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m a n a g e m e n t 2e H i t t / B l a c k / P o r t e r

m a n a g e m e n t 2e H i t t / B l a c k / P o r t e r. Chapter 13: Operations Management. Learning Objectives. After studying this chapter, you should be able to: Define operations management and explain its importance within service and manufacturing firms

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m a n a g e m e n t 2e H i t t / B l a c k / P o r t e r

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  1. m a n a g e m e n t 2eH i t t / B l a c k / P o r t e r Chapter 13: Operations Management

  2. Learning Objectives After studying this chapter, you should be able to: • Define operations management and explain its importance within service and manufacturing firms • Describe key techniques and tools for enhancing product and service quality • Explain common means of ensuring appropriate product quantity • Discuss tools for managing the appropriate timing of inventory and finished product

  3. Learning Objectives • Describe methods for enhancing productivity and efficiency • Explain the principle roles of effective supply chain management in the operations of organizations

  4. Operations Management Operations management: focuses on the conversion of resources into products and services • Old term: products and operations management (POM) • Modern term: operations management (OM)

  5. Objectives of Operations Management • Managing product/service quality • Planning quantity and capacity • Timing product and services • Achieving the best possible cost

  6. Managing Quality Quality: a measure of how well a product or service performs its intended purpose, including: • How reliable it is • How easy it is to service or repair when it does break down

  7. Repeat Business Positive Word of Mouth Higher Customer Satisfaction Higher Revenues Higher Efficiency Higher Margins Improved Quality Lower Repair, Rework, Scrap Costs Lower Unit Costs Lower Warrantee Costs Economic Impact of Higher Quality Adapted from Exhibit 13.1

  8. Total Quality Management (TQM) TQM: a management philosophy that: • Focuses on continual improvement • Emphasizes quality inspection at all stages of the production or service output • Encompasses a commitment from employees at all levels

  9. Total Quality Management (TQM) Important TQM concepts: Statistical Process Control (SPC) Continuous Process Improvement Six Sigma Employee Empowerment

  10. TQM Concepts: Continuous Process Improvement Continuous process improvement: refers to both incremental and breakthrough improvements in the way an organization does business • Four key elements: • Objective • Design • Capabilities • Metrics

  11. Quality Control Charts Adapted from Exhibit 13.2

  12. TQM Concepts: Six Sigma Six Sigma: a disciplined, data-driven approach for eliminating defects and enhancing quality with an orientation toward the impact such improvements will have on the customer • Quality is improved two ways: • DMAIC process (define, measure, analyze, improve, control) • DMADV process (define, measure, analyze, design, verify)

  13. TQM Concepts: Employee Empowerment By empowering employees, organizations will: • Engage the expertise of employees • Allow them to feel responsible for quality • Allow managers to understand and communicate the TQM vision

  14. Planning Quantity and Capacity • Capacity planning: determining how much a firm should be able to produce of a product or service • Design capacity is the maximum capacity that can be attained under ideal conditions, organizations usually run at their effective capacities instead • Effective capacity is the percent of design capacity actually expected Effective Capacity Expected Design Design Capacity =

  15. Planning Quantity and Capacity Other important concepts: • Materials requirement planning (MRP): getting right materials to right place at right time • Economic order quantity (EOQ): ordering economical quantity of product while minimizing costs • ABC analysis: which inventory items require most attention

  16. Economic Order Quantity Adapted from Exhibit 13.3

  17. Timing Products and Services Delivery of products and services must be timed well to avoid both out-of-stocks and excess inventory • Three important concepts: • Just-in-time (JIT) systems • Gantt charts • PERT and CPM charts

  18. Timing Products and Services: Just-in-Time (JIT) System • Objective: produce product or service only as needed with only the necessary materials, equipment, and employee time that will add value • Benefits: • Reduces inventory levels (and lowers carrying cost of inventory) • Improves productivity • Increases customer satisfaction

  19. Timing Products and Services: Gantt Charts

  20. Timing Products and Services: PERT/CPM Charts Prepare permits Obtain permits Start Develop plans Select contractor Construction Open store Tenant approval Move into store

  21. Achieving the Best Cost • Productivity measures how wellan organization is using its resources (inputs) to produce goods and services (outputs) Productivity Output Input =

  22. Service Productivity Differences by Country Adapted from Exhibit 13.4

  23. Achieving the Best Cost: Work Standard Work standard: amount of time it should take for a trained employee to complete a specific activity or process • Two work measurement techniques: • Time and motion studies • Review each activity in detail so that unnecessary steps are eliminated • Work sampling • Take a sample of workers and calculate percentage of time spent on each activity during a working day or shift

  24. Achieving the Best Cost: Production Processes Four different production processes: • Continuous flow production • Assembly-line processes • Small batch processes • Job shops

  25. Production Types and Trade Offs Continuous Flow Low Assembly Line Small Batch Flexibility Job Shop High High Economies of Scale Low Adapted from Exhibit 13.5

  26. Achieving the Best Cost: Technology • Computer-aided design (CAD) and computer-aided engineering (CAE) • Rapid prototyping • Computer-aided manufacturing (CAM) • Designing for manufacturing (DFM)

  27. Instrument-Panel Improvements Achieved Via DFM Adapted from Exhibit 13.6

  28. Managing the Supply Chain Supply chain is: • Coordinated system of resources, information, activities, people, and organizations • Involved in moving a product or service from raw materials to components • Into a finished product or service • Delivered to the end customer Suppliers Manufacturer Distributor Retailer Customer

  29. Dell’s Supply Chain Adapted from Exhibit 13.7

  30. Dell’s Supply Chain (cont.) Adapted from Exhibit 13.7

  31. Dell’s Supply Chain (cont.) Adapted from Exhibit 13.7

  32. Dell’s Supply Chain (cont.) Adapted from Exhibit 13.7

  33. Managing the Supply Chain: Using Technology • Electronic data interchange (EDI): the integration and real-time exchange of supply chain information that allows supply chain managers to manage complicated relationships and processes • Web-based systems

  34. Supplier Relationships Adapted from Exhibit 13.8

  35. Managing the Supply Chain: Reverse Supply Chain Reverse supply chain: activities needed to retrieve a used product from a customer and either reuse it or dispose of it Activities include: • Acquiring the used products • Managing reverse logistics to get the products to the company • Inspecting the product • Determining the disposition (destruction or reuse) • Distributing and selling refurbished products

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