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OVERVIEW OF THE CHAPTER To achieve superior quality, efficiency, responsiveness to customers, and innovation, managers at all levels in an organization must understand the significance of operations management. The contribution of effective operations management to the attainment of each of the four building blocks of competitive advantage is discussed. The chapter then explains how managers can use operations management practices and techniques such as facilities layout, flexible manufacturing, JIT, self managed teams, and process reengineering to build and sustain a competitive advantage. LEARNING OBJECTIVES !. "xplain the role of operations management in achieving superior quality, efficiency, and responsiveness to customers. #$%!& '. (escribe what customers want, and explain why it is so important for managers to be responsive to customer needs. #$%'& ). "xplain why achieving superior quality in an organization*s operations and processes is so important. #$%)& +. "xplain why achieving superior efficiency is so important. #$%+& MANAGEMENT SNAPSHOT: WHY TOYOTA IS A LEADER IN OPERATIONS MANAGEMENT Introduction of lean production and quality circles to the world of management during previous decades helped Toyota gain its long standing reputation as an innovator in the areas of efficiency and quality. To maintain its competitive advantage over its global competitors, ,"% Ju-io ,ho has introduced another set of initiatives designed to further enhance his company*s strength in these critical areas. %ne such initiative was .pokayoke/, which concentrates on identifying and correcting problems in stages of the assembly process that previously caused problems. 0 second was .,,,'!/, which requires Toyota*s managers to work continually with suppliers to find ways to reduce the cost of components. 0 third initiative was 12$, which uses a sophisticated, new assembly process to hold a car body firmly in place so that all welding and assembly operations can be performed with maximum accuracy.

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LECTURE OUTLINE I. OPERATIONS MANAGEMENT AND COMPETITIVE ADVANTAGE (LO1)

Operations management is the management of any aspect of the production system that transforms inputs into finished goods and services. 0 pro !"tion s#stem is the system that an organization uses to acquire inputs, convert the inputs into outputs, and dispose of the outputs. Operations managers are managers who are responsible for managing an organization*s production system. They are responsible for managing the three stages of production3 acquisition of inputs, control of conversion processes, and disposal of goods and services. %perations managers are responsible for ensuring that an organization has sufficient supplies of high quality, low cost inputs, and they are responsible for designing a production system that creates high quality, low cost products that customers are willing to buy. $!a%it# refers to goods and services that are reliable, dependable, and satisfying. E&&i"ien"# refers to the amount of inputs required to produce a given output. Responsi'eness to "!stomers refers to actions taken to meet the needs and demands of customers.

II. IMPROVING RESPONSIVENESS TO C(STOMERS %rganizations produce outputs that are consumed by customers. 2ecause customers are vital to the organization*s survival, it is important for managers to correctly identify customers and promote organizational strategies to respond to their needs. )*at Do C!stomers )ant+ (LO,) 0lthough there may be some variation among industries, it is possible to identify some universal product attributes that most customers in most industries want. 4ost customers prefer3 0 lower price to a higher price. 5igher quality products to low quality products. 6uick service to slow service. 7roducts with many features to products with few features. 7roducts that are customized or tailored to their unique needs.

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Designing Pro !"tion S#stems T*at Are Responsi'e to C!stomers 4anagers try to design production systems that can produce outputs possessing the attributes that customers desire. The attributes of an organization*s outputs their quality, cost, and features 8 are determined by the organization*s production system. In recent years, managers have adopted many new operations management techniques, in an effort to attract customers with improved products. These include total quality management, -ust in time inventory, flexible manufacturing systems, and new information systems and technologies. 4anagers must be careful not to promise a level of responsiveness to customers that is greater than its production system could profitably sustain.

III. IMPROVING $(ALIT- (LO.) 5igh quality products do the -ob for which they were designed and meet customer requirements. 6uality is a concept that can be applied to both manufacturing and service organizations. 4anagers seek to control and improve the quality of their organization for two reasons3 ,ustomers usually prefer a higher quality product to a lower quality product. 0n organization that provides a product of higher quality for the same price is being more responsive to its customers than competitors. 0lso, providing high quality products can create a brand name reputation, which in turn, may allow the organization to charge more for its products. 5igher product quality can increase efficiency, lower operating costs, and boost profits. 0 higher product quality means that less employee time is wasted, translating into higher employee productivity, thus lower costs.

