Copyright © 2004 South-Western. All rights reserved.9–1 Learning Goals Key resources used for production. Plant site decision. Design and layout decision. Production control. Production efficiency.

Copyright © 2004 South-Western. All rights reserved.9–2 Resources Used for Production Production –A series of tasks in which resources are used to produce a product or service. Production (or operations) management –Focuses on developing efficient and high- quality production process by determining the proper amount and mix of production resources to use:  Human resources, materials and other assets (buildings, machinery, equipment)

Copyright © 2004 South-Western. All rights reserved.9–3 Resources Used in Production Exhibit 9.1

Copyright © 2004 South-Western. All rights reserved.9–4 Selecting a Site Location of a factory or office Site location decision factors –Cost of workplace space –Cost and supply of labor –Tax incentives –Source of demand –Access to transportation

Copyright © 2004 South-Western. All rights reserved.9–5 Design and Layout Design –Dictates the eventual size and structure of the plant or office Layout –The arrangement of machinery and equipment within the plant or office

Copyright © 2004 South-Western. All rights reserved.9–6 Factors Affecting Design and Layout Site characteristics –Cost Production process –Product layout –Fixed-position layout –Flexible manufacturing

Copyright © 2004 South-Western. All rights reserved.9–7 Production Control Purchasing materials Inventory control Routing Scheduling Quality control

Copyright © 2004 South-Western. All rights reserved.9–8 Effects of Disintegration Exhibit 9.3

Copyright © 2004 South-Western. All rights reserved.9–9 Inventory Control Minimizes costs by:  Just-in-Time (JIT) inventory  Materials requirements planning (MRP) –Controlling work-in-process and finished goods inventories.

Copyright © 2004 South-Western. All rights reserved.9–10 Illustration of IBM’s Efforts to Minimize Inventory Exhibit 9.4

Copyright © 2004 South-Western. All rights reserved.9–11 Routing and Scheduling Routing Scheduling Gantt chart. Program evaluation and review technique (PERT)  Critical path

Copyright © 2004 South-Western. All rights reserved.9–12 Example of a Gantt Chart Exhibit 9.5

Copyright © 2004 South-Western. All rights reserved.9–13 Determining the Critical Path Based on a Sequence of of Production Tasks Exhibit 9.6

Copyright © 2004 South-Western. All rights reserved.9–14 Quality Control Quality control –A process of determining whether product quality meets the desired quality level. Total quality management (TQM)

Copyright © 2004 South-Western. All rights reserved.9–15 Total Quality Management 1940’s US War Dept 1950’s Dr. Edward Deming in Japan 1960’s Taguchi publishes “Total Quality Control” 1970’s Japanese successfully compete inside US 1980’s Ford, Baldridge award 1990’s TQM integrated into business (ISO 9000)

Copyright © 2004 South-Western. All rights reserved.9–16 Measuring Production Efficiency Economies of scale Fixed costs. Variable costs. –Break-even point  Reflects the total quantity of units sold at which total revenue equals total costs (fixed and variable) and profitability begins.

Copyright © 2004 South-Western. All rights reserved.9–17 Relationship between Production Volume and Costs Exhibit 9.9b

Copyright © 2004 South-Western. All rights reserved.9–18 Relationship between Volume and Profitability Exhibit 9.10a

Copyright © 2004 South-Western. All rights reserved.9–19 Improving Production Efficiency Bench marking Restructuring Reengineering

Copyright © 2004 South-Western. All rights reserved.9–20 Quiz

Copyright © 2004 South-Western. All rights reserved.9–21 Next Time Read chapter 4 In text study guide Rough Drafts due at BEGINNING of class (10% off if late – even 1 minute…) Evaluations due (include yourself and all group members)