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CHAPTER NINE. Operations Management (Production). Manufacturing. Service. What’s Had The Biggest Effect on Productivity?. Leading U.S. Manufacturing States. New York. Illinois. Ohio. California. Pennsylvania. Texas.

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Operations Management (Production)



leading u s manufacturing states
Leading U.S. Manufacturing States

New York






The Americans and the Japanese decided to engage in a competitive boat race.

Both teams practiced hard and long to reach their peak performance.

On the big day they felt they were ready

The Japanese won by a mile.

Afterwards the American team was discouraged by the loss. Morale sagged.

Corporate management decided that the reason for the crushing defeat had to be found, so a consulting firm was hired to investigate the problem and recommend corrective action

The consultants finding:

The Japanese team had eight people rowing and one person steering;

the American team had one person rowing and eight people steering..

After a year of study and millions spent analyzing the problem,

the consultant firm concluded that too many peoplewere steering and not enough were rowing on the American team

So as race day neared again the following year, the American team’s management structure was completely reorganized.

The new structure:

Four steering managers, three area steering managers, and a new performance review system for the person rowing the boat to provide work incentive.

The next year, the Japanese won by TWO miles

Humiliated, the American corporation laid off the rower for poor performance and gave the managers a bonus for discovering the problem.

what has the us done to regain a competitive edge
Customer focus

Cost savings through site selection

New manufacturing techniques

Reliance on the Internet

Total Quality Management

ISO 9000/ISO 140000

What has the US done to regain a competitive edge?
Production Management

Using land, labor, capital, entrepreneurship, knowledge to produce goods and services.

Operations Management

Transforms resources into goods and services.

inventory management

production scheduling

quality control

follow-up services

the production operations process
The Production& Operations Process



Conversion Process


UB’s Dry Cleaners


Operations Management Functions:

1. Facility location

  • Near resources
  • Near markets

2. Facility layout

  • For services: customer friendly
  • For manufacturing
  • - customer focused work cells
  • - away from assembly lines
  • c. Outsourcing
Operations Management Functions:

3. Quality Control

  • Measurement of products and services against set requirements
  • Often at the end of the line
  • Now quality becomes everyone’s concern
quality control standards
Six Sigma () Quality (3.4)

Statistical Quality Control (SQC)

Statistical Process Control (SPC)

Deming Cycle (Plan, Do, Check, Act) (Eliminate mistakes)

Quality Function Deployment (QFD) (maximize customer satisfaction)

Baldridge Award

ISO 9000/14000/9001:2002

Quality Control Standards
Quality Standards:

1. Baldridge Awards: quality in

  • leadership
  • Strategic planning
  • Customer and market focus
  • Information and analysis
  • Human resource focus
  • Process management
  • Business results
Quality Standards:

2. ISO 9000

  • Sets global measures for the quality of individual products
  • Provides a common denominator of business quality accepted around the world

3. ISO 14000

  • Concerns managing an organization’s environmental impact
  • Requires targets, policies and reviews of environmental programs
OM in the Service Sector

1. Measuring quality

  • Productivity strong in manufacturing, but weak in services
  • Quality versus quantity issues

2. Technological improvements

  • ATMs improve banking
  • Universal Price Codes make checkout faster
  • Computerized airline reservations, meal selection, and luggage handling
  • (finger printing foreigners)
  • Interactive services from banks, stockbrokers, travel agents
OM in the Manufacturing Sector

1. Form Utility

- the value added by the creation of finished goods and services

OM in the Manufacturing Sector

2. Types of Production Processes

  • Process manufacturing
  • - physically or chemically changing materials
  • - making steel, or cooking eggs
  • b. Assembly process
  • -putting together components
  • - TV, cars











OM in the Manufacturing Sector

2. Types of Production Processes

  • Continuous
  • 1) one long production run turns out finished goods
  • 2) like an assembly line
  • b. Intermittent
  • 1) short production runs where machines are changed to make different products
  • 2) custom made furniture
  • 3) easier to respond to customer requests.
Materials Requirement Planning

1. Materials Requirement Planning (MRP)

a. Uses sales forecasts to make sure required parts are available when needed

b. Now outdated

2. MRPII – Manufacturing resource planning

a. involved more than just materials

b. also has been updated

3. ERP Enterprise resource planning

a. Links multiple firms.

b. Monitors quality and satisfaction as it’s happening.

c. IT has had a major influence

modern production techniques
Just-In-Time (JIT) Inventory


Flexible Manufacturing

Lean Manufacturing

Mass Customizing

Competing in Time

Technology Assisted

Computer-Aided Design (CAD)

Computer-Aided Manufacturing (CAM)

ModernProduction Techniques
Modern Production Techniques
  • Just in time inventory control (JIT)
  • a. Parts and supplies are delivered just as needed in the production process
  • b. Avoids storage charges and damages

2. Internet purchasing

a. Reduces purchasing costs

b. 3 types

1) trading exchange platforms

- assist companies in several markets

2) industry-sponsored exchanges

3) Net market makers

-host electronic marketplaces

Modern Production Techniques

3. Flexible Manufacturing

a. Designing machines to do multiple tasks

b. Ford makes both V-8 and V-6 engines

4. Lean Manufacturing

a. Increasing capacity to produce high-quality goods while decreasing need for resources

b. Workers perform a cluster of tasks, not one assembly line job.

5. Mass customization

- Flexible machines can produce a good as fast as mass-produced goods once could.

Modern Production Techniques

6. Competing in Time

a. Being as fast or faster than all competition in responding to customer want and needs

b. Essential in global marketplace

7. CAD and CAM

a. CAD – 3D designing

b. CAM – direct computer involvement in production process

c. CIM Computer Integrated Manufacturing

1) software that unites CAD and CAM

2) currently expensive

3) cuts 80% of the time needed to program machines to make parts

Just in time inventory control

Flexible manufacturing

Mass customization

Lean manufacturing

Competing in time

The Daimler-Chrysler plant in Fenton, MO receives shipments about every 4 hours from its seat supplier, and literally hundreds of other parts continually. There is virtually no storage.

Volvo uses modular construction in their plants, where workers are grouped into autonomous teams working on mobile assembly platforms that carry the cars to the workers. Each worker has been trained to do a whole cluster of tasks. This system enabled Volvo to build quality cars with fewer workers in more space efficient plants and has reduced the number of hours to assemble a car.

Because of the increases competition from its Japanese counter-parts Xerox implemented a program designed to cut its new product development time in half

Levis markets a service which enables any customer to order a custom-made pair of jeans from any retailer at any time. The jeans cost $10 more than an “off-the-rack” pair.

At Dynalink Industries, 15 machines are used to make, test and package component parts for stereo and quadraphonic sound systems. The parts are never touched by human hands.

Program Evaluation & Review Techniques (PERT)

Designing a PERT Chart

1. Analyze and sequence task that need to be done

2. Estimate the time needed to complete each task

3. Draw a PERT network illustrating the two previous steps

  • Identify the critical path
  • - the sequence that takes the longest
PERT Breakfast

brew coffee 6 min

pour coffee (1 min)

assemble eggs and toast (1 min)


cook eggs (3 min)



butter toast (1 min)

make toast (2 min)