Achieving World-Class Operations Management CHAPTER 10 The Future of Business The Essentials 4 th Edition Gitman & McDaniel Prepared by Deborah Baker Chapter 10 Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved © BananaStock / Jupiterimages

2 Learning Goals CHAPTER 10 1 Why is production and operations management important in both manufacturing and service firms? 2 What types of production processes do manufacturers and service firms use? 3 How do organizations decide where to put their production facilities? What choices must be made in designing the facility? 4 Why are resource-planning tasks like inventory management and supplier relations critical to production?

3 Learning Goals (continued) CHAPTER 10 5 How do operations managers schedule and control production? 6 How can quality management and lean- manufacturing techniques help firms improve production and operations management? 7 What roles do technology and automation play in manufacturing and service industry operations management? 8 What key trends are affecting the way companies manage production and operations?

4 1 Why is production and operations management important in both manufacturing and service firms? 1 Production and Operations Management

5 production The creation of products and services by turning inputs into outputs, which are products and services. operations management Management of the production process. 1 Production and Operations Management

6 Production and Operations Management Decisions 1 1.Production planning 2.Production control 3.Improving production and operations

7 Production Planning 1 Long-Term Medium-Term 1 Year2 Years 3-5 Years Short-Term

8 Production and Operations Management Decisions 1 Site selection Facility layout Resource planning Type of Production Process

9 2 What types of production processes do manufacturers and service firms use? 2 The Production Process: How Do We Make It?

10 Production Process Classifications 1.How inputs are converted into outputs 2.Timing of the process 2

11 mass production The ability to manufacture many identical goods at once. mass customization Goods are mass-produced up to a point, then custom tailored to the needs of individual customers. customization The production of goods or services one at a time according to the needs of individual customers. How Do We Make It? 2

12 process manufacturing The basic input is broken down into one or more outputs. assembly process The basic inputs are combined or transformed into the output. Converting Inputs to Outputs 2

13 continuous process A production process that uses long production runs without equipment shutdowns. intermittent process A production process that uses short production runs to make batches of different products. Production Timing 2

14 3 How do organizations decide where to put their production facilities? What choices must be made in designing the facility? 3 Where Do We Make It?

15 Where Do We Make It? Marketing factors Manufacturing environment Local incentives Availability of production inputs International location considerations 3

16 Designing the Facility Product Layout Workstations or departments are arranged in a line with products moving along the line Fixed-Position Layout The product stays in one place and workers and machinery move to it as needed Process Layout Work flows according to the production process Cellular Manufacturing Technique uses small, self- contained production units each performing all or most of the tasks necessary 3

17 4 Why are resource-planning tasks like inventory management and supplier relations critical to production? 4 Resource Planning

18 bill of material A list of the items and the number of each required to make a given product. purchasing The process of buying production inputs from various sources; also called procurement. Resource Planning 4

19 Make-or-Buy Factors Size of components Standard or nonstandard items Quantity of items needed Special design features Quality and reliability 4

20 inventory The supply of goods that a firm holds for use in production or for sale to customers. inventory management The determination of how much inventory a firm will keep on hand, and the ordering, receiving, storing, and tracking of inventory. perpetual inventory A continuously updated list of inventory levels, orders, sales, and receipts. Inventory Management 4

21 materials requirement planning (MRP) A computerized system of controlling the flow of resources and inventory. A master schedule is used to ensure that the materials, labor, and equipment needed for production are at the right places in the right amounts at the right times. Computerized Resource Planning 4

22 enterprise resource planning (ERP) A computerized resource-planning system that incorporates information about the firm’s suppliers and customers with its internally generated data. Computerized Resource Planning 4

23 supply chain The entire sequence of securing inputs, producing goods, and delivering goods to customers. supply chain management The process of smoothing transitions along the supply chain so that the firm can satisfy its customers with quality products and services; focuses on developing tighter bonds with suppliers. Supply Chain Management 4

24 CONCEPT check What are the three types of decisions that must be made in production planning? What factors does a firm consider when making a site selection decision? How is technology being used in resource planning? 4

25 5 How do operations managers schedule and control production? 5 Production and Operations Control

26 Routing Value-stream mapping Scheduling Gantt charts Critical path method PERT 5 Production and Operations Control

27 The PERT Method Assigns three time estimates for completion:  An optimistic time  The most probable time  A pessimistic time 5

28 CONCEPT check What is production control, and what are its key aspects? How can value-stream mapping improve routing efficiency? Identify and describe three commonly used scheduling tools. 5

29 6 How can quality management and lean-manufacturing techniques help firms improve production and operations management? 6 Improving Production and Operations

30 Technology and automation Lean manufacturing Quality management techniques Improving Production and Operations 6

31 Putting Quality First 6 Total Quality Management The use of quality principles in all aspects of a company’s production and operations. Quality control The process of creating standards for quality, producing goods that meet them, and then measuring finished products against them. Continuous improvement A commitment to constantly seek better ways of doing things to maintain and increase quality. Six Sigma A QC process that relies on defining what needs to be done to ensure quality, measuring and analyzing results, and ongoing improvement.

32 Malcolm Baldrige National Quality Award  Given to U.S. companies whose goods and services offer world-class quality  Established by the U.S. Congress in 1987 and named for a former secretary of commerce  Promotes awareness of quality  Allows the business community to assess effective quality control programs 6

33 International Quality Standards 6 ISO A set of technical standards to promote clean production processes to protect the environment. ISO 9000 A set of five technical standards of quality management to provide a uniform way of determining whether manufacturing plants and service organizations conform to sound quality procedures.

34 Lean Manufacturing lean manufacturing Streamlining production by eliminating steps in the production process that do not add benefits that customers are willing to pay for. just-in-time (JIT) A system in which materials arrive exactly when they are needed for production, rather than being stored on site. 6

35 7 What roles do technology and automation play in manufacturing and service industry operations management? 7 Technology and Automation

36 Technology and Automation  Computer-aided design and manufacturing systems  Robotics  Flexible manufacturing systems  Computer-integrated manufacturing systems 7 © KIMIMASA MAYAMA / Bloomberg News / Landov

37 CONCEPT check Describe total quality management and the role that Six Sigma, ISO 9000, and ISO14000 play. How can lean manufacturing and just-in-time inventory management help a firm improve its production and operations? How are both manufacturing and nonmanufacturing firms using technology and automation to improve operations? 7

38 8 What key trends are affecting the way companies manage production and operations? 8 Trends in Production and Operations Management

39 business process management (BPM) A unified system that has the power to integrate and optimize a company’s sprawling functions by automating much of what it does. Business Process Management 8

40 CONCEPT check Describe the impact of the anticipated worker shortage on U.S. business. How are today’s educational trends affecting the future of manufacturing? What is business process management (BPM) and how do businesses use it to improve operations management? 8