Production and Operations Management 10 Chapter Production and Operations Management

Learning Objectives Identify and describe the four main characteristics of production processes. Identify and describe the three major production methods. Describe the strategic decisions made by production and operations managers. Identify the steps in the production control process. Discuss the importance of quality control. 1 2 3 4 5

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 process by managing people and machinery in converting materials and resources into finished goods and services. Producing and marketing desired goods and services is the key role of businesses. Production converts raw materials and other inputs into finished products (outputs). People often use the terms production and manufacturing interchangeably.

Production Systems Page 274 Every organization has its own inputs, transformation process, and outputs. The raw materials and assembly process differ greatly based on the output that the business produces. Page 274

Three Major Production Methods Mass Production Flexible Production Customer-Driven Production Mass production makes outputs available in large quantities. Much of the foundation of economic growth in the U.S. has been driven from mass production. The assembly line is a key byproduct of mass production. A very good example of flexible production is the auto industry. Changing from mass production to flexible production enabled companies to produce different kinds of cars at the same plant. Customer-driven production is used to drive short-term forecasting and design production schedules. In some cases, products are not produced until orders are received. Retail scanner data and information from sales drive production. Production processes use either an analytic or synthetic system and time requirements of either continuous or intermittent processes. An analytic production system reduces raw materials to its component parts. A synthetic production system is the reverse; it combines a number of raw materials. A continuous production process generates finished products over a lengthy period of time. An intermittent production process generates products in short production runs.

Three Major Production Methods Mass Production– a system for manufacturing products in large quantities through effective combinations of employees, with specialized skills, mechanization, and standardization Assembly line Efficient for large batches Inefficient for smaller batches Boring jobs Mass production makes outputs available in large quantities. Much of the foundation of economic growth in the U.S. has been driven from mass production. The assembly line is a key byproduct of mass production. A very good example of flexible production is the auto industry. Changing from mass production to flexible production enabled companies to produce different kinds of cars at the same plant. Customer-driven production is used to drive short-term forecasting and design production schedules. In some cases, products are not produced until orders are received. Retail scanner data and information from sales drive production. Production processes use either an analytic or synthetic system and time requirements of either continuous or intermittent processes. An analytic production system reduces raw materials to its component parts. A synthetic production system is the reverse; it combines a number of raw materials. A continuous production process generates finished products over a lengthy period of time. An intermittent production process generates products in short production runs.

Three Major Production Methods Flexible Production– more cost-effective for producing smaller batches using information technology, communication, and cooperation Customer-Driven Production– evaluating customer demands in order to make the connection between products manufactured and products bought Mass production makes outputs available in large quantities. Much of the foundation of economic growth in the U.S. has been driven from mass production. The assembly line is a key byproduct of mass production. A very good example of flexible production is the auto industry. Changing from mass production to flexible production enabled companies to produce different kinds of cars at the same plant. Customer-driven production is used to drive short-term forecasting and design production schedules. In some cases, products are not produced until orders are received. Retail scanner data and information from sales drive production. Production processes use either an analytic or synthetic system and time requirements of either continuous or intermittent processes. An analytic production system reduces raw materials to its component parts. A synthetic production system is the reverse; it combines a number of raw materials. A continuous production process generates finished products over a lengthy period of time. An intermittent production process generates products in short production runs.

Which production system? Production Processes Analytic production system - Reduces a raw material to its component parts in order to extract one or more marketable products. Example: crude oil to gasoline, heating oil, & aviation fuel Synthetic production system - The reverse of an analytic system - combines raw materials or parts or transforms raw materials to produce finished products Examples: cameras, canned foods Which production system? Logging – Medical Care – Soybean Farming – Fishing – Microchips - Analytic Synthetic Analytic Analytic Synthetic

Production Processes Continuous production process - Takes a long time and/or is costly to shut down Examples: power plant, petroleum refineries Intermittent production process - Generates products in short production runs, shutting down machines frequently or changing their configurations to produce different products Examples: services – restaurants, mechanics, hair stylists

Technology & the Production Process Green Manufacturing Processes – reducing waste from production processes to packaging to delivery Completely automated – no workers required to build or make the products Robots – reprogrammable machines now do boring, and sometimes dangerous, jobs Computer-Aided Design & Manufacturing (CAD & CAM) Flexible Manufacturing Systems Computer-Integrated Manufacturing – integrates elements from above .

The Location Decision Transportation Physical Factors Human Factors Proximity to markets & materials Modes available for inputs and outputs Physical Factors Weather, energy, waste Human Factors Labor supply Taxes & regulations Environment The decision of where to locate a production facility impacts transportation, human resources, and physical factors. Location is a very important production decision. The ability to hire enough qualified employees and managers in a specific area drives location decisions. Each business has different variables to balance and consider. A firm often must prepare an environmental impact study that analyzes how a proposed plant would affect quality of life in the proposed community. Page 280

The Job of Production Managers Planning the Production Process Selecting the Most Appropriate Layout Implementing the Production Plan Controlling the Production Process The decision of where to locate a production facility impacts transportation, human resources, and physical factors. Location is a very important production decision. The ability to hire enough qualified employees and managers in a specific area drives location decisions. Each business has different variables to balance and consider. A firm often must prepare an environmental impact study that analyzes how a proposed plant would affect quality of life in the proposed community. See Figure 10.4 on page 284 and read page 285

The Strategic Decisions Made by Production and Operations Managers Make, Buy, or Lease Decision Choosing whether to manufacture a needed product or component in-house, purchase it from an outside supplier, or lease it. Factors in the decision include: Cost Availability of reliable outside suppliers Duration of the firm’s supply needs Need for confidentiality When implementing the production plan, managers must think about whether to make, buy, or lease the product or components. Managers must think about cost and availability.

Selection of Suppliers Based on comparison of: Quality Prices Dependability of delivery Services offered by competing companies Once a company must choose the best vendors for its needs. To make this choice, production managers compare the quality, prices, dependability of delivery, and services offered by competing companies. The Internet has given buyers powerful tools for finding and comparing suppliers.

Inventory Control Inventory Control - function requiring production and operations managers to balance the need to keep stock on hand to meet demand against the costs of carrying inventory Just-in-Time Systems The right part at the right place at just the right time – right before it is needed 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 Inventory control is an important part of a production process. There can be 100s or more than 1,000s of parts and supplies required to produce one product. These materials can be costly to order, warehouse, and manage. Inventory must be effectively managed. Just-in-time systems allow managers to reduce the amount of inventory on hand. These systems can save money for an operation but they require effective communication and management to work well. Materials requirement planning aids in managing the purchase and planning of materials required for production. These systems can be key in keeping the cost of inventory down.

Production Control 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 Production planning determines the amount of resources an organization needs to produce a certain output. Routing determines the sequence of work. Managers develop timetables that specify how long each operation in the production process takes for workers. This scheduling includes using PERT and GANT diagrams. Dispatching is the phase of production control process where the manager dictates who will do what and the time allotted.

Quality Control 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 Quality is the goal of a good production process. The lack of quality can cost a company revenue. All companies must measure and control quality.

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 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 is a set of global quality standards. Many organizations have received significant benefits from ISO 9000. Many note that ISO 9000 increases the competitiveness of a firm.

Chapter 10 Questions Open document in Canvas, answer the five questions, and submit.