Management 11e John Schermerhorn Chapter 19 Operations and Services Management

Planning Ahead — Chapter 19 Study Questions What are the essentials of operations and services management? What is value chain management? How do organizations manage service and product quality? How can work processes be designed for productivity? Management 11e Chapter 19

Operations management Study Question 1: What are the essentials of operations and services management? 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 Management 11e Chapter 19

Manufacturing Organizations Service Organizations Study Question 1: What are the essentials of operations and services management? Manufacturing Organizations Produce physical goods Service Organizations Produce services Management 11e Chapter 19

Competitive advantage Study Question 1: What are the essentials of operations and services management? 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. Management 11e Chapter 19

Companies may achieve competitive advantage in many ways, including: Study Question 1: What are the essentials of operations and services management? Companies may achieve competitive advantage in many ways, including: Product innovations Customer service Speed to market Manufacturing flexibility Product/service quality Management 11e Chapter 19

Study Question 1: What are the essentials of operations and services management? Technology The combination of knowledge, skills, equipment, computers, and work methods used to transform resource inputs into organization outputs. Manufacturing technology. Service technologies. Management 11e Chapter 19

Small-batch production Continuous-process production Study Question 1: What are the essentials of operations and services management? 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. Management 11e Chapter 19

Manufacturing technology trends Study Question 1: What are the essentials of operations and services management? Manufacturing technology trends Robotics Flexible manufacturing systems Mass customization Cellular layouts Computer-integrated manufacturing Lean production Design for disassembly Remanufacturing Management 11e Chapter 19

Study Question 1: What are the essentials of operations and services management? Service-Profit chain All activities involved in the direct link between an organization’s service providers and customers or clients Should produce Satisfied and loyal customers Efficient and productive use of resources Management 11e Chapter 19

Long-linked technology Study Question 1: What are the essentials of operations and services management? 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. Management 11e Chapter 19

Study Question 2: What is value chain management? 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. Management 11e Chapter 19

Figure 19.1 Elements in an organization’s value chain. Management 11e Chapter 19

Study Question 2: What is value chain management? Inventory management 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 Management 11e Chapter 19

Study Question 2: What is value chain management? Inventory control Economic order quantity (EOQ) 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. Management 11e Chapter 19

Figure 19.2 Inventory control by economic order quantity (EOQ). Management 11e Chapter 19

Study Question 2: What is value chain management? 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 Management 11e Chapter 19

Figure 19.3 Graphical approach to break-even analysis. Management 11e Chapter 19

Customer relationship management Study Question 3: How do organizations manage service and product quality? 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. Management 11e Chapter 19

Customer Relationship Management (CRM) Study Question 3: How do organizations manage service and product quality? 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. Management 11e Chapter 19

Figure 19.4 The importance of external and internal customers. Management 11e Chapter 19

Total quality management (TQM) Study Question 3: How do organizations manage service and product quality? 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. Management 11e Chapter 19

ISO (International Standards Organization) certification Study Question 3: How do organizations manage service and product quality? 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. Management 11e Chapter 19

Quality and Continuous Improvement Study Question 3: How do organizations manage service and product quality? 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 Management 11e Chapter 19

Continuous improvement Study Question 3: How do organizations manage service and product quality? Continuous improvement Constant search for new ways to improve current performance. Reduce cycle time between order receipt and delivery. Management 11e Chapter 19

Quality circle Small group of workers who meet to improve quality Study Question 3: How do organizations manage service and product quality? Quality circle Small group of workers who meet to improve quality Assumes responsibility for quality Taps into members’ creativity Management 11e Chapter 19

Statistical quality control Study Question 3: How do organizations manage service and product quality? 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 Management 11e Chapter 19

Figure 19.5 Sample control chart showing upper and lower control limits. Management 11e Chapter 19

Study Question 4: How can work processes be designed for productivity? 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. Management 11e Chapter 19

Study Question 4: How can work processes be designed for productivity? 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 Management 11e Chapter 19

Study Question 4: How can work processes be designed for productivity? 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. Management 11e Chapter 19

Figure 19.6 How reengineering can streamline work processes. Management 11e Chapter 19

For activities and assessments, please visit… www wiley com/college/schermerhorn