7 chapter Business Essentials, 8 th Edition Ebert/Griffin Operations Management and Quality...

7chapter

Business Essentials, 8th EditionEbert/Griffin

Operations Management and Quality

Instructor Lecture PowerPointsPowerPoint Presentation prepared by

Carol Vollmer Pope Alverno College

Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

After reading this chapter, you should be able to:1. Explain the meaning of the term production or operations.2. Describe the three kinds of utility that operations processes

provide for adding customer value.3. Explain how companies with different business strategies

are best served by having different operations capabilities. 4. Identify the major factors that are considered in operations

planning and in operations control.

L E A R N I N G O B J E C T I V E S

7-2Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

After reading this chapter, you should be able to:5. Discuss the information contained in four kinds of

operations schedules—the master production schedule, detailed schedule, staff schedule, and project schedule.

6. Identify the activities and underlying objectives involved in total quality management.

7. Explain how a supply chain strategy differs from traditional strategies for coordinating operations among firms.

L E A R N I N G O B J E C T I V E S (cont.)


What’s in It for Me?

• By understanding this chapter’s methods for managing operations and improving quality, you can benefit in two ways:

1. As an employee, you’ll have a clearer picture of who your customers are and what they want and how your job depends on the services they receive from you

2. You’ll better understand how companies around you—even successful firms—have to change production methods whenever they adopt new business goals to remain competitive


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.


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– Systematic direction and control of processes that

transform resources into finished services and goods that create value for and provide benefits to customers


Differences Between Service and Goods Manufacturing Operations

• Goods are produced, services are performed• Service operations:

1. Involve interacting with consumers2. Are sometimes intangible and unstorable3. Involve a customer’s presence in the process4. Involve certain service quality considerations


Operations Processes

• Operations Process– Methods and technologies used to produce a good or

service

• Goods Production Processes– Make-to-order or make-to-stock processes

• Service Production Processes– Extent of Customer Contact

• Low-contact systems: low customer involvement• High-contact systems: high customer involvement


Business Strategy as the Driver of Operations

• Companies design their operations based on business strategy.


TABLE 7.1 Business Strategies That Win Customers for Four Companies


Operations Planning

• Capacity Planning– Determining the amount of a product that a

company can produce under normal conditions

• Location Planning– Determining where production will happen based

on costs and flexibility


Operations Planning (cont.)

• Layout Planning– Planning for the layout of machinery, equipment,

and supplies– Determines whether a company can respond

to demand for more and different products or it finds itself unable to match competitors’ speed and convenience

• Process layouts• Product layouts


FIGURE 7.1 Operations Planning and Control


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)

– Begins when products are designed: goals are set for performance and consistency

– Includes deciding what constitutes a high-quality product and determining how to measure these quality characteristics


Methods Planning

• Managers identify each production step and methods for performing it.

• They reduce waste and inefficiency through methods improvement and improving process flows.– A detailed description, often a process flowchart, helps

managers organize and record information.• They attempt to improve customer service.


Operations Scheduling

• Operations Scheduling– Times when specific production activities will occur

• Kinds of Planning Schedules– Master schedule: Shows which products will be

produced, and when– Detailed schedule: Shows day-to-day activities– Staff schedules: Show who and how many

employees will be working, and when– Project schedules: Coordinate completion of large-

scale projects


FIGURE 7.3 Example Partial Master Production Schedule (Tons of Each Product to be Produced)


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


Figure 7.4 Gantt Chart


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; critical, ongoing facet of operations.


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


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


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

5. Disruptions are visible and get resolved quickly

6. Continuous improvement of the process


Quality Control

• Quality Control – Taking action to ensure that operations produces

products that meet specific quality standards– Requires establishment of specific standards and

measurements


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


Total Quality Management

• Always Delivering High Quality– Planning for quality

– Organizing for quality

– Directing for quality

– Controlling for quality


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


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


FIGURE 7.5 Supply Chain for Baked Goods


The Supply Chain Strategy

• Supply Chain Management (SCM)– Working with the supply chain to improve overall

flow by 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


Key Terms

assembly line business process reengineeringcapacity competitive product analysisconsistency (in quality)detailed schedulefollow-up Gantt chartgoods operations (goods production)high-contact system inventory control

ISO 14000ISO 9000just-in-time (JIT) productionlean production system low-contact system make-to-order operationsmake-to-stock operationsmaster production schedule (MPS) materials management operations (production)operations (production)

management


Key Terms (cont.)

operations (production) manager operations capabilityoperations control operations processperformance (in quality)process layout product layout purchasing qualityquality control quality improvement teamquality ownership

service operations (service production)

staff schedulesupplier selection

supply chain (value chain) supply chain management (SCM)total quality management (TQM)transportationutility value-added analysiswarehousing


All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.


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