PowerPoint Presentation by Charlie Cook The University of West Alabama Fundamentals of Management Sixth Edition Robbins and DeCenzo with contributions from Henry Moon C H A P T E R 14 Part V: Controlling © 2008 Prentice Hall, Inc. All rights reserved. Operations Management

© 2008 Prentice Hall, Inc. All rights reserved.14–2 The Importance Of Operations Management Operations ManagementOperations Management  The study and application of the transformation process OM Is Important Because It:OM Is Important Because It:  Encompasses processes in all organizations— services as well as manufacturing.  Is important in effectively and efficiently managing productivity.  Plays a strategic role in an organization’s competitive success.

© 2008 Prentice Hall, Inc. All rights reserved.14–3 Transformation and Organizations Transformation ProcessTransformation Process  The process through which an organization creates value by turning inputs (people, capital, equipment, materials) into outputs (goods or services). Manufacturing OrganizationManufacturing Organization  Produces physical goods. Service OrganizationService Organization  Produces nonphysical outputs such as educational, medical or transportation services.

© 2008 Prentice Hall, Inc. All rights reserved.14–4 Productivity Productivity DefinedProductivity Defined  The overall output of goods and services produced divided by the inputs needed to generate that output. Benefits of High ProductivityBenefits of High Productivity  Fosters economic growth and development  Increases individual wages without inflation  Lowers costs and makes firms more competitive

© 2008 Prentice Hall, Inc. All rights reserved.14–5 What Is Value Chain Management? ValueValue  The performance characteristics, features and attributes, or any other aspects of goods and services for which customers are willing to give up resources. Value ChainValue Chain  The entire series of organizational work activities that add value at each step beginning with the processing or raw materials and ending with a finished product in the hands of end users.

© 2008 Prentice Hall, Inc. All rights reserved.14–6 Value Chain Management versus Supply Chain Management Value Chain ManagementValue Chain Management  Improves the process of creating and transferring documents by automating the flow of information. Supply Chain ManagementSupply Chain Management  Is the management of facilities, functions, and activities involved in producing and delivering a product or service, from suppliers to customers.

© 2008 Prentice Hall, Inc. All rights reserved.14–7 The Goals Of Value Chain Management Creating customer-defined value by:Creating customer-defined value by:  Providing a unique combination that meets customer needs and at a price that can’t be matched by competitors.  Having a sequence of participants work together as a team, each adding a component of value to the overall process. It’s all about providing value, not bargains, to the customer

© 2008 Prentice Hall, Inc. All rights reserved.14–8 Value Chain Management Requirements Business ModelBusiness Model  A strategic design for how a company intends to profit from its broad array of strategies, processes, and activities. Value Chain Management RequirementsValue Chain Management Requirements  Coordination and collaboration  Technology investment  Organizational processes  Leadership  Employees/human resources management  Strong culture and attitudes

© 2008 Prentice Hall, Inc. All rights reserved.14–9 Effect of Value Chain Management on Organizational Processes Better demand forecasting is necessary and possible because of closer ties with customers and suppliers.Better demand forecasting is necessary and possible because of closer ties with customers and suppliers. Selected functions may need to be done collaboratively with partners in the value chain.Selected functions may need to be done collaboratively with partners in the value chain. New measures are needed for evaluating the performance of activities along the value chain.New measures are needed for evaluating the performance of activities along the value chain.

© 2008 Prentice Hall, Inc. All rights reserved.14–10 Implementing Value Chain Management BenefitsBenefits  Improved customer service  Cost savings  Accelerated delivery times  Improved quality  Inventory reduction  Improved logistics management  Increased sales  Increased market share ObstaclesObstacles  Organizational barriers  Cultural attitudes  Required capabilities  People

© 2008 Prentice Hall, Inc. All rights reserved.14–11 Contemporary Operations Management Issues Technology Role in E-ManufacturingTechnology Role in E-Manufacturing  How an organization will transform its inputs into outputs. Just-in-time (JIT) Inventory SystemsJust-in-time (JIT) Inventory Systems  How to develop systems in which inventory items arrive when needed in the production process instead of being stored in stock.  Kanban

© 2008 Prentice Hall, Inc. All rights reserved.14–12 Quality and Operations Management Quality ControlQuality Control  Monitoring quality—weight, strength, consistency, color, taste, reliability, finish, or any one of myriad characteristics—to ensure that it meets some preestablished standard. Continuous ImprovementContinuous Improvement  A comprehensive, customer-focused program to continuously improve the quality of the organization’s processes, products and services.

© 2008 Prentice Hall, Inc. All rights reserved.14–13 Managing Projects ProjectProject  One-time-only set of activities with a definite beginning and ending point in time. Project ManagementProject Management  Task of getting the activities done on time, within budget, and according to specifications.

© 2008 Prentice Hall, Inc. All rights reserved.14–14 Popular Scheduling Tools Gantt ChartGantt Chart  Shows in bar graph form when tasks are supposed to be done and compares that with the actual progress on each task. Load ChartLoad Chart  Is a modified version of a Gantt Chart; it lists either whole departments or specific resources.  This information allows managers to plan and control for capacity utilization in the scheduling of individual work stations.

© 2008 Prentice Hall, Inc. All rights reserved.14–15 PERT Network Analysis Program Evaluation and Review Technique (PERT) Network AnalysisProgram Evaluation and Review Technique (PERT) Network Analysis  A flowchart-like diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity.

© 2008 Prentice Hall, Inc. All rights reserved.14–16 PERT Components EventsEvents  End points represent the completion of activities ActivitiesActivities  Actions that take place Slack TimeSlack Time  The time difference between the critical path and all other paths Critical PathCritical Path  The longest or most time-consuming sequence of events and activities required to complete a project in the shortest amount of time