1. Production Systems
Chapter 9
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2. Chapter 9 Objectives After studying this chapter, you will be able to:
Explain the systems perspective and identify seven principles of systems thinking that can improve your skills as a manager.
Describe the value chain and value web concepts and discuss the controversy over offshoring.
Define supply chain management and explain its strategic importance.
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3. Chapter 9 Objectives Cont.
Identify the major planning decisions in production and operations management.
Explain the unique challenges of service delivery.
Define quality, explain the challenge of quality and product complexity, and identify four major tools and strategies for ensuring product quality.
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4. The Systems View of Business
Elements
Processes
Converts
Inputs
To Desired
Outputs
A system is an interconnected and coordinated set of elements and processes that converts inputs into desired outputs.
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5. From Point to Line to Circle: The Systems View

6. Managing Systems for Peak Performance
Help everyone see the big picture.
Understand how individual systems really work and how they interact.
Understand problems before you try to fix them.
Understand the potential impact of solutions before you implement them.
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7. Managing Systems for Peak Performance (cont.)
Don’t just move problems around; solve them.
Understand how feedback works in the system.
Use mistakes as opportunities to learn and improve.
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8. The Conversion Process
The Value Chain
Inputs
Transformation
Outputs
Tangible
Goods
Intangible
Services
Value Chain:
All the elements and processes that add value as raw materials are transformed into the final products made available to the ultimate customer.

9. Business Transformation Systems
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10. Core Competencies and Outsourcing
Core Competencies: Functions in which a company has a distinct advantage over its competitors.
Outsourcing: Contracting out certain business functions or operations to other companies.

11. Value Webs
The combination of extensive globalization in many industries and the development of electronic networking has made it easy for companies to connect with partners around the world.
Instead of linear value chain, some businesses now think in terms of value webs, multidimensional networks of suppliers and outsourcing partners.

12. Offshoring Support of Offshoring
Offshoring: Transferring a part or all of a business function to a facility (a different part of the company or another company entirely) in another country.
Support of Offshoring
Responsibility to shareholder interests
U.S. competitiveness
Support for local customers around the world
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13. Supply Chain Management
Supply Chain: A set of connected systems that coordinates the flow of goods and materials from suppliers all the way through to final customers.
Supply Chain Management (SCM):
The business procedures, policies, and computer systems that integrate the various elements of the supply chain into a cohesive system.
Manage Risks
Manage
Relationships
Manage
Trade-offs
Promoting
sustainability
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14. Supply Chain vs. Value Chain
Part of the overall Value Chain
Focuses on “upstream” process
Everyone is part of the Value Chain
Focuses on the “downstream” process
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15. Supply Chain Systems and Techniques
Inventory:
Goods and materials kept in stock for production or sale.
Inventory Control:
Determining the right quantities of supplies and products to have on hand and tracking where those items are.
Procurement:
The acquisition of the raw materials, parts, components, supplies, and finished products required to produce goods and services.
Materials
Requirement
Planning (MRP)
Manufacturing Resource Planning (MRP II)
Enterprise
Resource Planning (ERP)
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16. Material Requirements Planning (MRP)
MRP helps a manufacturer get the correct materials where they are needed, when they are needed, without unnecessary stockpiling.
Managers use MRP software to calculate when certain materials will be required, when they should be ordered, and when they should be delivered so that storage costs will be minimal.

17. Manufacturing Resource Planning (MRP II)
MRP II expands the MRP with links to the company’s financial systems and other processes.
For instance, in addition to managing inventory levels successfully, an MRP II system can help ensure that material costs adhere to target budgets.

18. Enterprise Resource Planning (ERP)
ERP extends the scope of research planning even further to encompass the entire organization.
ERP systems are typically made up of software modules that address the needs of the various functional areas, from manufacturing to sales to human resources.

