PowerPoint Presentation by Charlie Cook The University of West Alabama © 2010 South-Western, Cengage Learning, Inc. All rights reserved. Student Version Management: Principles and Practices Griffin 21

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–2 The Nature of Operations Management Operations ManagementOperations Management  The set of managerial activities used by an organization to transform resource inputs into products, services, or both. Importance of Excellence in OperationsImportance of Excellence in Operations  Is necessary for competitiveness and overall organization performance.  Creates value and utility through the production of products and services.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–3 Types of Operations ManufacturingManufacturing  A form of business that combines and transforms resource inputs into tangible outcomes that are then sold to others. Service organizationService organization  An organization that transforms resources into an intangible output and creates time and place utility for its customers.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–4 Operations and Organizational Strategy Role of Operations in Organizational StrategyRole of Operations in Organizational Strategy  Operations management has a direct impact on competitiveness, quality, productivity, and effectiveness.  Operations management and organizational strategy have reciprocal effects on each other.  Strategic goals cannot be met if there are deficiencies and insufficiencies in operations resources.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–5 Designing Operations Systems Determining Product-Service MixDetermining Product-Service Mix  Involves deciding how many and what kinds of products to offer in the marketplace. Capacity DecisionsCapacity Decisions  Involve choosing amount of products, services, or both that can be produced by an organization.  Can be high-risk decisions due to uncertainty about future product demand and incurred costs of additional, possibly excess, capacity.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–6 Designing Operations Systems (cont’d) Facilities DecisionsFacilities Decisions  Facilities are the physical locations where products or services are created, stored, and distributed.  Location is the physical positioning or geographic site of facilities.  Layout is the physical configuration of facilities, the arrangement of equipment within facilities, or both.  Types of layouts  Product layout  Process layout  Fixed-position layout  Cellular layout

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–7 Organizational Technologies Manufacturing TechnologyManufacturing Technology  Technology  The set of processes and systems used by organizations to convert resources into products or services.  Automation  The process of designing work so that it can be completely or almost completely performed by machines.  Computer-assisted manufacturing (CAM)  Computer-aided design (CAD)  Computer-integrated manufacturing (CIM)  Flexible manufacturing systems (FMS)

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–8 Organizational Technologies (cont’d) Service TechnologyService Technology  Services are rapidly moving toward automated systems and procedures (e.g., automated teller machines and room reservations).

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–9 Operations Systems in Supply Chain Management Supply Chain ManagementSupply Chain Management Operations Management as ControlOperations Management as Control Purchasing Management (Procurement)Purchasing Management (Procurement) Inventory ManagementInventory Management

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–10 Managing Total Quality The Meaning of QualityThe Meaning of Quality  The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.  Quality is both a relative and absolute concept.  Quality is relevant to both products and services. The Importance of QualityThe Importance of Quality  Malcolm Baldrige Award  Named after a former secretary of commerce, this award is given by the Commerce Department to firms that achieve major quality improvements.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–11 Managing Productivity ProductivityProductivity  An economic measure of efficiency that summarizes the value of outputs relative to the value of resources used to produce them. Aggregate productivity Industry productivity Unit productivity Individual productivity Company productivity Levels of Productivity

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–12 Key Terms operations managementoperations management manufacturingmanufacturing service organizationservice organization product-service mixproduct-service mix capacitycapacity facilitiesfacilities locationlocation layoutlayout product layoutproduct layout process layoutprocess layout fixed-position layoutfixed-position layout cellular layoutcellular layout technologytechnology automationautomation computer-assisted manufacturingcomputer-assisted manufacturing robotrobot supply chain managementsupply chain management purchasing managementpurchasing management inventory controlinventory control just-in-time (JIT) methodjust-in-time (JIT) method qualityquality

© 2010 South-Western, Cengage Learning, Inc. All rights reserved.21–13 Key Terms (cont’d) Malcolm Baldrige AwardMalcolm Baldrige Award value-added analysisvalue-added analysis benchmarkingbenchmarking outsourcingoutsourcing cycle timecycle time ISO 9000:2000ISO 9000:2000 ISO 14000ISO statistical quality control (SQC)statistical quality control (SQC) Six SigmaSix Sigma total quality management (TQM, also called quality assurance)total quality management (TQM, also called quality assurance)