Transcript Achieving World-Class Operations Management Chapter 12

Achieving World-Class
Operations Management
Chapter 12
Chapter 12 Learning Goals
1. Why is production and operations
management important in both manufacturing
and service firms?
2. What types of production processes are used
by manufacturers and service firms?
3. How do organizations decide where to put their
production facilities? What choices must be
made in designing the facility?
4. Why are resource planning tasks like inventory
management and supplier relations critical to
production?
Chapter 12 Learning Goals (cont’d.)
5. How do operations managers schedule and
control production?
6. How can quality management and lean
manufacturing techniques help firms improve
production and operations management?
7. What roles do technology and automation play
in manufacturing and service industry
operations management?
8. What key trends are affecting the way
companies manage production and
operations?
Learning Goal 1
• Why is production and operations management
important in both manufacturing and service
firms?
– Manufacturers must produce high-quality, reasonably
priced products or they will lose customers
– Service organizations rely on effective operations
management to satisfy consumers
– Operations managers work with other functions in
organizations to ensure
• Quality
• Customer Satisfaction
• Financial success
Production:
The creation of products &
services by turning inputs into
outputs
Operations Management:
Management of the operations
process
Production planning:
The aspect of operations
management in which the firm
considers the competitive
environment and its own
strategic goals in an effort to
find the best production
methods
Titan’s Production Planning
Titan motorcycle company production estimates
for 1999 were based on:
– the introduction of a new product line
– estimated industry sales for 1999, based on past
sales trends
Titan’s Production
Motorcycle Industry Sales
1500
500
Number of
Motorcycles
Thousands of
Motorcycles
600
400
300
200
100
1000
500
0
0
1994 1995 1996 1997 1998 1999
1994 1995 1996 1997 1998 1999
Source: Motorcycle Industry Council/The Arizona Republic, Dec. 5, 1999, p.
D5.
Elements of Production Planning
1. Production process
2. Site selection
3. Facility layout
4. Resource planning
5. Supply chain management
Learning Goal 2
• What types of production processes are used by
manufacturers and service firms?
– Mass production
• Many identical goods are produced at once, keeping production
costs low
• Relies heavily on standardization, mechanization, specialization
– Mass customization
• Mass production techniques are used up to a point
• Special features are added to custom tailor product to individual
customers
• More expensive than mass production
– Customization
• Firm makes many products, one at a time
• Products produced to the very specific needs or wants of
individual customers
Types of Production Process
1. Mass production
2. Mass customization
Example products: Dell computers, Levi’s jeans,
Acumin vitamins, compact discs
(cductive.com), Ritz-Carlton hotel stays, Mattel
Barbie dolls, BMW cars, Paris Miki optical
frames (Source: Fortune, Sept. 28, 1998, pp. 115-124)
3. Customization
Coffee Bean Production Process
2 ways to grow coffee beans:
In the sun: beans grow faster, but this
process requires clearing forests
In the shade: beans grow slower, but
process preserves existing
ecosystems
The trade-off must be considered when
deciding what process to use
Source: Consumer Reports, Jan. 2000, p. 30.
Learning Goal 3
• How do organizations decide where to put their
production facilities? What choices must be made in
designing the facility?
– When choosing a production site, firms must weigh
• Availability of resources needed for production
• Ability to serve customers and take advantage of marketing
opportunities
• Availability of local incentives
• Manufacturing environment
– Three main production facility designs
• Process layout
• Product layout
• Fixed-position layout
Site Selection Considerations
1. Availability of production inputs
2. Marketing factors
3. Local incentives
4. Manufacturing environment
5. International location
considerations
Good Labor Locations in the US
States with above average labor quality
and below average labor cost:
•
•
•
•
•
•
Alabama
Alaska
Georgia
Hawaii
Virginia
Wyoming
Source: Corporate Location, www.corporatelocation.com
Types of Facility Layout
1. Process layout
2. Product layout
3. Fixed-position layout
Learning Goal 4
• Why are resource planning tasks like inventory
management and supplier relations critical to
production?
