1. Managing for Quality and Competitiveness
Part 3
Managing for Quality and Competitiveness
We continue part 3 of your textbook, Managing for Quality and Competitiveness.
© 2015 McGraw-Hill Education.

2. CHAPTER 6 CHAPTER 7 CHAPTER 8 The Nature of Management
Organization, Teamwork, and Communication
CHAPTER 8
Managing Service and Manufacturing Operations
Welcome to Chapter eight, Managing Service and Manufacturing Operations.
All organizations create products – goods, services or ideas – for customers and all organizations share a number of similarities to how they transform resources into products.
The check-in process at a hotel is similar to that of an airline for example. These similarities are the result of operations management, the focus of this chapter.

3. Learning Objectives
LO 8-1 Define operations management and differentiate between operations and manufacturing.
LO Explain how operations management differs in manufacturing and service firms.
LO Describe the elements involved in planning and designing an operations system.
LO Specify some techniques managers may use to manage the logistics of transforming inputs into finished products.
LO Assess the importance of quality in operations management.
We will discuss the role of production or operations management in acquiring and managing the resources necessary to create goods and services.
Production and operations management involves planning and designing the processes that will transform those resources into finished products, managing the movement of those resources through the transformation process, and ensuring that the products are of the quality expected by customers.

4. Nature of Operations Management
Operations Management (OM)
The development and administration of the activities involved in transforming resources into goods and services
Historically, OM has been called “production” or “manufacturing” limiting it to the manufacture of physical goods
The change from “production” to “operations” recognizes services and ideas and views the function as a whole
Operations management (OM) is the development and administration of the activities involved in transforming resources into goods and services.
OM is the “core” of most organizations because it is responsible for the creation of the organization’s goods and services.
Historically, OM has been called “production” or “manufacturing” due to the view it was limited to the manufacture of physical goods.
The change from “production” to “operations” recognizes the increasing importance of organizations that provide services and ideas.
Also, the term “operations” represents an interest in viewing the operations function as a whole rather than simply inputs and outputs.

5. Nature of Operations Management
The activities and processes used in making tangible products; also called production
Manufacturing
The activities and processes used in making tangible products; also called manufacturing
Production
The activities and processes used in making both tangible and intangible products
Operations
Manufacturing is the activities and processes used in making tangible products; also called production.
Production is the activities and processes used in making tangible products; also called manufacturing.
Operations are the activities and processes used in making both tangible and intangible products.
Manufacturing provides tangible products such as a printer.
Operations provides intangibles such as a hotel stay.

6. Transformation Process
At the heart of OM is the transformation process though which inputs are converted into outputs
The resources – such as labor, money, materials and energy – that are converted into outputs
Inputs
The goods, services and ideas that result from conversion of inputs
Outputs
At the heart of operations management is the transformation process though which inputs are converted into outputs.
Inputs are the resources – such as labor, money, materials and energy – that are converted into outputs.
Outputs are the goods, services and ideas that result from conversion of inputs.
Operations managers control the process by taking measurements (feedback) at various points in the transformation process and comparing them with previously established standards.
If there is any deviation, the manager may take corrective action.
Operations managers control the process by
Taking measurements (feedback) and comparing them to established standards
Taking corrective action for any deviation

7. 3D Printing
3D printing has become popular among businesses for the purposes of manufacturing certain items more efficiently and inexpensively
It is also used to create tools needed for work or manufacturing processes
The designs of the product or tool are put into a computer and printed with liquid metals or plastics…
A wide range of industries are taking advantage of this method from aircraft to dental product manufacturers
3D printing decreases the number of pieces in the assembly of an item making it less likely to break
For example, the National Aeronautics and Space Administration (NASA) printed a fuel injector for a rocket in two pieces that once require 115 pieces for complete assembly
3D Printing
3D printing has become popular among businesses for the purposes of manufacturing certain items more efficiently and inexpensively. It is also used to create tools needed for work or manufacturing processes. The designs of the product or tool are put into a computer and printed with liquid metals or plastics. A wide range of industries are taking advantage of this method from aircraft to dental product manufacturers. 3D printing decreases the number of pieces in the assembly of an item making it less likely to break. For example, the National Aeronautics and Space Administration (NASA) printed a fuel injector for a rocket in two pieces that once require 115 pieces for complete assembly.
SOURCE: Economist. “From Dental Braces to Astronaut Seats”. September 7, (accessed September 24, 2013).
SOURCE: Economist. “From Dental Braces to Astronaut Seats”. September 7, (accessed September 24, 2013).