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Management Snap !"t: C#t#$an% U e CRM t In&'ea e C( t"me' L")a*t) ,itibank, one of the leading global financial institutions, has begun using customer relationship management #,94& to increase responsiveness to customers. The bank recognizes that its customer base and their level of loyalty determine the bank*s future success. :irst ,itibank identified the factors that dissatisfied its customers. It then implemented an organizational 8wide ,94 system as a means of increasing employee responsiveness. The results were remarkable. 0s an example, the ,94 program reduced by ;<= the number of hand offs required to process a loan request, reducing the average response time from several hours to )> minutes. III. IMPROVING E//ICIENC- (LO0) The third goal of operations management is to increase the efficiency of an organization*s production system. 4anagers can measure efficiency in two ways3 Total factor prod cti!ity looks at how well an organization utilizes all of its resources to produce its outputs. The problem with this measure is that each input is typically measured in different units. To compute total factor productivity, managers must convert all inputs to a common unit. 0lso, total factor productivity obscures the exact contribution of an individual input. ,onsequently, most organizations focus on specific measures of efficiency, known as partial prod cti!ity that measures the efficiency of an individual unit. The measure of la"or prod cti!ity is an example of a partial productivity measure. $abor productivity is most commonly used to draw efficiency comparisons between different organizations. The management of efficiency is important be cause increased efficiency lowers production costs, allowing the organization to make a greater profit.

/a"i%ities La#o!t1 /%e2i3%e Man!&a"t!ring1 an E&&i"ien"# 0nother factor that influences efficiency is the way managers decide to layout or design an organization*s physical work facilities. This is important for two reasons3 The way in which machines and workers are organized affects the efficiency of the production system.

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0lso, a ma-or determinant of efficiency is the cost associated with setting up the equipment to make a particular product.

/a"i%ities %a#o!t is the operations management technique that attempts to design machine worker interfaces that increase production system efficiency. /%e2i3%e man!&a"t!ring is the set of operations management techniques that attempt to reduce the setup costs associated with a production system. /a"i%ities La#o!t The way in which machines, robots, and people are grouped together affects how productive they can be. There are three ways of arranging workstations3 prod ct layo t, process layo t, and fi#ed-position layo t. In a prod ct layo t, machines are organized so that each operation needed to manufacture a product is performed at workstations arranged in a fixed sequence. Typically, workers are stationary and a moving conveyor belt takes the product to the next workstation. Mass prod ction is the familiar name for this layout. The introduction of modular assembly lines controlled by computers has made mass production an efficient means of creating small batches as well as large quantities. In a process layo t, workstations are not organized in a fixed sequence. "ach workstation is relatively self contained, and a product goes to whichever workstation is needed to perform the next operation. 7rocess layout is often suited to manufacturing a variety of custom made products, each tailored to the needs of a different kind of customer. 7rocess layout provides flexibility, but often reduces efficiency because it is expensive. In a fi#ed-position layo t, the product stays in a fixed position. ,omponent parts are produced in remote workstations and brought to the production area for final assembly. ?elf managed teams are being used increasingly in fixed position layouts. This layout is commonly used for products that are large, complex or difficult to assemble.

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Manag#ng G*"$a**): H"+ t" Imp'",e Fa&#*#t#e La)"(t 7addy 5opkirk opened a car accessories business in "ngland after winning the prestigious 4onte ,arlo rally. 0lthough sales were brisk, 5opkirk realized that his production system needed improvement. The consultants 5opkirk hired determined that his facilities layout was the source of the company*s production problems. They suggested that the workstations be reorganized into a sequential product layout. %nce the change was made, results were dramatic. The untidy sprawl of workstations surrounded by piles of crates was transformed into tightly grouped workstations arranged in a fixed sequence. "fficiency increased dramatically. /%e2i3%e Man!&a"t!ring 0 ma-or source of costs is setting up the equipment needed to make a particular product. If setup times for complex production equipment can be reduced, efficiency will rise. :lexible manufacturing aims to reduce the time required to set up production equipment. ?etup time and its accompanying cost can be dramatically reduced if equipment used for manufacturing one product can be quickly replaced with equipment used for manufacturing a second product. %rganizations are experimenting with new designs for production systems that allow workers to be more productive and make the work process more flexible.

