Chapter 12 THE FUTURE OF BUSINESS Gitman & McDaniel 5 th Edition THE FUTURE OF BUSINESS Gitman & McDaniel 5 th Edition Chapter Achieving World-Class Operations Management Prepared by Deborah Baker Texas Christian University Prepared by Deborah Baker Texas Christian University 12

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 2 1Why is production and operations management important in both manufacturing and service firms? 2What types of production processes are used by manufacturers and service firms? 3How do organizations decide where to put their production facilities? What choices must be made in designing the facility? 4Why are resource-planning tasks like inventory management and supplier relations critical to production? Learning Goals

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 3 5How do operations managers schedule and control production? 6How can quality management and lean manufacturing techniques help firms improve production and operations management? 7What roles do technology and automation play in manufacturing and service industry operations management? 8What key trends are affecting the way companies manage production and operations? Learning Goals

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 4 Learning Goal 1 Why is production and operations management important in both manufacturing and service firms? 1

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 5 Production and Operations Management 1 The creation of products and services by turning inputs into outputs, which are products and services The creation of products and services by turning inputs into outputs, which are products and services Production Management of the production process Operations Management

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 6 The Production Process 1 Raw materials Natural resources Human resources Capital Inputs Conversion process Products Services Outputs

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 7 Production and Operations Management 1 Main Types of Decisions 1. Production Planning 2. Production Control 3. Improving production and operations

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 8 1 Production Planning Site selection Facility layout Resource planning Type of Production Process Decisions in Production Planning Long-Term Medium-Term 1 Year 2 Years 3-5 Years Short-Term

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 9 2 Learning Goal 2 What types of production processes are used by manufacturers and service firms?

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 10 2 Types of Production Mass Customization Customization Goods are mass-produced up to a point, then custom tailored to the needs of individual customers. The production of goods or services one at a time according to the needs of individual customers. Mass Production The ability to manufacture many identical goods at once.

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 11 2 Classification of Production Processes 2) By the timing of the process 1) By how inputs are converted into outputs

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 12 2 Classification of Production Processes Assembly Process The basic inputs are combined or transformed into the output. Process Manufacturing Process Manufacturing The basic input is broken down into one or more outputs.

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 13 2 Production Timing Intermittent Process A production process that uses short production runs to make batches of different products. Continuous Process A production process that uses long production runs without equipment shutdowns.

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 14 3 Learning Goal 3 How do organizations decide where to put their production facilities? What choices must be made in designing the facility?

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 15 3 Factors in Facility Location Decisions Make-or-buy decisions Marketing factors Manufacturing environment Local incentives Process layout Availability of production inputs International location considerations

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 16 3 Types of Facility Layouts 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

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 17 3 Types of Facility Layouts

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 18 4 Why are resource-planning tasks like inventory management and supplier relations critical to production? Learning Goal 4

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 19 4 Make-or-Buy Decisions FactorsFactors Size of components Standard or nonstandard items Quantity of items needed Special design features Quality and reliability

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 20 4 Inventory Management The determination of how much inventory a firm will keep on hand, and the ordering, receiving, storing, and tracking of inventory Inventory The supply of goods that a firm holds for use in production or for sale to customers Perpetual Inventory A continuously updated list of inventory levels, orders, sales, and receipts

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 21 4 Supply Chain Management Supply Chain The entire sequence of securing inputs, producing goods, and delivering goods to customers Goal: Satisfying customers with quality products and services

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 22 How do operations managers schedule and control production? 5 Learning Goal 5

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 23 5 Routing Value-stream mapping Scheduling Gantt charts Critical path method PERT Production Control

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 24 5 Scheduling Designing Ordering Delivering materials Machining components Assembling Inspecting Shipping SeptemberOctober     8 Start End Review Completed Time not available Gantt Charts

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 25 5 Critical Path Method

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 26 6 How can quality management and lean manufacturing techniques help firms improve production and operations management? Learning Goal 6

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 27 6 Automation Lean manufacturing Quality management techniques Improving Production and Operations

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 28 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. Putting Quality First

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 29 6  Given to U.S. companies whose goods and services offer world-class quality  Established by the U.S. Congress in 1987  Promotes awareness of quality  Allows the business community to benchmark effective quality control programs Malcolm Baldrige National Quality Award

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 30 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. International Quality Standards

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 31 6 Just-in-time (JIT) A system in which materials arrive exactly when they are needed for production, rather than being stored on site. Lean manufacturing Streamlining production by eliminating steps in the production process that do not add benefits that customers are willing to pay for. Lean Manufacturing

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 32 7 What roles do technology and automation play in manufacturing and service industry operations management? Learning Goal 7

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 33 7 Computer-Integrated Manufacturing Flexible Manufacturing Systems Robotics Computer-Aided Design and Manufacturing Systems Technology

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 34 8 What key trends are affecting the way companies manage production and operations? Learning Goal 8

Chapter 12 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 35 8 Modular production Designs for production efficiency Asset management Trends in Operations Management