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7

chapter

Business Essentials, 7
th

Edition

Ebert/Griffin

©

2009 Pearson Education, Inc.

Operations Management and
Quality

Instructor Lecture PowerPoints

PowerPoint Presentation prepared by

Carol Vollmer Pope Alverno College


What Does
Operations

Mean Today?


Operations (Production)


All the activities involved in making products

goods and services

for customers


Service Operations (Service Production)


Provide intangible and tangible service products


Goods Operations (Goods Production)


Produce tangible products


Operations managers create utility for customers
through production, inventory and quality control.

© 2009 Pearson Education, Inc.

Creating Value Through Operations


Utility


The ability of a product to satisfy a want or need


Form utility


Time utility


Place utility


Operations (Production) Management


The systematic direction and control of processes that
transform resources into finished services and goods that
create value for and provide benefits to customers

© 2009 Pearson Education, Inc.

Differences Between Service and Goods
Manufacturing Operations


Goods are
produced
, services are
performed


Service operations differ from manufacturing
operations in that service operations:

1.
Involve interacting with consumers.

2.
Are sometimes intangible and unstorable.

3.
Involve a customer’s presence in the process.

4.
Involve certain service quality considerations.

© 2009 Pearson Education, Inc.

Operations Processes


Operations Process


A set of methods and technologies used to produce
a good or a service


Goods Production Processes


Make
-
to
-
order processes


Make
-
to
-
stock processes


Service Production Processes


Extent of Customer Contact


Low
-
contact systems: low customer involvement


High
-
contact systems: high customer involvement

© 2009 Pearson Education, Inc.

Business Strategy as the

Driver of Operations


Businesses with contrasting business
strategies choose different operations
capabilities

the activities or processes that
production must
perform

especially well, with
high proficienc
y

© 2009 Pearson Education, Inc.

TABLE 7.1 Business Strategies That Win
Customers for Four Companies

© 2009 Pearson Education, Inc.

Operations Planning


Capacity Planning


Capacity
: T
he amount of a product that a
company can produce under normal conditions


Planning deals with determining how much can
be produced


Location Planning


Location affects production costs and flexibility


Planning deals with determining where it will be
produced

© 2009 Pearson Education, Inc.

Operations Planning (cont’d)


Layout Planning


The layout of machinery, equipment, and supplies
determines whether a company can respond
efficiently to demand for more and different
products or whether it finds itself unable to match
competitors’ speed and convenience


Planning deals with determining how the product
will be produced


Process layouts


Product layouts

© 2009 Pearson Education, Inc.

FIGURE 7.1 Operations Planning and Control

© 2009 Pearson Education, Inc.

Quality Planning


What Is Quality?


The combination of “characteristics of a product
or service that bear on its ability to satisfy stated
or implied needs” (American Society for Quality)


Quality planning begins when products are
designed: goals are set for performance and
consistency


Quality planning includes deciding what
constitutes a high
-
quality product and
determining how to measure these quality
characteristics

© 2009 Pearson Education, Inc.

Methods Planning


Managers identify each production step and
methods for performing it.


They reduce waste and inefficiency by examining
procedures in an approach called
methods
improvement
.


They reduce waste and inefficiency by improving
process flows
.


A detailed description, often a
process flowchart
, helps
managers organize and record information.


They attempt to improve customer service.

© 2009 Pearson Education, Inc.

Operations Scheduling


Operations Scheduling


Identifying times when specific production
activities will occur


Kinds of Planning Schedules


Master schedule:

Shows which products will be
produced, and when, in upcoming time periods


Detailed schedule:

Shows day
-
to
-
day activities
that will occur in production


Staff schedules:

Show who and how many
employees will be working, and when


Project schedules:

Coordinate completion of
large
-
scale projects

© 2009 Pearson Education, Inc.

Project Scheduling


Gantt Chart


Breaks down projects into steps to be performed


Specifies the time required to complete each step


A Project Manager uses the Gantt chart to:


List all activities to be performed


Estimate the time required for each step


Record the progress on the chart


Check the progress against the time scale on the report

© 2009 Pearson Education, Inc.

Figure 7.4 Gantt Chart

© 2009 Pearson Education, Inc.

Operations Control


Operations Control


Requires managers to monitor performance by
comparing results with detailed plans and
schedules.


Follow
-
up:
Checking to ensure that production
decisions are being implemented

is a key and
ongoing facet of operations.

© 2009 Pearson Education, Inc.

Materials Management


Materials Management


The process by which managers plan, organize,
and control the flow of materials from sources of
supply through distribution of finished goods


Materials Management Activities


Supplier selection


Purchasing


Transportation


Warehousing


Inventory control

© 2009 Pearson Education, Inc.

Lean Production Systems: Just
-
in
-
Time Operations


Lean Production Systems Goals


Smooth production flows avoid inefficiencies


Elimination of unnecessary inventories


Continuous improvement in production processes


Just
-
in
-
Time (JIT) Production


Bringing together all needed materials only when
they are required, creating fast and efficient
responses to customer orders

© 2009 Pearson Education, Inc.

Benefits of Just
-
in
-
Time Production

1.
Reduces the number of goods in process

(goods not yet finished)

2.
Minimizes inventory costs

3.
Reduces inventory storage space requirements

4.
Replaces stop
-
and
-
go production with

smooth movement

5.
Disruptions are more visible and get resolved

more quickly

6.
Continuous improvement of the process

© 2009 Pearson Education, Inc.

Quality Control


Quality Control


Taking action to ensure that operations produces
products that meet specific quality standards


Requires establishment of specific standards and
measurements

© 2009 Pearson Education, Inc.

Quality Improvement and Total Quality Management


Quality Improvement


Building quality into products and services rather than
trying to control quality by inspection


Total Quality Management (TQM)


All of the activities necessary for getting high
-
quality goods
and services into the marketplace


Quality Ownership


Quality belongs to each person who creates it while
performing a job and it requires a focus on quality by all
parts of an organization

© 2009 Pearson Education, Inc.

Total Quality Management


Always Delivering High Quality


Planning for quality


Organizing for quality


Directing for quality


Controlling for quality

© 2009 Pearson Education, Inc.

Tools for Total Quality Management


Competitive Product Analysis


Analyzing competitors’ products to identify improvements


Value
-
Added Analysis


Eliminating wasteful and unnecessary activities


Quality Improvement Teams


Adopting
quality circles


Getting Closer to the Customer


Identifying internal and external customers


ISO 9000 and ISO 14000


Ensuring certification of quality management in processes


Business Process Reengineering


Starting over from scratch to improve processes

© 2009 Pearson Education, Inc.

Adding Value Through Supply Chains


Supply Chain (or Value Chain)


The flow of information, materials, and services
that starts with raw
-
materials suppliers and
continues adding value through other stages in
the network of firms until the product reaches the
end customer


© 2009 Pearson Education, Inc.

FIGURE 7.5 Supply Chain for Baked Goods

© 2009 Pearson Education, Inc.

The Supply Chain Strategy


Supply Chain Management (SCM)


Working with the supply chain as a whole to
improve overall flow through a system composed
of companies working together


Supply Chain Reengineering


Improving the process for better results:


Lower costs, speedier service, and coordinated flows of
information and material


Outsourcing and Global Supply Chains


Paying suppliers and distributors to perform
certain business processes or to provide needed
materials or services

© 2009 Pearson Education, Inc.