1. Management 11e John Schermerhorn
Chapter 19
Operations and Services Management

2. Planning Ahead — Chapter 19 Study Questions
What are the essentials of operations and services management?
What is value chain management?
How do organizations manage service and product quality?
How can work processes be designed for productivity?
Management 11e Chapter 19

3. Operations management
Study Question 1: What are the essentials of operations and services management?
Operations management
Managing productive systems that transform resources into finished products, goods, and services for customers.
Typical operations management decisions include:
Resource acquisition
Inventories
Facilities
Workflows and technologies
Product quality
Management 11e Chapter 19

4. Manufacturing Organizations Service Organizations
Study Question 1: What are the essentials of operations and services management?
Manufacturing Organizations
Produce physical goods
Service Organizations
Produce services
Management 11e Chapter 19

5. Competitive advantage
Study Question 1: What are the essentials of operations and services management?
Productivity
Quantitative measure of the efficiency with which inputs are transformed into outputs.
Productivity = Output / Input.
Competitive advantage
A core competency that clearly sets an organization apart from competitors and gives it an advantage over them in the marketplace.
Management 11e Chapter 19

6. Companies may achieve competitive advantage in many ways, including:
Study Question 1: What are the essentials of operations and services management?
Companies may achieve competitive advantage in many ways, including:
Product innovations
Customer service
Speed to market
Manufacturing flexibility
Product/service quality
Management 11e Chapter 19

7. Study Question 1: What are the essentials of operations and services management?
Technology
The combination of knowledge, skills, equipment, computers, and work methods used to transform resource inputs into organization outputs.
Manufacturing technology.
Service technologies.
Management 11e Chapter 19

8. Small-batch production Continuous-process production
Study Question 1: What are the essentials of operations and services management?
Core manufacturing technologies:
Small-batch production
A variety of custom products are tailor-made to order.
Mass production
A large number of uniform products are made in an assembly-line system.
Continuous-process production
A few products are made by continuously feeding raw materials through a highly automated production system with largely computerized controls.
Management 11e Chapter 19

9. Manufacturing technology trends
Study Question 1: What are the essentials of operations and services management?
Manufacturing technology trends
Robotics
Flexible manufacturing systems
Mass customization
Cellular layouts
Computer-integrated manufacturing
Lean production
Design for disassembly
Remanufacturing
Management 11e Chapter 19

10. Study Question 1: What are the essentials of operations and services management?
Service-Profit chain
All activities involved in the direct link between an organization’s service providers and customers or clients
Should produce
Satisfied and loyal customers
Efficient and productive use of resources
Management 11e Chapter 19

11. Long-linked technology
Study Question 1: What are the essentials of operations and services management?
Core service technologies:
Intensive technology
Focuses the efforts of many people with special expertise on the needs of patients or clients.
Mediating technology
Links together parties seeking a mutually beneficial exchange of values.
Long-linked technology
Functions like mass production, where a client is passed from point to point for various aspects of service delivery.
Management 11e Chapter 19

12. Study Question 2: What is value chain management?
Sequence of step-by-step activities resulting in finished goods or services with customer value.
Supply chain management
Supply chain management is the strategic management of all operations relating to an organization’s resource suppliers.
Management 11e Chapter 19

13. Figure 19.1 Elements in an organization’s value chain.
Management 11e Chapter 19

14. Study Question 2: What is value chain management?
Inventory management
Goal is to ensure that inventory is just the right size to meet performance needs, thus minimizing the cost.
Methods of inventory control:
Economic order quantity
Just-in-time scheduling
Management 11e Chapter 19

15. Study Question 2: What is value chain management?
Inventory control
Economic order quantity (EOQ)
Inventory replenished with fixed quantity order when inventory falls to predetermined level.
Just-in-time scheduling
Materials arrive at workstation or facility ‘just-in-time’ for use.
Virtually eliminates carrying costs of inventories.
Management 11e Chapter 19

