1. Chapter 11 1 Achieving World-Class Operations Management Prepared by Norm Althouse University of Calgary Prepared by Norm Althouse University of Calgary Copyright © 2011 by Nelson Education Ltd.

2. Chapter 11 Learning Outcomes 2 1 Discuss why production and operations management is important in both manufacturing and service firms. 2 List the types of production processes used by manufacturers and service firms. 3 Describe how organizations decide where to put their production facilities and what choices must be made in designing the facility. 4 Explain why resource-planning tasks like inventory management and supplier relations are critical to production. 5 Discuss how operations managers schedule and control production. 6 Evaluate how quality management and lean-manufacturing techniques help firms improve production and operations management. 7 Identify the roles that technology and automation play in manufacturing and service industry operations management. 8 List some of the key trends affecting the way companies manage production and operations. Copyright © 2011 by Nelson Education Ltd.

3. Chapter 11 Operations Management 3 changes in consumer expectations, technology, and competition finding the most efficient and effective methods of producing the goods or services rethinking where, when and how the organization will produce products and services Copyright © 2011 by Nelson Education Ltd.

4. Chapter 11 Production and Operations Management 4 The creation of products and services by turning inputs into outputs, which are products and services Production Management of the production process Operations Management Copyright © 2011 by Nelson Education Ltd.

5. Chapter 11 Production and Operations Management 5 Main Types of Decisions 1. Production Planning 3. Improving production and operations Copyright © 2011 by Nelson Education Ltd. 2. Production Control

6. Chapter 11 Copyright © 2008 by Nelson, a division of Thomson Canada Limited6 The Production Process Raw materials Natural resources Human resources Capital InputsOutputs Conversion process Products Services

7. Chapter 11 Copyright © 2008 by Nelson, a division of Thomson Canada Limited7 Production and Operations Management Main Types of Decisions 1. Production Planning 2. Production Control 3. Improving production and operations

8. Chapter 11 Production Planning 8 Site selection Facility layout Resource planning Type of Production Process Decisions in Production Planning Long-Term Medium-Term Short-Term 1 Year 2 Years 3-5 Years Copyright © 2011 by Nelson Education Ltd.

9. Chapter 11 Classification of Production Types 9 Copyright © 2011 by Nelson Education Ltd.

10. Chapter 11 Converting Inputs to Outputs 10 Assembly Process The basic inputs are combined or transformed into the output. Process Manufacturing The basic input is broken down into one or more outputs. Copyright © 2011 by Nelson Education Ltd. Production involves converting inputs (raw materials, parts, human resources) into outputs (products or services)

11. Chapter 11 Production Timing 11 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. Copyright © 2011 by Nelson Education Ltd.

12. Chapter 11 Copyright © 2008 by Nelson, a division of Thomson Canada Limited12 Manufacturing to order, or for inventory Manufacture to order A product is not made until a customer has placed an order for it. E.g. Dell Computers, Burger King Manufacture for inventory A product is made in advance of a customer ordering it. E.g. Hewlett Packard, McDonalds

13. Chapter 11 Factors in Facility Location Decisions 13 Marketing factors Manufacturing environment Local incentives Availability of production inputs International location considerations Copyright © 2011 by Nelson Education Ltd.

14. Chapter 11 Copyright © 2008 by Nelson, a division of Thomson Canada Limited14 Production location problem Where should the factory be built in Outlandia? …near to the source of supply? … or near to the consumers? Location of main supply inputs Location of main consumption market

