FHF Operations Management Development and administration of the activities involved in transforming resources into goods and services. Historically called “production” or “manufacturing” where the focus was on methods to operate a factory “Operations” view the operations functions as a whole rather than just inputs and outputs The planning and designing of the processes that transform resources into finished products; managing the transformation process; ensuring high quality of finished goods. 8-3

FHF Operations Management Manufacturing – activities and processes used in making tangible products (also called production) Production – activities and processes used in making tangible products (also called manufacturing) 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 Services Are...  Generally intangible  Perishable  Demand can be variable  Cannot be saved, stored, resold, or packaged 8-7

FHF Service Businesses – Airlines Universities Hotels Restaurants Nonprofit organizations Over 70% of all employment in developed economies; fastest growth of jobs 8-10 …continued on next page

FHF 8-8 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 Designing Operations Process What is the appropriate method of transformation? A. Standardization – the making of identical interchangeable components or products. Faster, reduces production costs Televisions, Ballpoint pens, Tortilla chips etc. B. 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, Automobiles 8-10 …continued on next page

FHF Designing Operations Process C. Customization – making products to meet a particular customer’s needs or wants Repair services Photocopy services Custom artwork Bridges Ships 8-10 …continued on next page

FHF Designing Operations Process 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 8-11

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 Once the company knows the process it will use to create its products, then they need to decide on; Facility location Physical layout 8-13

FHF Facilities Layout Fixed-Position Layout--Project organization – All resources needed for the product are brought to a central location. – Unique product e.g., construction, exploration A company using a fixed position layout is called a project organization Process Layout-- Intermittent organization – Layout is organized into departments that group related processes – Produce products to customers’ specifications, e.g.,hospital Product Layout--Continuous manufacturing org – Production is broken down into relatively simple tasks assigned to workers positioned along an assembly line. – E.g., automobiles, TV 8-15

FHF Sustainability and Manufacturing  Pressure has increased for manufacturing and production systems to reduce waste and improve sustainability  Conservation, recycling, alternative energy use, reduction of pollution (greenhouse gas)  Consumers prefer to purchase goods that were manufactured in an environmentally-friendly facility  Conservation, recycling, alternative energy use, reduction of pollution (greenhouse gas) 8-17

[] FHF SUPPLY CHAIN MANAGEMENT Connecting and integrating all parties or members of the distribution system in order to satisfy customers 8-18 Also called Logistics: includes all the activities involved in obtaining and managing raw materials and component parts, managing finished products, packaging them and getting them to customers.

FHF PurchasingPurchasing Buying of all materials needed by the organization  Desired quality  Correct quantities  Lowest cost  Otherwise known as Procurement 8-19

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 8-20

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. 8-22

FHF Routing & Scheduling After all materials have been procured managers must then consider Routing  Sequence of operations through which the product must pass Scheduling  The assignment of required tasks to departments or specific machines, workers, or teams. 8-23

[] 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 8-24

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 8-25

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 8-26

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 8-27

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. 8-28