7
chapter
Operations Management and
Quality
Business Essentials, 7th Edition
Ebert/Griffin
Instructor Lecture PowerPoints
PowerPoint Presentation prepared by
© 2009 Pearson Education, Inc.
Carol Vollmer Pope Alverno College
What Does Operations Mean Today?
• Operations (Production)
– All the activities involved in making products—
goods and services—for customers
• Service Operations (Service Production)
– Provide intangible and tangible service products
• Goods Operations (Goods Production)
– Produce tangible products
• Operations managers create utility for customers
through production, inventory and quality control.
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Creating Value Through Operations
• Utility
– The ability of a product to satisfy a want or need
• Form utility
• Time utility
• Place utility
• Operations (Production) Management
– The systematic direction and control of processes that
transform resources into finished services and goods that
create value for and provide benefits to customers
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Differences Between Service and Goods
Manufacturing Operations
• Goods are produced, services are performed
• Service operations differ from manufacturing
operations in that service operations:
1.
2.
3.
4.
Involve interacting with consumers.
Are sometimes intangible and unstorable.
Involve a customer’s presence in the process.
Involve certain service quality considerations.
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Operations Processes
• Operations Process
– A set of methods and technologies used to produce
a good or a service
• Goods Production Processes
– Make-to-order processes
– Make-to-stock processes
• Service Production Processes
– Extent of Customer Contact
• Low-contact systems: low customer involvement
• High-contact systems: high customer involvement
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Business Strategy as the
Driver of Operations
• Businesses with contrasting business
strategies choose different operations
capabilities—the activities or processes that
production must perform especially well, with
high proficiency
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TABLE 7.1 Business Strategies That Win
Customers for Four Companies
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Operations Planning
• Capacity Planning
– Capacity: The amount of a product that a
company can produce under normal conditions
– Planning deals with determining how much can
be produced
• Location Planning
– Location affects production costs and flexibility
– Planning deals with determining where it will be
produced
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Operations Planning (cont’d)
• Layout Planning
– The layout of machinery, equipment, and supplies
determines whether a company can respond
efficiently to demand for more and different
products or whether it finds itself unable to match
competitors’ speed and convenience
– Planning deals with determining how the product
will be produced
• Process layouts
• Product layouts
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FIGURE 7.1 Operations Planning and Control
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Quality Planning
• What Is Quality?
– The combination of “characteristics of a product
or service that bear on its ability to satisfy stated
or implied needs” (American Society for Quality)
– Quality planning begins when products are
designed: goals are set for performance and
consistency
– Quality planning includes deciding what
constitutes a high-quality product and
determining how to measure these quality
characteristics
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Methods Planning
• Managers identify each production step and
methods for performing it.
• They reduce waste and inefficiency by examining
procedures in an approach called methods
improvement.
• They reduce waste and inefficiency by improving
process flows.
– A detailed description, often a process flowchart, helps
managers organize and record information.
• They attempt to improve customer service.
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Operations Scheduling
• Operations Scheduling
– Identifying times when specific production
activities will occur
• Kinds of Planning Schedules
– Master schedule: Shows which products will be
produced, and when, in upcoming time periods
– Detailed schedule: Shows day-to-day activities
that will occur in production
– Staff schedules: Show who and how many
employees will be working, and when
– Project schedules: Coordinate completion of
large-scale projects
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FIGURE 7.3 Example Partial Master Production
Schedule (Tons of Each Product to be Produced)
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Project Scheduling
• Gantt Chart
– Breaks down projects into steps to be performed
– Specifies the time required to complete each step
– A Project Manager uses the Gantt chart to:
•
•
•
•
List all activities to be performed
Estimate the time required for each step
Record the progress on the chart
Check the progress against the time scale on the report
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Figure 7.4 Gantt Chart
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Operations Control
• Operations Control
– Requires managers to monitor performance by
comparing results with detailed plans and
schedules.
– Follow-up: Checking to ensure that production
decisions are being implemented—is a key and
ongoing facet of operations.
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Materials Management
• Materials Management
– The process by which managers plan, organize,
and control the flow of materials from sources of
supply through distribution of finished goods
• Materials Management Activities
–
–
–
–
–
Supplier selection
Purchasing
Transportation
Warehousing
Inventory control
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Lean Production Systems: Justin-Time Operations
• Lean Production Systems Goals
– Smooth production flows avoid inefficiencies
– Elimination of unnecessary inventories
– Continuous improvement in production processes
• Just-in-Time (JIT) Production
– Bringing together all needed materials only when
they are required, creating fast and efficient
responses to customer orders
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Benefits of Just-in-Time Production
1. Reduces the number of goods in process
(goods not yet finished)
2. Minimizes inventory costs
3. Reduces inventory storage space requirements
4. Replaces stop-and-go production with
smooth movement
5. Disruptions are more visible and get resolved
more quickly
6. Continuous improvement of the process
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Quality Control
• Quality Control
– Taking action to ensure that operations produces
products that meet specific quality standards
– Requires establishment of specific standards and
measurements
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Quality Improvement and Total Quality Management
• Quality Improvement
– Building quality into products and services rather than
trying to control quality by inspection
• Total Quality Management (TQM)
– All of the activities necessary for getting high-quality goods
and services into the marketplace
• Quality Ownership
– Quality belongs to each person who creates it while
performing a job and it requires a focus on quality by all
parts of an organization
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Total Quality Management
• Always Delivering High Quality
– Planning for quality
– Organizing for quality
– Directing for quality
– Controlling for quality
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Tools for Total Quality Management
• Competitive Product Analysis
– Analyzing competitors’ products to identify improvements
• Value-Added Analysis
– Eliminating wasteful and unnecessary activities
• Quality Improvement Teams
– Adopting quality circles
• Getting Closer to the Customer
– Identifying internal and external customers
• ISO 9000 and ISO 14000
– Ensuring certification of quality management in processes
• Business Process Reengineering
– Starting over from scratch to improve processes
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Adding Value Through Supply Chains
• Supply Chain (or Value Chain)
– The flow of information, materials, and services
that starts with raw-materials suppliers and
continues adding value through other stages in
the network of firms until the product reaches the
end customer
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FIGURE 7.5 Supply Chain for Baked Goods
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The Supply Chain Strategy
• Supply Chain Management (SCM)
– Working with the supply chain as a whole to
improve overall flow through a system composed
of companies working together
• Supply Chain Reengineering
– Improving the process for better results:
• Lower costs, speedier service, and coordinated flows of
information and material
• Outsourcing and Global Supply Chains
– Paying suppliers and distributors to perform
certain business processes or to provide needed
materials or services
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