1. Production & Operations Management
Chapter 9

2. Goals USA Manufacturing Production  Operations Management
Production Processes
Production techniques that have improved productivity in USA
Operations management planning issues
Control Procedures

3. USA Manufacturing
In recent history manufacturing has declined while the service industry has grown
70% of US GDP comes from service sector
85% of jobs comes from service sector
25% of all goods produced in world come from US manufacturing sector (largest % in world)
This means that we must study how to produce goods and services
Manufacturing industries doing well: green technology, nanotechnologies, biotechnologies
Tesla Motors (Electric carmaker)
Solyndra (solar company)
Codexis (biofuels firm)
3M (nano research done by 3M for adhesives, LCD displays and more)

4. Production  Operations Management
The creation of finished goods and services using the factors of production: land, labor, capital, entrepreneurship and knowledge.
Production Management
Term used to describe all the activities managers do to help their firms create goods
Operations management
Term used to describe all the activities managers do to help their firms create goods and services
Converting resources into goods and services

5. Operations Management
Product creation, development, production, distribution, managing purchases, inventory control, quality control, storage, logistics and evaluations
A great deal of focus is on effectiveness & efficiency of processes
Substantial measurement and analysis of internal processes in order to become more effective and efficient

6. What Is Operations Management Like At:
Appliance Manufacturer (Product)
Operations Management take raw materials, human resources, parts, supplies, paints, tools and more to make appliance
Example:
Dacor kitchen wear
List of companies manufacturing appliances in USA
Sears (Retail, Finance & Repair - Product & Service)
Operations Management covers everything: purchases, sales, finances, repairs

7. What Is Operations Management Like At:
Colleges (Service)
Operations Management take information, teachers, buildings, computers, students and creates a service that transforms students into educated people
Hospitals (Service)
Hospitals Operations Management take information, buildings, high-tech machines, computers, supplies, highly skilled labor and creates a service that transforms sick people into healthy people

8. Form Utility
The value added by the creation of finished goods and services, such as:
The value added by taking silicon and making computer chips
Putting services together to create a vacation package
The value added by taking wood, paint, labor, packaging, and other costs and making a boomerang

9. Goal of production (Andrew S. Grove – Intel)
Build and deliver products that customers demand at a scheduled delivery time
Acceptable quality
Lowest possible price

10. Production Processes Process Manufacturing Assembly Process
That part of the production process that physically or chemically changes materials
Examples:
Poor the steel into the mold to make parts for excavator
Cook steak, vegetables and rice
Assembly Process
The part of the production process that puts together components
Assemble parts to make excavator
Assemble steak, vegetables and rice to make dinner

11. Production Processes Continuous Process Intermittent Process
A production process in which long production runs turn out finished goods over time
Examples:
Tortilla factory or lumber factory
Intermittent Process
A production process in which the production run is short and the machines are changed frequently to make different products
Auto factories can switch between models
Bakers can make cakes and pies and tarts

12. Production techniques that have improved productivity in USA
CAD (Computer-aided Design)
The use of computers in the design of products
CAM (Computer-aided Manufacturing)
The use of computers in the manufacturing of products
CIM (Computer-integrated Manufacturing)
One machine that does both CAD and CAM
Expensive but cuts manufacturing costs dramatically
Examples:

13. Production techniques that have improved productivity in USA
Mass Production (Perfective in US by companies like Ford)
Make a lot of one thing
Like Henry Ford did
Flexible Manufacturing
Designing machines to do multiple tasks so that they can produce a variety of products
Lean Manufacturing (Originated in Japan)
Manufacturing that uses fewer inputs (resources) to make the same number of outputs than before. Increase productivity.
Reduce labor hours, waste, defects, floor space, inventory

14. Production techniques that have improved productivity in USA
Mass Customization
Tailoring products to meet the needs of individual customers on a mass scale
Examples:
Dell – design your own computer
Vans shoes – design your own shoe
Colleges – design your own degree
Season Tickets to Mariner Games