19. Facilities Location and Design Forecasting and Capacity Planning
Production
Transformation
Outputs
Inputs
Operations Managers
Facilities Location and Design
Forecasting and Capacity Planning
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20. Facilities Location and Design
Energy
Transportation
Land
Living
Standards
Construction
Raw
Materials
Local Taxes
Labor
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21. Forecasting and Capacity Planning
Level of
Resources
Customer
Demand
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22. Production Scheduling
Gantt Chart
PERT
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23. GANTT Chart ID Task Name Start Date End Date Duration August September
2012 1
Make legs
8/1/12
8/28/12
20d 2
Cut tops
8/22/12
8/28/12 5d 3
Drill
8/29/12
9/4/12 5d 4
Sand
9/5/12
9/11/12 5d 5
Assemble
9/12/12
9/25/12
10d 6
Paint
9/19/12
9/25/12 5d 23

24. Simplified PERT Diagram for Store Opening
Critical Path:
In a PERT network diagram, the sequence of operations that requires the longest time to complete.

25. Lean Systems Productivity: Lean Systems: Just-in-Time (JIT):
The efficiency with which an organization can convert inputs to outputs.
Lean Systems:
Systems (in manufacturing and other functional areas) that maximize productivity by reducing waste and delays.
Just-in-Time (JIT):
Inventory management in which goods and materials are delivered throughout the production process right before they are needed.
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26. Manufacturing Goods Mass Production Customized Production Mass
Customization
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27. Mass Production
Mass production—manufacturing goods in large quantities—means little or no customization. Because of the high volume of similar goods produced, this process reduces production costs per unit and makes products available to more people.

28. Customized Production
The other extreme is customized production, sometimes called batch-of-one production in manufacturing, in which the producer creates a unique good or service for each customer.

29. Mass Customization
Mass customization—using mass production techniques to produce customized goods.
The basic idea behind mass customization is that consumers have individual needs and are best served by products that can be easily customized for them.

30. Unique Challenges of Service Delivery
Perishability
Location Constraints
Scalability Challenges and Opportunities
Performance Variability and Perceptions of Quality
Customer Involvement
Service provider Interaction
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31. Product and Process Quality
The degree to which a product or process meets reasonable or agreed-upon expectations.
Quality Control:
Measuring quality against established standards after the good or service has been produced and weeding out any defective products.
Quality Assurance:
A more comprehensive approach of companywide policies, practices, and procedures to ensure that every product meets quality standards.
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32. Product and Process Quality
Statistical Process Control (SPC):
The use of random sampling and tools such as control charts to monitor the production process.
Kaizen
Companies can empower each employee to continuously improve the quality of goods production or service delivery. The Japanese word for continuous improvement is kaizen.
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33. Total Quality Management (TQM)
Management commitment to supporting TQM at every level in the organization
Clear focus on customers and their needs
Employee involvement throughout the organization
Commitment to continuous improvement
Willingness to treat suppliers as partners
Meaningful performance measurements
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34. The DMAIC Process in Six Sigma Quality Management
A rigorous quality management program that strives to eliminate deviations between the actual and desired performance of a business system. I A
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35. Global Quality Standards
ISO 9000
(Quality and
customer
Satisfaction)
ISO 14000
(Environmental
İssues)
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36. Exhibit 9-6 Gantt Charts for Project Management
A Gantt chart is a handy tool in project and production management because it shows the order in which tasks must be completed and which tasks are dependent on other tasks. For the new product launch shown here, for example, the analysis task is dependent on all three tasks before it, which means those tasks must be completed before analysis can begin. With periodic updates, it’s also easy to show a team exactly where the project stands at any particular moment.

37. Exhibit 9-5 Conceptual Diagram of the Toyota Production System
The Toyota Production System, one of the most influential production strategies in modern business history, has been studied, duplicated, and adapted by companies in a variety of industries around the world. Toyota refined the system over decades, but it has always been based on the two fundamental principles of just-in-time inventory management, so that expensive inventory doesn’t pile up when it isn’t being used, and jidoka, or “automation with a human touch,” whereby the highly automated process can be stopped by any worker any time a problem appears, to avoid making more defective parts or cars. However, for all its abilities to reduce manufacturing defects, the system has not been able to prevent all failures—particularly now that cars are vast software systems as well as mechanical systems.

38. Applying What You’ve Learned
Explain the systems perspective and identify seven principles of systems thinking that can improve your skills as a manager
Describe the value chain and value web concepts and discuss the controversy over offshoring
Define supply chain management and explain its strategic importance

39. Applying What You’ve Learned
Identify the major planning decisions in production and operations management
Explain the unique challenges of service delivery
Define quality, explain the challenge of quality and product complexity, and identify four major tools and strategies for ensuring product quality