FHF Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

part CHAPTER 8 Managing Service and Manufacturing Operations CHAPTER 7 Organization, Teamwork, and Communication 3 FHF 8-2 CHAPTER 6 The Nature of Management

FHF Operations Management  Development and administration of the activities involved in transforming resources into goods and services Emphasis on viewing the operations function as a whole The “core” of most organizations Manufacturing/Production Activities and processes used in making tangible products Operations The activities and processes used in making both tangible and intangible products 8-3

FHF Transformation Processes of Operations Management 8-4 …continued on next page

FHF Transformation Processes of Operations Management  Inputs  The resources (labor, materials, energy, etc.) that are converted into outputs  Outputs  The goods, services and ideas that result from the conversion of inputs 8-5

FHF OM in Service Businesses  Salons, colleges, airlines  70% of all employment in the United States; fastest growth market for jobs  Represent over 72% of GDP in U.S.  Services are actions/performances directed at consumers  Different than manufacturing that produces tangible products 8-6

FHF Services Are...  Generally intangible  Perishable  Demand can be variable  Cannot be saved, stored, resold, or packaged 8-8

FHF 8-9 ManufacturingService TangibleIntangible Uniform inputsCustomized inputs Uniform outputsCustomized outputs Less labor intensiveMore labor intensive Easy to measure productivityMore difficult to measure productivity (due to variations in demand, service, requirements and intangibility) Manufacturing and Service Compared

FHF Planning the Product What do consumers want?  Develop the product  Can be a long and expensive process  Turn product ideas into workable design  The job of engineers and research and development departments 8-10

FHF Designing Operations Process Standardization  The making of identical interchangeable components or products. Faster, reduces production costs Modular Design  Creation of an item in self-contained units that can be combined or interchanged to create different products 8-11 …continued on next page

FHF Designing Operations Process Customization  Making products to meet a particular customer’s needs or wants Mass Customization  Making products to meet needs or wants of a large number of individual customers. 8-12

FHF CapacityCapacity 8-13 Maximum load that an organizational unit can carry or operate

FHF Planning Facilities  Facility location High costs involved Permanent  Pay attention to Proximity to market Availability of raw materials, transportation, power, labor  Climatic influences Community characteristics Taxes and inducements 8-14

FHF Facilities Layout  Fixed-Position Layout  Project Organization  Process Layout (Intermittent Organization)  Product Layout (Continuous Manufacturing Organization) 8-15 …continued on next page

FHF Facilities Layout 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 8-16

FHF TechnologyTechnology Basic underlying technology dictates each industry’s transformation process Computer Assisted Manufacturing  Manufacturing that employs specialized computer systems to guide and control the transformation process 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 8-17

FHF Sustainability and Manufacturing  Pressure has increased for manufacturing and production systems to reduce waste and improve sustainability  Consumers prefer to purchase goods that were manufactured in an environmentally-friendly facility 8-18

FHF Green Manufacturing Has become a leader in green manufacturing and sustainable practices Reuses parts of used products Designs products to be recyclable and reusable Over 90% of parts and materials from machines are recyclable/reusable Less than 2% of materials are thrown away  Saves Xerox money and improves its reputation 8-19

[] FHF Supply Chain Management Connecting and integrating all parties or members of the distribution system in order to satisfy customers 8-20

FHF PurchasingPurchasing Buying of all materials needed by the organization  Desired quality  Correct quantities  Lowest cost  Otherwise known as Procurement 8-21

FHF InventoryInventory All raw materials, components, completed or partially completed products, and pieces of equipment that a firm uses 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 8-22

FHF Supply Chain Management 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) Just-in-Time Inventory Management  Eliminates waste by using smaller quantities arriving “just in time” for use in the transformation process. Materials Requirements Planning  Planning system that schedules the precise quantity of materials needed to make the product. 8-23

FHF Numi Organic TeaNumi Organic Tea strives to achieve a sustainable, eco-friendly supply chain Performs an annual Eco-AuditEco-Audit Tracks environmental impact of its manufacturing and supply chain Offset all of its emissions in 2009  Honored by the Waste Reduction Awards Program 4 years in a row 8-24

FHF OutsourcingOutsourcing  Increasingly a part of supply chain management in operations  Outsource aspects of operations to companies that provide products more efficiently, at lower cost, greater customer satisfaction. 8-25

FHF Routing & Scheduling Routing  Sequence of operations through which the product must pass Scheduling  The assignment of required tasks to departments or specific machines, workers, or teams. 8-26

[] FHF Program Evaluation and Review Technique (PERT) Identifies major activities required to complete a project, determines the critical path and estimates time needed to finish 8-27

FHF Hypothetical PERT for a Hamburger 8-28

FHF QualityQuality Degree to which a good or service meets the demands and requirements of customers  A critical element of operations management  Determining quality can be difficult  Subjective based on consumers’ expectations and perspectives 8-29

FHF Malcolm Baldridge National Quality Award Criteria: Leadership Information and analysis Strategic planning Human resource development Process management Business results Customer focus & satisfaction 8-30

FHF 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 Statistical Process Control  System to collect and analyze information about production processed to pinpoint quality problems in the system 8-31

FHF International Organization for Standardization (ISO) system of quality management standards designed to ensure the customer’s quality standards are met  ISO 9000 : Quality assurance standards for product quality under many conditions  ISO : Uniform environmental standards for use by global corporations to help businesses be cleaner, safer and less wasteful 8-32

FHF ISO System ISO System Categories ISO System ISO System ISO System Categories ISO System  Incorporates standards from 162 countries  World’s largest developer and publisher of international standards  Plan, Do, Check, Act (PDCA) Cycle Operating principle for ISO Plan: Establish objectives Do: Implement plans Check: Measure results Act: Correct and improve plans 8-33

FHF Inspection and Sampling 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. 8-34