Managing for Quality and Competitiveness - · PDF fileSpecify some techniques managers may...

Part 3 Managing for Quality and

Competitiveness

© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any

manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

8-2

CHAPTER 6 The Nature of Management

CHAPTER 7 Organization, Teamwork, and Communication

CHAPTER 8 Managing Service and Manufacturing Operations

© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

8-3

Learning Objectives

LO 8-1 Define operations management and differentiate between operations and manufacturing. LO 8-2 Explain how operations management differs in

manufacturing and service firms. LO 8-3 Describe the elements involved in planning and

designing an operations system. LO 8-4 Specify some techniques managers may use to

manage the logistics of transforming inputs into finished products.

LO 8-5 Assess the importance of quality in operations management.

LO 8-6 Evaluate a business’s dilemma and propose a solution. © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,

duplicated, forwarded, distributed, or posted on a website, in whole or part.

8-4

Operations Management

Operations Management (OM) • The development and administration of the activities

involved in transforming resources into goods and services

Historically, OM has been called “production” or “manufacturing” limiting it to the manufacture of physical goods

The change from “production” to “operations” recognizes services and ideas and views the function

as a whole


8-5

The Nature of Operations Management

• The activities and processes used in making tangible products; also called production

Manufacturing

• The activities and processes used in making tangible products; also called manufacturing

Production

• The activities and processes used in making both tangible and intangible products

Operations


8-6

Transformation Process At the heart of OM is the transformation process though which inputs are converted into outputs

• The resources – such as labor, money, materials and energy – that are converted into outputs Inputs

• The goods, services and ideas that result from conversion of inputs Outputs

Operations managers control the process by: • Taking measurements (feedback) and comparing them to

established standards • Taking corrective action for any deviation


8-7

The Transformation Process of Operations Management

Transformation process combines inputs in predetermined ways using different equipment, administrative procedures, and technology to create a product

Any deviation between actual and desired outputs Manager may take some sort of corrective actions


8-8

Inputs, Outputs, and Transformation Processes in the Manufacturing of Oak Furniture

1. Strip the oak trees of their bark and saw them into appropriate sizes

2. Firm dries the strips of oak lumber 3. Dried wood is routed into its appropriate shape and made

smooth 4. Assemble and treat the wood pieces then stain or varnish

the piece 5. Completed piece is stored until it can be shipped to

customers © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,


8-9

OM in Service Businesses

Transformation processes occur in all organizations, regardless of what they produce or their objectives

o Unlike tangible goods, services are actions or performances that must be directed towards the consumers who use them Significant customer-contact component to most services

o Strive to provide a standardized process, and technology offers an interface that creates an automatic and structured response

o The output is generally intangible and even perishable Few services can be saved, stored, resold, or returned


8-10

Manufacturers and Service Providers Differences

Manufacturers and service providers differ in five basic ways:

1. Nature and consumption of output – services require more customer contact and happen at the point of consumption

2. Uniformity of inputs – services are more “customized” to each consumer

3. Uniformity of output – each service is performed differently

4. Labor required – services are more labor-intensive 5. Measurement of productivity – intangibility of the service

product makes measurement more difficult © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,


8-11

Subway’s Inputs and Outputs

Subway’s inputs are sandwich components such as bread, tomatoes and lettuce.

While Subway’s outputs are customized sandwiches


8-12

Planning the Product

Operations planning involves making the following decisions:

Planning the Product Marketing research helps determine the product and

features customers want, gauge demand and set price

Once management has a product, they must plan how to produce the product

Operations managers plan for the resources needed to complete the transformation process

What will we produce? Who are our customers? What processes will we use? Where will we make our product?


