operations Management Considerations (con’t) Product Strategy Process Strategy Types of Processes Continuous process Repetitive process Job-shop process Layout Strategy Basic types for manufacturing facilities: 1. Product 2. Process (functional) 3. Fixed-position.
© Prentice Hall, O PERATIONS M ANAGEMENT Figure 20.4 The three basic layout patterns.
© Prentice Hall, O PERATIONS M ANAGEMENT Operations Management Considerations (con’t) Human Resources Strategy Human resource imperatives: 1. Optimize individual, group, and organizational effectiveness 2. Enhance quality of organizational life Operational Tools in Human Resources Strategy Manpower planning Job design Work methods analysis Motion-study techniques Work measurement methods Operational tools to establish labor standards.
© Prentice Hall, O PERATIONS C ONTROL Just-in-Time Inventory Control Best Conditions for JIT Advantages of JIT Characteristics of JIT 1. Closeness of suppliers 2. High quality of materials purchased from suppliers 3. Well-organized receiving and handling of materials 4. Strong management commitment Maintenance Control Pure-preventive maintenance policy Pure-breakdown policy.
© Prentice Hall, O PERATIONS C ONTROL Cost Control Stages in Cost Control 1. Establishing standard or planned cost amounts 2. Measuring actual costs incurred 3. Comparing planned costs to incurred costs 4. Making changes to reduce actual costs to planned costs Following above stages: Establish planned costs for labor, materials, and overhead Measure or calculate costs incurred for these activities Compare actual operations costs to planned operations costs Take steps to reduce actual operations costs to planned levels.
© Prentice Hall, O PERATIONS C ONTROL Budgetary Control Potential Pitfalls of Budgets 1.Placing too much emphasis on insignificant expenses 2.Increasing expenses without adequate information Zero-base budgeting 3.Ignoring fact that budgets must be changed periodically Variable budget Human Relations Considerations in Using Budgets Reducing Human Relations Problems.
© Prentice Hall, O PERATIONS C ONTROL Ratio Analysis 1. Liquidity ratios 2. Leverage ratios 3. Activity ratios 4. Profitability ratios Using Ratios to Control Organizations Evaluate all ratios simultaneously Compare computed values with industry averages Incorporate trend analysis.
© Prentice Hall, O PERATIONS C ONTROL Table 20.1 Four Categories of Ratios TypeExampleCalculationInterpretation ProfitabilityReturn on investment (ROI) Profit after taxesProductivity of assets Total assets LiquidityCurrent ratioCurrent assetsShort-term solvency Current liabilities ActivityInventory turnoverSalesEfficiency of inventory Inventorymanagement LeverageDebt ratioTotal debtHow a company finances itself Total assets.
© Prentice Hall, O PERATIONS C ONTROL Materials Control Procurement of Materials Receiving, Shipping, and Trafficking Receiving activities include: Unloading Identifying Inspecting Reporting Storing inbound shipments Shipping and distribution activities include: Preparing documents Packaging Labeling Loading Directing out shipments Shipping and receiving are organized as one unit Traffic manager’s main responsibilities are: Selection of the transportation mode Coordination of the arrival and departure of shipments Auditing freight bills.
© Prentice Hall, O PERATIONS C ONTROL Materials Control (con’t) Inventory and Shop-Floor Control Inventory control subsystems: Work-in-process Finished-goods inventory Inventory control specifies: What When How much to buy Shop-floor control activities include: Input/output controlRouting SchedulingDispatching SequencingExpediting.
© Prentice Hall, S ELECTED O PERATIONS C ONTROL T OOLS Using Control Tools to Control Organizations Inspection To Inspect or Not to Inspect Management by Exception Establishing Rules Examples of rules based on exception principle: A department manger must immediately inform the plant manager if actual: 1. Weekly labor costs exceed estimated weekly labor costs by more than 15% 2. Dollars spent on a special project exceed funds approved by more than 10%.
© Prentice Hall, S ELECTED O PERATIONS C ONTROL T OOLS Management by Objectives Break-Even Analysis Basic Ingredients of Break-Even Analysis Break-even analysis typically involves: Reflection Discussion Reasoning Decision making Relative to major aspects of production: 1. Fixed costs3. Total costs5. Profits7. Breakeven 2. Variable costs4. Total revenue6. Losspoint Types of Break-Even Analysis Algebraic Break-even Analysis BE = FC (P – VC) Graphic Break-even Analysis Advantages of Using the Algebraic and Graphic Break-even Methods Control and Break-even Analysis.
© Prentice Hall, S ELECTED O PERATIONS C ONTROL T OOLS Table 20.2 Fixed costs and Variable Costs for a Book Publisher Fixed Costs (Yearly Basis)Variable Costs per Book Sold 1. Real estate taxes on property$1,0001. Printing$ Interest on loan to purchase equipment5,0002. Artwork Building maintenance2,0003. Sales commission Insurance8004. Author royalties Salaried labor80,0005. Binding1.00 Total fixed costs$88,800Total variable costs per book$6.00.
© Prentice Hall, S ELECTED O PERATIONS C ONTROL T OOLS Figure 20.5 Break-even analysis for a book publisher.
© Prentice Hall, S ELECTED O PERATIONS C ONTROL T OOLS Other Broad Operations Control Tools Decision Tree Analysis Process Control Value Analysis Computer-Aided Design (CAD) Computer Graphics Computer-aided engineering (CAE) Computer-Aided Manufacturing (CAM).
© Prentice Hall, Chapter Twenty Questions
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