CHAPTER 11 OPERATIONS MANAGEMENT AND …pvkketcho.pbworks.com/f/Chapter11.pdf · 248 CHAPTER 11...

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● PREDICT what the section will be about.

● CONNECT what you read with your own life.

● QUESTION as you read to make sure youunderstand the content.

● RESPOND to what you read.

248 CHAPTER 11 OPERATIONS MANAGEMENT AND PLANNING

CHAPTER 11CHAPTER 11OPERATIONSMANAGEMENT AND PLANNING

When you complete this chapter, you will be able to:

� Explain what operations managers do.

� Explain the differences between a continuous-flow andan intermittent-flow operating system.

� Name four ways businesses use computers to helpthem design, engineer, and manufacture products.

� Describe the factors managers must consider in choosing a site for their facilities.

� Describe the three kinds of facilities layouts.

PEPSICO

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WORKPLACE CONNECTIONS

For further reading on man-agers and management go to:www.businessweek.com

“Today size drives success. The bigger thebetter. Because that’s how you achieve trueeconomies of scale in manufacturing anddistribution. Equally important, size enables abottler to provide the service that large, geo-graphically diverse retailers need—whether it’sa single invoice or unified marketing supportover a large area. So we’ve been aggressivelyconsolidating more of our bottling volumeamong a handful of large, well-capitalized‘anchor bottlers’ that are closely aligned withPepsiCo. . . .”

—Roger A. Enrico, PepsiCo, Chairman and CEO

“MANAGEMENT TALK”

249

UnderstandingManagement

PepsiCo owns a number ofsnack-food and beverage brands.Several smaller bottling companiespay for the right to bottle and dis-tribute Pepsi Cola to local vendors,such as supermarkets. By the late1990s, many of the larger super-market chains in the United Statesmerged, creating huge corporations.PepsiCo, led by CEO Roger Enrico,responded to this change by con-solidating its own bottling opera-tions and by giving more businessto larger bottling companies.

Analyzing Management Skills

Why would a large company like PepsiCobenefit from using local bottling compa-nies to distribute its products?

Applying Management Skills

Have you, a friend, or family memberever worked for a company that reorga-nized its way of doing business?

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www.businessweek.com

OPERATIONS MANAGEMENT

➤ What operations man-agers do.

➤ How the two types ofoperating systems differ.

➤ How managers usecomputers to design,engineer, and produceproducts.

➤ Factors to considerwhen selectingequipment.

➤ Factors to consider inchoosing a site.

➤ The advantages anddisadvantages of thethree different types offacilities layouts.

To be able to competewith other businesses,companies must be ableto produce their goods orservices efficiently.

• operations manager• operating system• continuous-flow system• intermittent-flow system• site selection• facilities layout• materials-handling

system


Section 11.1

� PRODUCTION OPERATIONS The production manager is responsible for all ofthe activities involved in producing a company’s products. What are some ofthese activities?

The Role of the Operations Manager

Ronald Crenshaw is responsible for marketing the inflatablepool toys his company produces. Vanessa Cheng handles all of thefinancial planning for a large data-processing company. RickO’Brien oversees the production department at a 500-employeeassembly plant. All of these people are managers. Each handles dif-ferent kinds of issues. Each has a different set of responsibilities.Some of these responsibilities include ensuring that products areproduced efficiently, that products and services are marketed tomaximize sales, and that the company is earning a profit.

WHAT YOU’LL LEARN

WHY IT’S IMPORTANT

KEY TERMS

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Operations Management Section 11.1 251

Management Careers in Focus

Product Manager

� Salary RangeProduct managers earn $23,000 to $85,000.

A vice-president of product development earns$105,000+. Salaries vary depending on respon-sibilities, education, and the size and locationof the firm and the industry.

CRITICAL THINKINGWhat kind of pressures might a productmanager face? Why do you think productmanagers need good research and commu-nication skills? What other skills do youthink would be helpful for this job?

INDUSTRY OUTLOOKExperienced product

managers will be invalu-able in the world of theInternet. There will bedemands for new equipment and software tolink businesses and their employees with theInternet. Personal use will increase, too. About59 percent of American households now own aPC, a result of less expensive computers.

