Chapter Nine Production and Operations Management

Chapter NineProduction andOperations ManagementOperations Management (OM)The development and administration of the activities involved in transforming resources into goods and services.Key OM TermsManufacturingThe activities and processes used in making tangible products; also called productionOperationsThe activities and processes used in making both tangible and intangible productsThe Transformation ProcessCustomerControl standards(Feedback)Inputs land labor capital raw materials time information energyTransformation or Conversion procedures equipment facilities technology knowledgeOutputs goods services ideasInputs, Outputs, and Transformation Processes in the Manufactureof Oak FurnitureInputs oak trees labor information/ knowledge stain or varnish router/saw warehouse space/timeTransformation cutting or sawing routing measuring assembling staining/varnishing storingOutputs oak furnitureOM in Service BusinessesService providers use human and mechanical processes to provide products that are intangible.The transformation process requires inputs such as employees, equipment and supplies.Outputs provide a benefit from a performance, event or type of involvement with the service provider.Approximately 70% of the U.S. economy is based on the service industry.Differences Between Manufacturers and Service ProvidersNature and Consumption of OutputUniformity of InputsUniformity of OutputsLabor RequiredMeasurement of ProductivityThe Steps in Planning and Designing Operations Systems1. Planning the Product2. Designing the Operations Process a. Standardization b. Modular Design c. Customization3. Planning CapacityThe Steps in Planning and Designing Operations Systems4. Planning Facilities a. Facility Location b. Facility layout 1. Fixed-Position Layout 2. Project Organization 3. Process Layout (intermittent organizations) 4. Product Layout (continuous manufacturing organization) Facility LayoutsFixed-Position Layout All resources needed for a product are brought to a  central location.Process Layout Layout is organized into departments that group related processes.Product Layout Production is broken down into relatively simple tasks assigned to workers positioned along a line.The Steps in Planning and Designing Operations Systems c. Technology 1. CAD 2. CAM 3. Flexible Manufacturing 4. CIMFAST FACT:Robotic Industries Association estimates 100,000 robots work in US factories, making the US the world’s 2nd largest user of robots.Source: Robotic Industries Association Website, “Robotics Industry Posts Second Best Year Ever,”from (accessed July 18, 2001).Managing the Logistics of OMPurchasing ManagementInventory Control ManagementRouting and Scheduling Distribution ManagementManaging the Logistics of OM The objectives of purchasing (also called “procurement”):Buying the right itemsObtaining desired qualityBuying the right quantityPaying the lowest priceObtaining inventory at the right timeManaging the Logistics of OMInventory ManagementFinished-goods InventoryWork-in-Process InventoryRaw Materials InventoryManaging the Logistics of OMInventory Control TechniquesEOQJITMRPFAST FACT:Scholastic, Inc., publisher of Harry Potter books used JIT to deliver 100,000 copies of one book to stores across the US just minutes before midnight on July 8, the book’s official release date.Source: Michael Arndt, “Transportation,” Business Week, January 8, 2001, p. 130.Managing the Logistics of OMRoutingThe sequence of operations through which a product must passScheduling The assignment of required tasks to departments or specific machines, workers, or teamsPERTA Hypothetical PERT Diagram for Making a McDonald’s Big Mac214556783Remove buns, 2 beef patties, cheese, sauce, lettuce, onions, pickle (20)Grill beef patties (120)Apply sauce to bun (10)Place cooked patties on bun (5)Top with cheese and vegetables (15)Place Big Mac in package (5)Place package in heated bin (5)Serve to customer (5)Critical pathActivityEvent(185) Time to complete event (seconds)StartE n dManaging QualityQuality ControlThe process an organization uses to maintain its established quality standardsStatistical Process ControlISO 9000The Malcolm Baldrige National Quality AwardIS0 9000Internal Organization for StandardizationDesigned to ensure consistent qualityRequires documenting record keeping on training, testing and responding to defectsIndependent auditor must verify standards required by ISOISO 9002 certification has been established for service providersThe Malcolm Baldrige National Quality AwardThe three main purposes of the award:To Promote Quality AwarenessTo Recognize the Quality Achievements of American BusinessesTo Publicize Successful Quality StrategiesTechniques for Maintaining QualityInspectionSamplingFAST FACT:Quality Pays! The annual median income for a quality assurance/control manager is $65,536.Source: “20th Annual Survey of Compensation in Manufacturing 2000,” Abbot, Langer & Associates, Inc., Dept. NET, First Street, Crete, IL 60417 from accessed July 10, 2001). Solve the DilemmaWhat mistake did McKing make in approaching the introduction of pizza?How could this product introduction have been coordinated to avoid the problems that were encountered?If you were an executive at McKing, how would you proceed with the introduction of pizza into the restaurants?Explore Your Career OptionsHow can an understanding of total quality management (TQM) or ISO 9000 series certification assist in developing a career?Additional Discussion Questions and Exercises1. What is the purpose of inventory control?2. PERT charts can show a sequence of activities in days rather than seconds. Draw a PERT chart for the chairperson of a banquet committee showing the most efficient path for these projected events: January 5 Confirm banquet room reservation. January 6 Publicize banquet. January 19 Count number of banquet reservations; phone in total to hotel. January 20 Phone chairpersons of banquet decorating committee and hospitality committee to review preparations for banquet. Additional Discussion Questions and ExercisesQuestion 2 continued. January 27 Decorating committee places decorations on tables. (2-4 p.m.) Hospitality committee prepares registration table and banquet booklets. January 27 Banquet (6 p.m.) January 30 Send thank-you notes to all committee persons and hotel staff. Chapter 9 Quiz1. An assembly line is an example of a. a product layout b. a process layout c. a fixed-position layout d. an intermittent organization2. Which of the following identifies the optimum number of items to order to minimize the cost of ordering them? a. just-in-time (JIT) b. material-requirements planning (MRP) c. economic-order quantity model d. program evaluation and review technique (PERT)Chapter 9 Quiz3. Which of the following characteristics is most typical of a continuous manufacturing organization? a. The firm manufactures customized products. b. The firm has a low volume of production. c. The firm has a relatively low unit cost of production. d. The firm creates many different products with many different characteristics.4. Inspection is concerned with a. standards of quality. b. labor and energy. c. routing and scheduling. d. modular design and customization.Multiple Choice Questions about the Video1. Why was a new bridge needed between Alton, Illinois and St. Louis, Missouri? a. concern about the age and narrow design of the old bridge b. concern about underwater supports on the old bridge c. concern about the appearance of the old bridge d. concern about traffic on the old bridge e. none of the above2. Which operations management techniques used in the bridge construction were specifically mentioned in the case? a. PERT and CPM b. CPM and Gant charts c. PERT d. PERT and Gant charts e. PERT, CPM, and Gant charts