15. Chapter 11 Copyright © 2008 by Nelson, a division of Thomson Canada Limited15 Production location problem Physical weight loss SupplySmelters; sawmills Physical weight gain Consumer Soft-drink bottling; manufacture of cement blocks Bulk loss Supply Compressing cotton into high- density bales Bulk gain ConsumerManufacturing containers; sheet- metal work Perishability loss Supply Fish processing Perishability gain Consumer Newspaper (and job) printing; baking bread Fragility loss Supply Packing goods for shipment Fragility gainConsumer Coking of coal Hazard loss Supply Deodorizing captured skunks Hazard gainConsumer Manufacturing explosives; distilling moonshine whiskey Process characteristic …implies locating close toExamples Source: The Dynamics of Industrial Location: The Factory, the Firm and the Production System by Roger Hayter, Department of Geography, Simon Fraser University, Burnaby, 2004 (http://www.sfu.ca/geography/people/faculty/Faculty_sites/RogerHayter/books.htm)

16. Chapter 11 Copyright © 2008 by Nelson, a division of Thomson Canada Limited16 Production location problem Where should the factory be built in Outlandia? A centre of gravity model might be the answer when there are multiple consumption areas. Consumer market B Consumer market A Consumer market C Location of main supply inputs

17. Chapter 11 Designing the Facility 17 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 Copyright © 2011 by Nelson Education Ltd.

18. Chapter 11 Make-or-Buy Decisions 18 Factors Size of components Standard or nonstandard items Quantity of items needed Special design features Quality and reliability of suppliers Copyright © 2011 by Nelson Education Ltd.

19. Chapter 11 Inventory Management 19 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 Copyright © 2011 by Nelson Education Ltd.

20. Chapter 11 Computerized Resource Planning 20 Manufacturing Resource Planning II (MRPll) A complex computerized system that integrates data from many departments to allow managers to forecast and assess the impact of production plans on profitability more accurately Materials Requirement planning (MRP) Computerized system of controlling the flow of resources and inventory Enterprise resource planning (ERP) A computerized resource-planning system that incorporates information about the firm’s suppliers and customer with its internally generated data Copyright © 2011 by Nelson Education Ltd.

21. Chapter 11 Supply Chain Management 21 Supply Chain The entire sequence of securing inputs, producing goods, and delivering goods to customers Goal: Satisfying customers with quality products and services from their suppliers Copyright © 2011 by Nelson Education Ltd. Supply Chain Management The process of smoothing transitions along the supply chain to satisfy customers and develop tighter bonds with suppliers

22. Chapter 11 Production Control 22 Routing Value-stream mapping Scheduling Gantt charts Critical path method PERT Copyright © 2011 by Nelson Education Ltd.

23. Chapter 11 Copyright © 2008 by Nelson, a division of Thomson Canada Limited23 Gantt Chart

24. Chapter 11 Copyright © 2008 by Nelson, a division of Thomson Canada Limited24 Critical Path Method

25. Chapter 11 Copyright © 2008 by Nelson, a division of Thomson Canada Limited25 The Experience Curve 10 1 2 34 56 Cost per Unit made Total Accumulated Production Slope of.2 to.3, meaning a 20% to 30% reduction in unit manufacturing costs for each doubling of production As Boeing originally discovered with the 707, manufacturing cost continues to decline as you accumulate more production experience.

26. Chapter 11 Improving Production and Operations 26 Copyright © 2011 by Nelson Education Ltd. Quality Goods and services that meet customer exceptions by proving reliable performance Quality Control The process of creating standards for quality, producing goods that meet them, and measuring finished products and services against them Total Quality Management Deming’s concept that emphasizes the use of quality principles in all aspects of a company’s production and operations Continuous Improvement A constant commitment to seeking better ways of doing things to achieve greater efficiency and improved quality

27. Chapter 11 Lean Manufacturing 27 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. Copyright © 2011 by Nelson Education Ltd.

28. Chapter 11 Technology and Automation at Your Service 28 Computer-Integrated Manufacturing Flexible Manufacturing Systems Robotics Computer-Aided Design and Manufacturing Systems POS, ATMs, etc. Copyright © 2011 by Nelson Education Ltd.

29. Chapter 11 Trends in Operations Management 29 Modular production Designs for production efficiency Asset management Copyright © 2011 by Nelson Education Ltd.