� Nature of the WorkIn industries that depend on staying ahead

of technological developments, product man-agers are invaluable. They keep abreast of con-sumer demand for the products and servicesoffered by their company as well as their com-petitors. Considering factors such as region,age, income, and lifestyle, product managersconstantly reevaluate and identify the marketfor their products.

In addition to current and future marketanalysis and establishing prices for the product,product managers work with the marketingdepartment to develop the advertising and pro-motional materials. They develop sales toolsand train the sales team.

� Working ConditionsProduct managers work in comfortable

offices, often near top management. They maywork long hours, 40 to 50 hours per week, andmay work under pressure.

� Training, Other Qualifications, and AdvancementTo become a product manager, you need a

bachelor’s or master’s degree in liberal arts, orsuitable experience in the field. You must haveexcellent research, presentation, and communi-cation skills. Computer skills are also importantfor product managers in the technology industry.

For more information on management careers, go to: busmanagement.glencoe.com

BUSINESS MANAGEMENT

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busmanagement.glencoe.com

Managers that are responsible for the activities involved in pro-ducing the goods or services for a company are called

Their activities include the following:

• choosing a process for producing the company’s goods orservices

• selecting a production site • laying out the production facility• designing production workers’ jobs• planning day-to-day production operations

managers.operations


FIGURE 11–1

What Is an Operating System?

Operating systems transform labor and raw materials into goods or services. Different production processes require different kinds of operating systems.

BUILDING FROM PARTSMany operating systems take a collection of parts and form them

into a more valuable whole. Theoperating system that created thisHarley-Davidson takes pieces of metaland other materials and turns them intoan expensive motorcycle.

1

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• controlling costs (see Chapter 20) • monitoring inventories (see Chapter 20)

Operating Systems and ActivitiesAn consists of the processes and activities

needed to produce goods or services. All organizations use some kindof operating systems, as Figure 11–1 shows.

operating system


BREAKING DOWN OF PARTSSome operating

systems break downsomething large intosmaller quantities ofgreater per-unit value.Fabric stores, forexample, cut large boltsof fabric into smallerpieces that they sell fora higher price per yard.

2

CONNECT

You’re in charge of creating sou-venirs for your school’s 50thanniversary. Proceeds from thesale go to much-needed repairsfor the school gym and audito-rium. How would you design theproduct and assembly process inorder to maximize profits?

USING SKILL OR ARTISTRYA third type of operating system transforms simple materials into

more valuable ones, usually as a resultof labor. This potter, for example, usesher artistic skills to turn a simple pieceof clay into a valuable bowl.

3

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Operating systems are made up of people, materials, facilities,and information. As Figure 11–2 shows, managers combine theseinputs to produce the company’s goods or services.

Businesses use two types of operating systems—continuous-flow systems and intermittent-flow systems.

are operating systems that function all the time, regard-less of customer orders. are operat-ing systems that operate only when an order needs to be filled.

To understand the difference between the two types of oper-ating systems, consider the difference between McDonald’s andTaco Bell. McDonald’s uses a continuous-flow operating system. Itmakes a certain number of products, based on sales history, andhopes people will buy them. Taco Bell uses an intermittent-flowoperating system. It does not produce anything until a customerplaces an order.

Continuous-Flow SystemsContinuous-flow operating systems are used to produce standard-

ized products that a business keeps in stock. Production at the 3M

Intermittent-flow systemssystems

Continuous-flow


SIMPLIFIED MODEL OF AN OPERATING SYSTEMFigure 11–2

An operating system describes how a business turns various inputs into goods or services. Whatinputs do companies use to create their products?WORKING WITH CHARTS

OPERATINGSYSTEM

Inputs

Outputs

Conversion ortransformation

processes

Labor Information Material

Plant, facilities, equipment

Goods and/or services

DON’T BE A SLOUCH!Use body language topresent yourself as anattentive participant. Inbusiness meetings, try tosit up straight with yourfeet on the floor and fac-ing straight ahead. Yourinterest in the events athand will show up inyour body language.

