9: Chapter Operations Management I. U.S. Manufacturing in Perspective a. What manufacturers have done to become more competitive a.i. Focus on customers a.ii. Maintain close relationship with suppliers & other companies to satisfy customer needs a.iii. Practice continuous improvement a.iv. Focus on quality a.v. Save on costs through site selection a.vi. Rely on internet to unite companies a.vii. Adopt new production techniques such as enterprise resource planning, computer integrated manufacturing, flexible manufacturing, and lean manufacturing From production to operations management a. Production: a.i. the creation of finished goods and services using the factors of production: land, labor, capital, entrepreneurship, and knowledge b. Production management b.i. The term used to describe all the activities managers do to help their firms create goods c. Operations management c.i. A specialized area in management that converts or transforms resources (including human resources) into goods and services c.ii. Examples: c.ii.1. investory management c.ii.2. quality control c.ii.3. production scheduling c.ii.4. follow-up services d. Operations Management in the service sector d.i. About creating a good experience for whose who use the service A compressed history a. Vertical integration a.i. Integrated production processes a.ii. Specialized supply chains a.iii. Economies of scale b. Interchangeable parts b.i. "interchangeable" labor b.ii. Emphasis on "generalist" management b.iii. Economies of cale c. Specialized machines c.i. High speed of production c.ii. High investment c.iii. Economies of scale Economies of scale
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a. Reduction in cost per unit resulting from increased production, realized through operational efficiencies b. Economies of scale can be accomplished because as production increases, the cost of producing each additional unit alls c. Short term economies of scale are the result of spreading fixed costs across all throughput d. Intermediate term economies of scale are the result of having longer production runs e. Long term economies of scale are the result of physics, which dictate that unit cost as a funcoitn of capacity I equal to a function aC^(b-1), where b lies between 0.6 and 1 Production Processes a. Production adds value (utility) to materials (processes) b. Form utility: b.i. the value added by the creation of finished goods and services, such as the value added by taking silicon and making computer chips or putting services together to create a vacation package c. Three basic requirements of production c.i. To build and deliver products in response to the demands of the customer t a scheduled delivery time c.ii. To provide an acceptable quality level c.iii. To provide everything at the lowest possible cost d. Production process d.i. Inputs d.i.1. land d.i.2. labor d.i.3. capita d.i.4. entrepeneruship d.i.5. knowledge d.ii. production control d.ii.1. planning d.ii.2. routing d.ii.3. scheduling d.ii.4. dispatching d.ii.5. follow-up d.iii. outputs d.iii.1. goods d.iii.2. services d.iii.3. ideas Manufacturing Techniqiues a. Flexible manufacturing a.i. Designing machines to do multiple tasks so that they can produce a variety of products b. Just-in-time (JIT) inventory c. Purchasing and supply chain management d. Lean manufacturing
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e. Mass customizing f. Competing in time g. Technology assisted g.i. Computer-aided design (CAD) g.ii. Computer-aided manufacturing (CAM) Operations Management Functions a. Facility location a.i. Process of selectinga geographic location for a company's operations a.ii. Often want to find a site that is easy for customers to access the company's services and maintain a dialogue about their needs a.iii. Resources a.iii.1. labor a.iii.2. raw material a.iii.3. infrastructure a.iv. Customers a.iv.1. retail sites a.iv.2. customer interaction a.iv.3. "just in time" a.v. Clusters b. Facility layout and production c. Quality control c.i. Quality: consistently giving customers what they want and minimizing error c.ii. Dimensions of quality: c.ii.1. performance c.ii.2. conformance c.ii.3. reliability c.ii.4. durability c.ii.5. features c.ii.6. aesthetics c.ii.7. perceived quality c.iii. Total Quality Management c.iii.1. managing and improving quality c.iii.2. requires: c.iii.2.a. customer focus and satisfaction c.iii.2.b. quality improvement c.iii.2.c. teamwork c.iii.3. six-sigma paradigm c.iii.3.a. type of quality control that allows 3.4 defects per million of oportunities d. Inventory management d.i. Materials Requirement Planning (MRP) d.i.1. computer-based system that uses sales forecasts to make sure that needed resources and materials are avilalbae at the right time d.ii. Entrepretise Resource Planning