8. OM in Service Businesses
Manufacturers and service providers differ in five basic ways
Nature and consumption of output – services require more customer contact and happen at the point of consumption
Uniformity of inputs – services are more “customized” to each consumer
Uniformity of output – each service is performed differently
Labor required – services are more labor-intensive
Measurement of productivity – intangibility of the service product makes measurement more difficult
The transformation process occurs in all organizations, regardless of what they produce or their objectives.
Businesses that manufacture tangible goods and those that provide services often perform similar activities but they differ in five basic ways.
The nature and consumption of output – service providers require a higher degree of customer contact and the performance of the service occurs at the point of consumption.
Uniformity of inputs – manufacturers control the variability of their products but services tend to be more “customized” to consumer.
Uniformity of outputs – due to differences in people, both employees and customers, each service is performed differently. Another challenge to service operations is that output is generally intangible and even perishable. Few services can be saved, stored, resold or returned.
Labor required – services are much more labor-intensive
Measurement of productivity the intangibility of the service product makes it difficult to measure productivity

9. OM in Service Businesses
Subway’s inputs are sandwich components such as bread, tomatoes and lettuce.
While Subway’s outputs are customized sandwiches
Subway’s inputs are bread, tomatoes and lettuce while their outputs are customized sandwiches.

10. Planning and Designing Operations Systems
Operations planning involves making the following decisions
Planning the product
Marketing research helps determine the product and features customers want, gauge demand and set price
Once management has a product, they must plan how to produce the product
Operations managers plan for the resources needed to complete the transformation process
What will we produce?
Who are our customers?
What processes will we use?
Where will we make our product?
Before a company can produce any product, it must first decide what it will produce and for what group of customers. It must then determine what processes it will use to make those products as well as the facilities it needs to produce them. These decisions comprise operations planning.
Planning a product involves using market research to identify products and features customers want, gauge demand and even aid in setting price.
Developing a product can be a lengthy, expensive process.
Once management has a product, they must plan how to produce that product. Operations managers plan for the types and quantities of materials needed to produce the product, the skills and quantity of people needed and the actual processes that transform inputs to outputs.

11. Designing the Operations Process
Products are manufactured using one of three processes
Standardization
The making of identical interchangeable components or products
Modular Design
The creation of an item in self-contained units, or modules, that can be combined or interchanged to create different products
Customization
Making products to meet a particular customer’s needs or wants
A company must then determine the appropriate method of transforming resources into desired product. Typically, products are manufactured using one of three processes: standardization, modular design or customization.
Standardization is the making of identical interchangeable components or products. Used in firms that make large quantities for many customers.
Modular design is the creation of an item in self-contained units, or modules, that can be combined or interchanged to create different products. Allows for quick repair but is costly.
Customization is making products to meet a particular customer’s needs or wants. Products produced in this way are generally unique.

12. Planning Capacity Capacity
The maximum load that an organizational unit can carry or operate
The unit of measurement could be a worker or machine, a department, a branch or an entire plant
Capacity can be stated in terms of inputs or outputs
Planning capacity too low results in unmet demand while planning it too high results in higher costs
Planning the operational processes for the organization involves two important areas: capacity planning and facilities planning.
Capacity is the maximum load that an organizational unit can carry or operate. The unit of measure could be a worker or a machine, a department, a branch or an entire plant.
Capacity can be stated in terms of inputs or outputs.
Planning capacity is important for the operations manager. Planning for too little capacity results in unmet demand while too much capacity results in higher operating costs. Plus, it is difficult and expensive to change capacity after starting production.

