Modern Management 9th edition 4/8/2017 Modern Management 9th edition .

Ü Objectives Definitions of production, productivity, and quality 4/8/2017 Ü Objectives Definitions of production, productivity, and quality An understanding of the importance of operations and production strategies, systems, and processes Insights into the role of operations management concepts in the workplace An understanding of how operations control procedures can be used to control production Insights into operations control tools and how they evolve into a continual improvement approach to production management and control .

PRODUCTION Defining Production Productivity productivity = outputs 4/8/2017 PRODUCTION Defining Production Productivity productivity = outputs inputs Traditional strategies for increasing productivity: 1. Improving effectiveness of organizational workforce through training 2. Improving production process through automation 3. Improving product design to make products easier to assemble 4. Improving production facility by purchasing more modern equipment 5. Improving quality of workers hired to fill open positions .

PRODUCTION Quality and Productivity Automation 4/8/2017 PRODUCTION Quality and Productivity Focus on Continual Improvement Focus on Quality and Integrated Operations Quality Assurance Statistical Quality Control "No Rejects" Philosophy Quality Circles Automation Strategies, Systems, and Processes .

Deming’s flow diagram for improving product quality 4/8/2017 PRODUCTION Deming’s flow diagram for improving product quality Figure 20.1 .

The quality circle problem-solving process 4/8/2017 PRODUCTION The quality circle problem-solving process Figure 20.2 .

OPERATIONS MANAGEMENT 4/8/2017 OPERATIONS MANAGEMENT Defining Operations Management Operations Management Considerations Key notions: Involves managers Takes place within context of objectives and policies Criteria are standards for effectiveness and efficiency Operations strategies .

OPERATIONS MANAGEMENT 4/8/2017 OPERATIONS MANAGEMENT Major activities performed to manage production Figure 20.3 .

OPERATIONS MANAGEMENT 4/8/2017 OPERATIONS MANAGEMENT Operations Management Considerations (con’t) Capacity Strategy Capacity flexibility Steps in Capacity Decisions: 1. Measure capacity of currently available facilities 2. Estimate future capacity needs on basis of demand forecasts 3. Compare future capacity needs and available capacity 4. Identify ways to accommodate long-range capacity changes 5. Select best alternative based on quantitative and qualitative evaluation .

OPERATIONS MANAGEMENT 4/8/2017 OPERATIONS MANAGEMENT Operations Management Considerations (con’t) Location Strategy Factors in a Good Location Nearness to market and distribution centers Nearness to vendors and resources Requirements of federal, state, and local governments The character of direct competition The degree of interaction with the rest of the corporation The quality and quantity of labor pools The environmental attractiveness of the area Taxes and financing requirements Existing and potential transportation The quality of utilities and services .

OPERATIONS MANAGEMENT 4/8/2017 OPERATIONS MANAGEMENT Operations Management Considerations (con’t) Product Strategy Process Strategy Types of Processes Continuous process Repetitive process Job-shop process Layout Strategy Basic types for manufacturing facilities: 1. Product 2. Process (functional) 3. Fixed-position .

OPERATIONS MANAGEMENT 4/8/2017 OPERATIONS MANAGEMENT The three basic layout patterns Figure 20.4 .

OPERATIONS MANAGEMENT 4/8/2017 OPERATIONS MANAGEMENT Operations Management Considerations (con’t) Human Resources Strategy Human resource imperatives: 1. Optimize individual, group, and organizational effectiveness 2. Enhance quality of organizational life Operational Tools in Human Resources Strategy Manpower planning Job design Work methods analysis Motion-study techniques Work measurement methods Operational tools to establish labor standards .

Just-in-Time Inventory Control 4/8/2017 OPERATIONS CONTROL Just-in-Time Inventory Control Best Conditions for JIT Advantages of JIT Characteristics of JIT 1. Closeness of suppliers 2. High quality of materials purchased from suppliers 3. Well-organized receiving and handling of materials 4. Strong management commitment Maintenance Control Pure-preventive maintenance policy Pure-breakdown policy .

OPERATIONS CONTROL Cost Control Stages in Cost Control 4/8/2017 OPERATIONS CONTROL Cost Control Stages in Cost Control 1. Establishing standard or planned cost amounts 2. Measuring actual costs incurred 3. Comparing planned costs to incurred costs 4. Making changes to reduce actual costs to planned costs Following above stages: Establish planned costs for labor, materials, and overhead Measure or calculate costs incurred for these activities Compare actual operations costs to planned operations costs Take steps to reduce actual operations costs to planned levels .