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d.ii.1. compuer application that enable multiple firms to manage all of their operations (finance, requirements planning, human resources and order fulfillment) on the basis of a single, integrated set of cororate data Just-in-time and lean production a. Reducing setup times a.i. Increasing flexibility a.ii. Reducing inventory costs a.iii. Increasing quality b. Worker empowerment b.i. quality circle b.ii. authority ot "sotp the line" b.iii. "lifetime" employment c. Managing the supply chain c.i. Integrate suppliers into the design and planning process c.ii. "kanban" c.iii. Promote networking across suppliers Different production methods dependent on industry/product a. Craft production a.i. Categorized for products which have high customization and high variability a.ii. Example: glass blowing, fine musical instrument b. Mass production, assembly line b.i. High standardization and uniformity in the product b.ii. Example: car manufacturers c. Mass production, process plant c.i. Undifferentiated products c.ii. Example: chemicals, agriculture d. Uses the assembly line process and economies of scale (he breakfast cereal industry) e. Little variability or flexibility f. **one way to increase flexibility for mass production is the use of computing or software products g. ***quality is not dependent on costs h. Process manufacturing h.i. That part of the production process that physically or chemically changes materials h.ii. example: boiling physically changes the eggs, like manufacturing turns sand into glass i. Assembly process i.i. That part of the production process that puts together components to make a product i.ii. Example: egs, toast, and coffee to make breakfast; putting together frame, engine, etc. for a car j. Continuous process
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j.i. A production process in which long production runs turn out finished goods over time j.ii. Example: chef has a machine that puts in an egg toboiling water for 3 minutes, lifts them out, then does it again...continuous process always having a 3 minute egg available k. Intermittent process k.i. A production process in which the production run is short and the machiesn are changed frequently make to different products k.ii. Example: manufacturers of custom-designed furniture l. The Need to improve production techniques and cut costs l.i. Ultimate goal to provide high-quality goods and services instantaneously in response to customer demand l.ii. Different things add to the competitiveness l.ii.1. computer-aided design and manufacturing l.ii.2. flexible manufacturing l.ii.3. lean manufacturing l.ii.4. mass customization m. Computer-Aided Design and Manufacturing m.i. Computer-aided design (CAD) m.i.1. allows designers to work in 3 dimensions m.ii. computer-aided manufacturing (CAM) m.ii.1. computers directly involve din production process m.iii. CAD/CAM make it possible to custom-design products to meet ht eneeds of small markets with very little increase in cost m.iii.1. can incororprate a simple design change into the production line m.iv. CAD has doubled production in many firms m.v. Computer-integrated manufacturing (CIM) unites CAD with CAM m.v.1. expensive but cuts up to 80% of the time neded to program machines to make parts n. Flexible manufacturing n.i. Flexible manufacturing: involves designing machiesn to do multiple tasks so that they can produce a variety of products o. Lean Manufacturing o.i. Lean manufacturing: the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, etc. p. Mass Customization p.i. Mass customization: tailoring products to meet the needs of individual customers p.ii. Example: can even buy custom-made M&Ms p.iii. Can even be used int eh service sector p.iii.1. example: customized risk-management plans to companies p.iii.2. health clubs offering unique fitness programs for individuals Operations Management Planning