13. Planning Facility Location
A complex and costly decision
Facility Location
Important factors to consider
Proximity to market
Availability of raw materials, transportation, power and labor
Climatic influences and community characteristics
Taxes and inducements
Where to locate is a significant question because once the decision is made and implemented, the company must live with it due to the high costs involved.
A company must pay careful attention to factors such as
Proximity to market
Availability of raw materials, transportation, power and labor
Climatic influences
Community characteristics
And taxes and inducements which have become an increasingly important criterion in recent years.

14. Planning Facility Layout
Fixed-Position Layout
A layout that brings all resources required to create the product to a central location
Project Organizations
Companies using a fixed-position layout because it is typically involved in large, complex projects such as construction or exploration
Arranging the physical layout of a facility is a complex, highly technical task. There are three basic layouts: fixed-position, process and product.
A fixed-position layout brings all resources required to create the product to a central location. The product does not move.
A company using a fixed-position layout may be called a project organization because it is typically involved in large, complex projects such as construction or exploration.

15. Planning Facility Layout
Process Layout
A layout that organizes the transformation process into departments that group related processes
Intermittent Organizations
Organizations that deal with products of a lesser magnitude than project organizations; their products are not unique but possess a significant number of differences
Firms that use a process layout organize the transformation process into departments that group related processes. A hospital has an X-ray unit, a maternity unit, a recovery unit and so on.
These types of organizations are sometimes called intermittent organizations which deal with products of a lesser magnitude than do project organizations; their products are not necessarily unique but possess a significant number of differences.

16. Planning Facility Layout
Product Layout
A layout requiring production be broken down into relatively simple tasks assigned to workers, who are usually positioned along an assembly line
Continuous Manufacturing Organizations
Companies that use continuously running assembly lines, creating products with many similar characteristics
The product layout requires production be broken down into relatively simple tasks assigned to workers, who are usually positioned along an assembly line.
Companies that use assembly lines are usually known as continuous manufacturing organizations, so named because once they are set up, they run continuously, creating products with many similar characteristics. Automobiles are the perfect example.

17. Planning and Designing Operations Systems
Apple stores are designed to make the most efficient use of space
The layout of the stores allows customers to test its products before purchasing
Apple stores are designed to make the most efficient use of space. The layout of the store allows customers to test its products before purchasing.

18. Planning Facility Technology
Computer-Assisted Design (CAD)
The design of components, products and processes on computers instead of on paper
Computer-Assisted Manufacturing (CAM)
Employs specialized computer systems to actually guide and control the transformation process
Each industry has a basic, underlying technology that dictates the nature of its transformation process.
The operations function makes great use of computers in all phases of the transformation process.
Computer-assisted design (CAD) is the design of components, products and processes on computers instead of on paper.
Going a step further, computer-assisted manufacturing (CAM) employs specialized computer systems to actually guide and control the transformation process.
Such systems can monitor the transformation process, gathering information along the way.

19. Planning Facility 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
Flexible manufacturing is the direction of machinery by computers to adapt to different versions of similar operations. For example, with instructions from a computer, one machine can be programmed to carry out its function for several different versions of an engine without shutting down the production line for refitting.
When all of these technologies – CAD/CAM, flexible manufacturing, robotics, computer systems and more – are integrated, the result is:
Computer-integrated manufacturing (CIM) a complete system that designs products, manages machines and materials, and controls the operations function.

20. Sustainability and Manufacturing
Sustainability issues are becoming increasingly important to stakeholders and consumers
“Green” operations and manufacturing can improve a company’s reputation, increase customer and employee loyalty, leading to improved profits
Manufacturing and operations systems are moving quickly to establish environmental sustainability and minimize negative impact on the natural environment.
Issues include:
Pollution of land, air and water
Climate change
Waste management
Deforestation
Urban sprawl
Protection of biodiversity
And genetically modified foods
“green” operations and manufacturing can improve a firm’s reputation along with customer and employee loyalty, leading to improved profits.

