1. Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Production and Operations Management CHAPTER 9

2. MANUFACTURING in the U.S. 9-2 LO 9-1 Some areas in the U.S. are experiencing economic growth while others are declining. Manufacturing in the U.S. is so productive fewer workers are needed.

3. WHAT’S MADE in the USA? Leading U.S. Manufactured Goods 9-3 LO 9-1 Source: Parade Magazine, www.parade.com, accessed November 2014.www.parade.com

4. Source: Industry Week, www.industryweek.com, accessed November 2014.www.industryweek.com MASSIVE MANUFACTURERS The Top Ten U.S. Manufacturers 9-4 LO 9-1

5. TOP-PAYING SERVICE JOBS 9-5 LO 9-1 The U.S. economy is no longer manufacturing based. 85% of jobs are in the service sector. The top-paying service jobs in the U.S. are in:  Legal services  Medical services  Entertainment  Accounting  Finance  Management consulting

6. REMAINING COMPETITIVE in GLOBAL MARKETS 9-6 LO 9-1 U.S. is still the leader in nanotechnology and biotechnology. How can U.S. businesses maintain a competitive edge?  Focusing on customers  Maintaining close relationships with suppliers  Practicing continuous improvement  Focusing on quality  Saving on costs through site selection  Relying on the Internet to unite companies  Adopting new production techniques

7. Production -- The creation of goods using land, labor, capital, entrepreneurship and knowledge (the factors of production). PRODUCTION and PRODUCTION MANAGEMENT 9-7 LO 9-2 Production Management -- All the activities managers do to help firms create goods.

8. OPERATIONS MANAGEMENT 9-8 LO 9-2 Operations Management -- A specialized area in management that converts or transforms resources into goods and services. Operations management includes:  Inventory management  Quality control  Production scheduling  Follow-up services

9. All about creating a good experience for those who use the service. OPERATIONS MANAGEMENT in the SERVICE SECTOR 9-9 LO 9-2 In hotels, like Ritz- Carlton, operation management includes fine dining, fresh flowers, and training for every employee.

10. TEST PREP 9-10 What have U.S. manufacturers done to regain a competitive edge? What must U.S. companies do to continue to strengthen the country’s manufacturing base? What led companies to focus on operations management rather than production?

11. The PRODUCTION PROCESS 9-11 LO 9-3

12. FORM UTILITY 9-12 LO 9-3 Form Utility -- The value producers add to materials in the creation of finished goods and services.

13. PROCESS and ASSEMBLY in PRODUCTION 9-13 LO 9-3 Process Manufacturing -- The part of production that physically or chemically changes materials. Assembly Process -- The part of the production process that puts together components.

14. KEY PRODUCTION PROCESSES 9-14 LO 9-3 Production processes are either continuous or intermittent. Continuous Process -- Long production runs turn out finished goods over time. Intermittent Process -- Production runs are short and the producer adjusts machines frequently to make different products.

15. MINUTE MADE Production of Some of America’s Favorite Products 9-15 LO 9-3

16. DEVELOPMENTS MAKING U.S. COMPANIES MORE COMPETITIVE 9-16 LO 9-3 1. Computer-aided design and manufacturing 2. Flexible manufacturing 3. Lean manufacturing 4. Mass customization

17. COMPUTER-AIDED DESIGN and MANUFACTURING 9-17 LO 9-3 Computer-Aided Design (CAD) -- The use of computers in the design of products. Computer-Aided Manufacturing (CAM) -- The use of computers in the manufacturing of products.

18. COMPUTER-INTEGRATED MANUFACTURING 9-18 LO 9-3 Computer-Integrated Manufacturing (CIM) -- The uniting of computer- aided design with computer- aided manufacturing. CIM is expensive but it cuts as much as 80% of the time needed to program machines to make parts.

19. FLEXIBLE MANUFACTURING 9-19 LO 9-3 Flexible Manufacturing -- Designing machines to do multiple tasks so they can produce a variety of products. Allen-Bradley uses flexible manufacturing to build motor starters.Allen-Bradley 26 machines and robots build, test and package parts.

20. LEAN MANUFACTURING 9-20 LO 9-3 Lean Manufacturing -- Using less of everything than in mass production. Compared to others, lean companies:  Take half the human effort.  Have half the defects in finished products.  Require one-third the engineering effort.  Use half the floor space.  Carry 90% less inventory.

21. MASS CUSTOMIZATION 9-21 LO 9-3 Mass Customization -- Tailoring products to meet the needs of a large number of individual customers. More manufacturers are learning to customize. Mass customization exists in the service sector too.

22. ROBOTICS and SENSING 9-22 LO 9-3 The use of robotics allows manufacturing to continue 24 hours a day. Sensors can detect problems immediately and changes can be made quickly.

23. TEST PREP 9-23 What is form utility? Define and differentiate the following: process manufacturing, assembly process, continuous process and intermittent process. What do you call the integration of CAD and CAM? What is mass customization?