EADING THE AY

LWEADING

THE AY

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company, for example, occurs continuouslythroughout the year, allowing the company toturn out millions of rolls of Scotch™ tape. Thecompany ships products to customers andstores the remainder in inventory.

Most large manufacturing companies usecontinuous-flow operations systems. These sys-tems allow them to keep their assembly linesrunning all the time. This helps an assemblyline achieve maximum efficiency and highprofits.

Intermittent-Flow SystemsAn intermittent-flow system is used to pro-

duce customized products and services. ShuttersUnlimited, for example, makes custom woodenblinds. Each set of blinds is made to meet a par-ticular set of customer specifications. The com-pany maintains no finished-goods inventorybecause all products are immediately shipped tothe customers who ordered them.

Most service companies use intermittent-flow systems. An advertising agency, for exam-ple, cannot use exactly the same productionprocess for all of its clients, because each clienthas different needs. A construction companycannot use the same workers on every job,because every construction project is different.These kinds of businesses operate only inresponse to specific requests by customers.

Computer Technology for Operations Management

If you were to visit most large factories today, you would seesomething you would not have seen 50 years ago—computers. Inmany industries, computers have revolutionized the way businessesproduce their products.

Four processes—computer-aided design, computer-aided engineer-ing, computer-aided manufacturing, and computer-integrated manu-facturing—have helped businesses streamline their operations.Managers need to be familiar with each of these processes.


� OPERATING SYSTEM Construction jobs vary greatlyfrom project to project. Which type of operatingsystem is most suitable to this kind of business?

QUESTION

What is the difference between an intermittent-flow operatingsystem and a continuous-flowoperating system?

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Computer-Aided DesignMany companies use computer technology to design their prod-

ucts. Designing products with the help of computers is known as com-puter-aided design, or CAD. CAD helps companies create better productsbecause it allows them to try various product designs without actuallymanufacturing the product. Computer simulation helps businessesidentify defects or problems at the design stage, before they spend mil-lions of dollars on production.

CAD has significantly reduced the time it takes companies to designnew products. General Motors, for example, cut the time it takes toredesign a new model from 24 months to 14 months as a result of CAD.

Computer-Aided EngineeringBusinesses also use computers to engineer products, a process

known as computer-aided engineering, or CAE. Businesses use CAE toanalyze the performance of a product under different conditions. Abusiness interested in manufacturing a new bicycle helmet, for exam-ple, might use CAE to design several types of helmets. To determinewhich helmet provides the best protection, it would use CAE to testeach helmet under various simulated conditions.


� TECHNOLOGY Computers help companies design better products by identifying problems beforethe products go into production. What is the process of using computers to design products called?

PREDICT

How can computers make thedesign and manufacturingprocesses more efficient?

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Computer-Aided ManufacturingCompanies sometimes use computers to actually produce the

products they make. In computer-aided manufacturing, or CAM, com-puters provide instructions to automated production equipment, suchas robots. To use CAM, businesses collect and store data on how aprocess should be performed. The computer then programs equipmentto perform particular tasks. Automobile manufacturers, for example,use CAM extensively. Many of the tasks once performed by workers arenow done by robots.

Computer-Integrated ManufacturingUsing computers to integrate all manufacturing oper-

ations into a single, smoothly operating manufacturingsystem is known as computer-integrated manufacturing, orCIM. Every aspect of manufacturing a product is aided bycomputers, including

• conception• design and development • production• marketing• product support

Businesses use CIM because it lowers manufacturingcosts and reduces production time. CIM also improvesproduct quality.


� COMPUTER-INTEGRATEDMANUFACTURING Manyfactories today use computersto design, engineer, andmanufacture their products.What are some of thebenefits of using computer-integrated manufacturing?

Tips from Robert Half Higher positions do not mean

shorter hours. Among executivessurveyed, 76 percent said theyspend more time in the officethan they did five years ago.Employees who want to advanceas a company expands will oftenwork additional hours at home.

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Process SelectionThe selection of an operating system is

known as process selection. Process selectioninvolves a wide range of decisions about the spe-cific processes to use, the sequences in which toperform the processes, and the equipment to use.Once managers select the overall type of opera-tions process, they need to make specific deci-sions about such issues as which type ofequipment to use, which components to use, andwhich functions to automate.

