Meeting 4 Introduction to Business

8/12/2019 Meeting 4 Introduction to Business

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Cha

pter

1

Mee

ting

4Service/ManufacturingOperations

Ragil Sriharto

FEB UGM


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The Nature of Operations

Management!Operations management

the development and administration of theactivities involved in transforming resources

into goods and services!Manufacturing/production:

the activities and processes used in makingtangible products

!Operations :the activities and processes used in makingboth tangible and intangible products.


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The Transformation Process


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Inputs, Outputs, & Transformation Processes in the

Manufacture of Oak Furniture


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OM in Service Businesses" Salons, colleges, airlines" 70% of all employment in the United

States; fastest growth market for jobs

" Represent over 72% of GDP in U.S." Services are actions/performances directed at consumers# Different than manufacturing that produces tangible products


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Services Are..." Generally intangible" Perishable" Demand can be variable" Cannot be saved, stored, resold, or

packaged


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Operations Management in Service

Businesses!Nature and

Consumption of

Output

!Uniformity of Inputs!Uniformity of Output!Labor Required!

Measurement ofProductivity


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Manufacturing Service

Tangible Intangible

Uniform inputs Customized inputs

Uniform outputs Customized outputs

Less labor intensive More labor intensive

Easy to measure productivity More difficult to measure productivity(due to variations in demand, service, requirements

and intangibility)

Manufacturing and Service

Compared


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Operations Management and

Competitive Advantage

Concepts

Quality Goods and services that are reliable,dependable, or psychologically satisfying tocustomers.

Efficiency The amount of input needed to produce a givenoutput. Less input required lowers cost andwaste.

Responsiveness tocustomers

Actions taken to respond to customer needs.Firms can react quickly and correctly tocustomer needs as they arise.


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Improving Responsiveness to

Customers!Without customers, organizations would

cease to exist.

" Non-profit and for-profit firms all havecustomers.

" Managers need to identify who thecustomer is and their needs.


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Improving Responsiveness to

Customers!What do customers want?

" Usually customers prefer:!A lower price to a higher price.! High-quality products to low-quality products.! Quick service to slow service (also prefer good

after-sale support)

! Many features over few features.! Products that are customized or tailored to their

specific needs.


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QualityDegree to which a good or service

meets

the demands and requirements of

customers

"A critical element of operations management"Determining quality can be difficult

#Subjective based on consumersexpectations and perspectives


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Improving Quality

!The concept of quality applies theproducts of both manufacturing and

service firms

"A firm that provides higher quality thanothers at the same price is more responsive

to customers.

" Higher quality can also lead to betterefficiency through lower waste levels and

operating costs.


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Impact of Increased Quality on

Organizational Performance

Figure 18.4


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Total Quality Management

!Total Quality Management (TQM)"A management technique that focuses all

activities on improving the quality of a

firms goods or services.

" TQM is a company-wide managementphilosophy developed by Deming, Juran,

and Feigenbaum.

" The TQM philosophy is that the customerdefines quality.


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Steps to Successful TQM

Implementation! Build organizational

commitment to quality

! Focus on the customer! Find ways to measure

quality

! Set goals and createincentives

! Solicit input fromemployees

! Identify defects andtrace to source.

! Introduce just-in-time(JIT) inventory systems.

! Work with suppliers.! Design products for

easy manufacture.

! Break down barriersbetween functions.


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TQM: Associated Terms

! Quality Circles" Groups of employees who meet regularly to discuss ways

to increase quality

! Inventory" The stock of raw materials, inputs, and component parts

that an organization has on hand at a particular time.

! Just-in-Time (JIT) inventory systems" A system in which parts or supplies arrive at an

organization when they are needed and not before.


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Managing Quality

!Quality Control: the processes anorganization uses to maintain its

established quality standards

!Total Quality Management/TQM: aphilosophy that uniform commitment to

quality in all areas of an organization will

promote a culture that meets customersperceptions of quality


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Managing Quality

!Establishing Standards-ISO 9000a series of quality assurance standards

designed by the International

Organization for Standardization to

ensure consistent product quality under

many conditions

!Inspection!Sampling


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Inspection and SamplingInspection

" Reveals whether a product meets quality standards.Sampling

" How many items should be inspected." Depends on potential costs of product flaws in terms of human

lives and safety.