21. Planning and Designing Operations Systems
Patagonia is always looking for a greener way to design, produce and recycle its products
Their mission statement: Build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis
The outdoor clothing company Patagonia is always looking for a greener way to design, produce and recycle its products.
The company’s mission statement: build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.
Do you think their sustainable practices attract and / or keep consumers?

22. Managing the Supply Chain
Supply Chain Management
Connecting and integrating all parties or members of the distribution system in order to satisfy customers; also called logistics
Includes
Obtaining and managing raw materials and component parts
Managing finished products
Packaging products
Getting products to customers
Two critical elements of operations management is managing the supply chain and managing quality. We will first look at the supply chain.
Supply chain management is connecting and integrating all parties or members of the distribution system in order to satisfy customers.
Also called logistics, includes all activities involved in obtaining and managing raw materials and component parts, managing finished products, packaging them, and getting them to customers.
In this section we will look at purchasing, managing inventory, outsourcing and scheduling, all vital tasks in the transformation of raw materials into finished goods.

23. Managing the Supply Chain
Purchasing
The buying of all the materials needed by the organization; also called procurement
Aim is to obtain items of the desired quality in the right quantities at the lowest possible cost
Companies may be able to make some component parts more economically and efficiently
Can arrange to lease the item from another company
Purchasing, also known as procurement, is the buying of all the materials needed by the organization.
The purchasing department aims to obtain items of the desired quality in the right quantities at the lowest possible cost.
Not all companies purchase all of the materials needed to create their products. Sometimes, they can make some components more economically and efficiently than an outside supplier.
Or, depending on cost and availability, a company may lease items from another organization.

24. Managing Inventory Finished-goods inventory – products ready for sale
All raw materials, components, completed or partially completed products, and pieces of equipment a firm uses
Finished-goods inventory – products ready for sale
Work-in-process inventory – products partly completed
Raw materials inventory – all materials purchased to be used as inputs for making other products
Once the items needed to create a product have been procured, some provision has to be made for storing them until needed. Every raw material, component, completed or partially completed product, and piece of equipment a firm uses – its inventory – must be accounted for, or controlled.
There are three basic types of inventory:
Finished-goods inventory includes those products that are ready for sale.
Work-in-process inventory consists of those products that are partly completed or are in some stage of the transformation process.
Raw materials inventory includes all the materials that have been purchased to be used as inputs for making other products.

25. Managing Inventory
Inventory Control
The 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
Operations management must be closely coordinated with inventory control
Inventory managers try to determine the proper inventory level for each item
Each item held in any of the three inventories carries with it a cost.
Inventory control is the 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.
Operations management must be closely coordinated with inventory control.
Inventory managers spend a great deal of time trying to determine the proper inventory level for each item.

26. Approaches to Inventory Control
Economic Order Quantity (EOQ) Model
Identifies the optimum number of items to order to minimize the costs of managing (ordering, storing and using) them
Material-Requirements Planning (MRP)
Schedules the precise quantity of materials needed to make the product
Just-In-Time (JIT) Inventory Management
A technique using smaller quantities of materials that arrive “just in time” for use in the transformation process and therefore require less storage space and other inventory management expense
Several approaches may be used to determine how many units of a given item should be procured at one time and when that procurement should take place.
The Economic Order Quantity (EOQ) Model identifies the optimum number of items to order to minimize the costs of managing (ordering, storing and using) them. This is determined by cost alone.
The Material-Requirements Planning (MRP) schedules the precise quantity of materials needed to make the product. The basic components are a master production schedule, a bill of materials and an inventory status file. Can be, and often is, used in conjunction with just-in-time inventory management.
Just-In-Time (JIT) Inventory Management is a technique using smaller quantities of materials that arrive “just in time” for use in the transformation process and therefore require less storage space and other inventory management expense. JIT minimizes inventory by providing an almost continuous flow of items from suppliers to the production facility.

