Pmgt - Ops Mgmt (Ch10)
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Transcript of Pmgt - Ops Mgmt (Ch10)
Review: Mission & StrategyReview: Mission & Strategy
Mission - where are Mission - where are you going?you going?Organization’s Organization’s
purpose for beingpurpose for beingAnswers ‘What do Answers ‘What do
we provide we provide society?’society?’
Provides Provides boundaries and boundaries and focusfocus
Hard Rock CaféHard Rock Café
Our Mission: To spread the spirit of Rock ‘n’ Roll by delivering an exceptional
entertainment and dining experience. We are committed to being an important,
contributing member of our community and offering the Hard Rock family a fun,
healthy, and nurturing work environment while ensuring our long-term success.
Figure 2.2Figure 2.2
Strategic Process to Achieve the Strategic Process to Achieve the MissionMission
MarketingStrategy
OperationStrategy
FinanceStrategy
Organizational Strategy
Organization’s Mission
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CH 10: Operations Management Learning Goals
1. Define Operations Management/Production and explain what types of firms use it.
1. How operations contributes to the organizational strategy2. Issues facing Canadian Operations3. manufacturing vs service sectors,
2. Discuss measurement of productivity in the service sector, and tell how technology is leading to productivity gains in
service companies.
3. The 10 operations management strategic decisions
Design, location, QC, etc
4. Explain the various manufacturing processes.
What is Operations Management?
Production is the creation of goods & services
OM is the set of activities that create value in the form of goods and/or services by transforming inputs into outputs
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Operations Management
InputsInputs Conversion Conversion ProcessProcess
OutpuOutputt
ManufacturiManufacturingng
ServiceService
UB’s Dry UB’s Dry CleanersCleaners
Evolving Service Sector More focus is needed on the service side
of the business to gain an competitive advantage.
Service is all about creating a good experience for the users of the service.
Service improves quality but quality difficult to measure because don’t have inputs and outputs to compare.
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Productivity in Services and Technology
The service industry has always used technology to improve customer satisfaction.
Interactive computer networks available from banks, stockbrokers, travel agents and information providers of all kinds.
Internet sales in all categories.
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Ten Strategic OM Decisions
1. Service and product design2. Quality Management3. Process and capacity design4. Location5. Layout design6. Human resources and job design7. Purchasing & Supply-chain management8. Inventory9. Production scheduling10. Maintenance
Ten Strategic OM Decisions
1. Service and product design What does R&D do? What goods or services should we
offer? How should we design these products
and services? CAD/CAM
Computer-Aided Manufacturing Computer-Aided Manufacturing (CAM)(CAM)
Utilizing specialized computers Utilizing specialized computers and program to control and program to control manufacturing equipmentmanufacturing equipment
Often driven by the CAD systemOften driven by the CAD system
http://www.centroidcnc.com/video_catalog.html
Legal and Ethical StandardsLegal and Ethical Standards
For Design …For Design …
Federal Drug AdministrationFederal Drug Administration CSA CSA www.csa.ca/
Transport Canada Transport Canada http://www.tc.gc.ca/en/menu.htm
Children’s Product Safety ActChildren’s Product Safety Act
Ten Strategic OM Decisions
2. Quality Management How do we define quality? Who is responsible for quality? What TQM systems are there?
6 sigma ISO SPC
What is Quality?What is Quality?
The totality of features and The totality of features and characteristics of a product or characteristics of a product or
service that bears on its ability to service that bears on its ability to satisfy stated or implied needssatisfy stated or implied needs
American Society for QualityAmerican Society for Quality
Costs of QualityCosts of Quality
Prevention costs - reducing the potential for Prevention costs - reducing the potential for defectsdefects
Appraisal costs - evaluating products, parts, Appraisal costs - evaluating products, parts, and servicesand services
Internal failure - producing defective parts or Internal failure - producing defective parts or service before deliveryservice before delivery
External costs - defects discovered after External costs - defects discovered after deliverydelivery
Determinants of Service QualityDeterminants of Service Quality
ReliabilityReliability ResponsivenessResponsiveness CompetenceCompetence AccessAccess CourtesyCourtesy CommunicationCommunication
CredibilityCredibility SecuritySecurity Understanding/ Understanding/
knowing the knowing the customercustomer
TangiblesTangibles
Ten OM Decisions
3. Process and capacity design What process and what capacity will
these products require? What equipment and technology is
necessary for these processes? What is Lean manufacturing?
