Ch 11 - Producing Goods and Services

Transcript Ch 11 - Producing Goods and Services

CHAPTER 11

Producing Goods and Services

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Learning Objectives

Explain the meaning of the term production and operations Describe the four kinds of utility provided by production and explain the two classifications of operations

processes.

Identify the characteristics that distinguish service operations from goods production and explain the main differences in the service focus.

Describe the factors involved in operations planning.

Explain some factors in operations scheduling and describe some activities involved in operations control, including materials management and the use of certain operation control tools.

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Goods and Services

Services Operations

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production activities that yield tangible and intangible service products

 entertainment  transportation  education  food preparation

Goods Production

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production activities that yield tangible products

 things you can see and touch

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Utility: Adding Value

Time Utility

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Satisfying because of when the product is available Place Utility

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Satisfying because of where the product is available Ownership (Possession) Utility

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Satisfying during its consumption or use Form Utility

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Satisfying because of the product’s form (the transformation of raw materials into a finished product) Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

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Operations/Production Management

Systematic direction and control of the processes that transform resources into finished goods Production Managers are responsible for creating utility for consumers regardless of industry Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

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The Transformation System

Production Manager s Plan Organize Schedule Control Resources Land Capital Materials Human Resources Transformation Activities

Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke

Products and Services

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Operations Processes

methods and technologies used in the production of a good or service classified by:

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type of transformation technology

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type of process (analytic or synthetic)

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Goods-Producing Processes

Transformation Technology

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Chemical processes

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Fabrication processes

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Assembly processes

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Transport processes

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Analytic vs. Synthetic Processes Analytic

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resources are broken down in production process

 extracting minerals from ore

Synthetic

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resources are combined in the production process

 Paint production

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Service-Producing Processes

Customer are involved in and can affect the transformation process

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Low-contact system

 customers do not need to be physically present to receive the service  electric power, automatic bank transfers 

High-contact system

 customers need to be physically present  haircuts, medical examinations, bus transportation

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Differences Between Goods and Services

Services are performed to meet the needs customers of

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Focus on the customers themselves

 Haircut 

Focus on their possessions

 Investments or auto repairs

Services are more customized, intangible, and perishable than goods

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consumers evaluate services differently than goods

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Focus on Performance

Customer-oriented performance is the key in measuring the effectiveness of a service firm More complex than in a goods firm

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Link between production and consumption, and between process and outcome

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Services are more intangible, more customized and less storable than goods

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Quality must be well defined

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Focus on Process and Outcome

Most services have some goods attached to them Focus on both the transformation process and its outcome Need different skills from manufacturing

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Focus on Service Characteristics

Intangibility

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Services cannot be touched, tasted, smelled, or seen Customization

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Each service is performed to the customer’s needs

 dental work, veterinary services

Unstorability

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Most services must be taken when offered or the opportunity is gone

 Plane flight

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E-Commerce: The Virtual Presence of the Customer

In a regular service environment, customers are physically present In an e-commerce environment, the customers are virtually present, with 7/24 access Unique opportunity to build customer relationships Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

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Operations Planning

Successful operations are carefully planned and implemented Key issues include

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Forecasting

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Planning

 Capacity  Location  Layout  Quality  Methods planning

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Forecasting

Estimating future demand for new and existing products

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May be short to long term (2 to 5 years) Qualitative Methods

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based on judgment and experience

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obtained from experts or groups of experts Quantitative Methods

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based on statistical projections

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Capacity Planning

The amount of a product that a firm can produce under normal conditions

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capacity should slightly exceed normal demand

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accommodate seasonal changes and peak times

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Location Planning

The decision of where to place a production facility is crucial and is based on:

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location of customers and suppliers

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availability of labour

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proximity to raw materials

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transportation costs

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taxes

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Layout Planning

Productive facilities are used for transforming raw materials

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workstations, equipment Nonproductive facilities do not transform

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storage & maintenance areas Support facilities support the organization

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Process Layout

Resources are grouped based on their function in the production process

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tasks are performed in specialized locations

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suitable for “job shops” (custom work)

 in a bakery, areas are dedicated to mixing, baking, decorating, and packaging

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Cellular Layouts

A series of areas or “cells” are created

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each cell is used to manufacture a product in a “family”