15. Reverse Innovation or Frugal Innovation
Reverse Innovation or Frugal Innovation (Originated in emerging markets)
Reverse Innovation or Frugal Innovation
What are needs of poor  create product
“Turbo Charged Lean Manufacturing”
Examples:
Tata Motors (Indian Company) makes $2200 car
Kenya leads the world in mobile phone money transfer
GE R & D labs in Bangalore, India makes hand-held ECG (electrocardiogram) for $800 (instead of $2000)
TCS (India) create inexpensive water filter from rice husks (waste product)
Narayana Hrudayalaya Hospital (India) Heart Surgery for $2000 (same success rate as US)
BYD (China) makes lithium batteries for $12 (instead of $40)

16. Reverse Innovation or Frugal Innovation
Key ideas:
Dramatically reduce costs by:
Redesign products & processes
Applying division of labor (expert does what they are expert at) and economies of scale in new areas like surgery
Listening to what the poor need
Product must be tough and easy to use
Use minimal raw materials
Not harsh on environment

17. Reverse Innovation or Frugal Innovation
Rethinking Production processes:
Contract out more work and stick to core competency
Use existing technology in new ways
Computers are rare in India and TVs are common, so TCS designed a box that connects mobile phone (can get internet) to TV
Narayana Hrudayalaya Hospital
1000 beds instead of more common 200 (economies of scale)
Surgeons can specialize in one operation and become that best at the one operations

18. Operations Management Planning Issues (Manufacturing And Service):
Facility location
Facility layout
Materials requirement planning
Purchasing
JIT (just-in-time inventory) control
Quality control

19. Operations Management Planning
Facility Location
The process of selecting a geographic location for a company’s operations
Considerations:
Less expensive property, labor, logistic costs
Location, Location, Location
Attractive communities to live in – life style to attract employees
Are suppliers close?
Are there enough customers or employees?
Tax breaks
Can we just do things on the internet? Retail or engineer?

20. Operations Management Planning
Facility Layout
The physical arrangement of resources (including people) in the production process
Products:
Services:
Aravind Eye Hospital (India): 4 operating beds next to each other and 2 doctors

21. Operations Management Planning
MRP (Material Requirement Planning)
A computer-based production management system that uses sales forecasts to make sure that needed parts and materials are available at the right time and place (for a single firm)
ERP (Enterprise Resource Planning)
A computer application that enables multiple divisions or firms to manage all of their operations (finance, requirements planning, human resources and order fulfillment) on the basis of a single, integrated set of corporate data
ERP Programs help to bring operations management to the Internet

22. Operations Management Planning
Purchasing
The function in a firm that searches for quality material resources, finds the best suppliers, and negotiates the best price for the goods and services
Pays all bills that allow discounts during the discount period
2/10/net 30
$1000 owed
Discount if pay within 10 days = $1000*.02 = $20
$20 discount for paying 20 days early
Annual rate earned = (1+.02)^(365/20)-1 = 43.53%

23. Operations Management Planning
JIT (Just-in-time Inventory Control)
The production process in which a minimum of inventory is kept on the premises and parts, supplies, and other needs are delivered just in time to go on the assembly line
Reduces storage costs, facility space, obsolesces
Requires close ties with suppliers

24. Operations Management Planning
Quality
Consistently producing what the customer wants while reducing errors before and after delivery to the customer
The before in the most important
Statistical Quality Control (SQC)
Statistics used to continually monitor quality
Six Sigma Quality (Six Standard Deviation Quality)
A quality measure that allows only 3.4 defects per million opportunities

25. Control Procedures Pert Charts (Critical Path) Gantt Charts
A method for analyzing that tasks involved in completing a given project
The Critical Path is the path that takes the longest and this is most critical to avoid delays on this path
Gantt Charts
Bar graph showing production managers what projects are being worked on and what stage they are in any given time

26. How Manufacturers Have Become More Effective
Focus more on customers
Maintain close relationships
Continuous improvement
Focus on quality
Save costs through site selection
Rely on the Internet to unite partners
New production techniques
Looking overseas to get new ideas for production and innovation in providing goods and services