All operating processes require equipment.Managers make decisions about purchasing orleasing equipment based on several factors, asFigure 11–3 shows.

Site SelectionEntrepreneurs may come up with excellent

ideas for a business but locate the business in thewrong place. A restaurant or retail store located inan area that few people visit is not likely to suc-ceed. A factory located in an area where few peo-ple live may have difficulty finding workers.Choosing a location that meets the needs of a

FACTORS TO CONSIDER INSELECTING EQUIPMENTFigure 11–3

Choosing equipment for a company can be a difficultprocess. How important a factor do you think theavailability of parts and services is?

• Availability of production workers ableto operate equipment

• Training required to be able to operateequipment

• Availability of parts and services

• Availability of supplier assistance ininstallation and debugging

• Compatibility of equipment with exist-ing equipment

• Maintenance record

• Flexibility of equipment in handlingchanges to product

• Safety

• Expected delivery date

• Warranty coverage

• Price

� SITE SELECTION Saturnchose Spring Hill, Tennessee,as the site for its U.S.operations. What was the mainreason Saturn located there?

258 CHAPTER 11

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business is a very important management decision. Theprocess of selecting a location for a business is known as

Managers consider many factors in choosing a site fortheir businesses, as Figure 11–4 shows. One of the mostimportant factors is wage rate. Many manufacturing com-panies, including Guess! Jeans and Hewlett-Packard, oper-ate manufacturing plants in Mexico, where labor costs arelower than those in the United States. Many clothing andshoe manufacturers, including Calvin Klein and Nike,also operate factories abroad to take advantage of lowhourly wage rates.

Managers at the Saturn Corporation looked at manysites before choosing Spring Hill, Tennessee, in 1985.They wanted to attract and retain the workers theyneeded. They realized the attractiveness of location (cli-mate, terrain, beauty), business atmosphere, communityinterest, and proximity to quality education. Saturn’srecent plant development in 1998 in Wilmington,Delaware, also exhibits this concern for both employeeand community.

When a company outgrows its facilities, managersface three options for obtaining more space. They can

• expand the site• move the entire operation to another site• add another facility elsewhere

Many businesses first try to expand their current facil-ities in order to avoid the expense of moving or theinconvenience of operating more than one facility.

Facilities LayoutAfter selecting a site, a company must design its facilities.

is the process of planning the physical arrangementof a facility. It includes identifying where office space, meeting rooms,customer service areas, eating areas, production areas, equipment,storage space, bathrooms, hallways, and other areas will be located.

Materials HandlingManagers must closely coordinate the design and layout of their

facilities with the design of the materials-handling system. Ais the network that receives, stores, and

moves materials between processing points within a factory.materials-handling system

Facilities layout

site selection.


FACTORS TOCONSIDER INCHOOSING A SITE

Figure 11–4

Businesses consider a range of factors inselecting a site. Why do you think it isimportant for a business to consider acommunity’s attitudes toward business?

• Cost of land

• Cost of plant construction

• Location of competitors

• Location of customers

• Transportation costs

• Cost of materials

• Labor costs

• Taxes

• Availability of materials,supplies, and workers

• Strength of labor unions

• Community attitudes

• Political situation

• Laws

• Climate

• Living conditions

QUESTION

Why is site selection important toa company?

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Many factors, including the size, shape, weight, density, and flexi-bility of materials, affect a facility’s layout. Some materials require spe-cial handling and storage. Computer chips, for example, should not beexposed to humidity, light, or extreme temperatures. In designing thefacilities layout, computer manufacturers must take these special fac-tors into account.

Operations managers also need to consider the equipment that willbe needed to transport products. Companies that use forklifts, forexample, must create wide aisles to accommodate them.

Types of LayoutsMost companies use one of three types of layouts: product layout,

process layout, or fixed-position layout. The kind of layout a businesschooses depends on the type of product or service it produces.

