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© 2007 Prentice Hall, Inc. All rights reserved.7–1 Chapter 7 Operations Management and Quality
© 2007 Prentice Hall, Inc. All rights reserved.7–2 L E A R N I N G O U T C O M E S After reading this chapter, you should be able to: Explain the meaning of the term production or operations. Describe the three kinds of utility that operations processes provide for adding customer value. Explain how companies with different business strategies are best served by having different operations capabilities. Identify the major factors that are considered in operations planning. Discuss the information contained in four kinds of operations schedules – the master production schedule, detailed schedule, staff schedule, and project schedule. Identify the activities involved in operations control. Identify the activities and underlying objectives involved in total quality management. Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms.
© 2007 Prentice Hall, Inc. All rights reserved.7–3 What in It for Me? By understanding this chapter’s methods for managing operations and improving quality, you can benefit in two ways: 1. As an employee, you’ll have a clearer picture of who your customers are and what they want and how your job depends on the services they receive from you 2. You’ll better understand how companies around you—even successful firms—have to change production methods whenever they adopt new business goals, to remain competitive
© 2007 Prentice Hall, Inc. All rights reserved.7–4 What Does Operations Mean Today? Operations (Production) All the activities involved in making products—goods and services—for customers. Service Operations (Service Production) Provide intangible and tangible service products Goods Operations (Goods Production) Produce tangible products Operations managers create utility for customers through production, inventory, and quality control.
© 2007 Prentice Hall, Inc. All rights reserved.7–5 Creating Value Through Operations Utility The ability of a product to satisfy a want or need Form utility Time utility Place utility Operations (Production) Management The systematic direction and control of processes that transform resources into finished services and goods that create value for and provide benefits to customers
© 2007 Prentice Hall, Inc. All rights reserved.7–6 Differences Between Service and Goods Manufacturing Operations Goods are produced, services are performed Service operations differ from manufacturing operations in that service operations: 1. involve interacting with consumers 2. are sometimes intangible and unstorable 3. involve a customer’s presence in the process 4. involve certain service quality considerations
© 2007 Prentice Hall, Inc. All rights reserved.7–7 Operations Processes Operations Process A set of methods and technologies used to produce a good or a service Goods Production Processes Make-to-order processes Make-to-stock processes Service Production Processes Extent of Customer Contact Low-contact systems: low customer involvement High-contact systems: high customer involvement
© 2007 Prentice Hall, Inc. All rights reserved.7–8 Business Strategy as the Driver of Operations —the activities or processes that production must do especially well, with high proficiency Businesses with contrasting business strategies choose different operations capabilities—the activities or processes that production must do especially well, with high proficiency
© 2007 Prentice Hall, Inc. All rights reserved.7–9 Operations Planning Capacity Planning Capacity: The amount of a product that a company can produce under normal conditions Planning deals with determining how much can be produced Location Planning Location affects production costs and flexibility Planning deals with determining where it will be produced
© 2007 Prentice Hall, Inc. All rights reserved.7–10 Operations Planning (cont’d) Layout Planning The layout of machinery, equipment, and supplies determines whether a company can respond efficiently to demand for more and different products or whether it finds itself unable to match competitors’ speed and convenience Planning deals with determining how it will be produced Process layouts Product layouts
© 2007 Prentice Hall, Inc. All rights reserved.7–11 Quality Planning What Is Quality? The combination of “characteristics of a product or service that bear on its ability to satisfy stated or implied needs” (American Society for Quality) Quality planning begins when products are designed: goals are set for performance and consistency Quality planning includes deciding what constitutes a high-quality product and determining how to measure these quality characteristics
© 2007 Prentice Hall, Inc. All rights reserved.7–12 Methods Planning Managers identify each production step and methods for performing it. They reduce waste and inefficiency by examining procedures in an approach called methods improvement. They reduce waste and inefficiency by improving process flows. A detailed description, often a process flowchart, helps managers organize and record information. They attempt to improve customer service.