– Resources needed for production must be available at strategic
moments in the production process
– If resources are not readily available, productivity, customer
satisfaction, and quality may suffer
– Carefully managed inventory can help cut production costs
– Through good relationships with suppliers, firms can get:
• Better prices
• Reliable resources
• Support services than can improve production efficiency
Elements of Resource Planning
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•
•
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Purchasing
Insourcing vs. Outsourcing
Inventory management
Computerized resource planning
Materials requirement planning (MRP)
Enterprise resource planning (ERP)
“The guy with the most resources doesn’t win.
The guy who utilizes his resources best wins.”
Chuck Knight, CEO of Emerson Electric (Source:
Neff & Citrin, Lessons from the Top, 1999, p. 200.)
Supply Chain:
The entire sequence of
securing inputs, producing
goods, and delivering them to
customers
Supply Chain Management:
The process of smoothing
transitions along the supply
chain
Supply Chain Management Strategies
• Forge stronger bonds with
suppliers
• Improve supplier communication
– electronic data interchange (IDE)
Learning Goal 5
• How do operations managers schedule and control
production?
– Routing
• Analyzes steps needed in production
• Sets out a work flow
• Increases productivity and can eliminate unnecessary cost
– Scheduling
• Specifying and controlling time and resources required for each
step in production process
• Ranges from simple to complex
• Three methods are used to schedule production:
– Gantt charts
– Critical path method
– PERT
Production control:
The coordination of materials,
equipment, and human
resources to achieve production
& operation efficiency
Aspects of Production Control
1. Routing
determining work flow
2. Scheduling
controlling timing
– Gantt charts
– Critical path method & PERT charts
Typical Gantt Chart
September
October
8
Scheduling
Designing
Ordering
Delivering materials
Machining components
Assembling
Inspecting
Shipping
Symbols:
scheduled start
scheduled end
completed work
review date
time not avail.
Learning Goal 6
• How can quality management and lean
manufacturing techniques help firms improve
production and operations management?
– Quality and productivity go hand in hand
• Defective products waste materials and time; increase costs
• Poor quality leads to dissatisfied customers
– Quality-control methods can reduce problems and
streamline production
– Lean manufacturing eliminates unnecessary steps in
production process
• Allows manufacturers to respond to changing market
conditions with greater flexibility and ease
Learning Goal 7
• What roles do technology and automation play in
manufacturing and service industry operations
management?
– Operational efficiency is improved by using technology to automate
parts of production
• Computer-aided design and manufacturing systems
– Help design new products
– Control the flow of resources need for production
– Operate much of the production process
• Robotics
– Useful for tasks that require accuracy, speed, and strength
– Require less labor to operate
– Service firms are automating operations
• Banks, law firms, and utility companies
• Using technology cuts labor costs and controls quality
Improving Production
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•
•
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Total Quality Management
Lean Manufacturing
Just-in-Time
Automation
– Computer-aided design (CAD)
– Computer-aided manufacturing (CAM)
– Robotics
– Flexible manufacturing systems (FMS)
– Computer-integrated manufacturing (CIM)
Learning Goal 8
• What key trends are affecting the way companies manage
production and operations?
– Agile manufacturing
• Helps manufacturers stay fast and flexible
• Firms must develop production systems composed of tools and
processes that can quickly change to produce new or different
products
– Cellular manufacturing
• Creates small, self-contained production units
• Cell performs all or most of tasks necessary to complete a product or
production sequence
– Manufacturing and non-manufacturing firms are putting emphasis
on empowering employees
• Giving them greater say in deciding how to perform their jobs
• Larger role in company decision making
Trends in Operations Management
 Increase in modular production
 Agile manufacturing
permits adapting to changing customer
demands
 Work cell design
creates team environment in production
Changing Operations in Insurance
A new approach to insurance operations
involves:
• developing component-based systems
– faster development
– more flexible
• integration of processes & systems
– web-based sales & services, call-center
technology, data management
Source: Best’s Review, Dec., 1999, www.ambest.com