27. Managing the Supply Chain
Globalization requires supply chain managers improve speed and balance resources to compete
Outsourcing, or contracting work to other companies, is linked with competitive advantage through:
Improved product quality
Customers obtain products sooner
Overall supply-chain efficiencies
However, outsourcing may raise negative public opinion
Globalization has put pressure on supply chain managers to improve speed and balance resources against competitive pressures.
Outsourcing, as we mentioned in Chapter 3, refers to the contracting of manufacturing or other tasks to independent companies, often overseas.
Outsourcing, once used primarily as a cost-cutting tactic, has been linked with improved competitive advantage through improved product quality, speeding up the time it takes products to get to the customer, and overall supply-chain efficiencies.
However, outsourcing may create conflict with labor and negative public opinion when it results in U.S. workers being replaced by lower-cost workers in other countries.

28. Managing the Supply Chain
Next, management must consider:
Routing
The sequence of operations through which the product must pass; sequence depends on the product specifications
Once the routing is known, actual work can be scheduled
After all materials have been procured and their use determined, managers must then consider the routing or sequence of operations through which the product must pass.
The sequence depends on the product specifications developed by the engineering department of the company.
Once management knows the routing, the actual work can be scheduled.
Scheduling assigns the tasks to be done to departments or even specific machines, workers or teams.
Scheduling
The assignment of required tasks to departments or even specific machines, workers or teams

29. Managing the Supply Chain
One popular method developed for scheduling is:
Program Evaluation and Review Technique (PERT)
Identifies all the major activities or events required
Arranges them in a sequence or path
Determines the critical path
Estimates the time required for each event
The path requiring the longest time from start to finish is called the critical path as that is the minimum amount of time needed for completion
Many approaches to scheduling have been developed, ranging from simple trial and error to highly sophisticated computer programs.
One popular method is the Program Evaluation and Review Technique (PERT). PERT:
Identifies all the major activities or events required to complete a project
Arranges them in a sequence or path
Determines the critical path
Estimates the time required for each event
The path requiring the longest time from start to finish is called the critical path because it determines the minimum amount of time in which the process can be completed.

30. Managing the Supply Chain
A Hypothetical PERT Diagram for a McDonald’s Big Mac
This figure shows a hypothetical PERT diagram for a McDonald’s Big Mac.
Producing a Big Mac involves
Removing meat, cheese, sauce and vegetables from the refrigerator
Grilling the hamburger patties
Assembling the ingredients
Placing the completed Big Mac in its package
Serving it to the customer
If any of the activities on the critical path for production fall behind schedule, the sandwich will not be completed on time, causing customers to wait longer than they usually would.

31. Taco Bell Drive-Thru
Taco Bell’s efficient drive-thru operations mirror major factory operations such as standardized procedures, elimination bottlenecks, and optimization of staff efficiency
The restaurant averages 164 seconds per customer order from the time the customer arrives to departure
With an assembly line of food items to construct, six different types of wrappers, and detailed procedures for every step of the process, Taco Bell is now among the top for speed, accuracy, and efficiency
Employees at Taco Bell are divided into two categories: Service Champions (drive-thru) and Food Champions (food preparation)
Service Champions are trained to follow a specific script as they greet customers and take orders. They enter orders into the point-of-sale system, make drinks when needed, and handle payments
When processing orders for more complex menu items, Service Champions may assist Food Champions in food preparation Beyond that, it comes down to teamwork, to everyone working together to create a seamless process free from mistakes.
Taco Bell drive-thru
Taco Bell’s efficient drive-thru operations mirror major factory operations such as standardized procedures, elimination bottlenecks, and optimization of staff efficiency. The restaurant averages 164 seconds per customer order from the time the customer arrives to departure. With an assembly line of food items to construct, six different types of wrappers, and detailed procedures for every step of the process, Taco Bell is now among the top for speed, accuracy, and efficiency. Employees at Taco Bell are divided into two categories: Service Champions (drive-thru) and Food Champions (food preparation). Service Champions are trained to follow a specific script as they greet customers and take orders. They enter orders into the point-of-sale system, make drinks when needed, and handle payments. When processing orders for more complex menu items, Service Champions may assist Food Champions in food preparation. The script goes a long way toward eliminating botched orders. Beyond that, it comes down to teamwork, to everyone working together to create a seamless process free from mistakes. In this instance, speed and accuracy of service are as much a part of quality as the finished food.

