1. Achieving World-Class Operations Management
Chapter 12 1 1

2. Chapter 12 Learning Goals
Why is production and operations management important in both manufacturing and service firms?
What types of production processes are used by manufacturers and service firms?
How do organizations decide where to put their production facilities? What choices must be made in designing the facility?
Why are resource planning tasks like inventory management and supplier relations critical to production?

3. Chapter 12 Learning Goals (cont’d.)
How do operations managers schedule and control production?
How can quality management and lean manufacturing techniques help firms improve production and operations management?
What roles do technology and automation play in manufacturing and service industry operations management?
What key trends are affecting the way companies manage production and operations?

4. Learning Goal 1
Why is production and operations management important in both manufacturing and service firms?
Manufacturers must produce high-quality, reasonably priced products or they will lose customers
Service organizations rely on effective operations management to satisfy consumers
Operations managers work with other functions in organizations to ensure
Quality
Customer Satisfaction
Financial success

5. Production:
The creation of products & services by turning inputs into outputs
Operations Management:
Management of the operations process

6. Production planning:
The aspect of operations management in which the firm considers the competitive environment and its own strategic goals in an effort to find the best production methods

7. Titan’s Production Planning
Titan motorcycle company production estimates for 1999 were based on:
the introduction of a new product line
estimated industry sales for 1999, based on past sales trends
Motorcycle Industry Sales
Titan’s Production
Thousands of Motorcycles
Number of Motorcycles
Source: Motorcycle Industry Council/The Arizona Republic, Dec. 5, 1999, p. D5. 2 2

8. Elements of Production Planning
1. Production process
2. Site selection
3. Facility layout
4. Resource planning
5. Supply chain management 2 2

9. Learning Goal 2
What types of production processes are used by manufacturers and service firms?
Mass production
Many identical goods are produced at once, keeping production costs low
Relies heavily on standardization, mechanization, specialization
Mass customization
Mass production techniques are used up to a point
Special features are added to custom tailor product to individual customers
More expensive than mass production
Customization
Firm makes many products, one at a time
Products produced to the very specific needs or wants of individual customers

10. Types of Production Process
1. Mass production
2. Mass customization
Example products: Dell computers, Levi’s jeans, Acumin vitamins, compact discs (cductive.com), Ritz-Carlton hotel stays, Mattel Barbie dolls, BMW cars, Paris Miki optical frames (Source: Fortune, Sept. 28, 1998, pp )
3. Customization

11. Coffee Bean Production Process
2 ways to grow coffee beans:
In the sun: beans grow faster, but this process requires clearing forests
In the shade: beans grow slower, but process preserves existing ecosystems
The trade-off must be considered when deciding what process to use
Source: Consumer Reports, Jan. 2000, p. 30.

12. Learning Goal 3
How do organizations decide where to put their production facilities? What choices must be made in designing the facility?
When choosing a production site, firms must weigh
Availability of resources needed for production
Ability to serve customers and take advantage of marketing opportunities
Availability of local incentives
Manufacturing environment
Three main production facility designs
Process layout
Product layout
Fixed-position layout

13. Site Selection Considerations
1. Availability of production inputs
2. Marketing factors
3. Local incentives
4. Manufacturing environment
5. International location considerations 2 2

14. Good Labor Locations in the US
States with above average labor quality and below average labor cost:
Alabama
Alaska
Georgia
Hawaii
Virginia
Wyoming
Source: Corporate Location, 2 2

15. Types of Facility Layout
1. Process layout
2. Product layout
3. Fixed-position layout

16. Learning Goal 4
Why are resource planning tasks like inventory management and supplier relations critical to production?
Resources needed for production must be available at strategic moments in the production process
If resources are not readily available, productivity, customer satisfaction, and quality may suffer
Carefully managed inventory can help cut production costs
Through good relationships with suppliers, firms can get:
Better prices
Reliable resources
Support services than can improve production efficiency

17. Elements of Resource Planning
Purchasing
Insourcing vs. Outsourcing
Inventory management
Computerized resource planning
Materials requirement planning (MRP)
Enterprise resource planning (ERP)
“The guy with the most resources doesn’t win. The guy who utilizes his resources best wins.” Chuck Knight, CEO of Emerson Electric (Source: Neff & Citrin, Lessons from the Top, 1999, p. 200.)

18. Supply Chain:
The entire sequence of securing inputs, producing goods, and delivering them to customers
Supply Chain Management:
The process of smoothing transitions along the supply chain

19. Supply Chain Management Strategies
Forge stronger bonds with suppliers
Improve supplier communication
electronic data interchange (IDE)

20. Learning Goal 5
How do operations managers schedule and control production?
Routing
Analyzes steps needed in production
Sets out a work flow
Increases productivity and can eliminate unnecessary cost
Scheduling
Specifying and controlling time and resources required for each step in production process
Ranges from simple to complex
Three methods are used to schedule production:
Gantt charts
Critical path method
PERT

21. Production control:
The coordination of materials, equipment, and human resources to achieve production & operation efficiency

22. Aspects of Production Control
1. Routing
determining work flow
2. Scheduling
controlling timing
Gantt charts
Critical path method & PERT charts 2 2

23. Typical Gantt Chart September October 8 Scheduling Designing Ordering
Delivering materials
Machining components
Assembling
Inspecting
Shipping
Symbols:
scheduled start completed work time not avail.
scheduled end review date 2 2

24. Learning Goal 6
How can quality management and lean manufacturing techniques help firms improve production and operations management?
Quality and productivity go hand in hand
Defective products waste materials and time; increase costs
Poor quality leads to dissatisfied customers
Quality-control methods can reduce problems and streamline production
Lean manufacturing eliminates unnecessary steps in production process
Allows manufacturers to respond to changing market conditions with greater flexibility and ease

25. Learning Goal 7
What roles do technology and automation play in manufacturing and service industry operations management?
Operational efficiency is improved by using technology to automate parts of production
Computer-aided design and manufacturing systems
Help design new products
Control the flow of resources need for production
Operate much of the production process
Robotics
Useful for tasks that require accuracy, speed, and strength
Require less labor to operate
Service firms are automating operations
Banks, law firms, and utility companies
Using technology cuts labor costs and controls quality

26. Improving Production Total Quality Management Lean Manufacturing
Just-in-Time
Automation
Computer-aided design (CAD)
Computer-aided manufacturing (CAM)
Robotics
Flexible manufacturing systems (FMS)
Computer-integrated manufacturing (CIM) 2 2

27. Learning Goal 8
What key trends are affecting the way companies manage production and operations?
Agile manufacturing
Helps manufacturers stay fast and flexible
Firms must develop production systems composed of tools and processes that can quickly change to produce new or different products
Cellular manufacturing
Creates small, self-contained production units
Cell performs all or most of tasks necessary to complete a product or production sequence
Manufacturing and non-manufacturing firms are putting emphasis on empowering employees
Giving them greater say in deciding how to perform their jobs
Larger role in company decision making

28. Trends in Operations Management
Increase in modular production
Agile manufacturing
permits adapting to changing customer demands
Work cell design
creates team environment in production 2 2

29. Changing Operations in Insurance
A new approach to insurance operations involves:
developing component-based systems
faster development
more flexible
integration of processes & systems
web-based sales & services, call-center technology, data management
Source: Best’s Review, Dec., 1999, 2 2