1. Operations and Service Management
Chapter 21

2. Operations and Service Management
Strategic success depends on efficient operations
Operational concerns take on even greater importance in today’s competitive environment where consumers often want customized products and services delivered immediately
Manager’s Challenge: Donnelley

3. Operations and Service Management
Topics Chapter 21
Management and control of production operations
Define operations management
How to bring operations into strategic decision making
Overview of integrated operations activities
Specific operations design issues
How managers measure and improve productivity

4. Operations Management
The field of management that specializes in the physical production of goods or services and uses quantitative techniques for solving manufacturing problems
Technical core = heart of the organization’s production of its product or service

5. The Organization as an Operations Management System
Feedback
Operations Strategy
Operations Management
Inputs
Raw materials
Human resources
Land, buildings
Information
Technology
Outputs
Products
Services
Products & Facilities
Product design
Facilities layout
Capacity planning
Facilities location
Structure
Reporting relationships
Teams
Control Processes
Inventory management
Productivity
Quality
The Technical Core

6. Manufacturing and Service Organizations
Source: Based on Richard L. Daft, Organization Theory and Design (Cincinnati, OH: South-Western College Publishing, 1998), 130; and Byron J. Finch and Richard L. Luebbe, Operations Management (Fort Worth, Texas: The Dryden Press, 1995), 50.

7. Operational Concerns for Manufacturing and Service Organizations
Scheduling
Must obtain materials and supplies
Both must be concerned with quality and productivity

8. Four Stages of Operations Strategy
No Involvement
No positive contribution to strategy formulation
Concerns:
Cost
Labor efficiency
Stage 2
Industry Current
Goals set according to industry practice
Concerns:
Capital investment
Quality control
Inventory management
Capacity
Stage 3
Organizationally Supportive
Organization’s competitive strategy closely followed and supported
Concerns:
Advanced process technologies
New plants
What to make for the United States
Stage 4
Initiates Competitive Advantage
Advanced capabilities developed and significant input to strategic process provided
Concerns:
New products
New services
New technologies
International
Source: Based on R.H. Hayes and S.C. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984).

9. The Integrated Enterprise
Supply chain management = managing the sequence of suppliers and purchasers, covering all stages of processing from obtaining raw materials to distributing finished goods to final consumers

10. The E-Supply Chain Customer Extranet Data Exchange
Retail Chain
Retail Store
Supplier
Manufacturer
Intranet Data Exchange
Partnership approach to the supply chain optimizes inventory levels and enables rapid response to customer needs

11. How to Win Customers? Better price Quality Performance Delivery
Responsiveness to customer demand

12. Design for Manufacturability and Assembly - DFMA
Often requires
Restructuring operations
Creating teams of designers, manufacturers, and assemblers to meet objectives of design

13. Product Design Objectives
Producibility 1
Cost 2
Quality 3
Reliability 4

14. Service Design Objectives
Producibility 1
Cost 2
Quality 3
Reliability 4
Timing 5
Ethical Dilemma: A Friend for Life?

15. Procurement
Purchasing supplies, services, and raw materials for use in the production process

16. Facilities Layout Process Layout Product Layout Cellular Layout
Fixed-position Layout

17. Technology Automation
Service Technology
Restaurants – calculate exact cost and ingredient needs for each menu item
Banking – ATMs
Gas stations – pay-at-pump systems
Retailing = RFID – radio-frequency identification (high-tech barcode)

18. Technology Automation
Flexible Manufacturing Systems, the use of automated production lines that can be quickly adapted to produce more than one kind of product
CAD/CAM
CAD = computer aided design
CAM = computer aided manufacturing
PLM = Product-life cycle management

19. Facility Location
Cost-benefit analysis – most common approach to selecting a site for a new location
New location scouting software is helping managers turn facilities location into a science

20. Capacity Planning
Determination and adjustment of the organization’s ability to produce products and services to match customer demand

21. Inventory Management Finished goods inventory
Work-in-process inventory
Raw materials inventory

22. Techniques for Inventory Management
Economic order quantity
Material requirements planning
Just-in-Time inventory systems
Logistics & Distribution management

23. Logistics and Distribution Management
Logistics = activities required to physically move materials into the company’s operations facility and to move finished products to customers
Distribution = moving finished products to customers (order fulfillment)

24. Material Requirements Planning - MRP
Dependent demand inventory planning and control system
Schedules exact materials required
Is computer based
Based on precise estimates of future needs for production

25. Lean Manufacturing and Productivity
Lean manufacturing = process using highly trained employees at every stage of the production process to cut waste and improve quality – employee involvement is key

26. Measuring Productivity
Productivity = organization’s output of products and services divided by its inputs
Total factor
Productivity
Labor
Output
Labor + Capital + Materials + Energy = =
Output
Labor dollars

27. Improving Productivity
Technological productivity
Employee productivity
Managerial productivity
Experiential Exercise: What Is Your Attitude Toward Productivity?