1. PowerPoint Presentation by Charlie Cook Copyright © 2005 Prentice Hall, Inc. All rights reserved. Chapter 7 Managing Operations and Improving Quality “There are many ways of going forward, but only one way of standing still.” — Franklin D. Roosevelt

2. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–2 Key Topics Operations and Utility Creation Service operations vs. goods production Operations planning The supply chain strategy Quality management

3. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–3 The Management Process Planning – What are we going to do? Organizing – How are we going to do it? Directing – Get it done! Controlling – How well did we do? Operations touches on all areas, especially the middle two.

4. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–4 Organization Chart with Operations As of May 2005

5. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–5 What should operations do? Operations oversees the processes that transform resources (inputs) into services and goods (outputs) that create value & benefits (utility) for customers.

6. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–6 Operations Create Utility to Satisfy Form Time Place

7. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–7 What shouldn’t Operations do? Operations managers should eliminate non- essential processes which do not add utility for the customer.

8. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–8 Key Topics Operations and Utility Creation Service operations vs. goods production Operations planning Total quality management tools The supply chain strategy

9. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–9 Defining Operations Service:  Performing tangible and intangible services.  High contact  Low contact Goods Production:  Producing tangible products.  Analytic (break down)  Synthetic (build up)

10. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–10 Services in depth Focus on:  Performance vs production  Process and outcome both involve customer  Service characteristics  Intangible, Customized, Unstorable  Customer-service link  The customer is more a part of the process  Service quality considerations  What else is important to the customer?  Modern day feedback Modern day feedback

11. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–11 Growth in the Goods and Services Sectors 10080604020 Millions of WorkersServices Goods Production 198419861988 19901992 1994 1996 1998 2000 $4,000$3,000$2,000$1,000(Billions)Services GoodsProduction 198419861988 1990 19921994 1996 19982000

12. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–12 What’s Had The Biggest Effect on Productivity?

13. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–13 Integration of Global Operations & the Effect on Production Technology has pushed operations to become better and faster globally. The internet has integrated production with global suppliers and customers. As technology further evolves, fewer services are naturally protected. Bonus: If you can figure out how to build a strength, you can capture the world.

14. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–14 Key Topics Operations and Utility Creation Service operations vs. goods production Operations planning Total quality management tools The supply chain strategy

15. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–15 Resource Transformation Process Figure 7–1

16. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–16 Operations Processes Differ Depending on the Nature of the Business Goods-Manufacturing:  Analytic processes  Synthetic processes Service Delivery  High contact processes  Low contact processes

17. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–17 Operations Planning and Control Figure 7–2

18. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–18 Layout  Process  Product  Cellular Methods (Processes) Quality Location Capacity Operations Planning Topics

19. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–19 Methods Planning: Process Flow Chart

20. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–20 Layout of a Typical Piccadilly Cafeteria Figure 7–3

21. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–21 Operations Scheduling Gantt chart Pert chart

22. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–22 Gantt Charting Demonstration Identify the activity to be planned Set a deadline & time scale (hours, days, months, etc.) Identify steps needed to complete the task  Use scratch paper first! Identify time needed for each step Is the schedule RUMBA?  Reasonable? Understandable? Measurable? Believable? Achievable? THEN build the Gantt chart

23. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–23 Gantt Charting Activity Pick a business task of moderate complexity (>5 steps). Set a deadline & time scale (hours, days, months, etc.) Identify steps needed to complete the task  Use scratch paper first! Identify time needed for each step Is your schedule RUMBA?  Reasonable? Understandable? Measurable? Believable? Achievable? THEN fill in chart

24. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–24 Gantt Charting Activity – Controlling Is your schedule Reasonable? Achievable? Measurable? Where do you need the most follow-up attention?  Think: Where will a slow down cause a deliverable delay? How will you manage a crisis? What are your contingency plans?

25. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–25 PERT Chart Project Scheduling Figure 7–5 : A delay here delays the final project deliverable.

26. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–26 Gantt Chart Figure 7–4

27. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–27 Managing Several Projects with Gant Charts: Master Chart Subsidiary Charts

28. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–28 Other management tools: Material Requirements Planning Software Supplier Selection Purchasing Transportation Warehousing Inventory Control Planning, organizing, and controlling the flow of materials from design through distribution.

29. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–29 Resource management tools: Enterprise Resource Planning Software manufacturing, logistics, distribution, inventory, shipping, invoicing, sales, delivery, billing, production, inventory management, Human Resources, etc. One comprehensive business management software solution

30. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–30 Layout  Process  Product  Cellular Methods (Processes) Quality Location Capacity Operations Planning Topics

31. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–31 Tools for Operations Process Control Worker Training Just-in-time Production Systems (JIT) Material Requirements Planning Quality Control

32. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–32 Quality Management: Ensuring quality throughout the business Total Quality Management  Start with customers  Team approach  Measurement  Continual improvement Quality: The combination of characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

33. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–33 Tools for Total Quality Management Statistical Process Control Quality improvement teams Getting Close to the Customer Process improvement vs Reengineering ISO Certification Value-Added Analysis

34. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–34 Process Improvement Management using TQM Results:  Top down control  → Focus at end  “J” curve Process:  Delegated control  Focus on determinants of goal - processes  Constant improvement Time in Quarters 90% 80% 70% 60% 100% 01 2 3 4 Usable Production Time in Quarters 90% 80% 70% 60% 100% 01 2 3 4 Usable Production

35. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–35 Process Control Chart at Honey Nuggets Cereal Figure 7–6

36. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–36 What can you tell about this firm?

37. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–37 Supply Chain Management Managing the supply chain as a whole to maximize customer value and reduce waste. Value Chain Management All factors related to the value received by the customer. Expanding scope of management

38. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–38 Supply Chain for Baked Goods Figure 7–7

39. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–39 Process Management Diversion

40. Copyright © 2005 Prentice Hall, Inc. All rights reserved.7–40 Chapter Review Explain “operations” and the utility that operations processes provide. Distinguish service operations from goods production. Describe the five decision areas involved in operations planning. Identify the key tools for total quality management. Explain supply chain management.