Chapter14Chapter14 PowerPoint Presentation by Charlie Cook © Copyright The McGraw-Hill Companies, Inc., All rights reserved. Operations Management: Managing Vital Operations and Processes

© Copyright 2004 McGraw-Hill. All rights reserved.14–2 Learning Objectives After studying the chapter, you should be able to:After studying the chapter, you should be able to:  Explain the role of operations management in achieving superior quality, efficiency, and responsiveness to customers.  Describe what customers want, and explain why it is so important for managers to be responsive to their needs.  Explain why achieving superior quality in an organization’s operations and processes is so important.  Explain why achieving superior efficiency is so important.

© Copyright 2004 McGraw-Hill. All rights reserved.14–3 Learning Objectives (cont’d)  Differentiate among facilities layout, flexible manufacturing, just-in-time inventory, and process reengineering.

© Copyright 2004 McGraw-Hill. All rights reserved.14–4 Operations Management Concepts Operations ManagementOperations Management  The management of any aspect of the production system that transforms inputs into finished goods and services.  Production system The system used to acquire inputs, convert the inputs into outputs, and dispose of the outputs.The system used to acquire inputs, convert the inputs into outputs, and dispose of the outputs.  Operations manager Responsible for managing the firm’s production system and for determining where operating improvements are to be made.Responsible for managing the firm’s production system and for determining where operating improvements are to be made.

© Copyright 2004 McGraw-Hill. All rights reserved.14–5 Operations Management and Competitive Advantage

© Copyright 2004 McGraw-Hill. All rights reserved.14–6 The Purpose of Operations Management Figure 14.1

© Copyright 2004 McGraw-Hill. All rights reserved.14–7 Improving Responsiveness to Customers Without customers, organizations would cease to exist.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 needs.

© Copyright 2004 McGraw-Hill. All rights reserved.14–8 Improving Responsiveness to Customers What do customers want?What do customers want?  Usually customers prefer: A lower price to a higher price.A lower price to a higher price. High-quality products to low-quality products.High-quality products to low-quality products. Quick service to slow service (also prefer good after-sale support).Quick service to slow service (also prefer good after-sale support). Many features over few features.Many features over few features. Products that are customized or tailored to their specific needs.Products that are customized or tailored to their specific needs.

© Copyright 2004 McGraw-Hill. All rights reserved.14–9 Improving Quality The concept of quality applies to the products of both manufacturing and service firms.The concept of quality applies to the products of both manufacturing and service firms.  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.

© Copyright 2004 McGraw-Hill. All rights reserved.14–10 Impact of Increased Quality on Organizational Performance Figure 14.2

© Copyright 2004 McGraw-Hill. All rights reserved.14–11 Improving Efficiency The fewer the inputs required to produce a given output, the higher the efficiency of a production system. The fewer the inputs required to produce a given output, the higher the efficiency of a production system.  A measure of the organization’s efficiency in turning all of its inputs into outputs is:  A measure of a single input (such as labor) to total output (i.e., partial productivity):

© Copyright 2004 McGraw-Hill. All rights reserved.14–12 Facilities Layout, Flexible Manufacturing, and Efficiency Facilities LayoutFacilities Layout  The operations management technique whose goal is to design the machine-worker interface to increase production system efficiency. Flexible ManufacturingFlexible Manufacturing  Operations management techniques that attempt to reduce the setup costs associated with a production system.

© Copyright 2004 McGraw-Hill. All rights reserved.14–13 Three Facilities Layouts Figure 14.3

© Copyright 2004 McGraw-Hill. All rights reserved.14–14 Facilities Layout Product layoutProduct 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.Example: mass production systems where workers are stationary and a belt moves work to them. Process LayoutProcess Layout  Self contained work stations not organized in a fixed sequence. Provides flexibility in making a wide variety of products tailored to customers.Provides flexibility in making a wide variety of products tailored to customers.

© Copyright 2004 McGraw-Hill. All rights reserved.14–15 Facilities Layout (cont’d) Fixed-Position LayoutFixed-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.Large jet aircraft assembly uses this type of layout.

© Copyright 2004 McGraw-Hill. All rights reserved.14–16 Changing a Facilities Layout Figure 14.4

© Copyright 2004 McGraw-Hill. All rights reserved.14–17 Flexible Manufacturing Most firms face major expenses when setting up to produce a product.Most firms face major expenses when setting up to produce a product.  These costs must be paid before production begins. The more often products to be built change, the higher setup costs become.The more often products to be built change, the higher setup costs become.  Flexible manufacturing reduces setup costs by reducing the time required to reset the production line for a different product by: Using easily replaced manufacturing equipment.Using easily replaced manufacturing equipment. Redesigning the production system itself to be more productive.Redesigning the production system itself to be more productive.

© Copyright 2004 McGraw-Hill. All rights reserved.14–18 Just-in-Time Inventory and Efficiency Just-in-Time (JIT) InventoryJust-in-Time (JIT) Inventory  Benefit of JIT Reduces inventory holding costs for warehousing, storage, inventory tracking, and the cost of capital tied up in inventory.Reduces inventory holding costs for warehousing, storage, inventory tracking, and the cost of capital tied up in inventory.  Drawback to JIT Firm does not maintain a large buffer stock of parts which makes the firm vulnerable to strikes or supply problems that can quickly deplete on- hand inventories.Firm does not maintain a large buffer stock of parts which makes the firm vulnerable to strikes or supply problems that can quickly deplete on- hand inventories.

© Copyright 2004 McGraw-Hill. All rights reserved.14–19 Efficient Manufacturing Self-managed teams boost efficiency by allowing for a flatter organization structure.Self-managed teams boost efficiency by allowing for a flatter organization structure. The team takes on the role of the supervisor.The team takes on the role of the supervisor. Teams working together often become very skilled at enhancing productivity.Teams working together often become very skilled at enhancing productivity.

© Copyright 2004 McGraw-Hill. All rights reserved.14–20 Process Reengineering and Efficiency Process ReengineeringProcess Reengineering  A fundamental rethinking and radical redesign of the business process to achieve dramatic improvement in critical measures of performance. Boosts efficiency by directing efforts to activities that add value to the good or service produced.Boosts efficiency by directing efforts to activities that add value to the good or service produced. Top managers must support efficiency improvements for them to be accepted by workers.Top managers must support efficiency improvements for them to be accepted by workers.

© Copyright 2004 McGraw-Hill. All rights reserved.14–21 Operations Management: Some Remaining Issues Quality and Efficiency- Is It Worth It?Quality and Efficiency- Is It Worth It?  Achieving superior responsiveness requires profound shift change in management operations and in the culture of an organization.  Without hard work and persistence, change will not succeed.  Managers must consider the ethical implications and human costs of adopting JIT, flexible manufacturing, and reengineering.