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Improving Efficiency

!The fewer the inputs required to produce a givenoutput, the higher the efficiency of a productionsystem." A common measure of the organizations efficiency of

turning all of the inputs into outputs is called total factorproductivity:

inputsall

outputstyproductivifactorTotal =

A comparison measure of a single input(such as labor) to total output is called

partial productivity:

labordirect

outputstyproductiviLabor =


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Improving Efficiency

!Calculating labor productivity allowslabor comparisons between

organizations.

!Improved efficiency leads to lower costsand better performance.

!TQM and Efficiency" TQM can lead to much higher labor

productivity.

! When quality rises, less is wasted on scrap.


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Planning and Designing

Operations Systems!Planning the Product!Designing the Operations Processes

!Standardization :the making of identicalinterchangeable components or products

!Modular design: the creation of an item inself-contained units, or modules, that canbe combined or interchanged to create

different products!Customization: making products to meet

a particular customers needs or wants


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Product Life Cycles and

Product Development

! Product Life Cycle" Changes in product demand from its introduction

through its growth and maturity to its decline.! Embryonic stage: product is not widely accepted and has

minimal demand.

! Growth stage: many consumers seek out the product and buyit for the first time.

! Mature stage: demand peaks since most buyers already havethe product and only buy replacements.

!Decline stage: demand falls off as the product becomesobsolete.


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A Product Life Cycle


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The Relationship Between Technological

Change and Length of the Product Life Cycle


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Product Development

!The Rate of Technological Change" The rate of change determines the length

of the product life cycle demand curve.! In the computer industry, life cycle is about 18

months; in the steel industry, it is many years.


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Product Development!Fads and fashions also impact the life cycle

duration.

" Style changes can alter the demand for goods." Goods subject to fads and fashion changes will

experience shorter life cycles.

" In general, life cycles are gettingshorter, forcing managers

to be more responsive

to customers.


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Moores Law: Intels Evolving

Microprocessors


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Four Goals of New Product

Development


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Goals of New Product Development

!Reducing Development Time"Advantages of reduced product

development time

! First-to-market products with new features cancommand premium prices and will have a longer

life cycle.

! Products can be upgraded quickly to incorporatenew technology as it becomes available.

! Easier to experiment with new products andreplace them if they fail in the market.


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Goals of New Product

Development (contd)! Maximizing the Fit with Customer Needs

" Most products fail because they were not designed to fitcustomer needs.

! Ensure that customers actually want the product featuresbefore adding them to the product.

! Maximizing Product Quality" New products must be of superior quality.

! Poor quality in a new product can doom its acceptance even ifquality problem is fixed later on.

! Quality problems are often result from rushing products tomarket.


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Goals of New Product

Development (contd)!Maximizing Manufacturability and Efficiency

" The efficiency with which the product is builtimpacts the time it takes to get a product to

market.! Designing a product from the beginning for ease of

production can shorten development time.

! Designing a product for efficient production also avoidsproduction problems, reduces product costs, and

improves product quality.


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Principles of Product Development

!Principle 1: Use a Stage-GateDevelopment Funnel

" Forces managers to make choices amongcompeting projects to avoid spreading

organizational resources too thin.! Stage 1 considers all new ideas that are feasible and

meet the strategic goals of the firm.

! Stage 2 focuses on reviewing product developmentplans; with the best continuing on.

! Stage 3 issues a contract book and focuses onresponsibilities, budgets, and resources in a symbolic

launch of the formal development.


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A Stage-Gate Development Funnel


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Members of a Cross-

Functional Product

Development Team


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(contd)

!Principle 3: Concurrent Engineering" The traditional engineering approach

follows a sequential flow resulting in long

development times and poor quality ifmanagers do not communicate between

departments.

! By working concurrently, design and productionissues are considered together.

! Production concerns are addressed while theproduct is designed and can still be changed.


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Sequential vs.

ParallelDevelopment

Processes


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(contd)

!Principle 4: Involve Both Customers andSuppliers

" Products fail because their design does not meetthe needs of customers.! Customer ideas and needs should be included in the

design process.

! Solicit customer input from many sources." Suppliers are also critical to the success of a

product.! Include them during concurrent engineering.! Seek out their ideas and input early in the process.


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Problems with Product

Development!Successful product development is major

source of competitive advantage.

" While most managers know this, it can be difficultto actually carry out good development strategies.

