Management: Arab World Edition Robbins, Coulter, Sidani, Jamali Chapter 18: Managing Operations Lecturer: : Amani.B.AL-Kahtani

18.1 The Role of Operations Management Define operations management. Contrast manufacturing and services organizations. Describe the managers’ role in improving productivity. Discuss the strategic role of operations management What Is Value Chain Management and Why Is It Important? Define value chain and value chain management. Describe the goal of value chain management. Describe the benefits of successful value chain management. Learning Outcomes Follow this Learning Outline as you read and study this chapter Copyright © 2011 Pearson Education

18.3 Managing Operations by Using Value Chain Management Discuss the requirements for successful value chain management. Explain the obstacles to value chain management Current Issues in Operations Management Discuss technology’s role in manufacturing. Explain ISO 9000 and Six Sigma. Describe mass customization and how operations management contributes to it. Learning Outcomes 18-4 Copyright © 2011 Pearson Education

The Role of Operations Management 1. Define operations management. 2. Contrast manufacturing and services organizations. 3. Describe the managers’ role in improving productivity. 4. Discuss the strategic role of operations management Copyright © 2011 Pearson Education

What Is Operations Management? – Operations Management refers to the design, operation, and control of the transformation process that converts such resources as labor and raw materials into goods and services that are sold to customers Copyright © 2011 Pearson Education

The Importance of Operations Management – It encompasses both services and manufacturing. – It is important in effectively and efficiently managing productivity. – It plays a strategic role in an organization’s competitive success Copyright © 2011 Pearson Education

Exhibit 18–1The Operations System 18-8 Copyright © 2011 Pearson Education

Manufacturing and Services Manufacturing Organizations – Use operations management in the transformation process of turning raw materials into physical goods. Service Organizations – Use operations management in creating non-physical outputs in the form of services (the activities of employees interacting with customers) Copyright © 2011 Pearson Education

Managing Productivity Productivity – The overall output of goods or services produced divided by the inputs needed to generate that output. – A combination of people and operations variables Copyright © 2011 Pearson Education

Benefits of Increased Productivity – Economic growth and development – Higher wages and profits without inflation – Increased competitive capability due to lower costs Copyright © 2011 Pearson Education Managing Productivity (cont’d)

Exhibit 18–2 Deming’s 14 Points for Improving Productivity 1.Plan for the long-term future. 2.Never be complacent concerning the quality of your product. 3.Establish statistical control over your production processes and require your suppliers to do so as well. 4.Deal with the best and fewest number of suppliers. 5.Find out whether your problems are confined to particular parts of the production process or stem from the overall process itself. 6.Train workers for the job that you are asking them to perform. 7.Raise the quality of your line supervisors. 8.Drive out fear. 9.Encourage departments to work closely together rather than to concentrate on departmental or divisional distinctions. 10.Do not adopt strictly numerical goals. 11.Require your workers to do quality work. 12.Train your employees to understand statistical methods. 13.Train your employees in new skills as the need arises. 14.Make top managers responsible for implementing these principles. Source: W.E. Deming, “Improvement of Quality and Productivity Through Action by Management,” National Productivity Review, Winter 1981–1982, pp. 12–22. With permission. Copyright 1981 by Executive Enterprises, Inc., 22 West 21st St., New York, NY All rights reserved Copyright © 2011 Pearson Education

Strategic Role of Operations Management – The era of modern manufacturing began in the U.S. over 100 years ago. – After WWII, U.S. manufacturers focused on functional areas other than manufacturing Copyright © 2011 Pearson Education

– By the 1970’s, German and Japanese competitors integrated manufacturing technologies were producing quality goods at lower costs. – Today, successful organizations recognize the crucial role that operations management plays as part of the overall organizational strategy to establish and maintain global leadership planning Copyright © 2011 Pearson Education Strategic Role of Operations Management (cont’d)

What Is Value Chain Management and Why Is It Important? 1. Define value chain and value chain management. 2. Describe the goal of value chain management. 3. Describe the benefits of successful value chain management Copyright © 2011 Pearson Education

Value Chain Management Value – The performance characteristics, features and attributes, and any other aspects of goods and services for which customers are willing to give up resources (i.e., spend money) Copyright © 2011 Pearson Education