8-13

Designing the Operations Process Before beginning production, must determine the

appropriate method of transforming resources into the desired product

Products are manufactured using one of three processes:

Standardization

• The making of identical interchangeable components or products

Modular Design

• The creation of an item in self-contained units, or modules, that can be combined or interchanged to create different products

Customization

• Making products to meet a particular customer’s needs or wants


8-14

Planning Capacity Capacity

• The maximum load that an organizational unit can carry or operate

o The unit of measurement could be a worker or machine, a department, a branch or an entire plant

o Capacity can be stated in terms of inputs or outputs

o Planning capacity too low results in unmet demand while planning it too high results in higher costs

DID YOU KNOW? Hershey’s has the production capacity to make more than 80

million chocolate kisses per day © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,


8-15

Planning Facility Location

• Significant due to the high costs involved and complex because it involves the evaluation of many factors, some of which cannot be measured with precision

Facility Location

Important factors to consider: Proximity to market Availability of raw materials, transportation,

power and labor Climatic influences and community

characteristics Taxes and inducements


8-16

Fixed-Position Layout

Fixed-Position Layout

• A layout that brings all resources required to create the product to a central location

Project Organizations

• Companies using a fixed-position layout because it is typically involved in large, complex projects such as construction or exploration


8-17

Process Layout

Process Layout

• A layout that organizes the transformation process into departments that group related processes

Intermittent Organizations

• Organizations that deal with products of a lesser magnitude than do project organizations; their products are not unique but possess a significant number of differences


8-18

Product Layout

Product Layout

• A layout requiring production be broken down into relatively simple tasks assigned to workers, who are usually positioned along an assembly line

Continuous Manufacturing Organizations

• Companies that use continuously running assembly lines, creating products with many similar characteristics


8-19

Planning and Designing Operations Systems

Apple stores are designed to make the most efficient use of space

The layout of the stores allows customers to test its products before purchasing


8-20

Computer Assisted Design and Manufacturing

Two developments that have strongly influenced the operations of many businesses are computers and robotics

• The design of components, products and processes on computers instead of on paper

Computer-Assisted Design (CAD)

• Manufacturing that employs specialized computer systems to actually guide and control the transformation processes

Computer-Assisted Manufacturing (CAM)


8-21

3D Printing 3D printing has become popular among businesses for the purposes of manufacturing certain items more efficiently and inexpensively It is also used to create tools needed for work or

manufacturing processes The designs of the product or tool are put into a computer

and printed with liquid metals or plastics… A wide range of industries are taking advantage of this

method from aircraft to dental product manufacturers 3D printing decreases the number of pieces in the assembly

of an item making it less likely to break • For example, the National Aeronautics and Space

Administration (NASA) printed a fuel injector for a rocket in two pieces that once require 115 pieces for complete assembly


8-22

Flexible Manufacturing and Computer-Integrated Manufacturing

• The direction of machinery by computers to adapt to different versions of similar operations

Flexible Manufacturing

• A complete system that designs products, manages machines and materials, and controls the operations function

Computer-Integrated Manufacturing (CIM)

Robots have become particularly important in industries in which human lives would otherwise be at risk


8-23

Sustainability and Manufacturing

Sustainability issues are becoming increasingly

important to stakeholders and consumers

“Green” operations and manufacturing can improve

a company’s reputation, increase customer and

employee loyalty, leading to improved profits

Deforestation

Urban sprawl

Protection of biodiversity


8-24

Patagonia and the Greener Way

Patagonia is always looking for a greener way to design, produce and recycle its products

Their mission statement:

Build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis Do you think Patagonia’s

sustainable practices attract and/or keep

consumers?


8-25

Managing the Supply Chain

Supply Chain Management • Connecting and integrating all parties or members

of the distribution system in order to satisfy customers; also called logistics

Includes: Obtaining and managing raw

materials and component parts

Managing finished products Packaging products Getting products to customers

Integrates firms such as: • Raw material suppliers • Manufacturers • Retailers • Ultimate consumers

Into a seamless flow of information and products


8-26

Purchasing

Purchasing • The buying of all the materials needed by the

organization; also called procurement

» Aim is to obtain items of the desired quality in the right quantities at the lowest possible cost

» Companies may be able to make some component parts more economically and efficiently

