Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8 Producing Quality Goods and Services

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Operations Manager The person who manages systems that convert resources into goods and services 8 2  Marketing research  Planning  Control operations Quality Performance Inventory Cost © NEVENA RADONJA/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Manufacturing: U.S. Competition in the Global Marketplace  1940s -1970s U.S. dominated global manufacturing  By late 1970s, Japan, Germany, Taiwan, Korea, Singapore, Sweden and others were competing 8 3 © MYPIXXX/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Manufacturing: The Bad News  Employment in the manufacturing sector has decreased. Outsourcing to low-wage workers in countries where regulations are lax Costs 20% more to manufacture in U.S. Decreased consumer demand for manufactured goods  9% of current workforce  7 million jobs lost since © JUSTASC/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Manufacturing: Output 8 5

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Manufacturing: The Good News 8 6 © YURI ARCURS/SHUTTERSTOCK  U.S. produces 18% of global manufacturing output  $2 trillion of U.S. economy  60% of U.S. exports  2 million job openings by 2018  3 related jobs for each manufacturing job

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Reshoring (aka onshoring, insourcing): U.S. manufacturers bringing jobs back to U.S. Increasing foreign labor costs High shipping costs Quality and safety issues Speed of product development Federal and state subsidies Manufacturing: The Good News (cont'd) 8 7 © FABIO BERTI/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Careers in Operations Management: Characteristics of Success  Ability to motivate and lead  Understanding of the potential of technology  Appreciation of control processes that lower costs and improve quality  Understanding of the relationship among customer, marketing, and production 8 © BIKERIDERLONDON/SHUTTERSTOCK© LEVENT KONUK/SHUTTERSTOCK© VIOLETKAIPA/SHUTTERSTOCK© WAVEBREADMEDIA/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Conversion Process: Utility The purpose of manufacturing is to provide utility to customers.  Utility: the ability of a good or service to satisfy a human need Form Place Time Possession 8 9 © DONATAS1205/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Conversion Process: Form Utility Created by people converting raw materials, finances, and information into finished products 8 10 © JIM BARBER/SHUTTERSTOCK (cereal bowl) © ORIORI/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Conversion Process 8 11 Production Inputs Conversion 1.Plan 2.Design 3.Execute 4.Evaluate 5.Improve 6.Redesign Conversion 1.Plan 2.Design 3.Execute 4.Evaluate 5.Improve 6.Redesign Outputs The conversion process converts ideas and goods into useful goods and services.

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Conversion Process: Factors  Focus: The resource(s) that make up the major or most important input Financial Material Information People  Magnitude of change: Degree to which the resources are physically changed  Number of production processes 8 12

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Increasing Importance of Services: Service Economy A service economy is one in which more effort is devoted to the production of services than the production of goods. 8 13

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Characteristics of Services The production of services varies from the production of goods. Services are consumed immediately and cannot be stored. Customers are much more involved in obtaining the service they want or need. Services are provided when and where the customer desires. Services are usually labor intensive. Services are intangible, making it difficult to evaluate customer satisfaction. 8 14

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Service Process 8 15 Determine identity and needs of customer Develop a plan to deliver services Evaluate operating systems Measure customer satisfaction Redesign operating systems and services to improve the customer's experience The Service Process

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Service Process: Evaluating Quality Service firms often listen more carefully to customers and respond more quickly to changing needs © PAKHNYUSHCHA/SHUTTERSTOCK What are some other examples of tools service firms can use to evaluate customer satisfaction and anticipate customer needs? Is customer satisfaction more important in some industries than in others?

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. © MICHAELJUNG/SHUTTERSTOCK New Products and Services: Research and Development 8 17 A set of activities intended to identify new ideas that have the potential to result in new goods and services  Basic research Uncovering new knowledge; scientific advancement without regard for its potential use  Applied research Discovering new knowledge with some potential use  Development and implementation Activities undertaken to put new or existing knowledge to use in producing goods and services

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. New Products and Services: Product Life Cycle 8 18 What would happen to a firm that sells only one product? © S.JOHN/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. New Products and Services: Product Refinement and Extension  Product refinement Improving a product’s performance characteristics to increase its utility to consumers  Product extension Improving and adding additional performance features that extend the want-satisfying capability of the product and its life cycle in the market 8 19 © COBALT88/SHUTTERSTOCK © DJA65/SHUTTERSTOCK © SHI YALI/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Planning for Production Once research and development identifies an idea that meets customer needs, three additional steps are used to convert the idea to an actual good or service. 8 20

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Planning for Production: Design Planning 8 21 © KROMKRATHOG/SHUTTERSTOCK Development of a plan for converting an idea into an actual product or service  What will it look like?  Where and how will it be produced?  What options will be included?

