Transcript Slide 1

BUSİNESS
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Chapter 9: Production and Operations
Management
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Production and operations management is the set of
activities aimed at planning, organizing, directing,
staffing, and controlling the resources used to
convert raw materials into finished goods and
services.
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The Inputs and Outputs of Production
Every firm must have a production system. A
production system is one that converts inputs(raw
materials, labor, capital) into outputs (goods or
services).
The successful university converts entering
freshmen (inputs) into educated graduates (outputs).
Auto-manufacturing plant takes labor, steel, and
glass and uses its machinery to produce cars for us.
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Inputs: All production systems require certain
resources as inputs
Capital
Material
Human
Financial
Information
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Capital resources include the physical plant and
equipment.
Human resources include skilled labor, unskilled
labor, and managers. Skilled workers can perform
special tasks that cannot be performed by all
employees.
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Financial resources include money that comes from
the owners’ own funds or from
borrowing.Corporations often sell shares of stock to
obtain additional financial resources.
Information resources. Firms are making increasing
use of information resources. Knowledge and
information are becoming increasingly important
inputs in high-tech economy.
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Outputs
The outputs of production can be divided into two broad
classes consumer products and industrial products.
Consumer products are goods and services that
individuals and households buy. Such as cornflakes,
cars, clothes, haircuts, dry cleaning etc…
Industrial products are bought mostly by businesses or
by institutions. They include tangible goods such as
steel for cars, bricks for building, and wood for pencils.
Industrial services include market research reports,
legal advice and security systems.
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The output has to be designed carefully. It must
meet the customers’ needs and it must be profitable.
To be effective, a product’s (or service’s) design
should be simple, easy to use and easy to
manufacture.
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Types of Production Processes
There are two main types of production processes:
contionuous and intermittent production.
A continous production process is a production
process that operates more or less continuosly. The
process is highly automated. This means that little
human supervision is needed because computers
and machines can deal with nearly everything.
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An intermittent production process starts and stops
and starts again, perhaps several times per hour.
There are three types of intermittent production
systems: unit, batch, and mass production.
A unit production system produces small quantities
of product, often one at a time. Ships, homes are
usually built this way.
Batch production involves producing products in
small batches. Two or three at a time or twenty
gallons at a time.
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Mass production involves producing a large number
of standardized items in a standardized manner.
The mass production process depends upon four
elements: standardization, mechanization,
specialization, and the assembly line.
For a product to be mass-produced efficiently, it
must be more or less standardized. Mass production
also depends on mechanization, a heavy reliance
on machines for producing the work. In general, the
machines that do each job are specialized. They are
set up to do one specfic job over and over and over
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again.
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Mass production usually relies on an assembly line.
An assembly line consists of a fixed sequence of
specialized machines and work stations for
producing a product.
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Analytic and Synthetic Processes: Intermittent and
continuous processes often are classified as either
analytic or synthetic.
An analytic production system starts with raw
material and then breaks it down into one or more
finished products.
A synthetic production system manufactures take a
variety of raw materials and blend them into finished
product.
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Analytic systems break down raw materials to
produce a finished product; synthetic systems build
up raw materials into a finished product.
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Designing Convential Production Systems
This task requires that three decisions be made:
Where to locate the plant
What type of production process to use
How to lay out the physical facilities
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Plant Location Plant location decisions are important.
They affect overall costs, employee morale and many
other elements of a firm’s operation. The factors most
important in choosing a location were
Favorable labor climate is essential. Managers look at
more than just the size of the labor force, they also
consider its education level and attitude toward work.
Ability to keep control of the costs of doing business.
An economy diverse enough to weather economic
downturns.
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Adequate infrastructure-airports, highways, water
supplies- to support population growth; moving raw
materials and finished products requires an
adequate system of highways, railroads, airports,
and waterways.
Quality of life plays an important role in attracting
and retaining quality employees.
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Plant location decisions are becoming harder to
make. Labor in and near major population centers is
becoming scarce. Traffic congestion, crime, pollution
control requirements, and plant obsolescence are
forcing many plants to leave urban centers.
In deciding between two possible locations, a firm
might estimate the profitability of each.
Once a general has been selected, the next thing to
do is to choose a specific site. If several sites are
satisfactory, the decision might depend on cost.
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Plant Layout The third main aspect of production
system design is how to lay out the facility. There
are three main choices: process, product and fixed
layouts.
process layout is a type of plant arrangement in
which the machinery, materials and labor are laid
out on the basis of the function they perform.
product layout is a type of plant arrangement in
which the machines, material and labor needed to
produce one particular product are laid out in an
established sequence.
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fixed layout is a type of plant layout in which the
product stays in one place and the machinery,
materials, and labor are brought to that one location.
mixed layout combines process, product and/or
fixed layouts.
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Quality Control and Inventory
Quality has become the watchword of the decade. A
quality control system is a production system that
sets a standard for an input or output, and it makes
comparisons against this standard to prevent
nonstandard items from going into or coming out of
the production process.
A growing number of companies are depending on
statistical quality control to improve the quality of
their goods and services.
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Statistical quality control recognizes that every
production process inherently involves some degree of
variation and uses statistical analysis to detect those
variations and their sources. W. Edwards Deming was
one of the pioneers of statistical quality control.
In an attempt to become quality leaders, many
companies are using competitive benchmarking.
Benchmarking involves taking apart competitors’
products to see how they are made. The firm can then
estimate methods and costs of production and search
for new and better ways to make their own products.
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Controlling the Inventory Levels
Inventories include raw materials, parts, and finished
and partly finished goods. Controlling inventory levels
requires balancing the need to keep enough inventory
stock with the expense of holding too much inventory in
stock.
