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Business in aChanging World

McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.

Chapter 9Production and Operations Management

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Goya Foods: Quality Operations and Products

Goya Foods offers a wide range of products. As their product lines have expanded, management of operations has become a major priority.

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Operations Management

The planning and designing of the processes that transform resources into finished products; managing the transformation process; ensuring high quality of finished goods.

Importance of Production & Operations Management

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Development and administration of the activities involved in transforming resources into goods and services.

Operations Management (OM)

Operations Management

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•Historically called production or manufacturing•Change to operations = focus on goods & services•Emphasis on viewing the operations function as a whole

Operations Management (OM)

Operations Management

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Manufacturing – activities and processes used in making tangible products (production)

Production – activities and processes used in making tangible products (manufacturing)

Operations – the activities and processes used in making both tangible and intangible products

Production & Operations Management

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Production & Operations Management

Transformation Process of operations management

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Inputs – •Labor•Money•Materials•Energy

Outputs•Goods•Services•ideas

Transformation Process

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Production & Operations Management

Inputs, outputs, and transformation processes Manufacturing Oak Furniture

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Operations Management

Service Businesses –•Airlines•Colleges•Nonprofit organizations

OM in Service Businesses

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Operations Management

Service Businesses – 70% of all employment in the United States; fastest growth of jobs

OM in Service Businesses

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Operations Management

Service Businesses – actions that are directed toward consumers who use them

OM in Service Businesses

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Operations Management

Ideal Service Business - Customer contact•High-tech•High-touch

OM in Service Businesses

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Operations Management

Service Business Output• Intangible• Perishable• Difficult to gauge demand

OM in Service Businesses

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Operations Management

Differences in Nature & Consumption of Output (Manufacturing vs. Service Providers)

•Nature and consumption of output•Uniformity of inputs•Uniformity of outputs•Labor required•Measurement of productivity

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Planning & Designing Operations Systems

Determine –•What consumers want•Design product to satisfy the want•Marketing research

Planning the Product

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Planning & Designing Operations Systems

Determine –•Types and quantities of raw materials•Skills & quantity of labor•Processes for transformation to outputs

Planning the Product

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Designing the Operations Processes

Standardization – the making of identical interchangeable components or products. Faster, reduces production costs•Televisions•Ballpoint pens•Tortilla chips

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Designing the Operations Processes

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

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Designing the Operations Processes

Customization – making products to meet a particular customer’s needs or wants•Repair services•Photocopy services•Custom artwork•Bridges•Ships•Computer software

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Designing the Operations Processes

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•Fitness program•Travel packages

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Planning Capacity

Capacity – maximum load that an organizational unit can carry or operate •Hershey’s production capacity

•33 million Hershey’s kisses per day•12 billion per year

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Planning Facilities

Facility locationFacility layoutTechnology

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Planning Facilities

Facility layout• Fixed-Position Layout• Project Organization• Process Layout (intermittent

organizations)• Product Layout (continuous

manufacturing organization)

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Planning Facilities

Fixed-Position Layout--Project organizationAll resources needed for a product are brought to a central location.

Process Layout--Intermittent organizationLayout is organized into departments that group related processes.

Product Layout--Continuous manufacturing organization

Production is broken down into relatively simple tasks assigned to workers positioned along a line.

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Planning Facilities -- Technology

Computer-assisted design (CAD) – design of components, products, and processes utilizing computers instead of paper & pencil

Computer-assisted manufacturing (CAM) – manufacturing that employs specialized computer systems to actually guide and control the transformation processes.

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Planning Facilities -- 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.

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Estimate – 160,000 robots at work in U.S. factories – Japan #1 employer of robotics

Robotics Industries Association –

Facilities Planning

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Green Manufacturing

• It pays to go green– The affluent use green products as status symbols

• Smart Car’s US sales are soaring, as it has the highest mgp of any gas-powered car on the market– 95% of Smart Car buyers opt for deluxe versions over

the base model

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Managing the Supply Chain

Connecting and integrating all parties or members of the distribution system in order to satisfy customers.

Supply chain management

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Managing the Supply Chain

Procurement – buying of all materials needed by the organization.•Desired quality•Correct quantities•Lowest cost

Purchasing

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Managing the Supply Chain

Inventory – all raw materials, components, completed or partially completed products, and pieces of equipment that a firm uses

Managing Inventory

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Managing the Supply Chain

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.

Managing Inventory

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Managing the Supply Chain

Economic order quantity model – a model that identifies the optimum number of items to order to minimize the costs for managing them (ordering storing, and using).

EOQ model

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Managing the Supply Chain

Just-in-Time inventory management – eliminates waste by using smaller quantities arriving “just in time” for use in the transformation process.

JIT

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Managing the Supply Chain

Material-requirements planning – planning system that schedules the precise quantity of materials needed to make the product.

MRP

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Managing the Supply Chain

Outsource aspects of operations to companies that provide products more efficiently, at lower cost, greater customer satisfaction.

Outsourcing

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Managing the Supply Chain

Routing – sequence of operations through which the product must pass

Scheduling – the assignment of required tasks to departments or specific machines, workers, or teams.

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Managing Quality

Quality – critical element of operations management. Degree to which a good or service meets the demands and requirements of customers.

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Managing Quality

Hypothetical PERT Diagram for a McDonald’s Big Mac

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Managing Quality

Quality complaints from Air Travelers -- 2007

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Managing Quality

Malcolm Baldrige National Quality Award

Criteria -- • Leadership• Information and analysis• Strategic planning• Human resource development• Process management• Business results• Customer focus & satisfaction

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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.

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Managing Quality

Statistical process control – system to collect and analyze information about production processed to pinpoint quality problems in the system.

ISO 9000 – International Organization for Standardization (ISO) system of quality management standards designed to ensure the customer’s quality standards are met.

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Managing Quality

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.

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Communications in Organizations

Informal Communication – separate from management’s formal, official communication channels.

•Grapevine