Transcript Hitt/Black/Porter: Management 1st ed.

Operations Management
Operations Management (OM): a
specialized field of management
associated with the conversion or
transformation of resources into products
and services
• Old term: production and operations
management (POM)
• Strategically important
Objectives of Operations
Management
4 main objectives of operations managers
– Managing product/service quality
– Planning quantity and capacity
– Timing product and services
– Achieving the best possible cost
Managing Quality
Quality: a measure of how well a product or
service performs its intended purpose,
including:
• How reliable it is
• How easy it is to service or repair when it
does break down
• “Fitness for Use”
Why is Quality Important?
Higher quality can lead to:
• Higher efficiency
• Higher effectiveness
– Revenues and margins
• Lower costs
• Improves customer satisfaction
• Improved customer retention
Total Quality Management
(TQM)
TQM: a management philosophy that:
• Focuses on continual improvement
• Emphasizes quality inspection at all stages
of the production or service output
• Encompasses a commitment from
employees at all levels
• Simultaneous achievement of lower costs,
higher quality, and enhanced customer
service
Total Quality Management
(TQM)
Important TQM concepts:
Statistical Process Control (SPC)
Continuous Process Improvement
Six Sigma
Employee Empowerment
TQM Concepts:
Statistical Process Control
Statistical Process Control: a quantitative
tool to aid in making decisions concerning
how well a process is performing
• Used to track and highlight results and to
identify unacceptable deviations
• Typically involves the use of control charts
– Establishes upper and lower levels of
acceptable quality
– Products outside limits are investigated
Quality Control Charts
Adapted from Exhibit 13.2
TQM Concepts:
Continuous Process Improvement
Continuous process improvement: refers
to both incremental and breakthrough
improvements in the way an organization
does business
• Also known as
– Business process reengineering (BPR) and
– Kaizan in Japan
• Five key elements:
– Objective, Design, Capabilities, Infrastructure, Metrics
TQM Concepts:
Six Sigma
Six Sigma: a disciplined, data-driven approach for
eliminating defects and enhancing quality with an
orientation toward the impact such improvements
will have on the customer
• Six Sigma = no more than 3.4 defects per million
opportunities
• Quality is improved two ways:
– DMAIC process (define, measure, analyze, improve,
control) focused on improving existing processes
– DMADV process (define, measure, analyze, design,
verify) focused on the development of new processes
TQM Concepts:
Employee Empowerment
Empowerment: the sharing of power with
others, where those with high amounts of power
increase the power of those with less, especially
with regard to decision making
By empowering employees, organizations can:
• Engage the expertise of employees
• Allow them to feel responsible for quality
• Allow managers to understand and
communicate the TQM vision
Quantity and Capacity Planning
• Capacity planning: determining how much a firm should
produce of a particular product or service
• Design capacity: the maximum capacity that can be
attained under ideal conditions
• Effective capacity: the percent of design capacity a
facility is actually expected to maintain
Effective
Capacity
=
Expected Capacity
Design Capacity
Quantity and Capacity Planning:
Inventory Management
• Materials requirement planning (MRP): a
sophisticated computer system that can be
used to “get right materials to right place at
right time”
• Economic order quantity (EOQ): used to
order economical quantity of product so
that total inventory costs are minimized
• ABC analysis: categorizes which
inventory items require most control and
attention
Timing Products and Services
Delivery of products and services must be
timed well to avoid both “stocks-outs” and
excess inventory
• Three important concepts:
– Just-in-time (JIT) systems
– Gantt charts
– PERT and CPM charts
Timing Products and Services:
Just-in-Time (JIT) System
• Objective: produce product or service only
as needed with only the necessary
materials, equipment, and employee time
that will add value
• Benefits:
– Reduces inventory levels (and lowers carrying
cost of inventory)
– Improves productivity
– Increases customer satisfaction
Timing Products and Services:
Gantt Charts
May
Contact clients
Obtain contract specs
Submit bid
Receive feedback
Revise bid
Submit revised bid
Final approval or
rejection
Complete bid review
June
July
Aug
Sep
Oct
Nov
Timing Products and Services:
PERT/CPM Charts
Prepare
permits
Start
Develop
plans
Select
contractor
Tenant
approval
Obtain
permits
Construction
Open
store
Move into
store
Achieving the Best Cost
• Productivity measures how well an
organization is using its resources (inputs)
to produce goods and services (outputs)
Productivity
=
Output
Input
Achieving the Best Cost: Work
Standard
Work standard: amount of time it should take
for a trained employee to complete a
specific activity or process
• Two work measurement techniques:
– Time and motion studies
• Review each activity in detail so that unnecessary
steps are eliminated
– Work sampling
• Take a sample of workers and calculate
percentage of time spent on each activity during a
working day or shift
Achieving the Best Cost:
Production Processes
Continuous
Flow
Low
Assembly
Line
Flexibility
Small
Batch
Job
Shop
High
High
Economies of Scale
Low
Achieving the Best Cost:
Production Processes
• Economies of Scale
• Learning Effects
– The Learning/Experience Curve
• Flexible Manufacturing Systems
– Automation of a production line by controlling
and guiding all machinery by computer
– Attempt to capture both economies of scale
and learning effects
Achieving the Best Cost:
Technology
• Computer-aided design (CAD) and Computeraided engineering (CAE)
– Computerized systems used to design new products,
modify existing ones, and test prototypes
• Computer-aided manufacturing (CAM)
– the use of computers to direct manufacturing
processes
• Designing for manufacturing (DFM)
– designing products for ease of manufacturing to
maximize their functionality for customers
Managing the Supply Chain
Supply chain is:
• Coordinated system of resources,
information, activities, people, and
organizations
• Involved in moving a product or
service from raw materials to
components
• Into a finished product or service
• Delivered to the end customer
Suppliers
Manufacturer
Distributor
Retailer
Customer
Managing the Supply Chain:
Using Technology
• Electronic data interchange (EDI): the
integration and real-time exchange of
supply chain information that allows supply
chain managers to manage complicated
relationships and processes
• Web-based systems