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Business in a Changing World McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved. Chapter 9 Production and Operations Management 2

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9-4 Goya FoodsGoya Foods: Quality Operations and Products Goya Foods offers a wide range of products. As their product lines have expanded, management of operations has become a major priority.

9-5 Operations Management The planning and designing of the processes that transform resources into finished products; managing the transformation process; ensuring high quality of finished goods. Importance of Production & Operations Management

9-6 Development and administration of the activities involved in transforming resources into goods and services. Operations Management (OM) Operations Management

9-7 Historically called production or manufacturing Change to operations = focus on goods & services Emphasis on viewing the operations function as a whole Operations Management (OM) Operations Management

9-8 Manufacturing – activities and processes used in making tangible products (production) Production – activities and processes used in making tangible products (manufacturing) Operations – the activities and processes used in making both tangible and intangible products Production & Operations Management

9-9 Production & Operations Management Transformation Process of operations management

9-10 Inputs – Labor Money Materials Energy Outputs Goods Services ideas Transformation Process

9-11 Production & Operations Management Inputs, outputs, and transformation processes Manufacturing Oak Furniture

9-12 Operations Management Service Businesses – Airlines Colleges Nonprofit organizations OM in Service Businesses

9-13 Operations Management Service Businesses – 70% of all employment in the United States; fastest growth of jobs OM in Service Businesses

9-14 Operations Management Service Businesses – actions that are directed toward consumers who use them OM in Service Businesses

9-15 Operations Management Ideal Service Business - Customer contact High-tech High-touch OM in Service Businesses

9-16 Operations Management Service Business Output Intangible Perishable Difficult to gauge demand OM in Service Businesses

9-17 Operations Management Differences in Nature & Consumption of Output (Manufacturing vs. Service Providers) Nature and consumption of output Uniformity of inputs Uniformity of outputs Labor required Measurement of productivity

9-18 Planning & Designing Operations Systems Determine – What consumers want Design product to satisfy the want Marketing research Planning the Product

9-19 Planning & Designing Operations Systems Determine – Types and quantities of raw materials Skills & quantity of labor Processes for transformation to outputs Planning the Product

9-20 Designing the Operations Processes Standardization – the making of identical interchangeable components or products. Faster, reduces production costs Televisions Ballpoint pens Tortilla chips

9-21 Designing the Operations Processes Modular Design – creation of an item in self- contained units that can be combined or interchanged to create different products Personal computers -- CPU’s, motherboards, monitors

9-22 Designing the Operations Processes Customization – making products to meet a particular customer’s needs or wants Repair services Photocopy services Custom artwork Bridges Ships Computer software

9-23 Designing the Operations Processes Mass Customization – making products to meet needs or wants of a large number of individual customers. Customer selects Model, size, color, style, design Dell Computer Dell Fitness program Travel packages

9-24 Planning Capacity Capacity – maximum load that an organizational unit can carry or operate Hershey’s production capacity 33 million Hershey’s kisses per day 12 billion per year

9-25 Planning Facilities Facility location Facility layout Technology

9-26 Planning Facilities Facility layout Fixed-Position Layout Project Organization Process Layout (intermittent organizations) Product Layout (continuous manufacturing organization)

9-27 Planning Facilities Fixed-Position Layout--Project organization All resources needed for a product are brought to a central location. Process Layout--Intermittent organization Layout is organized into departments that group related processes. Product Layout--Continuous manufacturing organization Production is broken down into relatively simple tasks assigned to workers positioned along a line.

9-28 Planning Facilities -- Technology Computer-assisted design (CAD) – design of components, products, and processes utilizing computers instead of paper & pencil Computer-assisted manufacturing (CAM) – manufacturing that employs specialized computer systems to actually guide and control the transformation processes.

9-29 Planning Facilities -- Technology Flexible manufacturing – the direction of machinery by computers to adapt to different versions of similar operations Computer-integrated manufacturing (CIM) – a complete system that designs products, manages machines and materials, and controls the operations function.

9-30 Estimate – 160,000 robots at work in U.S. factories – Japan #1 employer of robotics Robotics Industries Association Robotics Industries Association – Facilities Planning

9-31 Green Manufacturing It pays to go green – The affluent use green products as status symbols Smart Car’s US sales are soaring, as it has the highest mgp of any gas-powered car on the market Smart Car’s – 95% of Smart Car buyers opt for deluxe versions over the base model

9-32 Managing the Supply Chain Connecting and integrating all parties or members of the distribution system in order to satisfy customers. Supply chain management

9-33 Managing the Supply Chain Procurement – buying of all materials needed by the organization. Desired quality Correct quantities Lowest cost Purchasing

9-34 Managing the Supply Chain Inventory – all raw materials, components, completed or partially completed products, and pieces of equipment that a firm uses Managing Inventory

9-35 Managing the Supply Chain Inventory control – process of determining how many supplies and goods are needed and keeping track of quantities on hand, where each item is, and who is responsible for it. Managing Inventory

9-36 Managing the Supply Chain Economic order quantity model – a model that identifies the optimum number of items to order to minimize the costs for managing them (ordering storing, and using). EOQ model

9-37 Managing the Supply Chain Just-in-Time inventory management – eliminates waste by using smaller quantities arriving “just in time” for use in the transformation process. JIT

9-38 Managing the Supply Chain Material-requirements planning – planning system that schedules the precise quantity of materials needed to make the product. MRP

9-39 Managing the Supply Chain Outsource aspects of operations to companies that provide products more efficiently, at lower cost, greater customer satisfaction. Outsourcing

9-40 Managing the Supply Chain Routing – sequence of operations through which the product must pass Scheduling – the assignment of required tasks to departments or specific machines, workers, or teams.

9-41 Managing Quality Quality – critical element of operations management. Degree to which a good or service meets the demands and requirements of customers.

9-42 Managing Quality Hypothetical PERT Diagram for a McDonald’s Big Mac

9-43 Managing Quality Quality complaints from Air Travelers

9-44 Managing Quality Malcolm Baldrige National Quality Award Criteria -- Leadership Information and analysis Strategic planning Human resource development Process management Business results Customer focus & satisfaction

9-45 Managing Quality Quality Control – processes an organization uses to maintain its established quality standards. Total Quality Management (TQM) – philosophy that uniform commitment to quality will promote a culture that meets customers’ perceptions of quality.

9-46 Managing Quality Statistical process control – system to collect and analyze information about production processed to pinpoint quality problems in the system. ISO 9000 – International Organization for Standardization (ISO) system of quality management standards designed to ensure the customer’s quality standards are met.International Organization for Standardization

9-47 Managing Quality Inspection – reveals whether a product meets quality standards. Sampling – how many items should be inspected. Depends on potential costs of product flaws in terms of human lives and safety.

9-48 Communications in Organizations Informal Communication – separate from management’s formal, official communication channels. Grapevine