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Operations Management in the Manufacturing Sector
o Production Processes• Process focus manufacturing
• Assembly Line process
• Continuous/Product focus
• Mass Customization
Process Design OptionsProcess Design Options
LowLow ModerateModerate HighHighVolumeVolume
HighHigh
ModerateModerate
LowLow
Vari
ety
of
Pro
duct
sV
ari
ety
of
Pro
duct
s
Process-focusedJOB SHOPS
(Print shop, emergency room, machine shop,
fine dining Repetitive (modular) focusASSEMBLY LINE
(Cars, appliances, TVs, fast-food restaurants) Product focused
CONTINUOUS(steel, beer,
paper, bread, institutional
kitchen)
Mass CustomizationCustomization at
high Volume(Dell Computer’s PC)
Lean Manufacturing
Use JIT techniquesUse JIT techniques Build systems that help Build systems that help
employees produce perfect partsemployees produce perfect parts Reduce space requirementsReduce space requirements Develop close relationships with Develop close relationships with
supplierssuppliers
Lean SystemsLean Systems
Educate suppliers/partnersEducate suppliers/partners Eliminate all but value-added Eliminate all but value-added
activitiesactivities Develop the workforceDevelop the workforce Make jobs more challengingMake jobs more challenging Reduce the number of job Reduce the number of job
classesclasses
Lean Manufacturing
Reduction of Waste
What is waste?
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Seven WastesSeven Wastes
OverproductionOverproduction QueuesQueues TransportationTransportation InventoryInventory MotionMotion Over-processingOver-processing Defective productDefective product
Ten OM Decisions
4. Location Where should we put the facility? On what criteria should we base the
location decision?
Factors That Affect Location Factors That Affect Location DecisionsDecisions
Labor ProductivityLabor Productivity Exchange Rates and Currency RisksExchange Rates and Currency Risks CostsCosts Political Risk, Values, and CulturePolitical Risk, Values, and Culture Proximity to MarketsProximity to Markets Proximity to SuppliersProximity to Suppliers Proximity to Competitors (Clustering)Proximity to Competitors (Clustering)
Ten OM Decisions
5. Layout design How should we arrange the facility and
material flow? How large must the facility be to meet
our plan?
Ten OM Decisions
6. Human resources and job design How do we provide a reasonable work
environment? How much can we expect our employees
to produce?
HR & Employee EmpowermentHR & Employee Empowerment
Getting employees involved in Getting employees involved in product and process improvementsproduct and process improvements
85% of quality problems are due to process and 85% of quality problems are due to process and
materialmaterial TechniquesTechniques
Build communication networks that include employeesBuild communication networks that include employees Develop open, supportive supervisorsDevelop open, supportive supervisors Move responsibility to employeesMove responsibility to employees Build a high-morale organizationBuild a high-morale organization Create formal team structuresCreate formal team structures
Supply Chain Management
The Supply Chain is the sequence of firms that focus on getting the right amount of the right products to the right place at the right time at the lowest possible cost.
Supply Chain Management is the integration and organization of information and logistics activities across firms in the supply chain.
