Chapter 11: Strategic Leadership Chapter 8 Production and operations management.

Chapter 11: Strategic Leadership

Chapter 8

Production and operations management


Learning outcomes

• Explain what is meant by the term ‘operations management’

• Understand some of the basic concepts of operations management

• Understand the relationship between operations and strategy

• Explain the roles of operations within strategy

• Understand the concept of planning operations capacity

• Understand the importance of product design and transformation process design


Learning outcomes (continued)• Understand the concept of quality management

• Explain the cost-of-quality concept

• Understand the importance of inventory management within operations management

• Understand the most recent operations management approaches and philosophies

• Understand the importance of operations management in the services environment


Key terms

Capacity planning

Concurrent engineering

Continuous improvement

Control

Customer involvement

Environmentally friendly

Flexibility

Inventory

Inventory management

Job shops

Just-in-time (JIT)

Lead time

Manufacturability

Operations management

Quality assurance

Quality function deployment (QFD)

Stock-keeping unit (SKU)

Supply chain operating

reference (SCOR) model

Total quality management (TQM)

Transformation process

Work-in-process (WIP)


Outline

• Introduction

• Strategic and planning concepts

• Quality management

• Inventory management

• Current approaches and philosophies

• Operations management in the service sector

• Conclusion


Introduction

• Operations management is the decisions made about the operations function and the management of the transformation process to ensure that value is provided to the customer at a cost that will ensure a profit to the company’s shareholders

• Four types of decisions:• Process

• Quality

• Capacity

• Inventory


Introduction (continued)


Introduction (continued)

• Five core management processes:• Plan: balancing demand and supply

• Source: acquiring inputs

• Make: transforming into products

• Deliver: managing and filling customer orders

• Return: from customer or to suppliers


Outline

• Introduction






• Conclusion


Strategic and planning concepts• Two types of strategy decisions relate to

operations:• Structural decisions include:

• Facilities

• Capacity

• Process technology

• Supply network

• Infrastructural decisions include:• Planning and control

• Quality

• Human resources

• New product development

• Performance measurement


Strategic and planning concepts (continued)• Five positioning decisions lead to operations

objectives:• Quality: doing things right

• Speed: doing things fast

• Dependability: doing things on time

• Flexibility: changing what you do

• Cost: doing things cheap

• Excelling in one or more of these performance objectives is critical to obtain a competitive advantage.

• Excelling at most of these objectives is costly and does not provide competitive advantages in all industries.


Strategic and planning concepts (continued)

Capacity planning can be broadly defined as:

‘ . . . the process of determining the production capacity needed by an organisation to meet changing demands for its products. In the context of capacity planning, capacity is the maximum amount of work that an organisation is capable of completing in a given period of time.’ (Wikipedia, 2008)


Strategic and planning concepts (continued)Three capacity planning strategies:


Strategic and planning concepts (continued)• Concurrent engineering is a term used to

describe the process of collective product design by all affected functions in an organisation.

• A product is designed for:• Manufacturability

• Procurement

• Storage and transport

• Environmental friendliness


Strategic and planning concepts (continued)• Quality function deployment is a planning tool

used to fulfil customer expectations through a disciplined approach to:• product design;

• engineering; and

• production.

• It provides in-depth evaluation of a product, with the focus remaining on integrating the customer’s specifications and quality requirements throughout the product design process.


Strategic and planning concepts (continued)• Four criteria need to be considered when

designing the transformation process:• Flexibility: adjusting for customer requirements

• Technology: an enabling factor

• Customer involvement: ensuring customer satisfaction

• Supply chain configuration: location, partner relationships and complexity


Strategic and planning concepts (continued)• Competitive criteria inform the decision as to

which of the following four types of transformation processes should be deployed:• Job shops

• Batch processes

• Repetitive processes

• Continuous flow processes


Strategic and planning concepts (continued)The purpose of planning and control is to make

decisions to ensure that operations run effectively

and make the correct products:• in the appropriate quantities;

• at the appropriate time; and

• at the appropriate level of quality.


Strategic and planning concepts (continued)• Planning and control activities are:

• Strategic operations planning

• Aggregate planning

• Master production schedule

• Activity scheduling

• Expediting

• Timescales play a significant role in planning and control activities:


Outline

• Introduction






• Conclusion


Quality management

• Four stages can be identified in the progression of the concept of quality:• Quality inspection: verifying final quality

• Quality control: inspection and corrective action

• Quality assurance: quality planned and designed

• Total quality management (TQM): company-wide quality focus

• The cost of quality has four components:• Internal failure cost: inside the company

• External failure cost: at the customer

• Appraisal cost: detecting defects

• Prevention cost: preventing defects


Quality management (continued)


Quality Management (continued)


Outline

• Introduction



• Inventory management• Current approaches and philosophies


• Conclusion


Inventory management

• Inventory refers to material resources that are stored for usage at a later stage either through transformation from a raw to a finished state, or through use in the current state.

• Different categories of inventory:• Raw materials inventory

• Work-in-process inventory

• Finished goods inventory

• Inventory management aims to optimise three targets:• Customer service

• Operating costs

• Inventory costs


Outline

• Introduction




• Current approaches and philosophies• Operations management in the service sector

• Conclusion


Current approaches and philosophies• Just in time (JIT)

• Started in Toyota manufacturing plants

• Aims at reducing or eliminating all waste from inventory in the transformation process

• Lean systems• Similar to JIT

• Focus is on the total business, not only production

• Theory of constraints• Focus attention on the one bottleneck that limits a

system’s ability to maximise throughput

• Total quality management• Putting quality as the major differentiating factor


Outline

• Introduction






• Conclusion


Operations management in the service sector• Most principles applicable to production

environment, but service sector is increasing in importance

• The characteristics of service include:• Intangibility: non-physical

• Inconsistency: quality dependent on ability

• Inseparability of customer from provider

• Inventory: service cannot be stored

• Challenge is to transfer and apply the operations management principles to the service environment


Outline

• Introduction






• Conclusion


Conclusion

• It is important for the logistics manager to understand:• The influence that production and operations have on

the logistics system

• The influence that the logistics system have on production and operations

• A company needs to find a balance between the efficiencies of both in order to optimise the total system and not of each in isolation.

Chapter 11: Strategic Leadership Chapter 8 Production and operations management.

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Transcript of Chapter 11: Strategic Leadership Chapter 8 Production and operations management.