PRODUCT LAYOUT A product layout groups equipment and staffbased on the various steps involved in producing a product. Such lay-outs are often set up as assembly lines. For example, a commercial bak-ery uses a product layout to produce cakes. In the first stage ofproduction, workers combine ingredients to form a batter. In the sec-ond stage, workers fill cake pans. In the next stage, workers put pansinto the oven and take them out. In the fourth stage, workers ice thecakes. In the final stage, workers box the cakes.

A product layout is efficient because it simplifies production plan-ning. It also allows workers to specialize in a small number of simple

tasks. This kind of layout may causeproblems. First, workers who per-form a limited number of repetitivetasks often grow bored. Second, anassembly line can move only as fastas the slowest link in the chain.

In the case of the bakery, forexample, the batter mixers, cakebakers, and boxers could performtheir tasks very quickly. If, however,the cake icers fall behind, the entireassembly line will have to slowdown to accommodate them.

PROCESS LAYOUT A process lay-out groups together equipment andstaff that perform similar functions.To see how this kind of layoutworks, think about how a newspaperis produced. First, the various edito-rial departments write the articles.


� FACILITY LAYOUT Many kinds of businesses cannot use assemblylines to produce their goods or services. What kind of layout doesthis tree service use?

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Section 11.1 Assessment

FACT AND IDEA REVIEW

1. What is the role of the operations manager? 2. What are the two types of operating sys-

tems? How do they differ?3. Name four ways that businesses use com-

puters to produce the goods they sell.4. Name five factors to be considered when

choosing equipment.

CRITICAL THINKING

1. Drawing Conclusions: What kind of oper-ating system would a large candy manufac-turer most likely use? Why?

2. Predicting Outcomes: What kind of pro-duction process would you select if yourworkforce consisted entirely of unskilledworkers? Explain your answer.

ASSESSING ART SKILLS

Choose one of the three types of layoutsdescribed in the chapter. Then prepare a scaledrawing of a plant based on the layout typeyou chose.

CASE ANALYSIS

Your company, a multinational footwearmanufacturer, has decided to expand its pro-duction. You have been asked to prepare a listof possible locations for a new factory that willemploy 400 unskilled workers.

Apply: Think about the factors you shouldconsider in making your recommendations.Then write a one-page memo that describesthe advantages to your company of building anew factory in the location you chose.

Second, the typesetting department typesets the articles. Third, theprinting department prints the papers. Once the papers are printed, afourth department assembles the various sections of the paper and tiesthe completed papers together.

The main advantage of the process layout is that employees per-form a wider variety of tasks than do people working on assemblylines. As a result, they are less likely to become bored at their jobs andmore likely to perform well. A disadvantage of the process layout isthat it requires highly skilled workers.

FIXED-POSITION LAYOUT The third kind of layout is the fixed-position layout. In this kind of layout, the product is too large to moveand remains in one place. Manufacturing of very large products, suchas ships or airplanes, and construction of most houses and buildingsuse the fixed-position layout. A disadvantage of fixed-position layout isthat it is not always as efficient as a product layout or a process layout.


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JOB DESIGN AND PLANNING

➤ How managersdesign jobs.

➤ Factors affectingthe physical workenvironment.

➤ The role of theOccupationalSafety and HealthAdministration.

➤ How managers plan aggregate production.

Careful planning of abusiness’s day-to-dayoperations is neces-sary if companies areto use their resourcesefficiently.

• job design• aggregate production

planning• activity scheduling


Section 11.2

Job Design Lisa Bryan just took over as the manager of a 75-employee insur-

ance company. To perform her job, she needs to understand exactlywhat each of the 75 people in the company does. She needs to becomefamiliar with the job designs of the people who work for her. A

describes the work an individual or group of individuals is sup-posed to perform.

Job Characteristics Job designs can be described in terms of five key characteristics:

• skill variety• task identify • task significance• autonomy• feedback

Skill variety refers to the number of different skills a worker needs toperform a job. Security officers who only check people’s bags as theyenter a building have little skill variety in their jobs. People whose jobsdemand little skill variety often become bored at work.

Task identity refers to the degree to which a job allows a worker tocomplete an entire task rather than just part of the task. Mechanicswho work at small garages have a high degree of task identity becausethey are responsible for every aspect of the job of repairing cars. In con-trast, mechanics on assembly lines that do nothing but check trans-missions have a lower degree of task identity.