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Record AccuracyRecord Accuracy Accurate records are a critical Accurate records are a critical
ingredient in production and ingredient in production and inventory systemsinventory systems
Allows organization to focus on Allows organization to focus on what is neededwhat is needed
Necessary to make precise Necessary to make precise decisions about ordering, decisions about ordering, scheduling, and shippingscheduling, and shipping
Incoming and outgoing record Incoming and outgoing record keeping must be accuratekeeping must be accurate
Stockrooms should be secureStockrooms should be secure
Inventory:Inventory:Holding, and Setup CostsHolding, and Setup Costs
Holding costs - the costs of Holding costs - the costs of holding or “carrying” inventory holding or “carrying” inventory over timeover time
Setup costs - cost to prepare a Setup costs - cost to prepare a machine or process for machine or process for manufacturing an order (also manufacturing an order (also ordering it)ordering it) Flexible manufacturing
Holding CostsHolding Costs
CategoryCategory
Cost (and Range) Cost (and Range) as a Percent of as a Percent of Inventory ValuInventory Valuee
Housing costs (including rent or Housing costs (including rent or depreciation, operating costs, taxes, depreciation, operating costs, taxes, insurance)insurance)
6%6% (3 - 10%) (3 - 10%)
Material handling costs (equipment lease or Material handling costs (equipment lease or depreciation, power, operating cost)depreciation, power, operating cost)
3%3% (1 - 3.5%) (1 - 3.5%)
Labor costLabor cost 3%3% (3 - 5%) (3 - 5%)
Investment costs (borrowing costs, taxes, Investment costs (borrowing costs, taxes, and insurance on inventory)and insurance on inventory)
11%11% (6 - 24%) (6 - 24%)
Pilferage, space, and obsolescencePilferage, space, and obsolescence 3%3% (2 - 5%) (2 - 5%)
Overall carrying costOverall carrying cost 26%26%
Table 12.1Table 12.1
Reduce Setup TimesReduce Setup Times
Figure 16.4Figure 16.4
Use one-touch system to eliminate Use one-touch system to eliminate adjustments (save 10 minutes)adjustments (save 10 minutes)Step 4Step 4
Step 5Step 5Training operators and standardizing Training operators and standardizing work procedures (save 2 minutes)work procedures (save 2 minutes)
Repeat cycle until subminute Repeat cycle until subminute setup is achievedsetup is achieved
Initial Setup Time
Step 2Step 2Move material closer and improve material handling
(save 20 minutes)
Step 1Step 1
Separate setup into preparation and actual setup, doing as much as possible while the
machine/process is operating (save 30 minutes)
Step 3Step 3Standardize and improve tooling
(save 15 minutes)
90 min —90 min —
60 min —60 min —
45 min —45 min —
25 min —25 min —
15 min —15 min —13 min —13 min —
——
EOQ ModelEOQ ModelObjective is to minimize total Objective is to minimize total
costscosts
Annu
al co
stA
nnu
al co
st
Order quantityOrder quantity
Curve for total Curve for total cost of holding cost of holding
and setupand setup
Holding cost Holding cost curvecurve
Setup (or order) Setup (or order) cost curvecost curve
Minimum Minimum total costtotal cost
Optimal Optimal order order
quantityquantity
Just-In-Time (JIT) ExampleJust-In-Time (JIT) Example
ScrapUnreliable Vendors
Capacity Imbalances
Work in process inventory level
(hides problems)
Just-In-Time (JIT) ExampleJust-In-Time (JIT) Example
Reducing inventory revealsReducing inventory revealsproblems so they can be solvedproblems so they can be solved
ScrapUnreliable Vendors
Capacity Imbalances
Modern Production Techniques
o Materials Requirement Planning (MRP)o Computer based operation system that uses
sales forecasts to ensure that needed parts and material are available at the right time and place.
o Enterprise Resource Planningo Computer application that enables multiple
firms to manage all operation on the basis of a single integrated set of corporate data.
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Summary1) Operations Management transforms resource into goods
and services and is used by firms in both the manufacturing and the service sectors.
2) Functions involved in both the manufacturing and service sectors includes ten strategic decisions will improve the productivity of companies
3) Service productivity is difficult to measure but technology is enabling firms to realize gains in this sector.
4) Manufacturing processes physically or chemically change materials.
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