The Value Chain – The entire series of organizational work activities that add value at each step beginning with the processing of raw materials and ending with the finished product in the hands of end users Copyright © 2011 Pearson Education Value Chain Management (cont’d)

What is Value Chain Management? Value Chain Management – The process of managing the entire sequence of integrated activities and information about product flows along the entire value chain Copyright © 2011 Pearson Education

Goal of Value Chain Management – To create a value chain strategy that fully integrates all members into a seamless chain that meets and exceeds customers’ needs and creates the highest value for the customer Copyright © 2011 Pearson Education

Benefits of Value Chain Management Improved Procurement Improved Logistics Enhanced Customer Order Management Improved Product Development Benefits of Value Change Management Copyright © 2011 Pearson Education

Managing Operations by Using Value Chain Management 1.Discuss the requirements for successful value chain management. 2.Explain the obstacles to value chain management Copyright © 2011 Pearson Education

Exhibit 18–3 Value Chain Strategy Requirements Copyright © 2011 Pearson Education

Requirements for Value Chain Management Coordination and collaboration  Collaborative relationships must exist among all chain participants.  Sharing information and being flexible throughout the value chain.  Requires open communication among the various value chain partners Copyright © 2011 Pearson Education

Investment in information technology  Successful value chain management is not possible without a significant investment in information technology.  Information technology can be used to restructure the value chain to better serve end users Copyright © 2011 Pearson Education Requirements for Value Chain Management (cont’d)

Changes in organizational processes  Organizational processes must be critically evaluated, from beginning to end, to see where value is being added.  Non-value-adding activities should be eliminated.  Better demand forecasting is necessary and possible because of closer ties with customers and suppliers.  Selected functions may need to be done collaboratively with other partners in the value chain.  New measures are needed for evaluating performance of various activities along the value chain Copyright © 2011 Pearson Education Requirements for Value Chain Management (cont’d)

Committed leadership  Value chain management requires managers’ continuous support, facilitation, and promotion.  A culture focused on superb customer value requires serious leadership commitment.  Managers need to outline expectations for what is involved in value chain management.  Managers should clarify expectations regarding each employee’s role in the value chain Copyright © 2011 Pearson Education Requirements for Value Chain Management (cont’d)

Employees/Human Resources Design jobs that are flexible.  Hire employees who have the ability to learn and adapt.  Employees need to learn:  how to use information technology software,  how to improve the flow of materials throughout the chain,  how to identify activities that add value,  how to make better decisions faster, or  how to improve any number of other potential work activities Copyright © 2011 Pearson Education Requirements for Value Chain Management (cont’d)

Organizational culture and attitudes  Cultural attitudes include:  sharing  collaborating  openness  flexibility  mutual respect  trust  Attitudes encompass external partners as well Copyright © 2011 Pearson Education Requirements for Value Chain Management (cont’d)

Exhibit 18–4 Obstacles to Successful Value Chain Management Copyright © 2011 Pearson Education

Obstacles to Value Chain Management Organizational barriers – Refusal or reluctance to share information – Reluctance to shake up the status quo – Security issues Copyright © 2011 Pearson Education

Cultural attitudes – Lack of trust and too much trust – Fear of loss of decision-making power Required capabilities – Lacking or failing to develop the requisite value chain management skills Copyright © 2011 Pearson Education Obstacles to Value Chain Management (cont’d)

People – Lacking commitment to do whatever it takes – Refusing to be flexible in meeting the demands of a changing situation – Not being motivated to perform at a high level – Lack of trained managers to lead value chain initiatives Copyright © 2011 Pearson Education Obstacles to Value Chain Management (cont’d)

Current Issues in Operations Management 1.Discuss technology’s role in manufacturing. 2.Explain ISO 9000 and Six Sigma. 3.Describe mass customization and how operations management contributes to it Copyright © 2011 Pearson Education

Technology’s Role in Manufacturing – Smart companies are looking at ways to use technology to improve operations management. – To connect more closely with customers, production must be synchronized (i.e. well-coordinated) across the enterprise Copyright © 2011 Pearson Education

– To avoid bottlenecks and slowdowns, the production function must be a full partner in the entire business system. – Technology is making such extensive collaboration possible Copyright © 2011 Pearson Education Technology’s Role in Manufacturing (cont’d)

– Increased automation and integration of production facilities with business systems also helps in controlling costs. – Predictive maintenance, remote diagnostics, and utility cost savings Copyright © 2011 Pearson Education Technology’s Role in Manufacturing (cont’d)

