1. PowerPoint Presentation to Accompany Management, 10/e John R. Schermerhorn, Jr. Prepared by: Jim LoPresti University of Colorado, Boulder Published by: John Wiley & Sons, Inc. Chapter 18: Operations and Services Management

2. Management 10/e - Chapter 182 Planning Ahead — Chapter 18 Study Questions  What are the essentials of operations management?  What are the essentials of value chain management?  How do organizations manage service and product quality?  How can work processes be designed for productivity?

3. Management 10/e - Chapter 183 Study Question 1: What are the essentials of operations management?  Operations management Managing productive systems that transform resources into finished products, goods, and services for customers. Typical operations management decisions include:  Resource acquisition  Inventories  Facilities  Workflows and technologies  Product quality

4. Management 10/e - Chapter 184 Study Question 1: What are the essentials of operations management?  Productivity Quantitative measure of the efficiency with which inputs are transformed into outputs. Productivity = Output / Input.  Competitive advantage A core competency that clearly sets an organization apart from competitors and gives it an advantage over them in the marketplace.

5. Management 10/e - Chapter 185 Study Question 1: What are the essentials of operations management?  Companies may achieve competitive advantage in many ways, including:  Product innovations  Customer service  Speed to market  Manufacturing flexibility  Product/service quality

6. Management 10/e - Chapter 186 Study Question 1: What are the essentials of operations management?  Technology The combination of knowledge, skills, equipment, computers, and work methods used to transform resource inputs into organization outputs.  Manufacturing technology.  Service technologies.

7. Management 10/e - Chapter 187 Study Question 1: What are the essentials of operations management?  Core manufacturing technologies: Small-batch production.  A variety of custom products are tailor-made to order. Mass production.  A large number of uniform products are made in an assembly-line system. Continuous-process production.  A few products are made by continuously feeding raw materials through a highly automated production system with largely computerized controls.

8. Management 10/e - Chapter 188 Study Question 1: What are the essentials of operations management?  Manufacturing technology trends Robotics Flexible manufacturing systems Mass customization Cellular layouts Computer-integrated manufacturing Lean production Design for disassembly Remanufacturing

9. Management 10/e - Chapter 189 Study Question 1: What are the essentials of operations management?  Core service technologies : Intensive technology  Focuses the efforts of many people with special expertise on the needs of patients or clients. Mediating technology  Links together parties seeking a mutually beneficial exchange of values. Long-linked technology  Functions like mass production, where a client is passed from point to point for various aspects of service delivery.

10. Management 10/e - Chapter 1810 Study Question 2: What are the essentials of value chain management?  Value chain Sequence of step-by-step activities resulting in finished goods or services with customer value.  Supply chain management Supply chain management is the strategic management of all operations relating to an organization’s resource suppliers.

11. Management 10/e - Chapter 1811 Figure 18.1 Elements in an organization’s value chain.

12. Management 10/e - Chapter 1812 Study Question 2: What are the essentials of value chain management?  Inventory control Goal is to ensure that inventory is just the right size to meet performance needs, thus minimizing the cost. Methods of inventory control:  Economic order quantity  Just-in-time scheduling

13. Management 10/e - Chapter 1813 Study Question 2: What are the essentials of value chain management?  Inventory control Economic order quantity  Inventory replenished with fixed quantity order when inventory falls to predetermined level. Just-in-time scheduling  Materials arrive at workstation or facility ‘just-in-time’ for use.  Virtually eliminates carrying costs of inventories.

14. Management 10/e - Chapter 1814 Figure 18.2 Inventory control by economic order quantity (EOQ).

15. Management 10/e - Chapter 1815 Study Question 2: What are the essentials of value chain management?  Break-even analysis Determination of the point at which sales revenues are sufficient to cover costs. Break-Even Point = Fixed Costs / (Price – Variable Costs) Used in evaluating:  New products  New program initiatives

16. Management 10/e - Chapter 1816 Figure 18.3 Graphical approach to break-even analysis.

17. Management 10/e - Chapter 1817 Study Question 3: How do organizations manage service and product quality?  Customer relationship management – Establishes and maintains high standards of customer service in order to strategically build lasting relationships with and add value to customers. External customers purchase the organization’s goods or utilize its services. Internal customers are the persons and groups within an organization who depend on the results of others' work to do their own jobs.

18. Management 10/e - Chapter 1818 Study Question 3: How do organizations manage service and product quality?  Customer Relationship Management (CRM) Uses latest technologies for intensive customer communication and collection of data regarding customer needs and desires. Establishes and maintains high standards of customer service.

19. Management 10/e - Chapter 1819 Figure 18.4 The importance of external and internal customers.

20. Management 10/e - Chapter 1820 Study Question 3: How do organizations manage service and product quality?  Total quality management (TQM) Quality principles are an integral part of organization’s strategic objectives.  Applying them to all aspects of operations.  Committing to continuous improvement.  Striving to meet customers’ needs by doing things right the first time.

21. Management 10/e - Chapter 1821 Study Question 3: How do organizations manage service and product quality?  ISO (International Standards Organization) certification Adopted by many countries as quality benchmark. Companies undergo rigorous audit to determine if ISO requirements are met. Focus is on customer service and product quality.

22. Management 10/e - Chapter 1822 Study Question 3: How do organizations manage service and product quality?  Quality and Continuous Improvement W. Edwards Deming emphasized:  Constant innovation.  Use of Statistical methods.  Training in the fundamentals of quality assurance. Continuous improvement Quality circles

23. Management 10/e - Chapter 1823 Study Question 3: How do organizations manage service and product quality?  Continuous improvement Constant search for new ways to improve current performance. Reduce cycle time between order receipt and delivery.  Quality circle Small group of workers who meet to improve quality Assumes responsibility for quality Taps into members’ creativity

24. Management 10/e - Chapter 1824 Study Question 3: How do organizations manage service and product quality?  Statistical quality control Uses rigorous statistical analysis for checking processes, materials, products, and services to ensure that they meet high standards.  Takes random work samples  Measures quality in samples  Determines acceptability  Unacceptable quality results in corrective action  “Six Sigma” common example of SQC

25. Management 10/e - Chapter 1825 Figure 18.5 Sample control chart showing upper and lower control limits.

26. Management 10/e - Chapter 1826 Study Question 4: How can work processes be designed for productivity?  Process reengineering Systematic and complete analysis of work processes. Design of new and better work processes.  Work process “A related group of tasks that create a result of value for the customer.” (Michael Hammer)  Workflow Movement of work from one point to another in the manufacturing or service delivery process.

27. Management 10/e - Chapter 1827 Study Question 4: How can work processes be designed for productivity?  Process value analysis Core processes are identified and evaluated for their performance contributions.  Each step in workflow is examined  Step is eliminated if not found to be important, useful, and contributing to the value added

28. Management 10/e - Chapter 1828 Study Question 4: How can work processes be designed for productivity?  Steps in reengineering core processes: Identify core processes. Map core processes in respect to workflows. Evaluate all tasks for core processes. Search for ways to eliminate unnecessary tasks or work. Search for ways to eliminate delays, errors, and misunderstandings. Search for efficiencies in how work is shared and transferred among people and departments.

29. Management 10/e - Chapter 1829 Figure 18. 6 How reengineering can streamline work processes.

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