PowerPoint Presentation to Accompany Management, 2/e John R. Schermerhorn, Jr. and Barry Wright Prepared by: Jim LoPresti University of Colorado, Boulder Revised by: Dr. Shavin Malhotra Ryerson University, Toronto, Ontario Published by: John Wiley & Sons Canada, Ltd. Chapter 17: Operations and Services Management

 What are the essentials of operations management?  What is value chain management?  How do organizations manage service and product quality?  How can work processes be designed for productivity? Planning Ahead — Chapter 17 Study Questions Management 2e - Chapter 172

 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 Study Question 1: What are the essentials of operations management? Management 2e - Chapter 173

 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. Study Question 1: What are the essentials of operations management? Management 2e - Chapter 174

 Companies may achieve competitive advantage in many ways, including: Product innovations Customer service Speed to market Manufacturing flexibility Product/service quality Study Question 1: What are the essentials of operations management? Management 2e - Chapter 175

 Technology The combination of knowledge, skills, equipment, computers, and work methods used to transform resource inputs into organization outputs. Manufacturing technology. Service technologies. Study Question 1: What are the essentials of operations management? Management 2e - Chapter 176

 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. Study Question 1: What are the essentials of operations management? Management 2e - Chapter 177

 Manufacturing technology trends Robotics Flexible manufacturing systems Mass customization Cellular layouts Computer-integrated manufacturing Lean production Design for disassembly Remanufacturing Study Question 1: What are the essentials of operations management? Management 2e - Chapter 178

 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. Study Question 1: What are the essentials of operations management? Management 2e - Chapter 179

 Value chain 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. Study Question 2: What is value chain management? Management 2e - Chapter 1710

Figure 17.1 Elements in an organization’s value chain. Management 2e - Chapter 1711

 Inventory control 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 Study Question 2: What is value chain management? Management 2e - Chapter 1712

 Inventory control Economic order quantity 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. Study Question 2: What is value chain management? Management 2e - Chapter 1713

Figure 17.2 Inventory control by economic order quantity (EOQ). Management 2e - Chapter 1714

 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 Study Question 2: What is value chain management? Management 2e - Chapter 1715

Figure 17.3 Graphical approach to break-even analysis. Management 2e - Chapter 1716

 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. Study Question 3: How do organizations manage service and product quality? Management 2e - Chapter 1717

 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. Study Question 3: How do organizations manage service and product quality? Management 2e - Chapter 1718

Figure 17.4 The importance of external and internal customers. Management 2e - Chapter 1719

 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. Study Question 3: How do organizations manage service and product quality? Management 2e - Chapter 1720

 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. Study Question 3: How do organizations manage service and product quality? Management 2e - Chapter 1721

 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 Study Question 3: How do organizations manage service and product quality? Management 2e - Chapter 1722

 Continuous improvement Constant search for new ways to improve current performance. Reduce cycle time between order receipt and delivery.  Quality circle Small group of workers who meet to improve quality Assumes responsibility for quality Taps into members’ creativity Study Question 3: How do organizations manage service and product quality? Management 2e - Chapter 1723

 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 Study Question 3: How do organizations manage service and product quality? Management 2e - Chapter 1724

Figure 17.5 Sample control chart showing upper and lower control limits. Management 2e - Chapter 1725

 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. Study Question 4: How can work processes be designed for productivity? Management 2e - Chapter 1726

 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 Study Question 4: How can work processes be designed for productivity? Management 2e - Chapter 1727

 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. Study Question 4: How can work processes be designed for productivity? Management 2e - Chapter 1728

Figure How reengineering can streamline work processes. Management 2e - Chapter 1729

COPYRIGHT Copyright © 2011 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.