The Concept of Quality – The ability of a product or service to reliably do what it’s supposed to do and to satisfy customer expectations Copyright © 2011 Pearson Education

Exhibit 18–5 Product Quality Dimensions 1.Performance – Operating characteristics 2.Features – Important special characteristics 3.Flexibility – Meeting operating specifications over some period of time 4.Durability – Amount of use before performance deteriorates 5.Conformance – Match with pre-established standards 6.Serviceability – Ease and speed of repair or normal service 7.Aesthetics – How a product looks and feels 8.Perceived quality – Subjective assessment of characteristics (product image) Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN: West Publishing Company, 1994); H.V. Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press, 1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988); and M.A. Hitt, R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p Copyright © 2011 Pearson Education

Exhibit 18–5 (cont’d) Service Quality Dimensions 1.Timeliness – Performed in promised period of time 2.Courtesy – Performed cheerfully 3.Consistency – Giving all customers similar experiences each time 4.Convenience – Accessibility to customers 5.Completeness – Fully serviced, as required 6.Accuracy – Performed correctly each time Copyright © 2011 Pearson Education Sources: Adapted from J.W. Dean, Jr., and J.R. Evans, Total Quality: Management, Organization and Society (St. Paul, MN: West Publishing Company, 1994); H.V. Roberts and B.F. Sergesketter, Quality is Personal (New York: The Free Press, 1993): D. Garvin, Managed Quality: The Strategic and Competitive Edge (New York: The Free Press, 1988); and M.A. Hitt, R.D. Ireland, and R.E. Hoskisson, Strategic Management, 4th ed. (Cincinnati, OH: SouthWestern, 2001), p. 211.

Quality initiatives and Quality Goals Quality Initiatives – Planning for quality – Organizing and leading for quality – Controlling for quality Quality Goals – ISO 9000 certification – Six Sigma standards Copyright © 2011 Pearson Education

Quality Initiatives – 1 Planning for quality – Managers must have quality improvement goals and strategies and plans to achieve those goals. – Goals can help focus everyone’s attention on some objective quality standard Copyright © 2011 Pearson Education

Organizing and leading for quality – Because quality improvement initiatives are carried out by employees, managers need to look at how they can best organize and lead them. – Organizations with extensive and successful quality improvement programs tend to rely on two important people approaches: – (1) cross-functional work teams; and – (2) self-directed, or empowered, work teams Copyright © 2011 Pearson Education Quality Initiatives – 2

Controlling for quality – Quality improvement initiatives are not possible without a means of monitoring and evaluating their progress. – This involves implementing many standards such as those related to inventory control, defect rate, raw materials procurement, or other operations management areas Copyright © 2011 Pearson Education Quality Initiatives – 3

Quality Goals – ISO 9000 certification – ISO 9000 is a series of international quality management standards established by the International Organization for Standardization which sets uniform guidelines for processes to ensure that products conform to customer requirements. – These standards cover everything from contract review to product design to product delivery Copyright © 2011 Pearson Education

– The ISO 9000 standards have become the internationally recognized standard for evaluating and comparing companies in the global marketplace. – This type of certification can be a prerequisite for doing business globally Copyright © 2011 Pearson Education Quality Goals – ISO 9000 certification (cont’d)

Quality Goals – Six Sigma – Six Sigma is a quality standard that establishes a goal of no more than 3.4 defects per million units or procedures. – Sigma is a Greek letter used in statistics. The higher the sigma, the fewer the deviations from the norm—that is, the fewer the defects. – At Six Sigma, you are about as close to defect free as you can get. It is an ambitious quality goal! – Many quality-driven businesses are using it and benefiting from it including many in the Arab region Copyright © 2011 Pearson Education

Mass Customization – Is a design-to-order concept that provides consumers with a product when, where, and how they want it. – Makes heavy use of technology (flexible manufacturing techniques) and engages in a continual dialogue with customers Copyright © 2011 Pearson Education

Benefits of Mass Customization – Creates an important relationship between the firm and the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm Copyright © 2011 Pearson Education

operations management manufacturing organizations service organizations productivity value value chain value chain management organizational processes RFID intellectual property quality ISO 9000 Six Sigma mass customization Cellular manufacturing Terms to Know Copyright © 2011 Pearson Education

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