Production and Operations Management Management: Empowering People to Achieve Business Objectives Production and Operations Management

Overview Businesses can create or enhance four basic kinds of utility: time, place, ownership, and form Businesses are compensated for creating or enhancing utility “Value added” – important concept Like marketing, accounting, and human resource management, production and operations management is a vital business function. Without a marketable good or service, a company cannot create profits, and it soon fails. The production process is also crucial in a not-for-profit organization, since the good or service it produces justifies the organization’s existence. Production and operations management plays an important strategic role by lowering the costs of production, boosting output quality, and allowing the firm to respond flexibly and dependably to customers’ demands.

The Production Process: Converting Inputs to Outputs

Strategic Importance of the Production Function Mass Production—system for manufacturing products in large amounts through effective combinations of employees with specialized skills, mechanization, and standardization Assembly Line—manufacturing technique that carries the product on a conveyor system past several workstations where workers perform specialized tasks. Henry Ford Can have car in any color as long as it is black. Used seat crates as floor boards Mass Production 1. A system for manufacturing products in large amounts through effective combinations of employees with specialized skills, mechanization, and standardization 2. Makes outputs available in large quantities at lower prices than individually crafted items would cost, and begins with the specialization of labor, dividing work into its simplest components 3. The assembly line is a manufacturing technique that moves the product along a conveyor belt past a number of workstations, where production workers perform specialized tasks such as welding, painting, installing individual parts, and tightening bolts.

Strategic Importance of the Production Function Flexible production—producing small batches of similar items e.g. Print-on-demand Customer-driven production—evaluates customer demands in order to link what a manufacture makes with what the customers want to buy e.g. Dell Flexible Production 1. Can take many forms, but it generally involves: a. using information technology to share the details of customer orders b. programmable equipment to fulfill orders b. skilled people to carry out whatever tasks are needed to fill a particular order. Customer-Driven Production 1. Evaluates customer demands in order to link what a manufacturer makes with what customers want to buy 2. One method is to establish computer links between factories and retailers’ systems, using data about sales as the basis for creating short-term forecasts and designing production schedules to meet those forecasts. Team Concept 1. Combines employees from various departments and functions, such as design, manufacturing, finance, and maintenance to work together in designing and building products 2. Concurrent engineering is a concept in which product development brings together: engineers, designers, production staff, marketing personnel, employees from other functions.

Production Processes Means of operating analytic system e.g. refineries synthetic system e.g. auto manufacturer Time requirements continuous process just keep doing the same thing, all the time e.g. steel industry, refineries, power plants intermittent process most services because each job is unique e.g. tax preparation, plumbers, dentists 1. Analytic production system - reduces a raw material to its component parts in order to extract one or more marketable products 2. Synthetic production system - reverses the method of an analytic system by: combining a number of raw materials or parts, or transforming raw materials to produce finished products. 3. Continuous production process - generates finished products over a period of days, months, or even years in long production runs. 4. Intermittent production process - generates products in short production runs, shutting down machines frequently or changing their configurations to produce different products.

Technology and the Production Process Computer-Aided Design (CAD) Computer-aided manufacturing (CAM) Robots 3D printing Surfboard example

Factors in the Location Decision

The Job of Production Managers Determining the Facility Layout Determining the best layout for the facility requires managers to consider all phases of production and the necessary inputs at each step Process Layout Product Layout Fixed-Position Layout Customer-Oriented Layout process •groups machinery and equipment according to their functions •often facilitates production of a variety of nonstandard items in relatively small batches product •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 products fixed-position •places the product in one spot and workers, materials, and equipment come to it •suits production of a very large, bulky, heavy, or fragile product. customer-oriented Service organizations also must decide on appropriate layouts for their production processes.

Process Layout and Product Layout

Fixed-Position Layout

Customer-Oriented Layout

The Job of Production Managers Inventory Control Requires balancing the need to keep stocks on hand to meet demand against the expenses of carrying the inventory Perpetual inventory: system that continuously monitors the amounts and location of inventory Vendor-managed inventory: system that hands over a firm’s inventory control functions to suppliers

Implementing the Production Plan Just-in-Time System (JIT) —management philosophy aimed at improving profits and return on investment by minimizing costs and eliminating waste through cutting inventory on hand. a. implements a broad management philosophy that reaches beyond the narrow activity of inventory control to influence the entire system of production and operations management b. seeks to eliminate all sources of waste - anything that does not add value - by providing the right part at the right place at the right time c. the inventory control function supplies parts to a production line or an entire company, as they are needed d. production using JIT shifts much of the responsibility for carrying inventory to vendors, which operate on forecasts and keep stocks on hand to respond to manufacturers’ needs e. producers address the risks of JIT by building long-term relationships with suppliers who demonstrate their ability to meet high standards

Controlling the Production Process Scheduling—development of timetables that specify how long each operation in the production process takes and when workers should perform it. Gantt chart—tracks projected and actual work progress over time PERT (Program Evaluation and Review Technique)—chart which seeks to minimize delays by coordinating all aspects of the production process Critical Path—sequence of operations that requires the longest time for completion

Sample Gantt Chart

PERT Diagram for Building a Home

Benchmarking Continually comparing and measuring performance against outstanding performers.