Chpt18 Operations Management

8/9/2019 Chpt18 Operations Management

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Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000

Operations

Management:Managing Quality,Efficiency, and

Responsiveness toCustomersTechnology

Operations

Management:Managing Quality,Efficiency, and

Responsiveness toCustomersTechnology

1818


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Operations ManagementOperations Management

Refers to the management of the production system thattransforms inputs into finished goods and services.

Production system: the way a firm acquires inputs thenconverts and disposes outputs.

Operations managers: responsible for thetransformation process from inputs to outputs.

Operations management seeks to increase the quality,efficiency, and responsiveness of the firm.Seeks to provide a competitive advantage.


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T he Purpose of Operations ManagementT he Purpose of Operations Management

The P roduction SystemThe P roduction System

InputsInputs ConversionConversion OutputsOutputs

raw materialsraw materials

laborlabor

component partscomponent parts

skillsskills

machinesmachines

computerscomputers

goodsgoods

servicesservices

Figure 18.1


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Operations Management ConceptsOperations Management ConceptsQuality : goods and services that are reliable and performcorrectly.

Quality allows customers to receive the performance

that they expect.Eff iciency : the amount of input to produce a givenoutput.

Less input required lowers cost and waste.

R esponsiveness to customers : actions taken to respondto customer needs.

Firm can react quickly and correctly to customer needsas they arise.


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I mproving Responsiveness to CustomersI mproving Responsiveness to CustomersWithout customers, organizations cease to exist.

Non-profit and for-profit firms all have customers.Managers need to identify who the customer is and their

needs.What do customers want? Usually customers prefer:A lower price to a higher price.High quality over low quality.

F ast service over slow service.Also good after sale support.

Many features over few features.P roducts tailored to their specific needs.


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Price/Attribute RelationshipPrice/Attribute Relationship

A ttributesA 1 A 2

P rice

P1

P2 P 2/A 2

A t price P 1, a firmoffer a product withA 1 attributes andcover costs. To offerA 2 attributes, firmmust charge P 2 orlose money.

Figure 18.2


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Price v . AttributesPrice v . Attributes

Firms offering high quality, fast service and other customer desires, often must raise price.

Customers must tradeoff price for attributes .Operations management tries to push the price/attributecurve to the right with better production.

Provides more attributes at the same cost.

By enhancing the price/attribute relationship, the firm canincrease its competitive position.


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Price/Attribute RelationshipPrice/Attribute RelationshipFigure 18.3

P rice

A ttributes

P 1

P 2

A 1 A 2

P 1/A 2

P 2/A 1

F ederal-Mogul1987

F ederal-Mogul1993

F ederal-Mogul was ableto offer products withmore attributes at alower price


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Customer Responsive Production SystemsCustomer Responsive Production Systems

An outputs attributes is determined by the production system.

Firms must strike a balance between cost andattributes

I mproving Quality : can apply to firms producinggoods and services.

A firm that provides higher quality than others atthe same price is more responsive to customers.Higher quality can also lead to better efficiency.

Lowers waste levels and operating costs.


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I mpact of I ncreased Quality onOrganizational Performance

I mpact of I ncreased Quality onOrganizational Performance

IncreasedIncreasedQualityQuality

IncreasedIncreasedReliabilityReliability

HigherHigherP ricesP rices

IncreasedIncreasedP roductivityP roductivity

LowerLowerCostsCosts

HigherHigherP rofitsP rofits

Figure 18.4


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T otal Quality ManagementT otal Quality Management

Seeks improvement in the quality of a firms goods or services.

Stress that all activities be directed to this goal.TQM is really a company-wide management

philosophy developed by Dr. Edwards Demming .J apanese firms were the first to use T QM.

TQM results have been outstanding in many firms.

Xerox has reduced defects and problems dramatically.T QM can fail when managers do not really support it.


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Successful T QM I mplementationSuccessful T QM I mplementationSuccessful firms have followed these steps:1) Build organizational commitment to quality.

All employees must embrace T QM concepts.

2) F ocus on the customer as definition of quality.3) F ind ways to measure quality.

Easy in manufacturing areas but harder in service jobs.

4) Set goals and create incentives to be reached.

5) Solicit input from employees .Quality circles: groups of employees meeting to discuss

how to increase quality.Managers must respect employee opinion.


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Successful T QM I mplementationSuccessful T QM I mplementation6) Identify defects and trace to source.

Managers must find out why the defect happened.

7) Introduce Just-in-Time (JIT) inventory systems.Inventory is the stock of raw materials .

JIThas partsarriving in the plant just when needed and not stored in

advance.KANBAN: J apanese name for JIT that seeks to avoid

stockpiles of costly inventory.

8) Work with suppliers. You need good parts to makegreat products.

9) Design products for easy manufacture.

10) Remove barriers between departments.


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Managers and T QMManagers and T QM

Managers are critical to a successful TQM system:Functional managers carry the responsibility for most of the 10 steps to success.For T QM to work, functional managers must totallyembrace T QM.

T op management must also show their strong support.T

hey need to arrange training for all managers(including themselves).Reward functional managers that move T QM forward.


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T he fewer the inputs required to produce a given output,the higher the production efficiency.

A common measure is called T otal factor productivity.

I t is a simple formula but each input is measured indifferent units (labor in hours, steel in tons)

T herefore, most firms measure partial productivity.Focus on one input at a time.

I mproving EfficiencyI mproving Efficiency

Total factor productivity =Outputs

A ll Inputs

Labor productivity =Labor productivity = OutputsOutputsDirect LaborDirect Labor


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I mproving EfficiencyI mproving EfficiencyLabor productivity allows labor comparisons betweenorganizations.

I mproved efficiency leads to lower costs and better

performance.TQM and Efficiency : T QM can lead to much higher labor productivity.

When quality rises, less time is wasted on scrap.

F lexible manufacturing and efficiency : reduces the set-up costs for production systems.

F acilities layout : seeks to design the machine-worker interface to increase production efficiency.


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Facilities LayoutsFacilities Layouts

F inalP roduct

F inalP roduct

F inal P roduct

P roductlayout

P rocesslayout

F ixed-positionlayout

Figure 18.5


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Facilities LayoutsFacilities LayoutsP roduct layout: work stations arranged in sequence.

Mass production systems are a common example.Workers are stationary and a belt moves work to them.

P rocess Layout : work stations are self contained and notin a fixed sequence.

Well suited to making a wide variety of products tailoredto customers.

Provides flexibility to change products quicklyF ixed-position layout : product stays in a fixed spot,components produced at remote stations and brought tofinal assembly.

Good for jet aircraft assembly.


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Efficient ManufacturingEfficient ManufacturingMost firms face major expense when setting up to

produce a product.T hese costs must be paid before production begins.

T he more often products to be built change, the higher setup costs become.

Flexible Manufacturing reduces setup costs.J ust-in-Time ( JI T) inventory , while developed for T QM, also adds to efficient production.

Many costs are reduced including warehousing, holdingcosts and inventory tracking.

Firm does not have a supply of parts, but can bevulnerable to strikes or supply problems.


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Efficient ManufacturingEfficient ManufacturingS el f -managed teams boost efficiency by allowing for aflatter organization structure.

T he team takes the role of the supervisor.T eams working together often become very skilled atenhancing productivity.

K aizen : J apanese term for a management philosophy thestresses the need for continuous improvement.

Better operations can come from many, small,continuous improvements.Focus on what adds value to the product and try toeliminate steps that do not add value (such as inspectionfor defects).


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Chpt18 Operations Management