Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Operations Management: Managing Vital Operations and Processes Chapter Fourteen

14-2 Learning Objectives LO14-1 Explain the role of operations management in achieving superior quality, efficiency, and responsiveness to customers. LO14-2 Describe what customers want, and explain why it is so important for managers to be responsive to their needs.

14-3 Learning Objectives (cont.) LO14-3 Explain why achieving superior quality in an organization’s operations and processes is so important. LO14-4 Explain why achieving superior efficiency is so important.

14-4 Operations Management  Operations Management  The management of any aspect of the production system that transforms inputs into finished goods and services

14-5 Operations Management  Production System  The system that an organization uses to acquire inputs, convert inputs into outputs, and dispose of the outputs

14-6 Operations Management  Operations Manager  Manager who is responsible for managing an organization’s production system and for determining where operating improvements might be made

14-7 Question? What is action taken to meet the demands and needs of customers? A. Quality B. Efficiency C. Responsiveness to customers D. Effectiveness

14-8 Operations Management  Quality  goods and services that are reliable, dependable, or psychologically satisfying  Efficiency  amount of inputs required to produce a given output  Responsiveness to customers  action taken to meet the demands and needs of customers

14-9 The Purpose of Operations Management Figure 14.1

14-10 Improving Responsiveness to Customers  Without customers, organizations would cease to exist.  Non-profit and for-profit firms all have customers.  Managers need to identify who the customer is and their wants or needs.

14-11 What do customers want?  Most customers prefer:  A lower price to a higher price  High-quality products to low-quality products  Quick service to slow service  Many features over few features.  Products that are customized or tailored to their specific needs

14-12 Designing Production Systems to Be Responsive to Customers  The attributes of an organization’s outputs—their quality, cost, and features—are determined by the organization’s production system  Since the ability of an organization to satisfy the demands of its customers derives from its production system, managers need to devote considerable attention to constantly improving production systems

14-13 Customer Relationship Management  Customer relationship management (CRM)  technique that uses IT to develop an ongoing relationship with customers to maximize the value an organization can deliver to them over time

14-14 Improving Quality  A firm that provides higher quality than others at the same price is more responsive to customers.  Higher quality can also lead to better efficiency through lower waste levels and operating costs.

14-15 Impact of Increased Quality on Organizational Performance Figure 14.2

14-16 Improving Efficiency  The fewer the inputs required to produce a given output, the higher the efficiency of a production system

14-17 Improving Efficiency  Total factor productivity  looks at how well an organization utilizes all of its resources—such as labor, capital, materials, or energy—to produce its outputs

14-18 Improving Efficiency  Partial productivity  specific measure of productivity that measures the efficiency of an individual unit.

14-19 Facilities Layout, Flexible Manufacturing, and Efficiency  Facilities Layout  The operations management technique whose goal is to design the machine-worker interface to increase production system efficiency.

14-20 Facilities Layout, Flexible Manufacturing, and Efficiency  Flexible Manufacturing  Operations management techniques that attempt to reduce the setup costs associated with a production system.

14-21 Figure 14.3 Three Facilities Layouts

14-22 Discussion Question Which facilities layout is best? A. Product layout B. Process Layout C. Fixed-Position Layout

14-23 Facilities Layout  Product layout  Machines are organized so that each operation is performed at work stations arranged in a fixed sequence.  Example: mass production systems where workers are stationary and a belt moves work to them.

14-24 Facilities Layout  Process Layout  Self contained work stations not organized in a fixed sequence.  Provides flexibility in making a wide variety of products tailored to customers.

14-25 Facilities Layout  Fixed-Position Layout  The product stays in a fixed spot and components produced at remote stations are brought the product for to final assembly.  Large jet aircraft assembly uses this type of layout.

14-26 Changing a Facilities Layout Figure 14.4

14-27 Flexible Manufacturing  Flexible manufacturing aims to reduce the time required to set up production equipment.  Redesigning the manufacturing process so that production equipment geared for manufacturing one product can be quickly replaced with equipment geared to make another product can dramatically reduce setup times and costs.

14-28 Flexible Manufacturing  Flexible manufacturing increases a company’s ability to be responsive to its customers.  Increasingly, organizations are experimenting with new designs for production systems that not only allow workers to be more productive but also make the work process more flexible, thus reducing setup costs

14-29 Just-in-Time Inventory and Efficiency  Inventory  the stock of raw materials, inputs, and component parts that an organization has on hand at a particular time

14-30 Just-in-Time Inventory and Efficiency  Just-in-Time (JIT) Inventory  A system in which parts or supplies arrive at an organization when they are needed, not before

14-31 Just-in-Time Inventory and Efficiency  One drawback of JIT systems is that they leave an organization without a buffer stock of inventory.  Although buffer stocks of inventory can be expensive to store, they can help an organization when it is affected by shortages of inputs brought about by a disruption among suppliers

14-32 Self-Managed Work Teams  The use of empowered self-managed teams can increase productivity and efficiency.  Cost savings arise from eliminating supervisors and creating a flatter organizational hierarchy, which further increases efficiency.

14-33 Question What is the rethinking and redesign of the business process to achieve dramatic improvement in critical measures of performance? A. Corporate efficiency B. Process redesign C. Process re-qualification D. Process reengineering

14-34 Process Reengineering and Efficiency  Process Reengineering  The fundamental rethinking and radical redesign of the business process to achieve dramatic improvement in critical measures of performance such as cost, quality, service, and speed

14-35 Process Reengineering and Efficiency  Process reengineering can boost efficiency because it eliminates the time devoted to activities that do not add value.  Top management’s role is to encourage efficiency improvements by emphasizing the need for continuous improvement or reengineering.

14-36 Video: Zappos Delivers Happiness  Which parts of Zappos corporate culture make customers and employees happy?  How do customer service policies differ from those of a typical call center?