There are some good reasons for keeping high levels
of inventory. A firm using assembly line production is
less likely to run out of parts and partly finished
components. Running out of inventory can mean
expensive downtime. Big orders can be lost if deliveries23
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There are some equally good reasons for keeping
inventories low, however. First, inventories require
an investment of funds. A factory with a lower
inventory operates more efficiently. Second,
inventories take up scarce space. Third, products in
inventory may decrease in value. That is, they may
deteriote or be stolen or damaged.
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Some firms use mathematical formulas to determine
the best inventory levels to maintain. These
formulas include such things as the cost of losing an
order, storage costs, interest, and expected delivery
time.
Many of these inventory control techniques are
based on Pareto’s Law. It recognizes that 80
percent of the typical firm’s sales come from only 20
percent of items in inventory.
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Materials requirements planning (MRP) is another
widely used inventory technique. MRP is a
computerized planning system designed to get the
neccessary component parts in the right quantities
where they are needed on schedule. It is especially
helpful when a company’s product is complex and
has a large number of component parts. The MRP
program takes the quantity of finished products
desired, traces through all component parts to
needed to produce them, and creates a schedule for
having the components arrive on time.
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Just-in-Time Inventory Control Just-in-time (JIT)
inventory control is a system designed to link
inventory levels to production needs to reduce the
amount of inventory required at production facilities.
The idea is to have parts for production arrive when
they are needed rather than to rely on mountains of
inventory to protect against mistakes.
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The Factory of the Future
The factory of the future is composed of six basic
elements: automation, robotics, just-in-time
inventory control, flexible manufacturing systems,
computer-aided design and manufacturing, and
computer integrated manufacturing.
The principal goals of these manufacturing tactics
are speed and flexibility.
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Automation involves replacing people with a process
or a machine that operates automatically with little or
no help from humans.
In an effort to boost productivity and cut costs, more
companies are using automated systems.
Robotics A robot is simply an automated machine, one
that can be programmed to perform an operation over
and over again. Robots are often used to perform jobs
such as welding, spray painting, and materials
handling.
Robots never get tired, take coffee breaks, call in sick,
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go on strike.
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Flexible Manufacturing Systems (FMS) is; a
computer-controlled production system that can
produce small batches of products as efficiently as a
mass production line produces large batches. FMS
has three components:
Several work stations and a computer that controls
their operations
A computer-controlled transport system for moving
materials and parts from one machine to another
and in out of a system
Loading and unloading stations
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Computer-aided Design and Manufacturing CAD is
a process that enables designers of products to
sketch their design on a computer screen with an
electronic pencil.
Computer-aided manufacturing CAM is a process that
guides via computer the steps involved in producing a
product.
An extension of most CAD/CAM systems is computer
simulation. A computer simulation is a computer
model of a real-world product or system that enables
a designer to test the product’s or system’s operation31
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Computer İntegrated Manufacturing CIM takes
CAD/CAM one step farther. CIM blends the features
of CAD/CAM with basic business functions such as
purchasing, inventory control, accounting,
distribution, and customer relations to produce a
control system.
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Materials Management
The most vital activity in managing materials, one
that often requires a special department, is
purchasing.
The purchasing task can have a great effect on
profits for manufacturers, retailers, and wholesalers.
Over time, firms usually develop standard
purchasing policies. A common purchasing policy
involves reciprocity. Reciprocity is a purchasing
policiy under which a customer buys from a supplier
if that supplier also buys from its customer.
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Today the purchasing function is usually handled by
professionals. Two tools that they use are value
analysis and vendor analysis.
Value analysis involves reviewing existing product
specifications as set by user departments and
identifying and eliminating nonessential requirements.
Vendor analysis evaluates and rates the technical,
financial, and managerial abilities of potential suppliers
in terms of their past performance. It is a method of
substituting facts for feeling in the selection of
suppliers.
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Finished products coming off the assembly line must
be moved to a storage facility so that orders can be
processed and the products can be packed and
shipped. Warehousing refers to the selection and
use of buildings or facilities to store finished goods.
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Production Planning and Control
Production planning is aimed at deciding what
products to produce and where, when, and how to
produce them. Production control is aimed at
ensuring that production plans or schedules are
being met.
The most common type of production planning and
control is called order control. It is used when
custom products or small lots of products are to be
made, and it helps to illustrate the basic production
planning and control process. It involves six steps: 36
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Step 1: Receive Orders The process begins with
the customer’s order.
Step 2: Develop the Bill of Materials Next the
company compiles a list of the raw materials and
parts required to fill the order. Many firms maintain
forms that list the materials needed to make a
product. The list is called a bill of materials list.
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Step 3: Develop the Route Sheet Routing
determines the sequence of operations to be
performed and the path to be taken by the order.
The route sheet lists the types of machines required
to get each part of the job done and the time
required for each step in the operations.
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Step 4: Develop the Production Plan or Schedule
The production schedule is often presented on a
chart that shows in detail what manufacturing
operations are to be carried out and when. A PERT
chart is often used for scheduling products. A PERT
chart shows all activities that must be completed in
their proper sequence. The two major components
of a PERT network are events and activities.
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Step 5: Dispatching Dispatching means issuing the
orders for performing the work.
Step 6 Follow Up/Expedite In production
management jargon, production control is often
called follow-up or expediting. It is the control aspect
of production planning and control.
There are many different techniques for controlling
production. One is for the production supervisor to
prepare a report at the end of each day.
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Still other companies use of Gantt scheduling charts
for controlling production. The Gantt chart shows the
scheduled start and stop dates of each production
step. These charts show quickly whether the
production department is meeting its planned
schedules.
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