WHAT IS PRODUCTIVITY? Productivity is the output-input ratio within a time period with due consideration for quality. Speed is of vital importance to Inditex. Industry analysts say no other company reacts to fashion trends as quickly as the Spanish group, and none is faster when it comes to turning sketches into products ready for shipment. “The essence of the Inditex model is to push the moment of production as close as possible to the moment of sale,” says José Luis Nueno, a professor of marketing at Iese business school. Many of the items you see in Zara stores today will have been designed back in Arteixo as little as two weeks before. He insists that Inditex’s success is based not on speed but on accuracy, on understanding exactly what customers want, week by week, and store by store. Even successful designs will never get a second run. “You need to evolve, and you must never repeat,” says the designer.   Every Inditex store receives fresh deliveries twice a week – a feat of logistics that helps encourage customers to return to the store as often as possible. According to Prof Nueno, Zara customers typically visit the shop four or five times more often than clients of a more traditional fashion store. “They sell in small batches and they are producing what they already know will sell,” https://www.youtube.com/watch?v=7UxRAhTJ1CM

Copyright © 2010 , by Weihrich & Cannice Management 13th ed. KEY CONCEPTS Efficiency Efficacy Primary and Secondary Activities Trade-off P&Quality Copyright © 2010 , by Weihrich & Cannice Management 13th ed.

Copyright © 2010 , by Weihrich & Cannice Management 13th ed. Porter’s Value Chain Copyright © 2010 , by Weihrich & Cannice Management 13th ed.

OPERATIONS MANAGEMENT PRODUCTION AND OPERATIONS MANAGEMENT MANUFACTURING AND SERVICE Production management: activities necessary to manufacture products. Operations management: activities necessary to produce and deliver a service as well as a physical product.

SUPPLY & VALUE CHAIN MANAGEMENT Supply chain management focuses on the sequence of getting raw materials and subassemblies through the manufacturing process in an economical manner. Value chain management involves analyzing every step in the process, ranging from the handling of raw materials to servicing end users, providing them with the greatest value at the lowest cost.

QUALITY MEASUREMENT IN THE INFORMATION AGE In the past, the concepts of quality were mostly applied to products. With the increase in service companies, quality concepts must be applied in those firms. This means such things as the measurement of expectations, experiences, and emotions.

TOOLS AND TECHNIQUES FOR IMPROVING PRODUCTIVITY Inventory planning and control Just-in-time inventory system The supplier delivers the components and parts to the production line only when needed and “just in time” to be assembled. Outsourcing Production and operations are contracted to outside vendors that have expertise in specific areas.

Copyright © 2010 , by Weihrich & Cannice Management 13th ed. KEY CONCEPTS Cycle time Utilization Time to Market Layout Copyright © 2010 , by Weihrich & Cannice Management 13th ed.

WHAT IS VALUE ENGINEERING? Value engineering is the process of analyzing the operations of the product or service, estimating the value of each operation, and attempting to improve that operation by trying to keep costs low at each step or part.

WHAT IS A QUALITY CIRCLE? A quality circle is a group of people from the same organizational area who meet regularly to solve problems they experience at work.

TOTAL QUALITY MANAGEMENT Total quality management is the organization's long-term commitment to the continuous improvement of quality, throughout the organization and with the active participation of all members at all levels, to meet and exceed customer expectations.

TOTAL QUALITY MANAGEMENT TQM Focus on clients Continuous Improvement Ivolvement of the workforce Leadership TM But…What effects on costs? Copyright © 2010 , by Weihrich & Cannice Management 13th ed.

SIX SIGMA It is a statistical term that tells us how far a given process deviates from perfection. The idea is that if you can measure defects, then it is possible to eliminate them systematically approaching a process of zero defects (no waste! muda). To achieve a level of six sigma quality there must be no more than 3-4 defects per million. Quality is the most important attribute for customers Defect: it is what the customer wants Eliminate variances DPMO: (n. Defects / (possibility of occurrence of a defect * n. Unit)) * 1000000 Copyright © 2010 , by Weihrich & Cannice Management 13th ed.

Copyright © 2010 , by Weihrich & Cannice Management 13th ed. SIX SIGMA (2) To improve the quality you can make the external benchmarking. 2 phases: identify what to improve; analyze the data and see where the other firm is and where the existing gap lays. Some techniques for analyzing six sigma: Flow chart Pareto's chart Ishikawa’ s diagram Copyright © 2010 , by Weihrich & Cannice Management 13th ed.

Copyright © 2010 , by Weihrich & Cannice Management 13th ed. 7 forms of waste Transportation Each time a product is moved it stands the risk of being damaged, lost, delayed, etc. as well as being a cost for no added value. Transportation does not make any transformation to the product that the consumer is willing to pay for. Inventory Inventory, be it in the form of raw materials, work-in-progress (WIP), or finished goods, represents a capital outlay that has not yet produced an income either by the producer or for the consumer. Any of these three items not being actively processed to add value is waste. Motion In contrast to transportation, which refers to damage to products and transaction costs associated with moving them, motion refers to the damage that the production process inflicts on the entity that creates the product, either over time. Waiting Whenever goods are not in transport or being processed, they are waiting. In traditional processes, a large part of an individual product's life is spent waiting to be worked on. Over-processing Over-processing occurs any time more work is done on a piece other than is required by the customer. This also includes using components that are more precise, complex, higher quality or expensive than absolutely required. Over-production Overproduction occurs when more product is produced than is required at that time by your customers. One common practice that leads to this muda is the production of large batches, as often consumer needs change over the long times large batches require. Overproduction is considered the worst muda. Defects Whenever defects occur, extra costs are incurred reworking the part, rescheduling production, etc. This results in labor costs, more time in the "Work-in-progress". Defects in practice can sometimes double the cost of one single product. This should not be passed on to the consumer and should be taken as a loss. Copyright © 2010 , by Weihrich & Cannice Management 13th ed.

Copyright © 2010 , by Weihrich & Cannice Management 13th ed. LEAN PRODUCTION Integrated activities designed to achieve a defined quantity using minimum stock inventory of raw materials, WIP and finished products. Materials are passed to the work station just in time to be worked (pull process). DO NOT PRODUCE ANYTHING UNTIL YOU NEED! Whatever exceeds the minimum quantity necessary it is a waste. Solutions? e.g. Reduce set-up time LP HQ Suppliers Foreseeable demand Reliability Small batch sizes Stable environment Copyright © 2010 , by Weihrich & Cannice Management 13th ed. https://www.youtube.com/watch?v=U0_ktNqbQyU

MASS PRODUCTION VERSUS LEAN PRODUCTION MANAGERIAL PRACTICES Lean implementation is therefore focused on getting the right things to the right place at the right time in the right quantity to achieve perfect work flow, while minimizing waste and being flexible and able to change.