Operations and Service Management

Operations and Service Management

Cha

pter

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Copyright © 2005 by South-Western, a division of Thomson Learning. All rights reserved.


Strategic success depends on efficient operations

Operational concerns take on even greater importance in today’s competitive environment where consumers often want customized products and services delivered immediately

Manager’s Challenge: Donnelley

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Management and control of production operations

Define operations management

How to bring operations into strategic decision making

Overview of integrated operations activities

Specific operations design issues

How managers measure and improve productivity

Topics Topics Chapter 21Chapter 21

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Operations Management

The field of management that specializes in the physical production of goods or services and uses quantitative techniques for solving manufacturing problems

Technical core = heart of the organization’s production of its product or service

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The Organization as an Operations Management System

Products & FacilitiesProduct designFacilities layoutCapacity planningFacilities location

StructureReporting relationships

Teams

Control ProcessesInventory managementProductivityQuality

Operations ManagementInputsRaw materialsHuman resourcesLand, buildingsInformationTechnology

InputsRaw materialsHuman resourcesLand, buildingsInformationTechnology

OutputsProductsServices

OutputsProductsServices

Operations Strategy

The Technical Core

Feedback

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Manufacturing and Service Organizations

Source: Based on Richard L. Daft, Organization Theory and Design (Cincinnati, OH: South-Western College Publishing, 1998), 130; and Byron J. Finch and Richard L. Luebbe, Operations Management (Fort Worth, Texas: The Dryden Press, 1995), 50.

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Operational Concerns for Manufacturing and Service Organizations

Scheduling Must obtain materials and supplies Both must be concerned with quality

and productivity

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Four Stages of Operations Strategy

Stage 4Initiates Competitive Advantage• Advanced capabilities developed and

significant input to strategic process provided

• Concerns:New productsNew servicesNew technologiesInternational

Stage 3Organizationally Supportive• Organization’s

competitive strategy closely followed and supported

• Concerns:Advanced process technologiesNew plantsWhat to make for the United States

Stage 2Industry Current• Goals set according to industry practice• Concerns:

Capital investmentQuality controlInventory

managementCapacity

Stage 1No Involvement• No positive

contribution to strategy

formulation• Concerns:

CostLabor efficiency

Source: Based on R.H. Hayes and S.C. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984).

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The Integrated Enterprise

Supply chain management = managing the sequence of suppliers and purchasers, covering all stages of processing from obtaining raw materials to distributing finished goods to final consumers

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The E-Supply Chain

Retail Chain

Retail Store

Intranet Data Exchange

Customer

Extranet Data

Exchange

ManufacturerExtranet

Data Exchange

Supplier

Partnership approach to the supply chain optimizes inventory levels and enables rapid response to customer needs

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How to Win Customers?

Better price Quality Performance Delivery Responsiveness to customer demand

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Design for Manufacturabilityand Assembly - DFMA

Often requires– Restructuring operations– Creating teams of designers,

manufacturers, and assemblers to meet objectives of design

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Product Design Objectives

1 Producibility

Cost

Quality

Reliability

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3

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Service Design Objectives

1 Producibility

Cost

Quality

Reliability

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3

4

Timing5

Ethical Dilemma: A Friend for Life?

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Procurement

Purchasing supplies, services, and raw materials for use in the production process

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Facilities Layout

Process Layout Product Layout Cellular Layout Fixed-position Layout

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Technology Automation

Service Technology Restaurants – calculate exact cost and ingredient

needs for each menu item Banking – ATMs Gas stations – pay-at-pump systems Retailing = RFID – radio-frequency identification

(high-tech barcode)

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Technology Automation

Flexible Manufacturing Systems, the use of automated production lines that can be quickly adapted to produce more than one kind of product

CAD/CAM● CAD = computer aided design● CAM = computer aided manufacturing● PLM = Product-life cycle management

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Facility Location

Cost-benefit analysis – most common approach to selecting a site for a new location

New location scouting software is helping managers turn facilities location into a science

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Capacity Planning

Determination and adjustment of the

organization’s ability to produce

products and services to match

customer demand

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Inventory Management

Finished goods inventory

Work-in-process inventory

Raw materials inventory

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Techniques for Inventory Management

Economic order quantity

Material requirements planning

Just-in-Time inventory systems

Logistics & Distribution management

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Logistics and Distribution Management

Logistics = activities required to physically move materials into the company’s operations facility and to move finished products to customers

Distribution = moving finished products to customers (order fulfillment)

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Material Requirements Planning - MRP

Dependent demand inventory planning and control system

Schedules exact materials required

Is computer based

Based on precise estimates of future needs for production

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Lean Manufacturing and Productivity

Lean manufacturing = process using highly trained employees at every stage of the production process to cut waste and improve quality – employee involvement is key

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Measuring Productivity

Productivity = organization’s output of products and services divided by its inputs

Total factor Productivity

Labor Productivity

Output

Labor + Capital + Materials + Energy=

= Output Labor dollars

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Improving Productivity

1. Technological productivity

2. Employee productivity

3. Managerial productivity

Experiential Exercise: What Is Your Attitude Toward Productivity?

Documents

Operations and Service Management