OPERATIONS CONTROL Budgetary Control Potential Pitfalls of Budgets 4/8/2017 OPERATIONS CONTROL Budgetary Control Potential Pitfalls of Budgets 1. Placing too much emphasis on insignificant expenses 2. Increasing expenses without adequate information • Zero-base budgeting 3. Ignoring fact that budgets must be changed periodically • Variable budget Human Relations Considerations in Using Budgets Reducing Human Relations Problems .

OPERATIONS CONTROL Ratio Analysis 4/8/2017 OPERATIONS CONTROL Ratio Analysis 1. Liquidity ratios 2. Leverage ratios 3. Activity ratios 4. Profitability ratios Using Ratios to Control Organizations Evaluate all ratios simultaneously Compare computed values with industry averages Incorporate trend analysis .

Four Categories of Ratios 4/8/2017 OPERATIONS CONTROL Table 20.1 Four Categories of Ratios Type Example Calculation Interpretation Profitability Return on investment (ROI) Profit after taxes Productivity of assets Total assets Liquidity Current ratio Current assets Short-term solvency Current liabilities Activity Inventory turnover Sales Efficiency of inventory Inventory management Leverage Debt ratio Total debt How a company finances itself .

OPERATIONS CONTROL Materials Control Procurement of Materials 4/8/2017 OPERATIONS CONTROL Materials Control Procurement of Materials Receiving, Shipping, and Trafficking Receiving activities include: •Unloading •Identifying •Inspecting •Reporting •Storing inbound shipments Shipping and distribution activities include: •Preparing documents •Packaging •Labeling •Loading •Directing out shipments Shipping and receiving are organized as one unit Traffic manager’s main responsibilities are: •Selection of the transportation mode •Coordination of the arrival and departure of shipments •Auditing freight bills .

Materials Control (con’t) 4/8/2017 OPERATIONS CONTROL Materials Control (con’t) Inventory and Shop-Floor Control Inventory control subsystems: •Work-in-process •Finished-goods inventory Inventory control specifies: •What •When •How much to buy Shop-floor control activities include: •Input/output control •Routing •Scheduling •Dispatching •Sequencing •Expediting .

SELECTED OPERATIONS CONTROL TOOLS 4/8/2017 SELECTED OPERATIONS CONTROL TOOLS Using Control Tools to Control Organizations Inspection To Inspect or Not to Inspect Management by Exception Establishing Rules Examples of rules based on exception principle: A department manger must immediately inform the plant manager if actual: 1. Weekly labor costs exceed estimated weekly labor costs by more than 15% 2. Dollars spent on a special project exceed funds approved by more than 10% .

SELECTED OPERATIONS CONTROL TOOLS 4/8/2017 SELECTED OPERATIONS CONTROL TOOLS Management by Objectives Break-Even Analysis Basic Ingredients of Break-Even Analysis Break-even analysis typically involves: •Reflection •Discussion •Reasoning •Decision making Relative to major aspects of production: 1. Fixed costs 3. Total costs 5. Profits 7. Breakeven 2. Variable costs 4. Total revenue 6. Loss point Types of Break-Even Analysis Algebraic Break-even Analysis BE = FC (P – VC) Graphic Break-even Analysis Advantages of Using the Algebraic and Graphic Break-even Methods Control and Break-even Analysis .

SELECTED OPERATIONS CONTROL TOOLS 4/8/2017 SELECTED OPERATIONS CONTROL TOOLS Table 20.2 Fixed costs and Variable Costs for a Book Publisher Fixed Costs (Yearly Basis) Variable Costs per Book Sold 1. Real estate taxes on property $1,000 1. Printing $2.00 2. Interest on loan to purchase equipment 5,000 2. Artwork 1.00 3. Building maintenance 2,000 3. Sales commission .50 4. Insurance 800 4. Author royalties 1.50 5. Salaried labor 80,000 5. Binding 1.00 Total fixed costs $88,800 Total variable costs per book $6.00 .

SELECTED OPERATIONS CONTROL TOOLS 4/8/2017 SELECTED OPERATIONS CONTROL TOOLS Break-even analysis for a book publisher Figure 20.5 .

SELECTED OPERATIONS CONTROL TOOLS 4/8/2017 SELECTED OPERATIONS CONTROL TOOLS Other Broad Operations Control Tools Decision Tree Analysis Process Control Value Analysis Computer-Aided Design (CAD) Computer Graphics Computer-aided engineering (CAE) Computer-Aided Manufacturing (CAM) .

4/8/2017 Chapter Twenty ? Questions