Operations and Service Management Chapter 21

Operations and Service Management Strategic success depends on efficient operations Operational concerns take on even greater importance in today’s competitive environment where consumers often want customized products and services delivered immediately Manager’s Challenge: Donnelley

Operations and Service Management Topics Chapter 21 Management and control of production operations Define operations management How to bring operations into strategic decision making Overview of integrated operations activities Specific operations design issues How managers measure and improve productivity

Operations Management The field of management that specializes in the physical production of goods or services and uses quantitative techniques for solving manufacturing problems Technical core = heart of the organization’s production of its product or service

The Organization as an Operations Management System Feedback Operations Strategy Operations Management Inputs Raw materials Human resources Land, buildings Information Technology Outputs Products Services Products & Facilities Product design Facilities layout Capacity planning Facilities location Structure Reporting relationships Teams Control Processes Inventory management Productivity Quality The Technical Core

Manufacturing and Service Organizations Source: Based on Richard L. Daft, Organization Theory and Design (Cincinnati, OH: South-Western College Publishing, 1998), 130; and Byron J. Finch and Richard L. Luebbe, Operations Management (Fort Worth, Texas: The Dryden Press, 1995), 50.

Operational Concerns for Manufacturing and Service Organizations Scheduling Must obtain materials and supplies Both must be concerned with quality and productivity

Four Stages of Operations Strategy No Involvement No positive contribution to strategy formulation Concerns: Cost Labor efficiency Stage 2 Industry Current Goals set according to industry practice Concerns: Capital investment Quality control Inventory management Capacity Stage 3 Organizationally Supportive Organization’s competitive strategy closely followed and supported Concerns: Advanced process technologies New plants What to make for the United States Stage 4 Initiates Competitive Advantage Advanced capabilities developed and significant input to strategic process provided Concerns: New products New services New technologies International Source: Based on R.H. Hayes and S.C. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984).

The Integrated Enterprise Supply chain management = managing the sequence of suppliers and purchasers, covering all stages of processing from obtaining raw materials to distributing finished goods to final consumers

The E-Supply Chain Customer Extranet Data Exchange Retail Chain Retail Store Supplier Manufacturer Intranet Data Exchange Partnership approach to the supply chain optimizes inventory levels and enables rapid response to customer needs

How to Win Customers? Better price Quality Performance Delivery Responsiveness to customer demand

Design for Manufacturability and Assembly - DFMA Often requires Restructuring operations Creating teams of designers, manufacturers, and assemblers to meet objectives of design

Product Design Objectives Producibility 1 Cost 2 Quality 3 Reliability 4

Service Design Objectives Producibility 1 Cost 2 Quality 3 Reliability 4 Timing 5 Ethical Dilemma: A Friend for Life?

Procurement Purchasing supplies, services, and raw materials for use in the production process

Facilities Layout Process Layout Product Layout Cellular Layout Fixed-position Layout

Technology Automation Service Technology Restaurants – calculate exact cost and ingredient needs for each menu item Banking – ATMs Gas stations – pay-at-pump systems Retailing = RFID – radio-frequency identification (high-tech barcode)

Technology Automation Flexible Manufacturing Systems, the use of automated production lines that can be quickly adapted to produce more than one kind of product CAD/CAM CAD = computer aided design CAM = computer aided manufacturing PLM = Product-life cycle management

Facility Location Cost-benefit analysis – most common approach to selecting a site for a new location New location scouting software is helping managers turn facilities location into a science

Capacity Planning Determination and adjustment of the organization’s ability to produce products and services to match customer demand

Inventory Management Finished goods inventory Work-in-process inventory Raw materials inventory

Techniques for Inventory Management Economic order quantity Material requirements planning Just-in-Time inventory systems Logistics & Distribution management

Logistics and Distribution Management Logistics = activities required to physically move materials into the company’s operations facility and to move finished products to customers Distribution = moving finished products to customers (order fulfillment)

Material Requirements Planning - MRP Dependent demand inventory planning and control system Schedules exact materials required Is computer based Based on precise estimates of future needs for production

Lean Manufacturing and Productivity Lean manufacturing = process using highly trained employees at every stage of the production process to cut waste and improve quality – employee involvement is key

Measuring Productivity Productivity = organization’s output of products and services divided by its inputs Total factor Productivity Labor Output Labor + Capital + Materials + Energy = = Output Labor dollars

Improving Productivity Technological productivity Employee productivity Managerial productivity Experiential Exercise: What Is Your Attitude Toward Productivity?