Task significance refers to the level of impact a job has on the wholeorganization. Workers who feel that their work affects the organizationgenerally have high job satisfaction. Workers who feel that their jobsdo not affect others rarely share this feeling.

Autonomy refers to the independence workers have to make deci-sions about how to perform their jobs. Check-out clerks in supermarketshave almost no job autonomy. In contrast, supermarket store managersare able to decide how they spend their time. They evaluate the tasks

designjob

WHAT YOU’LL LEARN

WHY IT’S IMPORTANT

KEY TERMS

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they need to accomplish during the day and per-form them in the order they choose. Most peopleprefer to have some autonomy in their jobs.

Feedback involves the extent to which man-agers let workers know how they are performing.Feedback can be presented in a formal or informalmanner (see Chapter 15). People who receivefeedback are generally happier at work than peo-ple who do not.

People who hold jobs that rank high in thesefive characteristics are more motivated than otherworkers are. They also produce better-qualitywork (see Figure 11–5). Finally, they are more sat-isfied with their jobs and have lower rates ofabsenteeism and turnover.

The Physical Work EnvironmentTo attract and retain good workers, managers

need to provide a satisfactory and pleasant phys-ical work environment. Poor work environmentsmay prevent employees from working efficiently.Examples of negative environments are those thatare too hot or cold, poorly ventilated, noisy,poorly lit, or crowded.

Job Design and Planning Section 11.2 263

� SKILL VARIETY Aticket-taker’s job requiresvery few skills. How mightskill variety affect jobperformance?

THE IMPORTANCE OF JOB DESIGNFigure 11–5

Managers need to design jobs that motivate their employees. Why do youthink workers whose jobs allow them some autonomy are more satisfiedwith their jobs than workers whose jobs do not?

WORKING WITH CHARTS

Core Job Characteristics

Skill variety

Task identity

Task significance

Autonomy

Feedback

Work Outcomes

High level ofwork motivation

High quality workperformance

High satisfactionwith work

Low absenteeismand turnover

CONNECT

Describe the job characteristics ofyour current job or one that youwould like to hold.

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Managers must ensure that thework environment is safe. The Occu-pational Safety and Health Act of1970 established specific safetyguidelines governing most work-places. The law is enforced by the

Occupational Safety and Health Administration (OSHA), a federal govern-ment agency that inspects workplaces to ensure that they comply withOSHA regulations. Businesses that violate OSHA standards are subjectto fines and closure.

In general, the work area should allow for normal lighting, venti-lation, and humidity. Exposure to less than ideal conditions should belimited to short periods. Managers should minimize potential physicalor psychological damage to employees.

Day-To-Day Operations PlanningDesigning an effective operating system does not ensure that the

system will operate efficiently. Managers need to carefully plan day-to-day operations to ensure that production proceeds smoothly and that

costs are low. This process of planning a business’sproduction needs is known as production planning.

Production planning involves three compo-nents:

• aggregate production planning• resource allocation• activity scheduling

Aggregate Production PlanningRoberto Nunez is the production manager of a

South Carolina company that manufactures tow-els. As part of his job, he needs to estimate whatresources his company will need in the next 6 to18 months to produce enough towels to meetdemand. This part of Roberto’s job is aggregateproduction planning.


� WORKPLACE SAFETY The blocked exits inthis factory represent a serious safety violation.Which government agency inspectsworkplaces to ensure that they meet federalsafety standards?

TAIWANTraditional Taiwanese officeworkers—and even high-

level executives—take a short nap afterlunch, between 1:00 and 1:30 P.M.The office management cooperates bydimming the lights and keeping activity to a minimum. Obviously, this is not a good time for an appointment.

W O R K P L A C E

D I V E R S I T Y

RESPOND

How important are workplacesafety standards to you in consid-ering a job? Explain the reasonsfor your answer.

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Thousands of small manufac-turers are skating on thin ice.