© 2007 Prentice Hall, Inc. All rights reserved.7–13 Operations Scheduling Identifying times when specific production activities will occur Kinds of Planning Schedules Master schedule: Master schedule: Shows which products will be produced, and when, in upcoming time periods Detailed schedules: Show day-to-day activities that will occur in production Staff schedules: Show who and how many employees will be working, and when Project schedules: Coordinate completion of large- scale projects
© 2007 Prentice Hall, Inc. All rights reserved.7–14 Project Scheduling with PERT Program Evaluation and Review Technique (PERT) PERT charts break down large projects into steps to be performed and specify the time required to perform each one. Critical path: The sequence of the most time- consuming set of required activities—for completing the project.
© 2007 Prentice Hall, Inc. All rights reserved.7–15 Operations Control Requires managers to monitor performance by comparing results with detailed plans and schedules. Follow-up: Checking to ensure that production decisions are being implemented—is a key and ongoing facet of operations.
© 2007 Prentice Hall, Inc. All rights reserved.7–16 Materials Management The process by which managers plan, organize, and control the flow of materials from sources of supply through distribution of finished goods Materials Management Activities Supplier selection Purchasing Transportation Warehousing Inventory control
© 2007 Prentice Hall, Inc. All rights reserved.7–17 Lean Production Systems: Just-in-Time Operations Lean Production Systems Goals Smooth production flows avoid inefficiencies Elimination of unnecessary inventories Continuous improvement in production processes Just-in-Time (JIT) Production Bringing together all needed materials only when they are required, creating fast and efficient responses to customer orders
© 2007 Prentice Hall, Inc. All rights reserved.7–18 Benefits of Just-in-Time Production 1.Reduces the number of goods in process (goods not yet finished) 2.Minimizes inventory costs 3.Reduces inventory storage space requirements 4.Replaces stop-and-go production with smooth movement 5.Disruptions are more visible and get resolved more quickly 6.Continuous improvement of the process
© 2007 Prentice Hall, Inc. All rights reserved.7–19 Quality Control Taking action to ensure that operations produce products that meet specific quality standards. Requires establishment of specific standards and measurements.
© 2007 Prentice Hall, Inc. All rights reserved.7–20 Quality Improvement and Total Quality Management Quality Improvement Building quality into products and services rather than trying to control quality by inspection Total Quality Management (TQM) All of the activities necessary for getting high-quality goods and services into the marketplace Quality Ownership Quality belongs to each person who creates it while performing a job and it requires a focus on quality by all parts of an organization
© 2007 Prentice Hall, Inc. All rights reserved.7–21 Total Quality Management Always Delivering High Quality Planning for quality Organizing for quality Directing for quality Controlling for quality
© 2007 Prentice Hall, Inc. All rights reserved.7–22 Tools for Total Quality Management Competitive Product Analysis Analyzing competitor’s products to identify improvements Value-Added Analysis Eliminating wasteful and unnecessary activities Quality Improvement Teams Adopting quality circles Getting Closer to the Customer Identifying internal and external customers ISO 9000 and ISO 14000 Ensuring certification of quality management in processes Business Process Reengineering Starting over from scratch to improve processes
© 2007 Prentice Hall, Inc. All rights reserved.7–23 Adding Value Through Supply Chains Supply Chain (or Value Chain) The flow of information, materials, and services that starts with raw-materials suppliers and continues adding value through other stages in the network of firms until the product reaches the end customer
© 2007 Prentice Hall, Inc. All rights reserved.7–24 The Supply Chain Strategy Supply Chain Management (SCM) Working with the supply chain as a whole to improve overall flow through a system composed of companies working together Supply Chain Reengineering Improving the process for better results: lower costs, speed up service, and coordinate flows of information and material Outsourcing and Global Supply Chains Paying suppliers and distributors to perform certain business processes or to provide needed materials or services
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