Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 13-1

Management, 3 rd edition Hitt/Black/Porter Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 13-2

13-3 Operations Management Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall OM = conversion of resources into products and services POM (Old term)—products and operations management OM (Modern term)—operations management

13-4 Operations Management Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall  Manage produce/service quality  Ensure appropriate quantities are produced  Ensure on-time delivery to customers Overall Objectives of OM Survival/growth = produce product/service with the quality, in the quantity, and at a time that customers desire while maintaining a positive profit margin  Accomplish objectives at best possible cost

13-5 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Managing Quality—Fitness for Use How reliable it is How easy it is to service How easy it is to repair when it does break down Measure of how well a product or service performs its intended purpose, including:

13-6 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Economic Impact of Higher Quality Exhibit 13.1

13-7 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall TQM  Focuses on continual improvement  Emphasizes quality inspection at all stages of the production or service output  Encompasses a commitment from employees at all levels Enhancing Quality—Total Quality Management

13-8 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall TQM must be part of organization’s culture for a true commitment to quality  Quantitative techniques—statistical process control  Non-quantitative techniques—employee empowerment TQM emphasizes quality at the source Quality at the Source

13-9 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall TQM— Quantitative/non-quantitative techniques Enhancing Quality—Total Quality Management Objective tool—making decisions concerning how well process is performing SPC—Statistical Process Control Improvements in the way organization does business Continuous Process Improvement Data-drive approach for eliminating defects and enhancing quality Six Sigma Taking pride in and having a sense of responsibility for individual output Employee Empowerment

13-10 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Statistical Process Control  Track and highlight results  Identify unacceptable deviations  Various forms of process-control charts Enhancing Quality—SPC

13-11 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Enhancing Quality—SPC—Quality Control Charts

13-12 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Quality is improved by…  DMAIC process (define, measure, analyze, improve, control)  DMADV process (define, measure, analyze, design, verify) TQM—Six Sigma Disciplined, data-driven approach  Eliminating defects  Enhancing quality with orientation toward impact on customer

13-13 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Achieving high quality requires managerial and employee action  Take pride in work  Have sense of responsibility  Have input on quality enhancement  Committed top managers  Communicate vision  Provide strong leadership  Strong customer-need focus TQM—Employee Empowerment

13-14 Operations Management: Quantity Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Effective Capacity = Expected Capacity/Design Capacity Level organizations usually run Quantity and Capacity Planning: Effective Capacity Capacity planning determining how much a firm should be able to produce of a product or service Design capacity which is the maximum capacity that can be attained under ideal conditions

13-15 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Economic order quantity (EOQ): When and how much System to determine the most economical quantity of products to order Materials requirement planning (MRP): Where Computer system — getting right materials to right place at right time Quantity and Capacity Planning: Inventory ABC analysis: Which Inventory items need most control

13-16 Operations Management: Quality Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Quantity and Capacity Planning: Economic Order Quantity Exhibit 13.3

13-17 Operations Management: Timing Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Delivery must be timed well to avoid both out-of- stocks and excess inventory Just-in-time (JIT) systems Gantt charts PERT and CPM charts Delivery

13-18 Operations Management: Timing Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 1) Only as needed 2) Only the necessary materials, equipment, and employee time 3) That will add value Just-in-Time System - JIT Objective: Produce product or service Key BenefitsOf JIT Systems Reducing inventory levelsLowering holding or carrying cost Improving productivity and quality Increasing customer satisfaction

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Operations Management: Timing 5-19 Gantt Chart

13-20 Operations Management: Timing Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall PERT/Critical-Path Method Program Evaluation and Review Technique— for large complex projects 20

13-21 Operations Management: Best Cost Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Productivity = Output ÷ Input Measures how well an organization is… Using its (inputs) resources To produce (outputs) goods and services

13-22 Operations Management: Best Cost Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Service Productivity Differences by Country Exhibit 13.4

13-23 Operations Management: Best Cost Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Achieving the Best Cost: Work Standard Work standard: Amount of time it should take for a trained employee to complete a specific activity or process  Time and motion studies Review each activity Eliminate unnecessary steps  Work sampling Take a sample from workers Calculate % time spent

13-24 Operations Management: Best Cost Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Achieving the Best Cost: Production Processes Production processes: 1) Continuous flow production 2) Assembly-line processes 3) Small batch processes 4) Job shops

13-25 Operations Management: Best Cost Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Production Types and Trade Offs Exhibit 13.5

13-26 Operations Management: Best Cost Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall FMS—Flexible Manufacturing System Higher degree of ability to adjust to both anticipated and unanticipated changes Station flexibility Change the order or operations Change ability of given worker/machine Routing flexibility Ability to use different people Use multiple machines

