1. PowerPoint Presentation by Charlie Cook The University of West Alabama Copyright © 2005 Prentice Hall, Inc. All rights reserved. Operations Management Chapter 14 PART V: Controlling 14

2. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–2 The Importance Of Operations Management Operations management defined  The study and application of the transformation process OM is important because it:  Encompasses processes in all organizations—services as well as manufacturing.  Is important in effectively and efficiently managing productivity.  Plays a strategic role in an organization’s competitive success.

3. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–3 Transformation and Organizations Transformation process  The process through which an organization creates value by turning inputs (people, capital, equipment, materials) into outputs (goods or services) Manufacturing organization  Organizations that produce physical goods Service organization  An organization that produces nonphysical outputs such as educational, medical or transportation services

4. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–4 Productivity Productivity defined  The overall output of goods and services produced divided by the inputs needed to generate that output. Benefits of high productivity  Fosters economic growth and development  Increases individual wages without inflation  Lowers costs and makes firms more competitive

5. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–5 Value and the Value Chain Value  The performance characteristics, features and attributes, or any other aspects of goods and services for which customers are willing to give up resources. Value chain  The entire series of organizational work activities that add value at each step beginning with the processing or raw materials and ending with a finished product in the hands of end users.

6. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–6 Value Chain Management versus Supply Chain Management Value chain management  A method of improving the process of creating and transferring documents by automating the flow of information Supply chain management  Management of the facilities, functions, and activities involved in producing and delivering a product or service, from suppliers to customers.

7. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–7 The Goals Of Value Chain Management Creating customer-defined value by:  Providing a unique combination that truly meets customer needs and at a price that can’t be matched by competitors.  Having a sequence of participants work together as a team, each adding a component of value to the overall process.

8. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–8 Value Chain Management Business model  A strategic design for how a company intends to profit from its broad array of strategies, processes, and activities. Value chain management requirements  Coordination and collaboration  Technology investment  Organizational processes  Leadership  Employees/human resources management  Strong culture and attitudes

9. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–9 Effect of Value Chain Management on Organizational Processes Better demand forecasting is necessary and possible because of closer ties with customers and suppliers. Selected functions may need to be done collaboratively with partners in the value chain. New measures are needed for evaluating the performance of activities along the value chain.

10. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–10 Implementing Value Chain Management Benefits  Improved customer service  Cost savings  Accelerated delivery times  Improved quality  Inventory reduction  Improved logistics management  Increased sales  Increased market share Obstacles  Organizational barriers  Cultural attitudes  Required capabilities  People

11. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–11 Contemporary Operations Management Issues Technology  How an organization will transform its inputs into outputs. Just-in-time (JIT) inventory systems  How to develop systems in which inventory items arrive when needed in the production process instead of being stored in stock.

12. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–12 Quality and Operations Management Quality control  Monitoring quality—weight, strength, consistency, color, taste, reliability, finish, or any one of myriad characteristics—to ensure that it meets some preestablished standard. Continuous improvement  A comprehensive, customer-focused program to continuously improve the quality of the organization’s processes, products and services.

13. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–13 Managing Projects Project  One-time-only set of activities with a definite beginning and ending point in time Project management  Task of getting the activities done on time, within budget, and according to specifications

14. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–14 Popular Scheduling Tools Gantt chart  A planning tool that shows in bar graph form when tasks are supposed to be done and compares that with the actual progress on each task. Load chart  As modified version of a Gantt Chart, the load chart lists either whole departments or specific resources.  This information allows managers to plan and control for capacity utilization in the scheduling of individual work stations.

15. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–15 PERT Program evaluation and review technique (PERT) network analysis  A flowchart-like diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity

16. Copyright © 2005 Prentice Hall, Inc. All rights reserved.14–16 PERT Components Events  End points that represent the completion of major activities Activities  Actions that take place Slack time  The time difference between the critical path and all other paths Critical path  The longest or most time-consuming sequence of events and activities required to complete a project in the shortest amount of time