24. OPERATIONS MANAGEMENT 9-24 LO 9-4 Operations management planning helps solve problems like:  Facility location  Facility layout  Materials requirement planning  Purchasing  Inventory control  Quality control

25. Facility Location -- The process of selecting a geographic location for a company’s operations. FACILITY LOCATION 9-25 LO 9-4 Rising numbers of Internet businesses means brick-and-mortar retailers must find great locations. Service vs. Manufacturing

26. OPERATIONS MANAGEMENT on the INTERNET 9-26 LO 9-4 Sometimes businesses outsource engineering, design and manufacturing to other companies. Often these relationships are managed through the Internet. Many companies are developing Internet-focused strategies.

27. SETTING UP the FACILITY 9-27 LO 9-4 Facility Layout -- The physical arrangement of resources, including people, to most efficiently produce goods and provide services. Facility layout depends on the processes performed:  Service: Help customers find products  Manufacturing: Improve efficiency

28. 9-28 Assembly Line Layout 1. Assembly Line Layout – Workers do only a few tasks at a time.

29. 9-29 Modular Layout 2. Modular Layout – Teams of workers produce more complex units of the final product.

30. Process Layout 3. Process Layout – Similar equipment and functions are grouped together.

31. 9-31 Fixed Position Layout 4. Fixed-Position Layout – Allows workers to congregate around the product.

32. MRP and ERP 9-32 LO 9-4 Materials Requirement Planning (MRP) -- A computer-based operations management system that uses sales forecasts to make sure parts and materials are available when needed. Enterprise Resource Planning (ERP) -- A newer version of MRP, combines computerized functions into a single integrated software program using a single database.

33. INVENTORY CONTROL 9-33 LO 9-4 Just-in-Time (JIT) Inventory Control -- The production process in which a minimum of inventory is kept and parts, supplies and other needs are delivered just in time to go on the assembly line. To work effectively, the process requires excellent coordination with suppliers.

34. QUALITY CONTROL 9-34 Photo Credit: Argonne National Laboratory LO 9-4 Quality -- Consistently producing what the customer wants while reducing errors before and after delivery. Six Sigma Quality -- A quality measure that allows only 3.4 defects per million opportunities.

35. STATISTICAL QUALITY CONTROL & STATISTICAL PROCESS CONTROL 9-35 LO 9-4 Statistical Quality Control -- A process used to continually monitor all phases of the production process. Statistical Process Control -- A process of testing statistical samples of product components at each stage of production. Measuring quality along the production process reduces the need for quality control at the end.

36. The BALDRIGE AWARDS 9-36 LO 9-4 Companies can apply for awards in these areas:  Manufacturing  Services  Small Businesses  Non-Profit/Government  Education  Healthcare

37. Source: National Institute of Standards and Technology, www.quality.nist.gov, accessed November 2014.www.quality.nist.gov THE WINNERS ARE… 2014 Baldrige Award Recipients 9-37 LO 9-4

38. WHAT is ISO? 9-38 LO 9-4 The International Organization for Standardization (ISO) is a worldwide federation of national standards bodies. ISO 9000 -- The common name given to quality management and assurance standards. ISO 14000 -- A collection of the best practices for managing an organization’s impact on the environment.

39. TEST PREP 9-39 What are the major criteria for facility location? What’s the difference between MRP and ERP? What’s just-in-time inventory control? What are Six Sigma quality, the Baldrige Award, ISO 9000 and ISO 14000?

40. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 9-40 Control Procedures

41. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 9-41 PERT Program Evaluation and Review Technique (PERT) A method for analyzing the tasks involved in completing a given project and estimating the time needed.

42. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 9-42 PERT Steps 1. 1.Analyzing and sequencing tasks that need to be done 2. 2.Estimating the time needed to complete each task 3. 3.Drawing a PERT network illustrating the information from steps 1 and 2 4. 4.Identifying the critical path - Sequence of tasks that takes the longest time to complete

43. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 9-43 PERT DIAGRAM

44. McGraw-Hill/Irwin Understanding Business, 7/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 9-44 Gantt Chart Named for its developer, Henry Gantt A bar graph that clearly shows what projects are being worked on and how much has been completed at any given time

45. GANTT CHART for a DOLL FACTORY 9-45 LO 9-5

46. PERT 9-46 LO 9-5 Program Evaluation and Review Technique (PERT) -- A method for analyzing the tasks involved in completing a given project and estimating the time needed.

47. STEPS INVOLVED in PERT 9-47 LO 9-5 1. Analyzing and sequencing tasks 2. Estimating the time needed to complete each task 3. Drawing a PERT network illustrating the first two steps 4. Identifying the critical path Critical Path -- The sequence of tasks that takes the longest time to complete.

48. PERT CHART for a MUSIC VIDEO 9-48

49. GANTT CHARTS 9-49 LO 9-5 Gantt Chart – A bar graph that shows what projects are being worked on and how much has been completed.

50. TEST PREP 9-50 Draw a PERT chart for making breakfast of three- minute eggs, buttered toast and coffee. Define the critical path. How could you use a Gantt chart to keep track of production?