" Revolutionizing product development requires abreak with the traditional ways of thinking andmanaging.

! Many managers have difficulty in releasing control of theirpart of the process and allowing groups and teams tofunction in the development process.


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Planning and Designing

Operations Systems!Planning Capacity

Capacity:the maximum load that an

organizational unit can carry or operate

!Planning Facilities" Facility location" Facility layout" Technology


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Facilities Layout

Fixed-Position Layout (Project Organization)

" All resources needed for a product are broughtto a central location

Process Layout (Intermittent Organization)

" Layout is organized into departments that group related processesProduct Layout (Continuous Manufacturing Organization)

" Production is broken down into relatively simple tasks assigned to workerspositioned along a line


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Facilities Layout, Flexible

Manufacturing, and Efficiency!Facilities Layout

" The operations management technique

whose goal is to design the machine-worker interface to increase productionsystem efficiency.

!Flexible Manufacturing" Operations management techniques that

attempt to reduce the setup costs

associated with a production system.


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Three Facilities

LayoutsFigure 18.5


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Facilities Layout

!Product layout" Machines are organized so that each

operation is performed at work stationsarranged in a fixed sequence.

! Example: mass production systems where workersare stationary and a belt moves work to them.

!Process Layout" Self contained work stations not organized in

a fixed sequence.! Provides flexibility in making a wide variety of

products tailored to customers.


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Facilities Layout (contd)

!Fixed-Position Layout" The product stays in a fixed spot and

components produced at remote stations

are brought the product for to finalassembly.

! Large jet aircraft assemblyuses this type of layout.


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Changing a Facilities Layout


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Flexible Manufacturing

! Most firms face major expenses when setting up toproduce a product.

" These costs must be paid before production begins.! The more often products to be built change, the higher setup

costs become.

" Flexible manufacturing reduces setup costs by reducingthe time required to reset the production line for a different

product.

! Using easily replaced manufacturing equipment! Redesigning the production system itself to be more productive.


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[ ]

Supply Chain Management

Connecting and integratingall parties or members of the

distribution system in order

to satisfy customers


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Managing the Supply Chain

Purchasing Management

Inventory Control Management

Routing and Scheduling

Distribution Management


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Purchasing

!Procurement" Buying the right items" Obtaining desired quality" Buying the right quantity" Paying the lowest price" Obtaining inventory at the right time


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Managing Inventory

!Three basic types of inventory:" Finished-goods inventory" Work-in-process inventory" Raw materials inventory


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Inventory Control Process

!Determines how many supplies andgoods are needed, and keeps track of:

" Quantities on hand" Where each item is" Who is responsible for it


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Inventory Management Approaches

!Economic order quantity model (EOQ)" Identifies the optimum number of items to

order.

!Just in time inventory management(JIT)" Uses smaller quantities of materials that

arrive just in time.

!Material-requirements planning (MRP)" Schedules the precise quantity of materials

needed to make the product.


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Just-in-Time Inventory and

Efficiency!Just-in-Time (JIT) Inventory

" Originally developed for TQM, also adds toefficient production.

! JIT reduces inventory holding costs forwarehousing, storage, inventory tracking, and

the cost of capital tied up in inventory.

!A drawback to JIT is that a firm does notmaintain have a large buffer stock of parts which

makes the firm vulnerable to strikes or supplyproblems that can quickly deplete on-hand

inventories.


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Routing and Scheduling

!Routing" The sequence of operations through which

a product must pass

!Scheduling" The assignment of required tasks to

departments or specific machines, workers,or teams

"Program Evaluation and Review Technique(PERT)


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Hypothetical PERT Diagram for Making

a McDonald

s Big Mac


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Outsourcing

" Increasingly a part of supply chainmanagement in operations

" Outsource aspects of operations tocompanies that provide products moreefficiently, at lower cost, greater

customer satisfaction.


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The Worlds Top Five

Outsourcing ProvidersCompany Services

IBM Customer relationship management: Human

Resources Management: information and

communication technology management

Sodexho

Alliance

Real estate and Capital asset managementfacility

servicesAccenture Human resources management; information and

communication technology management; financial

management

Hewlett-

packard

Information and communication technology

management; financial management; imaging and

printing

Capgemini CRM; information and communication technology

management; financial management

Meeting 4 Introduction to Business

Documents

Transcript of Meeting 4 Introduction to Business