Chapter Nine Production and Operations Management Mc GrawHillIrwin

Chapter Nine Production and Operations Management Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Operations Management (OM) The development and administration of the activities involved in transforming resources into goods and services. Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Key OM Terms • Manufacturing – The activities and processes used in making tangible products; also called production • Operations – The activities and processes used in making both tangible and intangible products Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

The Transformation Process Inputs land labor capital raw materials time information energy Customer Mc. Graw-Hill/Irwin Transformation or Conversion procedures equipment facilities technology knowledge Control standards Outputs goods services ideas (Feedback) © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Inputs, Outputs, and Transformation Processes in the Manufacture of Oak Furniture Inputs oak trees labor information/ knowledge stain or varnish router/saw warehouse space/time Mc. Graw-Hill/Irwin Transformation cutting or sawing routing measuring assembling staining/varnishing storing Outputs oak furniture © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

OM in Service Businesses • Service 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. Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Differences Between Manufacturers and Service Providers • • • Nature and Consumption of Output Uniformity of Inputs Uniformity of Outputs Labor Required Measurement of Productivity Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

The Steps in Planning and Designing Operations Systems 1. Planning the Product 2. Designing the Operations Process a. Standardization b. Modular Design c. Customization 3. Planning Capacity Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

The Steps in Planning and Designing Operations Systems 4. Planning Facilities a. Facility Location b. Facility layout 1. Fixed-Position Layout 2. Project Organization 3. Process Layout (intermittent organizations) Mc. Graw-Hill/Irwin 4. © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Facility Layouts Fixed-Position Layout All resources needed for a product are brought to a central location. Process Layout organized into departments that group Layout is related processes. Production is Product Layout broken down into relatively simple tasks assigned to workers Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

The Steps in Planning and Designing Operations Systems c. Technology 1. CAD 2. CAM 3. Flexible Manufacturing 4. CIM FAST FACT: Robotic Industries Association estimates 100, 000 robots work in US factories, making the US the world’s 2 nd largest user of robots. Source: Robotic Industries Association Website, “Robotics Industry Posts Second Best Year Ever, ” from http: //robotics. org/public/articlesdetails. cfm? id=336 (accessed July 18, 2001). Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Managing the Logistics of OM Purchasing Management Inventory Control Management Routing and Scheduling Distribution Management Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Managing the Logistics of OM The objectives of purchasing (also called “procurement”): 1. 2. 3. 4. 5. Mc. Graw-Hill/Irwin Buying the right items Obtaining desired quality Buying the right quantity Paying the lowest price Obtaining inventory at the right time © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Managing the Logistics of OM • Inventory Management – Finished-goods Inventory – Work-in-Process Inventory – Raw Materials Inventory Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Managing the Logistics of OM • Inventory Control Techniques – EOQ – JIT – MRP FAST 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. Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Managing the Logistics of OM • 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 – PERT Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Start A Hypothetical PERT Diagram for Making a Mc. Donald’s Big Mac Remove buns, 2 beef patties, cheese, sauce, 1 lettuce, onions, pickle (20) Grill beef patties (120) 2 4 3 Apply sauce to bun (10) Critical path Mc. Graw-Hill/Irwin 6 5 Place cooked patties on bun (5) Activity Top with cheese and vegetables (15) 7 Place Big Mac in package (5) 5 Event 8 Place package in heated bin (5) Serve to customer (5) E n d (185) Time to complete event (seconds) © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Managing Quality • Quality Control – The process an organization uses to maintain its established quality standards • Statistical Process Control • ISO 9000 • The Malcolm Baldrige National Quality Award Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

IS 0 9000 Internal Organization for Standardization • Designed to ensure consistent quality • Requires documenting record keeping on training, testing and responding to defects • Independent auditor must verify standards required by ISO • ISO 9002 certification has been established for service providers Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

The Malcolm Baldrige National Quality Award The three main purposes of the award: 1. To Promote Quality Awareness 2. To Recognize the Quality Achievements of American Businesses 3. To Publicize Successful Quality Strategies Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Techniques for Maintaining Quality • Inspection • Sampling FAST FACT: Quality Pays! The annual median income for a quality assurance/control manager is $65, 536. Source: “ 20 th Annual Survey of Compensation in Manufacturing 2000, ” Abbot, Langer & Associates, Inc. , Dept. NET, First Street, Crete, IL 60417 from http: //www. careerjournal. com accessed July 10, 2001). Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Solve the Dilemma 1. What mistake did Mc. King make in approaching the introduction of pizza? 2. How could this product introduction have been coordinated to avoid the problems that were encountered? 3. If you were an executive at Mc. King, how would you proceed with the introduction of pizza into the restaurants? Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Explore Your Career Options How can an understanding of total quality management (TQM) or ISO 9000 series certification assist in developing a career? Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Additional Discussion Questions and Exercises 1. 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 January 6 January 19 phone in total to hotel. January 20 decorating committee to review Mc. Graw-Hill/Irwin Confirm banquet room reservation. Publicize banquet. Count number of banquet reservations; Phone chairpersons of banquet committee and hospitality preparations for banquet. © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Additional Discussion Questions and Exercises Question 2 continued. January 27 decorations on Decorating committee places tables. (2 -4 p. m. ) Hospitality committee prepares registration table and banquet booklets. January 27 Banquet (6 p. m. ) January 30 persons and hotel staff. Send thank-you notes to all committee Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Chapter 9 Quiz 1. An assembly line is an example of a. a product layout b. a process layout c. a fixed-position layout d. an intermittent organization 2. of Which of the following identifies the optimum number 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) Mc. Graw-Hill/Irwin © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Chapter 9 Quiz 3. of a Which of the following characteristics is most typical 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. Mc. Graw-Hill/Irwin Inspection is concerned with a. standards of quality. b. labor and energy. c. routing and scheduling. d. modular design and customization. © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.

Multiple Choice Questions about the Video 1. Louis, bridge 2. Mc. Graw-Hill/Irwin Why was a new bridge needed between Alton, Illinois and St. Missouri? a. concern about the age and narrow design of the old b. c. d. e. concern about underwater supports on the old bridge concern about the appearance of the old bridge concern about traffic on the old bridge none of the above 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 © 2003 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.