Production and Operations International Business Production and Operations Presented By Mrs. Bowden

Today we will: Identify the relationship of international business and the operations function Discuss the various activities included in the operations function including quality control

Recap: FOUR MAIN FUNCTIONS OF BUSINESS Production: Planning and Operations Management: Strategy and human resources Finance Marketing

Operations Permit businesses to deliver on their promises A set of actions that produce goods & services Operating efficiency is critical to business success. - Discuss how efficiency generates profit…

Operations Manufacturing/Production Suppliers and Supply Chain Inventory Monitor Quality – Quality assurance/TQM Technology Organizational Chart – who reports to who (HR and management)

Operations Manual operations manual employee handbook contains all the rules, policies, and procedures that a business should follow to function effectively employee handbook details the rules, policies, and procedures that apply to employees

Customer Service Policies Operating policies set daily operating hours that are convenient for customers Customer Service Policies Customer satisfaction is the goal. returns follow-up service

Safety Policies Delivery Policies Employees should be trained in emergency procedures. Delivery Policies often offered for customer convenience The policy should cover: delivery radius delivery fee delivery timeframe

Production Decisions Quality vs. value Standardization vs. adaptation Make vs. Buy Export/Import vs. direct investment

Production Factors Culture Technology Trading barriers Labels and Packaging Exchange rates Location Political/Legal National Resources

The Location Decision

Production & Operations Management Production: Use of resources, such as workers and machinery, to convert materials into finished goods and services. Production and Operations Management: Oversee the production Three methods of production – manual, automated, computerized Production includes inputs, a transformation process, and outputs

Production Systems

Strategic Importance of the Production Function Efficiency Utilizing all resources with no wastes and generating profit Effective production and operations management can: boost the quality of its goods and services. allow it to respond dependably to customer demands.

The Job of Production Managers Oversee the work of people and machinery to convert inputs (materials and resources) into finished goods and services.

Production Layouts Production layouts create efficiency by grouping, people, processes, machinery, equipment, and products according to their functions.

Process Layout Process Layout allows companies to layout efficient steps to produce a specific product. Facilitates production of a variety of nonstandard items in relatively small batches

Product Layout Product layout sets up production equipment along a product-flow line, and the work in process moves along this line past workstations. Efficiently produces large numbers of similar items.

Fixed-Position Layout A fixed-position layout places the product in one spot, and workers, materials, and equipment come to it.

Customer-Oriented Layout Customer-oriented layout arranges facilities to enhance the interactions between customers and a service.

Controlling the Production Process Production control creates a well-defined set of procedures for coordinating people, materials, and machinery to provide maximum production efficiency. 1. Planning 2. Routing 3. Scheduling 4. Dispatching 5. Follow-up

Elements of Project Management Project Scheduling Project schedule evolves from planning documents, with focus on timely completion. Critical element in project management – source of most conflicts and problems. Schedule development steps: 1. Define activities, 2. Sequence activities, 3. Estimate activity times, 4. Develop schedule. Gantt chart and CPM/PERT techniques can be useful. Computer software packages available, e.g. QM for Windows, Microsoft Project.

Pert Charts Program Evaluation and Review Technique Items are listed in blocks What it is Duration Who is responsible Used to determine what tasks can be done in parallel and what have to be done in series Pert charts are a good collaborative tool for the team leader and the advisor for planning. Tasks are listed in blocks along with duration and who is responsible for getting it completed. The strength of this strategy is that it helps visualize multitasking. Students can easily see what needs to be done sequentially and what can be done in parallel.

PERT Diagram

Critical path Longest string of dependent task in the project. Tasks on the critical path will hold up the completion of the overall project if they are delayed. Example: mathematics sequence in an engineering or science curriculum. Delaying a semester of calculus class typically delays graduation for one semester. Critical path is a string of dependent tasks in the project

Popular, traditional technique, also known as a bar chart -developed by Henry Gantt (1914). Direct precursor of CPM/PERT for monitoring work progress. A visual display of project schedule showing activity start and finish times and where extra time is available. Suitable for projects with few activities and precedence relationships. Drawback: precedence relationships are not always discernible which limits chart’s use for smaller projects Gantt Chart

Gantt Charts Visual scheduling tool Graphical representation of information Show dependencies between tasks, personnel, and other resources allocations Track progress towards completion

