1. Management, by Williams South-Western College Publishing Copyright © 2000 Chapter 15 Managing Service and Manufacturing Operations

2. Management, by Williams South-Western College Publishing Copyright © 2000 2 What Would You Do? Producing a Daily Paper at Newsday 4How can late-breaking stories be included in the paper? 4How can quality and productivity be improved? 4In terms of production, should they focus on efficiency or flexibility?

3. Management, by Williams South-Western College Publishing Copyright © 2000 3 After discussing this section, you should be able to: Learning Objectives Managing for Productivity and Quality ¬discuss the kinds of productivity and their importance in managing operations. ­explain the role that quality plays in managing operations.

4. Management, by Williams South-Western College Publishing Copyright © 2000 4 Productivity Why Productivity Matters Kinds of Productivity

5. Management, by Williams South-Western College Publishing Copyright © 2000 5 Why Productivity Matters Higher Productivity Lower Costs Lower Prices Higher Market Share Higher Profits Higher Standard of Living

6. Management, by Williams South-Western College Publishing Copyright © 2000 6 Kinds of Productivity 4Partial productivity = Outputs Single Kind of Input 4Multifactor productivity = Outputs Labor + Capital + Materials + Energy

7. Management, by Williams South-Western College Publishing Copyright © 2000 7 Quality Quality-Related Service Characteristics Quality-Related Product Characteristics ISO 9000 Malcolm Baldrige National Quality Award Total Quality Management

8. Management, by Williams South-Western College Publishing Copyright © 2000 8 Quality-Related Product Characteristics 4Reliability Tthe average time between breakdowns 4Serviceability Tthe ease with which a product is fixed 4Durability Tmean time to failure

9. Management, by Williams South-Western College Publishing Copyright © 2000 9 Quality-Related Product Characteristics Assurance Tangibles Reliability Responsiveness Empathy

10. Management, by Williams South-Western College Publishing Copyright © 2000 10 ISO 9000 4A series of five international standards 4Certifies quality processes 4Managers often want this to improve customer satisfaction

11. Management, by Williams South-Western College Publishing Copyright © 2000 11 Malcolm Baldrige National Quality Award 4Given to U.S. companies 4Recognizes achievement in quality 4Winners have been financially successful

12. Management, by Williams South-Western College Publishing Copyright © 2000 12 Total Quality Management Customer Focus and Satisfaction Continuous Improvement Teamwork

13. Management, by Williams South-Western College Publishing Copyright © 2000 13 After discussing this section, you should be able to: Learning Objectives Managing Operations ®explain the essentials of managing a service business. ¯describe the different kinds of manufacturing operations. °describe why and how companies should manager inventory levels.

14. Management, by Williams South-Western College Publishing Copyright © 2000 14 Service Operations Service- Profit Chain Service Recovery and Empowerment

15. Management, by Williams South-Western College Publishing Copyright © 2000 15 Service-Profit Chain Internal Service Quality Employee SatisfactionService CapabilityHigh Value ServiceCustomer Satisfaction Customer Loyalty Profit and Growth Adapted From Figure 15.2

16. Management, by Williams South-Western College Publishing Copyright © 2000 16 Service Recovery and Empowerment 4Service recovery is restoring customer satisfaction to strongly dissatisfied customers 4Empowering workers is one way to speed up service recovery

17. Management, by Williams South-Western College Publishing Copyright © 2000 17 Manufacturing Operations Amount of Processing in Manufacturing Operations Amount of Processing in Manufacturing Operations Flexibility of Manufacturing Operations Flexibility of Manufacturing Operations

18. Management, by Williams South-Western College Publishing Copyright © 2000 18 Amount of Processing in Manufacturing Operations 4Make-to-order operations Tmanufacturing doesn’t begin until an order is placed 4Assemble-to-order operations Tused to create semi-customized products 4Make-to-stock operations Tmanufacture standardized products

19. Management, by Williams South-Western College Publishing Copyright © 2000 19 Flexibility of Manufacturing Operations Least FlexibleMost Flexible Continuous- Flow Production Line- Flow Production Batch Production Job Shops Project Manufacturing Adapted From Figure 15.3

20. Management, by Williams South-Western College Publishing Copyright © 2000 20 Back to the Future Software Simplifies Operations Management 4Sophisticated mathematical and statistical models Tnow in easy to use software 4Examples: TResources in Motion Management System (RIMMS) TROBCAD

21. Management, by Williams South-Western College Publishing Copyright © 2000 21 Inventory Types of Inventory Managing Inventory Costs of Maintaining an Inventory Measuring Inventory

22. Management, by Williams South-Western College Publishing Copyright © 2000 22 Types of Inventory Raw Materials Vendors Distribution Centers Field Warehouses Wholesalers Retailers Component Parts Fabrication Work-in- Progress Initial Assembly Finished Goods Final Assembly Adapted From Figure 15.4

23. Management, by Williams South-Western College Publishing Copyright © 2000 23 Measuring Inventory 4Average aggregate inventory Tthe average overall inventory for a certain time period 4Stockout Trunning out of inventory 4Inventory turnover Tthe number of times a year that a company sells its average inventory

24. Management, by Williams South-Western College Publishing Copyright © 2000 24 Blast From The Past Guns, Geometry, and Fire 4Whitney and standardized parts Tinterchangeable parts Tfewer defects 4Monge’s 3-dimensional drawings Tmore precise designs 4Fire led to just-in-time at Oldsmobile

25. Management, by Williams South-Western College Publishing Copyright © 2000 25 Costs of Maintaining an Inventory 4Ordering costs Tall associated costs with ordering goods 4Setup costs Tchanging goods produced 4Holding costs Tcarrying inventory 4Stockout costs Trunning out of inventory

26. Management, by Williams South-Western College Publishing Copyright © 2000 26 Managing Inventory Economic Order Quantity Kanban Just-in-Time Materials Requirement Planning Independent Demand Systems Dependent Demand Systems

27. Management, by Williams South-Western College Publishing Copyright © 2000 27 Been There, Done That 4America has focused on quality, not cost management 4Eliminating muda is important 4Must focus on gemba Mr. Kaizen

28. Management, by Williams South-Western College Publishing Copyright © 2000 28 What Really Happened? Producing a Daily Paper at Newsday 4Reduce delays by reducing production problems 4Moved up most closing times but extended it for sports 4Used both JIT and MRP