Transcript Management Now

Chapter
12
Operations Control
Learning Outcomes
1. Understand the basic requirements for
controlling operating costs
2. Define quality from the perspective of an
operations manager
3. Explain the concept of total quality
management (TQM)
Learning Outcomes
4. Define the following terms: continuous
improvement, kaizen, six sigma, lean
manufacturing and quality at the source
5. Understand the difference between raw
material, in-process and finished-goods
inventory classifications
6. Explain the concept of just-in-time (JIT)
inventory
Operations Control
• Effective Operations systems
• Design
• Control
• Process monitored and quality ensured
• Controlling Operations Costs
• Variable overhead expenses
• Fixed overhead expenses
• Budgets
• Compare budgeted costs to actual
Quality Management
• Quality from perspective of manager
• Achieve product/service specifications
• Affect of quality on the organization
•
•
•
•
Loss of business
Liability
Costs
Productivity
• Total customer response program to transfer
workplace quality to customer dealings
• Quality assurance
Quality Management
• Quality assurance
• Build quality into the product, instead of
inspecting quality in
• All employees should be responsible for quality
• W. Edwards Deming:
• Cause of poor quality: system, not the employees
• Management needs to correct system
Total Quality Management (TQM)
• Manages entire organization so that it excels
in all dimensions of products and services
important to the customer
• Getting Started with TQM
•
•
•
•
Find out what customers want
Design a product or service to meet wants
Keep track of results
Extend concepts to suppliers and distribution
Implementing TQM
• Demonstrate top-down commitment
• Set tough improvement goals
• Determine critical measurement factors
• Identify costs
• Rely on teamwork
• Allow time to see progress
• Key internal task: culture change
Barriers to TQM
• Lack of consistency of purpose on the part of
management
• An emphasis on short-term profits
• An inability to modify personnel review
systems
• Mobility of management (job hopping)
• Lack of commitment to training and failure to
instill leadership that is change-oriented
• Excessive costs
Total Quality Management (TQM)
• Continuous Improvement
• Kaizen
• Incremental refining of existing processes
• Taking small steps to improve workplace
• Quality at the Source
• Each employee responsible for his or her work
• Six Sigma
• Precise set of statistical tools for continuous
improvement
Total Quality Management (TQM)
• ISO 9000
• International Organization for Standardization
• International body that creates standards to facilitate
the exchange of goods internationally
• Outlined quality system requirements
• ISO 14000
• Series of voluntary international standards
covering environmental management tools and
systems
Total Quality Management (TQM)
• Zero Defects
• Attempts to create a positive attitude toward the
prevention of low quality
• Extensive communication regarding the
importance of quality
• Organization-wide recognition
• Problem identification by employees
• Employee goal setting
Total Quality Management (TQM)
• Malcolm Baldrige Awards
• An award given to honor companies’ quality
achievements
Types of Quality Control
• Product quality control
• Quality is being evaluated with respect to a batch
of products or services
• Process quality control
• Monitoring quality while the product or service is
in process
Types of Quality Control
• Acceptance sampling
• Method of predicting the quality of a batch by
taking a sample from the batch
• Used for the following reasons:
• Cost of passing defective items not great relative to the
cost of inspections
• Inspection requires destruction of product
• Sampling produces faster results
Types of Quality Control
• Process control chart
• Time-based graphic that shows whether a
machine or process is producing output at the
expected quality level
• Charts calculate the desired level of a
characteristic
• Calculate upper & lower limits to determine how much
characteristic can vary before machine/process is
considered out of control
Inventory Control
• Raw materials
• The parts that go into making a completed good
• In process
• Products that are not finished yet, but have
entering the manufacturing system
• Finished goods
• Goods that are finished and ready for shipping
Inventory Control
• Inventories allow for:
• Purchase, produce and ship in economic lot sizes
rather than in small jobs
• Produce on a smooth, continuous basis even if the
demand for the finished product or raw material
fluctuates
• Prevent major problems when forecasts of
demand are in error or when unforeseen
slowdowns or stoppages in supply or production
occur
Jus- in-Time (JIT) Inventory Systems
• A system that schedules materials to arrive
and leave as they are needed. In other words,
large inventories are not kept in stock
Tracking Inventory
• Bar code technology reduces errors in
tracking inventory
• RFIP
• Physical inventory
• Process of counting the number of units a
company has in stock
• Independent demand items
• Finished goods or end products that are sold or
shipped as opposed to being used in making
another product
Just-in-Time (JIT) Inventory Systems
• Dependant demand items
• Goods that are subassemblies or component
parts, which are used to make some finished
product
• ABC classification system
• Manages inventories based on the total value of
their usage per unit of time
• Grouping items establishes appropriate control
over each item
Just-in-Time (JIT) Inventory Systems
• Safety stock
• Accommodates unexpected changes in demand
• Ordering costs include costs of preparing an
order, shipping costs and setup costs
• Economic ordering quality refers to the point at
which ordering costs equal carrying costs