a. Facility Location a.i. Facility location: the process of selecting a geographic location for a company's operations a.ii. One strategy: fnd a site that makes it seasy for consumers to access the company's services and to maintain a dialogue about their needs a.iii. Ultimate convenience: never having to leave home to get services a.iv. Facility location for manufacturers a.iv.1. inssues that influence site selection a.iv.1.a. labor costs a.iv.1.b. availability of resources a.iv.1.c. proximity to suppliers a.iv.1.d. proximity to customers a.iv.1.e. low crime rates a.iv.1.f. quality of life for employees a.iv.1.g. cost of living a.iv.1.h. aility to train or retrain local workforce a.iv.2. inexpensive resources is a big reason a.iv.3. reducing time-to-market is a big reason a.v. Taking operations management to the internet a.v.1. many apdily growing companies outsore most of the production a.vi. facility location int h efuture a.vi.1. telecommuting is a major trend in business a.vi.2. companies that no longer need to locate near sources of labr will be able to move to areas whre land is less expensive quality of life may be nicer b. Facility Layout b.i. Facility layout: the physical arrangement of resources (including people) in the production process b.ii. Services: layout usually designed to help the consumer fin dand buy things b.iii. Many companies moving from assemply line layout (workers do only a few tasks at at ime) to a modular layout (workers combine to rp produce more complex units ofhte final product) b.iv. Process layout: one in which similar equipment and funcitonis are grouped together b.v. Fixed-position layout: allows workers to congregate around the product to be completed c. Materials Requirement Planning c.i. Materials requirement planning (MRP): a computer-based operations management system that uses sales forecasts to make sure that needed parts and materials are available at the right time and place in a specific company c.ii. Enterprise resource planning (ERP) c.ii.1. a compuer application that enables multiple firms to manage all o the operations (finance, rquirements planning, human
resources, and order fulfillment) on the basis of a singell, integrated set of corporate data c.ii.2. results in shorter time between orders and pament, less staff to do ordering order processing, reduced inventories, & better customer service d. Purchasing d.i. Purchasing: the function in a firm that searches for quality material resources, finds the best suppliers, and negotiates the best price for goods and services d.ii. Today, manufacturers rely more heavily on one or two suppliers e. Just-in-time inventory control e.i. One major cost of production is holding parts, motors, and other items in storage for later use e.ii. Justin-time (JIT) inventory control: e.ii.1. keeps a minimum inventory on premises, and other needs are delivered just in time to go on the assembly line e.ii.2. requires excellent coordination with carefully selected suppliers f. Quality Control f.i. Quality: consistently producing what the customer wants while reducing errors before and after delivery to the customer f.ii. Six sigma quality: f.ii.1. a quality measure that allows only 3. defects per million opportunities f.iii. statistical quality control (SQC) f.iii.1. process some managers use toncontinulaly monitor all phases of the production process to assure that quality is being build into the product from the beginning f.iv. Statistical process control (SPC) f.iv.1. the process of taking statistical samples of product compnents at each stage of the production procs sand plotting those resuls on a graph f.iv.2. any variances from quality standards are recognized and can be corrected if beyond the set standard f.iv.3. customer is ultimately the one who determines what the standard for quality should be f.v. Quality standards: The Baldrige Awards f.v.1. Malcolm Baldrge Natoinal Quality Awards f.v.2. to qualify, must show quality in 7 key areas: f.v.2.a. leadership f.v.2.b. strategic planning f.v.2.c. customer and market focus f.v.2.d. information and analysis f.v.2.e. human resource focus f.v.2.f. process management f.v.2.g. business results
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f.vi. ISO 9000 and ISO 14000 Standards f.vi.1. ISO 9000: f.vi.1.a. the common name given to quality management and assurance standards f.vi.2. ISO 14000 f.vi.2.a. Collection ofhte best practices for managing an organiation's impact on the environment Control Procedures: pert and Gantt Charts a. Program evaluation and review technique (PERT) a.i. A method for analyzing the tasks involved in completing a given project, estimating the time needed to complete each task, and identifying the minimum time needed to complete the total project a.ii. Steps: a.ii.1. analyzing and sequencing tasks that need to be done a.ii.2. estimating the time needed to complete each task a.ii.3. drawing a PERT network illustrating the information from steps 1 and 2 a.ii.4. identifying the critical path a.ii.4.a. the sequence of tasks that takes the longest time to complete b. gantt chart: a bar graph that clearly shows what projects are being worked on and how much has been completed at any given timeu