operations and value chain management

Operations and Value Chain Management

Operations and Value Chain Management

CHAPTER 16CHAPTER 16

2 Copyright © 2008 by South-Western, a division of Thomson Learning. All rights reserved.

Learning ObjectivesLearning Objectives

Define operations management and describe its applications within manufacturing and service organizations.

Discuss the role of operations management strategy in the company’s overall competitive strategy.

Explain the role of e-business in today’s partnership approach to supply chain management.

Summarize considerations in designing an operations system, including product and service design, facilities layout, and capacity planning.


Learning Objectives (contd.)Learning Objectives (contd.)

Explain why small inventories are preferred by most organizations.

Discuss major techniques for the management of materials and inventory.

Describe what is meant by lean manufacturing. Define productivity and explain why and how

managers seek to improve it.


Operations and Value Chain ManagementOperations and Value Chain 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


Operations ManagementOperations 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


The Organization as a Value Chain SystemThe Organization as a Value Chain System

Products & FacilitiesProduct designFacilities layoutCapacity planningFacilities location

StructureReporting relationships

Teams

Control ProcessesInventory managementProductivityQuality

Operations ManagementInputsRaw materialsHuman resourcesLand, buildingsInformationTechnology

InputsRaw materialsHuman resourcesLand, buildingsInformationTechnology

OutputsProductsServices

OutputsProductsServices

Competitive Strategy

The Technical Core

Feedback

Exhibit 16.1


Manufacturing and Service OrganizationsManufacturing 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.

Exhibit 16.2


Operations StrategyOperations Strategy

The recognition of the importance of operations to the firm’s success and the involvement of operations managers in the organization’s strategic planning.


Supply Chain ManagementSupply Chain Management

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


The Integrated Enterprise The Integrated Enterprise

daft ch21 insert1.CLP

16.3


Design for Manufacturabilityand Assembly - DFMA

Design for Manufacturabilityand Assembly - DFMA

Often requires– Restructuring operations– Creating teams of designers,

manufacturers, and assemblers to meet objectives of design


Product Design ObjectivesProduct Design Objectives

1 Producibility

Cost

Quality

Reliability

2

3

4


Service Design ObjectivesService Design Objectives

1 Producibility

Cost

Quality

Reliability

2

3

4

Timing5


ProcurementProcurement

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


Facilities LayoutFacilities Layout

Process Layout Product Layout Cellular Layout Fixed-position Layout


Technology AutomationTechnology 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)


Technology AutomationTechnology 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


Facility LocationFacility 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


Capacity PlanningCapacity Planning

Determination and adjustment of

the organization’s ability to produce

products and services to match

customer demand


Inventory ManagementInventory Management

Finished goods inventory

Work-in-process inventory

Raw materials inventory


Techniques for Inventory ManagementTechniques for Inventory Management

Economic order quantity

Material requirements planning

Just-in-Time inventory systems

Logistics & Distribution management


Material Requirements Planning - MRPMaterial 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


Logistics and Distribution ManagementLogistics 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)


Lean Manufacturing and ProductivityLean 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


Measuring ProductivityMeasuring Productivity

Productivity = organization’s output of products and services divided by its inputs

Total factorProductivity

LaborProductivity

Output

Labor + Capital + Materials + Energy=

= Output Labor dollars


Improving ProductivityImproving Productivity

1. Employee productivity

2. Managerial productivity