Most earn their keep by produc-ing parts for large suppliers whoserve masters such as the BigThree or the Pentagon. But theBoeings, Chryslers, and TRWs ofthe world no longer want tobother buying parts from a scoreof suppliers. To assure qualityand to speed products to marketquickly, they want one com-pany to take responsibility forthe whole thing. For a companywith 10 or 15 employees, thatcan be asking for the moon.

So independent smallmanufacturers are learning anew skill: electronic datainterchange.

EDI involves linking com-panies together electronicallyso their computers can auto-matically handle many busi-ness chores, from dealing withpurchase orders to exchangingblueprints. The system is criti-cal today, when all facets ofproduct development, fromdesign to final assembly plan-ning, happen simultaneouslyand in different locations. TALENT POOL. Hundreds ofsmall manufacturers in the U.S.and abroad are learning to think

as one by joining flexible man-ufacturing networks. The mem-bers of these mini-consortiumspool talents for jobs too big forany one of them to tackle.

Going digital would reapmany benefits. Small compa-nies could then connect to ashared database and instantlycoordinate production sched-ules and blueprint revisions.The flexible manufacturingalliances can organize smallerteams for contracts that lastonly as long as it takes to get aspecific job done.

While such a concept mayseem foreign to most executivesin the job-shop business, othersare quick to spot a parallel. “Wethought we were a flexible

A Cutting-Edge StrategyCalled Sharing

manufacturing group untilsomeone told us we were reallya virtual corporation,” saysRobert E. Steele, chief operat-ing officer of PosiTech Manu-facturing Group, an alliance ofnine small companies in WestVirginia. “We’ve become a vir-tually large company. Butinstead of farming out work tointernal departments, we farmit to our member companies.”

Considering the benefits,EDI is not expensive. Settingup a system—including a com-puter, modem, software, andcertification of compliancewith EDI standards—can cost$3,000 to $5,000.

Management Model

Excerpted with permission fromBusinessWeek, November 20, 1995

CRITICAL THINKINGWhy are companiesdemanding that all phasesof product development beintegrated?

DECISION MAKINGAs a manager for a smallmanufacturing company,decide if you would use anEDI system. Explain yourreasoning.

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uses an organization’s resourcesto produce enough goods or services to meet demand. Roberto relieson his company’s demand forecasts to make decisions about produc-tion planning. Last month’s forecast indicated that the companyexpects to ship 20,000 towels a month for six months. Based on thisforecast, Roberto calculates the workers and supplies necessary to meetthis goal. His aggregate production plan establishes production rates,workforce needs, and inventory levels for the operating system for thenext six months.

Resource AllocationRoberto must make decisions about resource allocation to produce

20,000 towels a month. Resource allocation is the allocation of people,materials, and equipment to meet the operating system requirements.

Roberto can spend $18,000 on production. He mustallocate these resources to labor, textile purchases, ship-ping expenses, and equipment maintenance. Allocatingthese resources efficiently will keep company costs low

Aggregate production planning


� ACTIVITY SCHEDULING To make the most efficient use of expensive machinery,production managers create detailed activityschedules that indicate when each machinewill be used. What would happen if theseschedules were not made?

CONNECT

If the demand for your company’sproduct suddenly increased, howwould you plan to meet thatdemand?

DIRECTIONS TOCARNEGIE HALL—PRACTICE!Professional athletes and enter-tainers rehearse their movesover and over again. Thisrepetition leads to greateraccuracy. The more accurateyou become at something, the more likely you are to beconfident at your abilities. Practice makes perfect.

All About

A T T I T U D E

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Section 11.2 Assessment

FACT AND IDEA REVIEW

1. List the five job characteristics managersneed to consider in designing jobs.

2. Explain the concept of task identity.3. Which federal government agency inspects

workplaces to ensure that they are safe?4. What is resource allocation? 5. How do production managers schedule

production activity?

CRITICAL THINKING

1. Analyzing Information: How does a pro-duction manager use forecasts of demandfor the company’s products?

2. Making Comparisons: Using the five jobcharacteristics identified in the chapter,create a table comparing a police officer’sjob with that of a telemarketer.