32. Managing Quality
Quality, like cost and efficiency, is a critical element of operations management, for defective products can quickly ruin a firm
Quality reflects the degree to which a good or service meets the demands and requirements of customers
Determining quality can be difficult because it depends on customers’ perceptions of how well the product meets or exceeds their expectations
Quality is especially difficult to measure for a service
A company must define important quality characteristics into measurable terms
Quality, like cost and efficiency, is a critical element of operations management, for defective products can quickly ruin a firm.
Quality reflects the degree to which a good or service meets the demands and requirements of customers.
Determining quality can be difficult because it depends on customers’ perceptions of how well the product meets or exceeds their expectations.
It is especially difficult to measure quality characteristics when the product is a service. A company has to decide exactly which quality characteristics it considers important and then define those characteristics in terms that can be measured.

33. Statistical Process Control
Managing Quality
Quality is so important, it needs examination in the context of operations management
Quality Control
The processes an organization uses to maintain its established quality standards
Statistical Process Control
A system in which management collects and analyzes information about the production process to pinpoint quality problems in the production system
Quality is so important, it needs examination in the context of operations management.
Quality control is the processes an organization uses to maintain its established quality standards.
Kia vehicles were seen as low quality but they recognized the importance of quality control when it revamped its image. Sales for a one-year period increased by 27%.
Statistical process control is a system in which management collects and analyzes information about the production process to pinpoint quality problems in the production system.

34. Top Quality Management (TQM)
Managing Quality
Top Quality Management (TQM)
A philosophy that uniform commitment to quality in all areas of an organization will promote a culture that meets customers’ perceptions of quality
TQM requires constant improvements in all areas of the company as well as employee empowerment
A primary tool of TQM is benchmarking, the measuring and evaluating of the quality produced by the best-performing companies in the industry
Quality control is viewed as an element of the product itself
Quality has become a major concern in many organizations, particularly in light of intense foreign competition and increasingly demanding customers. To regain a competitive edge, a number of companies have adopted a total quality management approach.
Top quality management (TQM) is a philosophy that uniform commitment to quality in all areas of an organization will promote a culture that meets customers’ perceptions of quality.
TQM requires constant improvements in all areas of the company as well as employee empowerment.
Continuous improvement is built around the notion that quality is free; by contrast, not having high-quality goods and services can be very expensive, especially in terms of dissatisfied customers.
A primary tool of TQM is benchmarking the measuring and evaluating of the quality of the organization’s goods, services or processes as compared with the quality produced by the best-performing companies in the industry.
Companies employing TQM programs know that quality control should be incorporated throughout the transformation process. They view quality control as an element of the product itself, rather than a function of the operations process.

35. Managing Quality
Product specifications and quality standards must be set so the company can create a product that will compete in the marketplace
A company must first determine what standard of quality it desires and then assess whether its products meet that standard
For manufacturing, that could be specifications such as thickness of metal or amount of a certain material
Service industries establish standards such as how long a customer waits, or how many fries are in an order
Once the desired quality characteristics, specifications and standards are stated in measurable terms, inspection follows
Regardless of whether a company has a TQM program for quality control, it must first determine what standard of quality it desires and then assess whether its products meet that standard.
Product specifications and quality standards must be set so the company can create a product that will compete in the marketplace.
Quality standards for manufacturing might be the thickness of metal for amount of a certain material.
Service industry standards could be things such as how long a customer waits or how many fries are in an order.
Once the desire quality characteristics, specifications and standards are stated in measurable terms, the next step is inspection.