» Can arrange to lease the item from another company » What the firm does depends on cost, product

availability, and supplier reliability © 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,


8-27

Managing Inventory

Inventory • All raw materials, components, completed or partially

completed products, and pieces of equipment a firm uses

Finished-goods inventory – products ready for sale Work-in-process inventory – products partly

completed McDonald’s cooked hamburger still has more stages

before sold to customer

Raw materials inventory – all materials purchased to be used as inputs for making other products Nuts and bolts for an automobile manufacturer


8-28

Inventory Control

Inventory Control • The process of determining how many supplies and

goods are needed and keeping track of quantities on hand, where each item is, and who is responsible for it

Operations management must be closely coordinated with inventory control Each item held in inventory carries with it a cost

Inventory managers try to determine the proper inventory level for each item Depends on usage rate, cost of maintaining the item

in inventory, other procedures associated with ordering or making the item, and cost of the item


8-29

Operations Managers and Inventory Management

Operations managers are concerned with managing

inventory to ensure that there is enough inventory in stock to

meet demand


8-30

Approaches to Inventory Control

• A model that identifies the optimum number of items to order to minimize the costs of managing (ordering, storing and using) them

Economic Order Quantity (EOQ) Model

• A technique using smaller quantities of materials that arrive “just in time” for use in the transformation process and therefore require less storage space and other inventory management expense

Just-In-Time (JIT) Inventory Management

• A planning system that schedules the precise quantity of materials needed to make the product

Material-Requirements

Planning (MRP)


8-31

Outsourcing Outsourcing refers to the contracting of manufacturing

or other tasks to independent companies, usually overseas

o Globalization requires supply chain managers improve speed and balance resources to compete

o Is linked with competitive advantage through: Improved product quality Customers obtain products sooner Overall supply-chain efficiencies

o However, outsourcing may raise negative public opinion


8-32

Routing and Scheduling

Next, management must consider: Routing

• The sequence of operations through which the product must pass; sequence depends on the product specifications

Once the routing is known, actual work can be scheduled:

Scheduling

• The assignment of required tasks to departments or even specific machines, workers or teams


8-33

Program Evaluation and Review Technique

One popular method developed for scheduling is:

o Program Evaluation and Review Technique (PERT) Identifies all the major activities or events required Arranges them in a sequence or path Determines the critical path Estimates the time required for each event

o The path requiring the longest time from start to finish is called the critical path as that is the minimum amount of time needed for completion


8-34

Hypothetical PERT Diagram A Hypothetical PERT Diagram for a McDonald’s Big Mac


8-35

Taco Bell Drive-Thru Taco Bell’s efficient drive-thru operations mirror major factory operations

such as standardized procedures, elimination bottlenecks, and optimization of staff efficiency

The restaurant averages 164 seconds per customer order from the time the customer arrives to departure

With an assembly line of food items to construct, six different types of wrappers, and detailed procedures for every step of the process, Taco Bell is now among the top for speed, accuracy, and efficiency

Employees at Taco Bell are divided into two categories: Service Champions (drive-thru) and Food Champions (food preparation)

Service Champions are trained to follow a specific script as they greet customers and take orders. They enter orders into the point-of-sale system, make drinks when needed, and handle payments

When processing orders for more complex menu items, Service Champions may assist Food Champions in food preparation. Beyond that, it comes down to teamwork, to everyone working together to create a seamless process free from mistakes.


8-36

Managing Quality

Quality, like cost and efficiency, is a critical element of operations management, for defective products can quickly ruin a firm

Quality reflects the degree to which a good or service meets the demands and requirements of customers

Determining quality can be difficult because it depends on customers’ perceptions of how well the product meets or exceeds their expectations

Quality is especially difficult to measure for a service A company must define important quality characteristics

into measurable terms


8-37

J.D. Power and Associates Initial Automobile Quality Study

Fuel economy or reliability of an automobile can be measured with some degree of precision

