1. McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 14 Operations Management: Managing Vital Operations and Processes

2. 14-2 Learning Objectives Explain the role of operations management in achieving superior quality, efficiency, and responsiveness to customers Describe what customers want, and explain why it is so important for managers to be responsive to their needs Explain why achieving superior quality is so important Explain why achieving superior efficiency is so important

3. 14-3 Operations Management Management of any aspect of the production system that transforms inputs into finished goods and services Production system: System that an organization uses to acquire inputs, convert inputs into outputs, and dispose of the outputs

4. 14-4 Operations Management Operations manager Responsible for managing an organization’s production system Three stages of production—acquisition of inputs, control of conversion processes, and disposal of goods and services Determining where operating improvements might be made To increase quality, efficiency, and responsiveness to customers and so give an organization a competitive advantage

5. 14-5 Question What is action taken to meet the demands and needs of customers? A. Quality B. Efficiency C. Responsiveness to customers D. Effectiveness

6. 14-6 Operations Management Quality: Goods and services that are reliable, dependable, or psychologically satisfying Efficiency: Amount of inputs required to produce a given output Responsiveness to customers: Actions taken to meet the demands and needs of customers

7. 14-7 Figure 14.1 - The Purpose of Operations Management

8. 14-8 Improving Responsiveness to Customers Without customers, organizations would cease to exist Non-profit and for-profit firms all have customers Managers need to identify who the customer is and their needs

9. 14-9 What do Customers Want? Usually customers prefer: Lower price to a higher price High-quality products to low-quality products Quick service to slow service Many features over few features Products that are customized or tailored to their specific needs

10. 14-10 Designing Production Systems to be Responsive to Customers Attributes of an organization’s outputs—their quality, cost, and features—are determined by the organization’s production system Organization's ability to satisfy customers' demand derives from its production system Managers need to devote considerable attention to constantly improving production systems Flexible manufacturing systems Just-in-time inventory New information systems and technologies

11. 14-11 Customer Relationship Management Technique that uses IT to develop an ongoing relationship with customers to maximize the value an organization can deliver to them over time CRM systems have three interconnected components Sales and selling After-sales service Support and marketing

12. 14-12 Improving Quality Concept of quality applies the products of both manufacturing and service firms A firm that provides higher quality than others at the same price is more responsive to customers Higher quality can also lead to better efficiency through lower waste levels and operating costs

13. 14-13 Improving Quality Managers should ensure that: Mistakes, defects, and poor-quality materials are not acceptable and should be eliminated Employees are trained in new skills to keep pace with changes in the workplace Organizational values and norms are centered on improving quality

14. 14-14 Figure 14.2 - Impact of Increased Quality on Organizational Performance

15. 14-15 Improving Efficiency Fewer the inputs required to produce a given output, higher the efficiency of a production system Managers can measure efficiency at the organization level in two ways: Total factor productivity Partial productivity

16. 14-16 Improving Efficiency: Total Factor Productivity Measures how well an organization utilizes all of its resources—such as labor, capital, materials, or energy—to produce its outputs

17. 14-17 Improving Efficiency: Partial Productivity Measures the efficiency of an individual unit Labor productivity is most commonly used to draw efficiency comparisons between different organizations

18. 14-18 Facilities Layout, Flexible Manufacturing, and Efficiency Facilities layout: Operations management technique whose goal is to design the machine- worker interface to increase production system efficiency Flexible manufacturing: Operations management techniques that attempt to reduce the setup costs associated with a production system

19. 14-19 Figure 14.3 - Three Facilities Layouts

20. 14-20 Question Which facilities layout is best? A. Product layout B. Process layout C. Fixed-position layout

21. 14-21 Facilities Layout Product layout: Machines are organized so that each operation is performed at work stations arranged in a fixed sequence Example - Mass production systems where workers are stationary and a belt moves work to them Introduction of modular assembly lines controlled by computers makes it efficient to make products in small batches

22. 14-22 Facilities Layout Process layout Work stations not organized in a fixed sequence Relatively self-contained, a product goes to whichever workstation is needed to perform the next operation Provides flexibility in making a wide variety of products tailored to suit different customer-needs Reduces efficiency because it is expensive

23. 14-23 Facilities Layout Fixed-position layout Product stays in a fixed position and components produced at remote stations are brought to the production area for final assembly Large jet aircraft assembly uses this type of layout Products that are complex and difficult to assemble or so large that moving them from one workstation to another would be difficult

24. 14-24 Flexible Manufacturing Most firms face major expenses when setting-up to produce a product Setup costs must be paid before production begins More often products to be built change, higher the set-up costs become Flexible manufacturing aims to reduce the time required to set-up production equipment Redesigning the production system itself to be more productive Using easily replaced manufacturing equipment

25. 14-25 Figure 14.4 - Changing a Facilities Layout

26. 14-26 Just-in-Time Inventory and Efficiency Inventory: Stock of raw materials, inputs, and component parts that an organization has on hand at a particular time Just-in-Time (JIT) inventory: System in which parts arrive at an organization when they are needed, not before Advantage - Defective inputs can be quickly spotted Drawback - JIT systems is that they leave an organization without a buffer stock of inventory

27. 14-27 Self-Managed Work Teams Use of empowered self-managed teams can increase productivity and efficiency Cost savings arise from eliminating supervisors and creating a flatter organizational hierarchy People often respond well to being given greater autonomy and responsibility Teams working together often become very skilled at enhancing productivity

28. 14-28 Question What is the rethinking and redesign of the business process to achieve dramatic improvement in critical measures of performance? A. Corporate efficiency B. Process redesign C. Process re-qualification D. Process reengineering

29. 14-29 Process Reengineering and Efficiency Process reengineering: Fundamental rethinking and radical redesign of the business process to achieve dramatic improvement in critical measures of performance such as cost, quality, service, and speed Boosts efficiency by eliminating the time devoted to activities that do not add value

30. 14-30 Operations Management: Some Remaining Issues JIT, flexible manufacturing, and reengineering can all increase quality, efficiency, and responsiveness to customers, but: Employees may see the demands of their job increase Employees may see themselves reengineered out of a job