Part 3 Managing for Quality and Competitiveness © 2015 McGraw-Hill Education.

CHAPTER 6 The Nature of Management CHAPTER 7 Organization, Teamwork and Communication CHAPTER 8 Managing Service and Manufacturing Operations 8-2

Learning Objectives LO 8-1Define operations management and differentiate between operations and manufacturing. LO 8-2 Explain how operations management differs in manufacturing and service firms. LO 8-3 Describe the elements involved in planning and designing an operations system. LO 8-4 Specify some techniques managers may use to manage the logistics of transforming inputs into finished products. LO 8-5 Assess the importance of quality in operations management. 8-3

Nature of Operations Management 8-4 Operations Management (OM) The development and administration of the activities involved in transforming resources into goods and services Historically, OM has been called “production” or “manufacturing” limiting it to the manufacture of physical goods The change from “production” to “operations” recognizes services and ideas and views the function as a whole

Nature of Operations Management 8-5 The activities and processes used in making tangible products; also called production Manufacturing The activities and processes used in making tangible products; also called manufacturing Production The activities and processes used in making both tangible and intangible products Operations

Transformation Process 8-6 The resources – such as labor, money, materials and energy – that are converted into outputs Inputs The goods, services and ideas that result from conversion of inputs Outputs Manufacturers and service providers differ in five basic ways 1.Nature and consumption of output – services require more customer contact and happen at the point of consumption 2.Uniformity of inputs – services are more “customized” to each consumer 3.Uniformity of output – each service is performed differently 4.Labor required – services are more labor-intensive 5.Measurement of productivity – intangibility of the service product makes measurement more difficult

8-7 Designing the Operations Process Products are manufactured using one of three processes Standardization The making of identical interchangeable components or products Modular Design The creation of an item in self-contained units, or modules, that can be combined or interchanged to create different products Customization Making products to meet a particular customer’s needs or wants Capacity The maximum load that an organizational unit can carry or operate A complex and costly decision Facility Location

Planning Facility Layout 8-8 Fixed-Position Layout A layout that brings all resources required to create the product to a central location Project Organizations Companies using a fixed- position layout because it is typically involved in large, complex projects such as construction or exploration Process Layout A layout that organizes the transformation process into departments that group related processes Intermittent Organizations Organizations that deal with products of a lesser magnitude than project organizations; their products are not unique but possess a significant number of differences

Planning Facility Layout 8-9 Product Layout A layout requiring production be broken down into relatively simple tasks assigned to workers, who are usually positioned along an assembly line Continuous Manufacturing Organizations Companies that use continuously running assembly lines, creating products with many similar characteristics

Planning Facility Technology 8-10 The design of components, products and processes on computers instead of on paper Computer-Assisted Design (CAD) Employs specialized computer systems to actually guide and control the transformation process Computer-Assisted Manufacturing (CAM) The direction of machinery by computers to adapt to different versions of similar operations Flexible Manufacturing A complete system that designs products, manages machines and materials, and controls the operations function Computer-Integrated Manufacturing (CIM)

Managing the Supply Chain 8-11 Supply Chain Management Connecting and integrating all parties or members of the distribution system in order to satisfy customers; also called logistics Purchasing The buying of all the materials needed by the organization; also called procurement Inventory All raw materials, components, completed or partially completed products, and pieces of equipment a firm uses Inventory Control The process of determining how many supplies and goods are needed and keeping track of quantities on hand, where each item is, and who is responsible for it

Approaches to Inventory Control 8-12 Identifies the optimum number of items to order to minimize the costs of managing (ordering, storing and using) them Economic Order Quantity (EOQ) Model Schedules the precise quantity of materials needed to make the product Material- Requirements Planning (MRP) A technique using smaller quantities of materials that arrive “just in time” for use in the transformation process and therefore require less storage space and other inventory management expense Just-In-Time (JIT) Inventory Management

Managing the Supply Chain 8-13 Routing The sequence of operations through which the product must pass; sequence depends on the product specifications Scheduling The assignment of required tasks to departments or even specific machines, workers or teams Quality Control The processes an organization uses to maintain its established quality standards Statistical Process Control A system in which management collects and analyzes information about the production process to pinpoint quality problems in the production system

Managing Quality 8-14 A series of quality assurance standards designed by the International Organization for Standardization (ISO) to ensure consistent product quality under many conditions ISO 9000 A comprehensive set of environmental standards that encourages companies to conduct business in a cleaner, safer and less wasteful way; providing a uniform set of global standards ISO 1400 Top Quality Management (TQM) A philosophy that uniform commitment to quality in all areas of an organization will promote a culture that meets customers’ perceptions of quality

Managing Quality 8-15 Inspection Reveals whether a product meets quality standards Inspecting finished items determines quality level Inspecting work-in- process items finds defects before the product is completed so corrections can be made Sampling Allows a company to pass an entire batch of products through inspection by testing a sample There is always the risk of making an incorrect conclusion based on a sample Sampling is more likely to be used when inspection tests are destructive to the product