Automakers use their own measures of vehicle quality

♦ Also rely on J.D. Power & Associates annual initial quality survey

♦ Confirmation of their quality assessment

♦ Consumer perceptions of quality for the industry


8-38

Quality Control

Quality is so important, it needs examination in the context of operations management

Quality Control • The processes an organization uses to maintain its

established quality standards

Statistical Process Control • A system in which management collects and analyzes

information about the production process to pinpoint quality problems in the production system


8-39

Total Quality Management

Total Quality Management (TQM) • A philosophy that uniform commitment to quality in

all areas of an organization will promote a culture that meets customers’ perceptions of quality

TQM requires constant improvements in all areas of the company as well as employee empowerment

A primary tool of TQM is benchmarking, the measuring and evaluating of the quality produced by the best-performing companies in the industry

Quality control is viewed as an element of the product itself


8-40

Product Specifications and Quality Standards

Product specifications and quality standards must be set so the company can create a product that will compete in the

marketplace A company must first determine what standard of quality it

desires and then assess whether its products meet that standard o For manufacturing, that could be specifications such as

thickness of metal or amount of a certain material o Service industries establish standards such as how long

a customer waits, or how many fries are in an order Once the desired quality characteristics, specifications and

standards are stated in measurable terms, inspection follows


8-41

International Organization for Standards

• A series of quality assurance standards designed by the International Organization for Standardization (ISO) to ensure consistent product quality under many conditions

ISO 9000

Companies must pass a rigorous certification process but for some industries, certification is necessary to compete

• A comprehensive set of environmental standards that encourages companies to conduct business in a cleaner, safer and less wasteful way; providing a uniform set of global standards

ISO 1400


8-42

Inspection and Sampling

Inspection • Reveals whether a

product meets quality standards

• Inspecting finished items determines quality level

• Inspecting work-in-process items finds defects before the product is completed so corrections can be made

Sampling • Allows a company to pass

an entire batch of products through inspection by testing a sample

• There is always the risk of making an incorrect conclusion based on a sample

• Sampling is more likely to be used when inspection tests are destructive to the product


8-43

Integrating Operations and Supply Chain Management

Managing operations and supply chains can be complex due to the number of participants in the process

Managing the various partners is important because stakeholders hold the firm responsible

Companies can adopt a Global Supplier Code of Conduct and ensure its communicated

Supply chain and procurement managers must work together to make operational decisions Ensure the selection of the best suppliers from an ethical

and cost effective standpoint

Must regularly audit its suppliers against firm’s standards and take action against those found to be in violation


McKing Corporation operates fast-food restaurants in 50 states, selling hamburgers, roast beef and chicken

sandwiches, french fries, and salads ► Wants to diversify into the growing pizza business

♦ Ideal pizza to sell was a 16-inch pie in three varieties: cheese, pepperoni, and deluxe (multiple toppings)

► Marketing and human resources personnel prepared: ♦ Training manuals for employees ♦ Advertising materials ♦ Rationale to present to the restaurant managers (many stores

are franchised)

Solve the Dilemma Planning for Pizza

8-44


8-45

Solve the Dilemma Planning for Pizza (cont.)

A problem:

• The drive-through windows in current restaurants are too small for a 16-inch pizza to pass through

• Concerned that if this aspect of operations has been overlooked perhaps the product is not ready to be launched

• There may be other problems yet to be uncovered

Discussion Questions • What mistake did McKing

make in approaching the introduction of pizza?

• How could this product introduction have been coordinated to avoid the problems that were encountered?

• If you were an executive at McKing, how would you proceed with the introduction of pizza into the restaurants?


? In what industry would the fixed-position layout be most efficient? The process layout? The product layout? Use real examples.

? Define supply chain management and summarize the activities it involves.

? Compare and contrast a manufacturer versus a service provider in terms of operations management.

? What criteria do businesses use when deciding where to locate a plant?

Discussion

8-46


Managing for Quality and Competitiveness - · PDF fileSpecify some techniques managers may...

Documents

Transcript of Managing for Quality and Competitiveness - · PDF fileSpecify some techniques managers may...