McGraw-Hill/Irwin

Operations Management: Managing Vital Operations and Processes

Chapter Fourteen

Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

LO1

Explain the role of operations management in achieving superior quality, efficiency, and responsiveness to customers.

LO2

Describe what customers want, and explain why it is so important for managers to be responsive to their needs.

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Learning Objectives (cont.)

LO3

Explain why achieving superior quality in an organization’s operations and processes is so important.

LO4

Explain why achieving superior efficiency is so important.

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Operations Management

•

Operations Management

– The management of any aspect of the production system that transforms inputs into finished goods and services 14-4

Operations Management •

Production System

– The system that an organization uses to acquire inputs, convert inputs into outputs, and dispose of the outputs 14-5

Operations Management •

Operations Manager

– Manager who is responsible for managing an organization’s production system and for determining where operating improvements might be made 14-6

Question?

What is action taken to meet the demands and needs of customers?

A.

B.

C.

Quality Efficiency Responsiveness to customers D.

Effectiveness 14-7

Operations Management • •

Quality

– goods and services that are reliable, dependable, or psychologically satisfying

Efficiency

– amount of inputs required to produce a given output 14-8

Operations Management

•

Responsiveness to customers

– action taken to meet the demands and needs of customers 14-9

Figure 14.1

The Purpose of Operations Management 14-10

Improving Responsiveness to Customers •

Without customers, organizations would cease to exist.

– Non-profit and for-profit firms all have customers.

– Managers need to identify who the customer is and their needs.

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What do customers want?

•

Usually customers prefer:

– A lower price to a higher price – High-quality products to low-quality products – Quick service to slow service – Many features over few features.

– Products that are customized or tailored to their specific needs 14-12

Designing Production Systems to Be Responsive to Customers • • The attributes of an organization’s outputs—their quality, cost, and features—are determined by the organization’s production system Since the ability of an organization to satisfy the demands of its customers derives from its production system, managers need to devote considerable attention to constantly improving production systems 14-13

Customer Relationship Management •

Customer relationship management (CRM)

– technique that uses IT to develop an ongoing relationship with customers to maximize the value an organization can deliver to them over time 14-14

Improving Quality

The concept of quality applies the products of both manufacturing and service firms

– A firm that provides higher quality than others at the same price is more responsive to customers.

– Higher quality can also lead to better efficiency through lower waste levels and operating costs.

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Impact of Increased Quality on Organizational Performance Figure 14.2

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Improving Efficiency

• The fewer the inputs required to produce a given output, the higher the efficiency of a production system 14-17

Improving Efficiency •

A common measure of the organization’s efficiency of turning all of the inputs into outputs is called total factor productivity:

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Improving Efficiency •

A comparison measure of a single input (such as labor) to total output is called partial productivity:

14-19

Facilities Layout, Flexible Manufacturing, and Efficiency •

Facilities Layout

– The operations management technique whose goal is to design the machine-worker interface to increase production system efficiency.

14-20

Facilities Layout, Flexible Manufacturing, and Efficiency •

Flexible Manufacturing

– Operations management techniques that attempt to reduce the setup costs associated with a production system.

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Figure 14.3

Three Facilities Layouts

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Discussion Question Which facilities layout is best?

A.

B.

C.

Product layout Process Layout Fixed-Position Layout 14-23

Facilities Layout •

Product layout

– Machines are organized so that each operation is performed at work stations arranged in a fixed sequence.

– Example: mass production systems where workers are stationary and a belt moves work to them.

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Facilities Layout •

Process Layout

– Self contained work stations not organized in a fixed sequence.

– Provides flexibility in making a wide variety of products tailored to customers.

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Facilities Layout •

Fixed-Position Layout

– The product stays in a fixed spot and components produced at remote stations are brought the product for to final assembly.

– Large jet aircraft assembly uses this type of layout.

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Changing a Facilities Layout

Figure 14.4

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Flexible Manufacturing •

Most firms face major expenses when setting up to produce a product.

– These costs must be paid before production begins.

– The more often products to be built change, the higher setup costs become.

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Flexible Manufacturing •

Flexible manufacturing reduces setup costs by reducing the time required to reset the production line for a different product.

– Using easily replaced manufacturing equipment – Redesigning the production system itself to be more productive.

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Just-in-Time Inventory and Efficiency •

Inventory

– the stock of raw materials, inputs, and component parts that an organization has on hand at a particular time 14-30

Just-in-Time Inventory and Efficiency •

Just-in-Time (JIT) Inventory

– System in which parts arrive at an organization when they are needed, not before 14-31

Just-in-Time Inventory and Efficiency • A drawback to JIT is that a firm does not maintain a large buffer stock of parts which makes the firm vulnerable to strikes or supply problems that can quickly deplete on-hand inventories.

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Self-Managed Work Teams •

Self-managed teams boost efficiency by allowing for a flatter organization structure.

– The team takes on the role of the supervisor.

– Teams working together often become very skilled at enhancing productivity.

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Question A.

B.

C.

D.

What is the rethinking and redesign of the business process to achieve dramatic improvement in critical measures of performance?

Corporate efficiency Process redesign Process re-qualification Process reengineering 14-34

Process Reengineering and Efficiency •

Process Reengineering

– The fundamental rethinking and radical redesign of the business process to achieve dramatic improvement in critical measures of performance such as cost, quality, service, and speed 14-35

Process Reengineering and Efficiency • •

Process Reengineering:

Boosts efficiency by directing efforts to activities that add value to the good or service produced Top managers must support efficiency improvements for them to be accepted by workers 14-36

Video Case: CVS How can a company like CVS grow in size yet maintain its organizational agility?

How does CVS respond to its customers? 14-37