16. Figure 19.2 Inventory control by economic order quantity (EOQ).
Management 11e Chapter 19

17. Study Question 2: What is value chain management?
Break-even analysis
Determination of the point at which sales revenues are sufficient to cover costs.
Break-Even Point = Fixed Costs / (Price – Variable Costs)
Used in evaluating:
New products
New program initiatives
Management 11e Chapter 19

18. Figure 19.3 Graphical approach to break-even analysis.
Management 11e Chapter 19

19. Customer relationship management
Study Question 3: How do organizations manage service and product quality?
Customer relationship management
Establishes and maintains high standards of customer service in order to strategically build lasting relationships with and add value to customers.
External customers purchase the organization’s goods or utilize its services.
Internal customers are the persons and groups within an organization who depend on the results of others' work to do their own jobs.
Management 11e Chapter 19

20. Customer Relationship Management (CRM)
Study Question 3: How do organizations manage service and product quality?
Customer Relationship Management (CRM)
Uses latest technologies for intensive customer communication and collection of data regarding customer needs and desires.
Establishes and maintains high standards of customer service.
Management 11e Chapter 19

21. Figure 19.4 The importance of external and internal customers.
Management 11e Chapter 19

22. Total quality management (TQM)
Study Question 3: How do organizations manage service and product quality?
Total quality management (TQM)
Quality principles are an integral part of organization’s strategic objectives.
Applying them to all aspects of operations.
Committing to continuous improvement.
Striving to meet customers’ needs by doing things right the first time.
Management 11e Chapter 19

23. ISO (International Standards Organization) certification
Study Question 3: How do organizations manage service and product quality?
ISO (International Standards Organization) certification
Adopted by many countries as quality benchmark.
Companies undergo rigorous audit to determine if ISO requirements are met.
Focus is on customer service and product quality.
Management 11e Chapter 19

24. Quality and Continuous Improvement
Study Question 3: How do organizations manage service and product quality?
Quality and Continuous Improvement
W. Edwards Deming emphasized:
Constant innovation.
Use of Statistical methods.
Training in the fundamentals of quality assurance.
Continuous improvement
Quality circles
Management 11e Chapter 19

25. Continuous improvement
Study Question 3: How do organizations manage service and product quality?
Continuous improvement
Constant search for new ways to improve current performance.
Reduce cycle time between order receipt and delivery.
Management 11e Chapter 19

26. Quality circle Small group of workers who meet to improve quality
Study Question 3: How do organizations manage service and product quality?
Quality circle
Small group of workers who meet to improve quality
Assumes responsibility for quality
Taps into members’ creativity
Management 11e Chapter 19

27. Statistical quality control
Study Question 3: How do organizations manage service and product quality?
Statistical quality control
Uses rigorous statistical analysis for checking processes, materials, products, and services to ensure that they meet high standards.
Takes random work samples
Measures quality in samples
Determines acceptability
Unacceptable quality results in corrective action
“Six Sigma” common example of SQC
Management 11e Chapter 19

28. Figure 19.5 Sample control chart showing upper and lower control limits.
Management 11e Chapter 19

29. Study Question 4: How can work processes be designed for productivity?
Process reengineering
Systematic and complete analysis of work processes.
Design of new and better work processes.
Work process
“A related group of tasks that create a result of value for the customer.” (Michael Hammer)
Workflow
Movement of work from one point to another in the manufacturing or service delivery process.
Management 11e Chapter 19

30. Study Question 4: How can work processes be designed for productivity?
Process value analysis
Core processes are identified and evaluated for their performance contributions.
Each step in workflow is examined
Step is eliminated if not found to be important, useful, and contributing to the value added
Management 11e Chapter 19

31. Study Question 4: How can work processes be designed for productivity?
Steps in reengineering core processes:
Identify core processes.
Map core processes in respect to workflows.
Evaluate all tasks for core processes.
Search for ways to eliminate unnecessary tasks or work.
Search for ways to eliminate delays, errors, and misunderstandings.
Search for efficiencies in how work is shared and transferred among people and departments.
Management 11e Chapter 19

32. Figure 19.6 How reengineering can streamline work processes.
Management 11e Chapter 19

33. For activities and assessments, please visit…
www wiley com/college/schermerhorn