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Design Planning 8 22 Product DesignProduct LineCapacity © YAKOBCHUK VASYL/SHUTTERSTOCK © FANFO/SHUTTERSTOCK © BRANISLAVPUDAR/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Design Planning: Product Line  Group of similar products that differ only in relatively minor characteristics  Balance customer preferences and production requirements 8 23 What are the benefits and drawbacks of “long” and “short” product lines? © FANFO/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Design Planning: Product Design  Process of creating a set of specifications from which a product can be produced.  The product design must be complete and detailed 8 24 What is involved in the product design of services? © YAKOBCHUK VASYL/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Design Planning: Capacity  Amount of products or services that an organization can produce in a given period of time  Operations managers determine capacity 8 25 What happens if a firm overestimates capacity? Underestimates? What can happen if a firm tries to increase capacity without rethinking their line and design? © BRANISLAVPUDAR/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Design Planning: Automation and Technology Labor-intensive Technology  People do most of the work  Low initial cost  High operating cost Capital-intensive Technology  Machines do most of the work  High initial cost  Low operating cost 8 26 © BARTLOMIEJMAGIEROWSKI/SHUTTERSTOCK © SFC/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Site Selection and Facilities Planning: Existing Factory 8 27 © JELLE VD WOLF/SHUTTERSTOCK To build or not to build…  Does the existing facility have the capacity to handle the increased demand for production?  Is the cost of refurbishing or expanding the existing facility less than constructing a new facility?

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Site Selection and Facilities Planning: Build a New Facility Considerations in choosing a location:  Location of customers and suppliers  Availability and cost of labor  Quality of life in the proposed location  Cost of land and construction  Taxes, regulations, and laws  Financial support and subsidies  Special resource requirements 8 28 © KEKYALYAYNEN/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Build a New Facility: Human Resources  Human resources manager and operations manager must work together The appropriate skills must be identified Employees with the right skills must be recruited Training programs must be developed Compliance with human rights policies and wage laws must be ensured 8 29 © OZZON/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Process Layout Process layout is used when small batches of different products are created or worked on in a different operating sequence. 8 30

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Product Layout Product layout (assembly line) is used when all products undergo the same operations in the same sequence. 8 31

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Fixed-Position Layout Fixed-position layout is used in producing a product that is too large to move. 8 32

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Operational Planning FOUR STEPS IN OPERATIONAL PLANNING Step 1: Select a planning horizon -The period during which a plan will be in effect; commonly one year Step 2: Estimate market demand -The quantity that customers will purchase at the going price -Demand is estimated for the planning horizon Step 3: Compare market demand with capacity -If market demand and the facility’s capacity are not equal, adjustments may be necessary Step 4: Adjust products or services to meet demand -Increase capacity to meet demand -Ignore excess demand -Eliminate excess capacity 8 33

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Operations Control 8 34

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Operations Control: Purchasing 8 35  Ensure that required materials are available when they are needed, in the proper amounts, at a minimum cost  Choose suppliers based on: Price Quality Reliability Credit terms Shipping costs

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Operations Control: Inventory Control 8 36  Process of managing inventories in such a way as to minimize inventory costs Holding cost: storage cost Stock-out cost: cost of running out of inventory  Raw-materials inventory  Work-in-progress inventory  Finished-goods inventory

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. © HELDER ALMEIDA/SHUTTERSTOCK Inventory Control: Materials Requirement Planning (MRP) 8 37  MRP is a computerized system that integrates production planning and inventory control  ERP is an extension of MRP

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Inventory Control: Just-in-Time Inventory System Ensure materials and supplies arrive at a facility just when they are needed so that storage and holding costs are minimized 8 38 © BILAN 3D/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Operations Control: Scheduling 8 39  Process of ensuring that materials and other resources are at the right place at the right time  Routing: sequence of workstations  Timing: specifies when materials arrive at each station and how long they stay there  Follow-up: monitoring schedules to ensure that the work flows according to a timetable

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Operations Control: Quality Control 8 40  Process of ensuring that goods and services are produced in accordance with design specifics  Quality is an essential ingredient of goods and services  Defects decrease and profits increase  Reduces rework

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quality Control: Malcolm Baldrige National Quality Award  Given by the President of the United States to organizations judged to be outstanding in specific managerial tasks that lead to improved quality for products and services  Using the Baldrige criteria results in: Better employee relations Higher productivity Greater customer satisfaction Increased market share Improved profitability 8 41