ASSESSING MATH SKILLS

Ronald Lewis, the production manager of afactory that produces metal lunch boxes, needsto produce 1,800 units a week for the next ninemonths. To do so, he plans to schedule 22 work-ers a day, 8 hours a day, 5 days a week. If theaverage wage in the factory is $8.02 per hour,how much will weekly labor costs run? If totalproduction costs run $17,000 a week, what per-cent of these costs does labor represent?

CASE ANALYSIS

As the production manager of a small glass-ware factory, you are responsible for designingjobs and planning production.

Apply: Write a one-page essay describingspecific features that you would build into thejob designs at your company in order to createjobs that motivate workers.

while producing quality goods. Inefficient allocation of resourcesmay prevent Roberto’s company from competing in its market.

Activity Scheduling involves creating a detailed production

timetable. It involves loading and dispatching. Loading is the term pro-duction managers use for assigning a job to a factory or department.Dispatching refers to the scheduling of each task that is performed inthe factory.

To schedule work at his company, Roberto first decides whichtowels will be produced by each of his company’s two factories. Hethen prepares a detailed schedule that indicates when the towels willbe cut, sewn, dyed, and boxed. His schedule identifies which workersand equipment will be involved. This increases efficiency and ensuresthat all workers understand their role in the production process.

Activity scheduling


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REVIEWING VOCABULARY

Together with a partner, discuss the meaning of each of the fol-lowing terms:

operations manageroperating systemcontinuous-flow systemintermittent-flow

systemsite selectionfacilities layout

RECALLING KEY CONCEPTS

1. What are the two types of operating systems?2. Describe the three types of facility layouts.3. What is a materials-handling system?4. List five important characteristics of well-designed

jobs.5. What are the three main components of produc-

tion planning?

THINKING CRITICALLY

1. How much control do you think operations man-agers have over the job satisfaction of theiremployees?

2. What kinds of companies use continuous-flowoperating systems? Intermittent-flow systems?Why do you think different types of companiesuse different operating systems?

3. What can computers do to help with modernassembly line planning?

4. Give an example of how resource allocation worksat your school.

materials-handlingsystem

job designaggregate production

planningactivity scheduling

CHAPTER SUMMARY

Section 11.1

� Operations managers are responsi-ble for activities involved in pro-ducing company goods or services.

� Two types of operating systems arecontinuous-flow and intermittent-flow.

� Businesses use computer-aided de-sign, computer-aided engineering,computer-aided manufacturing, andcomputer-integrated manufacturingto help design, engineer, and manu-facture products.

� There are many factors to considerin site selection.

� The three types of facilities layoutsare product layout, process layout,and fixed position layout.

Section 11.2

� Job design describes the work anindividual or group is supposed toperform.

� Production planning includes aggre-gate production planning, resourceallocation, and activity scheduling.

CHAPTER 11 ASSESSMENTCHAPTER 11 ASSESSMENT


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Assessment CHAPTER 11 269

PREPARING FOR COMPETITIVE EVENTS

Answer true or false to the following statements.

a. A continuous-flow system operatesonly when there is an order thatneeds to be filled.

b. The OSHA inspectsworkplaces to ensurethat safety guidelinesare being met.

CHAPTER 11 ASSESSMENTCHAPTER 11 ASSESSMENT

ASSESSING ACADEMIC SKILLS

COMPUTER SKILLS Use the Internet or theresources at your public library to research howbusinesses use computers to design, engineer,and manufacture products. Prepare a two-pagepaper that discusses what you have learned. Besure to identify your sources, including theaddresses of any Web sites.

APPLYING MANAGEMENT PRINCIPLES

SOLVE THE PROBLEM Three of your friendsare thinking of starting their own businessesand have asked you for advice. One friendplans to start a landscaping company. A secondplans to start a manufacturing company thatwill produce calendars and greeting cards. Athird plans to start his own catering company.

Language Arts Write a short memo toeach of your friends. In each memo, identifywhich type of operating system and facilitylayout you believe is appropriate. Explain eachof your recommendations.

In this chapter you read theBusinessWeek Management Modelabout electronic data interchange(EDI) systems. Using the Internetor your school library, find addi-tional articles about EDI systemsand share your findings with theclass. For more information, go to BusinessWeek online at:www.businessweek.com

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www.businessweek.com

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