Computer-aided design (CAD) Computer-aided engineering (CAE) Rapid prototyping Computer-aided manufacturing (CAM) Designing for manufacturing (DFM) Operations Management: Best Cost Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall CAD Computer-aided design and CAE Computer-aided engineering Economies of scale + flexibility and customization benefits

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Instrument-Panel Improvements Achieved Via DFM Adapted from Exhibit 13.6 Previous Instrument PanelDFM Instrument Panel Part Count74 pieces9 pieces Fabrication Time305 Hours20 Hours Assembly Time149 Hours8 Hours Installation Time153 Hours Total Time697 Hours181 Hours Weight3.00 Kilograms2.74 Kilograms Cost74% Reduction

13-29 Operations Management: Best Cost Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Managing the Supply Chain Coordinated system of resources, information, activities, people, and organizations Involved in moving a product or service from raw materials to components Into a finished product/service Delivered to the end customer SupplierManufacturerDistributerRetailerCustomer

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Adapted from Exhibit 13.7 Activity or ComponentOrganization(s)Location Phone OrderDell25 centers around the world, including the United States, the Philippines, and India AssemblyDellLimerick, Ireland; Xiamen, China; Eldorado do Sul, Brazil; Nashville Tennessee; Austin, Texas; Penang, Malaysia Notebook designDell (ODM) Original Design Manufacturer United States Taiwan MicroprocessorIntelPhilippines, Costa Rica, Malaysia, China MemorySamsung Nanya Infineon Elpida Korea Taiwan Germany Japan Graphics CardMSI Foxconn Taiwan China Cooling FanCCI Auras Taiwan Dell’s Supply Chain

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Adapted from Exhibit 13.7 Dell’s Supply Chain Activity or ComponentOrganization(s)Location MotherboardSamsung Quanta Compal Wistron Korea Taiwanese (China factory) Taiwan KeyboardAlps Sunrex Darfon Japanese (China factory) Taiwanese (China factory) LCD DisplaySamsung LG Philips Toshiba Chi Mei Optoelectronics Hannstar Display AU Optronics Korea Japan Taiwan Wireless CardAgere Arrow Askey Gemtek USI United States (China factory) United States (Malaysia factory) Taiwan China

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Adapted from Exhibit 13.7 Dell’s Supply Chain Activity or ComponentOrganization(s)Location ModemAsustek Liteon Foxconn Taiwanese (China factory) China BatteryMotorola SDI Simplo United States (Malaysia factory) Korea Taiwan Hard DriveSegate Hitachi Fujitsu Toshiba United States (Singapore factory) Japanese (Thailand factory) Japanese (Philippines factory) CD/DVD DriveSamsung NEC Teac Korean (Indonesia or Philippine factory) Japanese (China or Malaysia factory) Japanese (Indonesia, China or Malaysia factory)

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Adapted from Exhibit 13.7 Dell’s Supply Chain Activity or ComponentOrganization(s)Location Power AdapterDelta Liteon Samsung Mobility Thailand Taiwan Korea United States (China factory) Power CordVolexUnited Kingdom (China, Malaysia, or India factory) Memory StickM-System Smart Modular Israel United States (Malaysia factory)

13-34 Electronic data interchange (EDI): Integration and real- time exchange of supply chain information that allows supply chain managers to manage complicated relationships and processes Web-based systems Using Technology to Manage the Supply Chain Managing the Supply Chain Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall

13-35 Supplier Relationships Exhibit 13.8 Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall

13-36 Reverse Supply Chain Managing the Supply Chain Reverse supply chain: Activities needed to retrieve a used product from a customer and either reuse it or dispose of it Activities include:  Acquiring the used products  Managing reverse logistics to get the products to the company  Inspecting the product  Determining the disposition (destruction or reuse)  Distributing and selling refurbished products Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall

13-37 Operations Management OPM is strategically important as it directly affect both costs and revenues

Summary: Key Topics Operations Management Quality— techniques and tools Quantity — common means Inventory and Finished Product— tools for timing Effectiveness and Efficiency Enhancement Methods Effective Supply-Chain Management Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 13-38

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall Marketing Mgr. International Intermodal Oper. BNSF Railway Co. Managerial Challenges: Rest of the Story From the front line Michelle Jackson Learning: Respond to major shifts in demand Change: Added capacity Increased service quality Responsible for meeting jobs’ objectives Result: Better train service and performance due to the network’s fluidity

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall #Question Answer the following questions from perspective of TQM 1 Categorize the quality problems in this case 2 What are the probable causes of so many mishaps? 3 What specific actions should Jackson take immediately? What should some of his longer-term goals be? Closing Case: Cranston Nissan 13-40

Copyright Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 13-41