Gantt Charts Establish a time-phased network Can be used as a tracking tool Benefits of Gantt charts Easy to create and comprehend Identify the schedule baseline network Allow for updating and control Identify resource needs

Gantt Chart

Sequence of Activities of The Project - House Building Number Activity Predecessor Duration 1 Design house and obtain financing -- 3 months 2 Lay foundation 2 months 3 Order and receive materials 1 month 4 Build house 2,3 5 Select paint 2, 3 6 Select carper 7 Finish work 4, 6

Supply Chain Management Management of sourcing, procurement, production, & logistics to go from raw materials to end consumers across multiple intermediate steps Addresses models & relations Partners work together to use tools & techniques for increased efficiency

Sources of Suppliers Trade shows or conferences Trade catalogs or journals The Yellow Pages Internet search engines Wholesale supply houses & brokers Newspapers & magazines Competitors Firms like yours that are outside of your trading area Sales representatives Customers

Supplier Considerations Conformance of products to your quality standards Certification—either from an official organization or via a process that you employ Timely delivery Lead times Minimum-order quantities Extension of trade credit The value added to your business (i.e., training, promotion, customer leads) Flexibility & responsiveness

Safety stock & reorder points (ROP) Inventory Management Visual control Safety stock & reorder points (ROP) ROP = (Average demand per unit of lead time x lead time) + safety stock Economic order quantity (EOQ) EOQ = the square root of ((2 x the annual demand in units x the ordering cost per order)/carrying cost per unit)

Inventory Control Inventory Control Just-in-Time Systems function requiring production and operations managers to balance the need to keep stock on hand to meet demand against the costs of carrying inventory Perpetual inventory Vendor-managed inventory Just-in-Time Systems broad management philosophy that reaches beyond the narrow activity of inventory control to influence the entire system of production and operations management. Materials Requirement Planning computer-based production planning system that lets a firm ensure that it has all the parts and materials it needs to produce its output at the right time and place and in the right amounts.

JIT “Just in Time” manufacturing Developed in Japanese factories Focuses on making smallest amount of product needed, quickly & efficiently Good method for small business Principles Run smallest batches necessary Reduce setup time/cost to minimum Schedule production so products are finished “just in time” to ship Stay flexible

Importance of Quality A good or service free of deficiencies. Poor quality can account for 20% loss in revenue. Benchmarking is the process of analyzing other firms’ best practices. Quality control is measuring goods and services against established quality standards. Many companies evaluate quality using the Six Sigma concept. A company tries to make error-free products 99.9997% of the time, a tiny 3.4 errors per million opportunities.

Quality Assurance The concept of quality is used broadly & has multiple definitions, including to determine degrees of excellence, & conformance to specifications or standards. Quality products or services will be largely defined by your market positioning strategy. Profits follow quality according to W. Edwards Deming.

Organization-Wide Quality Initiatives Benchmarking ISO9000 Six Sigma Total Quality Management (TQM) Malcolm Baldrige National Quality Award

ISO Standards International Organization for Standardization (ISO)- mission is to promote the development of standardized products to facilitate trade and cooperation across national borders. Representatives from more than 146 nations. ISO 9000 series of standards sets requirements for quality processes. Nearly half a million ISO 9000 certificates have been awarded to companies around the world. ISO 14000 series also sets standards for operations that minimize harm to the environment.

ISO 9000 The family of standards for quality management systems established by the International Organization for Standardization (ISO) Certified by independent companies to document that consistent business procedures are being used & that the organization has been independently audited for compliance. Organizations sometimes market their ISO certification, although it is not guarantee of excellence by itself.

ISO9000 Quality Management Principles for Organizational Improvement Customer focus Leadership Involvement of people Process approach System approach to management Continual improvement Factual approach to decision making Mutually beneficial supplier relationships

Six Sigma Originated in the 1980s by Motorola engineers The use of statistical methods to eliminate defects to a failure rate of 3.4 defects per one million opportunities, or a 99.9997% success rate A rigorous process-improvement program that aims to achieve near perfection May be overwhelming for a new enterprise

Total Quality Management Strategic advantage through quality Developed in the 1950s, but many of the principles are valid & valued Continuous improvement = always identifying & implementing changes to focus on the requirements of internal & external customers Constant monitoring & improvement of processes with measures of quality, such as compliance with product specifications & operating standards, volume of production, on-time delivery, & return rates. Success depends upon the commitment of all employees toward treating one another as customers & working together