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Three Types of Control 8 42 Source: Robert Kreitner, Management, 10th ed. (Boston: Houghton Mifflin, 2007), p. 503

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quality Improvement Techniques Benchmarking Identifying industry best practices Benchmarking Identifying industry best practices 8 43 Continuous Improvement Ongoing effort to eliminate problems and improve quality Continuous Improvement Ongoing effort to eliminate problems and improve quality Statistical Process Control (SPC) Sampling to obtain data that are plotted on charts and graphs to pinpoint problem areas in process Statistical Process Control (SPC) Sampling to obtain data that are plotted on charts and graphs to pinpoint problem areas in process Statistical Quality Control (SQC) Detailed set of specific statistical techniques used to monitor all aspects of production process Statistical Quality Control (SQC) Detailed set of specific statistical techniques used to monitor all aspects of production process © DUCU59US/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quality Control: Employee Participation Quality Circle  Team of employees who meet on company time to solve quality problems Inspection  Examination of the quality of a work-in-progress 8 44 © YURI ARCURS/SHUTTERSTOCK © MICHAELJUNG/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quality Control: Total Quality Management 8 45 TQM Customer Satisfaction Employee Participation Supplier Relationships Atmosphere of Continuous Quality

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quality Control: Six Sigma 8 46 © JOAN KERRIGAN/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Quality Control: World Quality Standards International Organization for Standardization (ISO)  Network of national standards institutes and similar organizations from over 160 countries charged with developing standards for quality products  Standardization achieved through consensus agreements  American National Standards Institute (Washington, D.C.) 8 47

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ISO 9000 Certification for manufacturers and service providers based on quality management  Design  Production Process  Product Testing ISO International standards for incorporating environmental concerns into operations and product standards World Quality Standards: ISO 8 48 © DIETMAR HOEPFL/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Productivity with Technology Productivity – Average level of output per worker per hour 8 49

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Productivity Growth: Lean Manufacturing Lean manufacturing – Eliminating waste from activities required to produce a product or service  Reduction in resources required  More efficient use of employee time  Improved quality  Increased profits 8 50 © DUSIT/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Productivity Growth Rates Nations with the largest increase in output per hour

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Productivity with Technology: U.S. Productivity 8 52 Real Value-Added Output divided by combined inputs

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Improving Productivity with Technology: U.S. Productivity (cont’d) How can the U.S. improve productivity and compete globally?  Stabilize economy  Increase employee motivation  Eliminate unreasonable government regulations  Use manufacturing techniques to increase productivity in service industry  Increase use of automation, robotics, and computer manufacturing systems  Emphasize customer satisfaction  Increase innovation and research and development efforts 8 53

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Impact of Automation, Robotics, and Computers  Automation The total or near total use of machines to do work  Robotics The use of programmable machines to perform a variety of tasks by manipulating materials and tools Work quickly, accurately, and steadily Effective in tedious, repetitious, and hazardous tasks 8 54 © RAINER PLENDL/SHUTTERSTOCK © MAKSIM DUBINSKY/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Computer Manufacturing Systems: CAD Computer-aided design (CAD) – the use of computers to aid in the development of products 8 55 © RAGMA IMAGES/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Computer Manufacturing Systems: CAM Computer-aided manufacturing (CAM) – The use of computers to plan and control manufacturing processes 8 56 © JANEZ HABJANIC/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Computer Manufacturing Systems: CIM CAD + CAM = CIM (Computer-integrated manufacturing) 8 57  Improved flexibility  More efficient scheduling  Higher product quality © MAKSIM DUBINSKY/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Flexible Manufacturing Systems  Traditional assembly lines require expensive retooling of equipment when a new product is introduced (continuous process)  Flexible manufacturing system (FMS) combines electronic machines and computer-integrated manufacturing in a single production system (intermittent process) 8 58 © DMITRY KALINOVSKY/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Flexible Manufacturing Systems: Customer-Driven Production  Customer-driven production – A manufacturing system driven by customer needs and what customers want to buy  Can customize manufacturing for each customer 8 59 © 300DPI/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Sustainability  Meeting the needs of the present without compromising the ability of future generations to meet their own needs  Resources are limited  Efforts to reduce waste and sustain the planet can improve profitability 8 60 © ALEXMILLOS/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Technological Displacement  Automation cuts manufacturing time, reduces error, and simplifies retooling procedures  Many robots work with humans to make jobs safer and easier  Automation will bring change to many jobs; many workers will have to retrain or seek jobs in other sectors of the economy 8 61 © DVPODT/SHUTTERSTOCK