36. Managing Quality
ISO 9000
A series of quality assurance standards designed by the International Organization for Standardization (ISO) to ensure consistent product quality under many conditions
Companies must pass a rigorous certification process but for some industries, certification is necessary to compete
ISO 1400
A comprehensive set of environmental standards that encourages companies to conduct business in a cleaner, safer and less wasteful way; providing a uniform set of global standards
The International Organization for Standardization (ISO) has created a series of quality management standards – ISO 9000 – designed to ensure the customer’s quality standards are met.
Companies must pass a rigorous certification process but for some industries, certification is needed to compete effectively.
ISO 9002 certification was established for service providers.
ISO is a comprehensive set of environmental standards that encourages companies to conduct business in a cleaner, safer and less wasteful way; providing a uniform set of global standards.
The goal of the ISO standards is to promote a more uniform approach to environmental management and to help companies attain and measure improvements in their environmental performance.

37. Managing Quality Inspection Sampling
Reveals whether a product meets quality standards
Inspecting finished items determines quality level
Inspecting work-in-process items finds defects before the product is completed so corrections can be made
Sampling
Allows a company to pass an entire batch of products through inspection by testing a sample
There is always the risk of making an incorrect conclusion based on a sample
Sampling is more likely to be used when inspection tests are destructive to the product
Inspection reveals whether a product meets quality standards.
Inspecting purchased items and finished items determines the quality level after the fact.
Inspecting work-in-progress items finds defects before the product is completed so necessary corrections can be made
Some inspection procedures are expensive, elaborate or even destructive and inspecting every item is prohibitive.
Sampling allows a company to pass an entire batch of products through inspection by testing a sample of the batch.
There is always the risk of making an incorrect conclusion based on a sample. And sampling is more likely to be used when inspection tests are destructive to the product.

38. Integrating Operations and Supply Chain Management
Managing operations and supply chains can be complex due to the number of participants in the process
Managing the various partners is important because stakeholders hold the firm responsible
Companies can adopt a Global Supplier Code of Conduct and ensure its communicated
Companies must regularly audit its suppliers against company standards and take action against those found to be in violation
Managing operations and supply chains can be complex and challenging due to the number of independent organizations that must perform their responsibilities in creating product quality.
Managing the various partners is very important because many stakeholders hold the firm responsible for appropriate conduct.
Despite the challenges, there are steps companies can take to manage the risk.
Companies working with global suppliers can adopt a Global Supplier Code of Conduct and ensure its communicated.
Finally, companies must perform regular audits on its suppliers and take action against those found to be in violation of company standards.

39. Discussion
In what industry would the fixed-position layout be most efficient? The process layout? The product layout? Use real examples.
Define supply chain management and summarize the activities it involves.
In what industry would the fixed‑position layout be most efficient? The process layout? The product layout? Use real examples.
A fixed-position layout uses a central location for the basic product, and all resources required to create the product are moved to that location. Students’ examples will vary, but a bridge under construction would be one example of fixed-position layout.
The process or functional layout organizes the transformation process into departments according to the type of work to be done. These organizations are known as intermittent organizations and deal with products of lesser magnitude than product organizations. They are able to create a product to a customer’s specifications and produce relatively few units of each product. Students’ examples will vary, but a factory that engages in printing activities would be one example of fixed-position layout.
A product or line layout requires that the work of creating a product be broken down into activities or tasks requiring relatively short periods of time and be assigned to workers positioned along the line. The product moves from one worker to another and each one in turn performs the required tasks or activities. Organizations using this layout are known as continuous manufacturing organizations because once they are set up they run continuously, creating products with many similar characteristics. Students’ examples will vary, but a company that makes plastic components would be one example of fixed-position layout.
Define supply chain management and summarize the activities it involves.
Supply chain management refers to connecting and integrating all parties or members of the distribution system in order to satisfy customers. It includes all the activities involved in obtaining and managing raw materials and component parts, managing finished products, packaging them, and getting them to customers. Its primary activities include purchasing, managing inventory, and scheduling.