7 chapter

Operations Management and Quality

Business Essentials, 7th Edition Ebert/Griffin

Instructor Lecture PowerPoints

PowerPoint Presentation prepared by

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Carol Vollmer Pope Alverno College

What Does Operations Mean Today?

Operations (Production) All the activities involved in making products goods and servicesfor 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 customers 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 capabilitiesthe 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 (contd) 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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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 implementedis 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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 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

Tools for Total Quality Management

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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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