1. Producing Quality Goods and Services
Chapter Nine
Producing Quality Goods and Services

2. What Is Production? Operations Manager
The creation of utility; especially in the the making of goods
Operations Manager
A person who manages systems that convert resources into goods and services
Need to understand the system in order to manage it

3. Manufacturing Processes
Analytic process: a process that breaks raw materials into different component parts
Synthetic process: a process that combines raw materials or components to create a finished product

4. Reason for Conversion Processes
The purpose of the resources conversion process is to provide utility (value) to customers
Utility: the ability of an item to satisfy a human need
Four types of utility: form, place, time, and possession
Form utility: utility created by converting raw materials, people, finances, and information into finished products

5. How to Categorize Conversion
By Focus
the resource that comprises the major or most important input
i.e.-money for banks or info for colleges
By Magnitude of Change
The degree to which the resources must be physically changed to provide utility
Plastics =high, services = little
But what exactly are services?

6. The Increasing Importance of Services
Service Economy
An economy in which more effort is devoted to services than to the production of goods –US 81% in 2001
Service characteristics
cannot be stored (perishability)
produced & consumed at the same time (inseparable)
labor intensive (heterogeneity)
can’t be sensed (intangible)

7. Where Do We Get New Products and Services ?
Research and Development
Basic research
Uncover new knowledge
Goal is scientific advancement and knowledge creation without regard for its potential use
Applied research
Use existing knowledge to produce new and/or better goods and services
Goal is development and implementation of knowledge

8. Planning for Production
Design Planning-how to get from idea to item
Product line
A group of similar products that differ only in relatively minor characteristics-how many sizes/flavors do I need to satisfy demand?
Capacity
The amount of products or services that an organization can produce in a given time
Required capacity must meet product demand
Too much ability to produce leaves plant idle
Too little ability to produce misses sales

9. Planning for Production
Use of technology
Labor-intensive technology: a process in which people must do most of the work
Capital-intensive technology: a process in which machines and equipment do most of the work
The degree of automation is based on the tradeoff between high initial investment costs with lower operating costs (for automation) and low initial investment costs with high operating costs (for human labor)

10. Planning for Production-Plant Layout
Process Layout
used when small batches of different products are created or worked on in a different operating sequence

11. Planning for Production-Plant Layout
Product Layout
The product layout (assembly line) is used when all products undergo the same operations in the same sequence

12. Planning for Production-Plant Layout
The fixed position layout is used in producing a product that is too large to move

13. Operational Planning- how much product should I make at each plant
Step 1: Selecting a Planning Horizon
Period during which a plan will be in effect; commonly one year
Step 2: Estimating Market Demand
The quantity that customers will purchase at the going price
Demand is estimated for the planning horizon
Step 3: Comparing Market Demand with Capacity
If market demand and facility’s capacity unequal, …
Step 4: Adjusting Products to Meet Demand
Increase capacity to meet demand
Ignore excess demand
Eliminate excess capacity
Sell excess capacity for private brand production
Shut down the plant

14. Four Aspects of Operations Control
Now that I have a plan and a plant, I must start producing!!

15. Operations Control Purchasing Control
Objective: to ensure that the required materials are available when needed, in the proper amounts, and at minimum cost
Factors affecting the choice of suppliers
Quality
Reliability
Price
Credit terms
Shipping costs

16. Operations Control Inventory Control - Goal is to minimize costs
Types of inventory
Raw materials: materials that will become part of the product during the production process
Work-in-process: partially completed products
Finished-goods: completed goods
Costs of inventory
Holding costs: the investment and storage costs of inventory
Just-in-time inventory system
materials or supplies arrive at just when they are needed to minimize storage and holding costs
Stock-out costs: the costs of not having inventory available when needed

17. Operations Control Scheduling
The process of ensuring that materials and other resources are at the right place at the right time
Routing of materials: the sequence of work stations that the materials will follow
Timing of materials: when the materials will arrive at each work station

18. Scheduling: A Gantt Chart•
This chart details the job of building
three dozen electric golf carts
Source:
Robert
Kreitner ,
Management,
8th ed. Copyright © 2001 by Houghton Mifflin Company. Reprinted
with permission.

19. Operations Control Quality Control
The process of ensuring that goods and services are produced in accordance with specifications
World Quality Standards: International status quo
ISO 9000: certification for meeting quality control standards in procedures for the development and production of products
ISO 14000: certification for incorporating environmental concerns into operations and product standards