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each product in the family goes through a similar process Requires less adjustment of equipment, smaller flow distances, reduced materials handling and transit time

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clothing pockets (product family) with individual products requiring similar steps in production

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Product Layout

Resources are moved through a series of steps as they become finished goods Equipment and people are arranged in a production line for each product being produced Often use assembly lines , where products are moved along a conveyor belt or similar equipment Can be efficient and cost-effective

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streamlined production

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simplified tasks, can use unskilled labour

 automobile manufacturing, food processing

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Flexible Manufacturing Systems (FMS)

Automatic equipment produces small batches of different products on the same production line

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Linking company information systems and production systems result in an increased ability to plan for changes in consumer tastes and seasonal demand Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

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Soft Manufacturing

Emphasis on computer software and networks rather than production equipment

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does not rely on complete automation, recognizing that human labour can excel in ways that machines cannot Humans can do fine work and do not break down or wear out the way robots do Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

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Layout Planning for Producing Services

Differs for low and high contact systems Low-contact systems should be designed to enhance service production High-contact systems should be arranged to meet customer ’s needs and expectations Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

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Methods Planning

Must clearly identify:

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every production step

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the specific methods for performing them Methods improvement 1.

document the current method

 process flow chart identifies the sequence, movements and tasks

analyze to identify wasteful activities, source of delays, and other inefficiencies implement improvements, Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada

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Methods Improvement in Services

Service Flow Analysis

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shows the process flows and helps determine which processes are necessary

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Identifies areas that pose potential problems

 “fail points”

Design to control employee discretion

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enhance consistency, perhaps by automating Design for customer contact

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Service Flow Analysis for Quick Photo Finishing

1/2 minute

Customer drive-in

1 minute

Receive exposed film from customer

45 minutes

Develop film

2 minutes

Return film and collect payment

Standard execution time: 48.5 minutes Total acceptable execution time: 90 minutes

Proper development Fail point Customers will wait up to 90 minutes for photo finishing before lowering their evaluation of service quality.

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Scheduling Goods Operations

Master production schedule (top level)

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Which products will be produced

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When will production occur

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What resources will be used

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Time periods for resource use Short-term detailed schedule :

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task assignments

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order information

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Scheduling Service Operations

Scheduling work and workers

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Low-contact services:

 Scheduling based on desired completion dates and/or arrival  Less direct customer involvement  reservations and appointment systems 

High-contact services:

 Customer is directly involved in the production process  Scheduling must revolve around the customer

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Scheduling tools Gantt Charts

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diagram of steps in project and time required for each

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can be used to check progress

PERT Charts

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specifies the sequence and critical path of steps in a project

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Gantt Chart

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PERT chart

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Operations Control Operations control

= monitoring performance by comparing results to original plans and schedules

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Follow-up = checking to ensure that production decisions are being implemented

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Materials management

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Materials Management

Planning, organizing & controlling the flow of materials from purchase to distribution of finished goods

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transportation

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warehousing

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inventory control

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purchasing Standardization

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using standard and uniform components in the production process

 simplifies paperwork  reduces storage needs  eliminates unnecessary materials flow

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Supplier Selection

1) Survey possible suppliers 2) Visit and evaluate each supplier 3) Negotiate terms of service with chosen suppliers 4) Develop an ongoing order routine and maintain a positive buyer-seller relationship

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Process Control: Training Workers

Staff skills are essential to render high quality goods and services Staff manage both sales and service production

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human relations skills are vital in high-contact services

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Just-in-Time Production Systems (JIT)

Parts and components are delivered precisely when they are needed

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resources continually flowing

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reduces goods in progress and saves money

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disruptions visible and resolved quickly by continuous improvement

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Materials Requirements Planning (MRP)

Uses a computerized bill of materials to estimate production needs so resources are acquired and put into production only as needed

 fewer early arrivals  less frequent stock shortages  lower storage costs

Bill of materials

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a list of goods that are needed in the production processes, and the method of combining the resources

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Manufacturing Resource Planning (MRP II)

Advanced version of MRP Ties together all parts of the organization into the company ’s production activities

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Production

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Inventory

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Human resources

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Marketing

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Quality Control

The management of the production process so as to manufacture the goods or supply services that meet specific quality standards Business, Sixth Canadian Edition, by Griffin, Ebert, and Starke Copyright © 2008 Pearson Education Canada