Manag#ng G*"$a**): Ig( - Fa&t"') ". t!e F(t('e In the !@@>s, managers at Igus Inc., a bearings and cable products manufacturer located in ,ologne, 1ermany, realized they needed to build a new factory to handle their rapidly growing product line. 0t Igus, new products are often introduced on a daily basis and many of its products are highly customized. Igus* new factory was designed with flexibility in mind. 0ll machines, computers, and equipment can be moved and repositioned to suit changing product requirements. Aorkers are equipped with power scooters to move around the plant quickly to reconfigure operations and are cross trained to perform the many production tasks necessary. Igus can change its production system at a moment*s notice with minimal disruption. The company*s decision to create a flexible factory of the future has paid off. In the last five years, sales have increased dramatically.

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4!st5in5Time In'entor# an E&&i"ien"# 0lthough JIT systems, such as Toyota*s &an"an system, were originally developed to improve product quality, they also have implications for efficiency. 4a-or cost savings can result from increasing inventory turnover and reducing inventory holding costs. ?ervice companies as well as manufacturers can benefit from the JIT concept.

%ne drawback of JIT systems is that they leave an organization without a buffer stock of inventory. 0lthough buffer stocks of inventory can be expensive to store, they can help an organization when it is affected by shortages of inputs or when it needs to respond quickly to increases in customer demand. IV. Se%&5Manage )or6 Teams an E&&i"ien"# 0nother efficiency boosting innovation is the use of self managed work teams. The typical team consists of from five to fifteen employees who produce an entire product instead of -ust parts of it. Team members learn all team tasks and move from -ob to -ob. The result is a flexible workforce. Team members also assume responsibility for work and vacation scheduling, ordering materials, and hiring new members. Traditionally, each of these was the responsibility of first line managers. The use of empowered, self managed teams can increase productivity and efficiency. ,ost savings also arise from eliminating supervisors and creating a flatter organizational hierarchy, which increases efficiency.

Pro"ess Reengineering an E&&i"ien"# 7rocess reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance. ,ustomer relationship management, for example, can be thought of as a business process. In this chapter*s opening case, ,itibank managers decided to reengineer its processes to improve their level of customer responsiveness.

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0nother example of process reengineering is :ord 4otor ,ompany*s decision to simplify its procurement process. 4anagers at all levels have important roles to play in a company*s effort to boost efficiency. Top management*s role is to encourage efficiency improvements by emphasizing the need for continuous improvements. They are also responsible for ensuring that managers from different functional departments work together to find ways to increase efficiency. 5owever, it is typically functional level managers who are in the best position to identify opportunities for continuous improvement or reengineering, as they are involved in an organization*s production system on a day to day basis. OPERATIONS MANAGEMENT7 SOME REMAINING ISS(ES 0chieving superior responsiveness to customers through quality and efficiency often requires a profound shift in management operations and in the culture of an organization. :ailure of management to understand the dramatic culture shift required may result in disillusionment with JIT, flexible manufacturing, or reengineering. Bone of these systems is a quick panacea to cure industrial ills. 4aking these techniques work can pose a significant challenge that calls for hard work and persistence by the sponsoring managers. 4anagers also need to understand the ethical implications of the adoption of many of these techniques. The increases in organizational performance they yield often come at great cost to employees. "mployees may see the demands of their -ob increase or they may see themselves reengineered out of a -ob. ,ontinually increasing the demands placed on employees regardless of human costs in terms of -ob stress raises ethical concerns.

V.

Et!#& #n A&t#"n: T!e H(man C" t ". Imp'",#ng P'"/(&t#,#t)

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0t a Toyota plant in Tokyo, members of a self managed team work at a grueling pace, with little room for error. 0 red button halts the production line if problems become severe, but there is an unspoken rule against pushing it. Aorkers complain that constant attempts to increase quality and reduce costs typically results in continuous speedup of operations, resulting in even higher levels of -ob stress. Ahile some pressure is good, beyond a certain level, it can seriously harm workers. 0t C? Aest, a team of billing clerks eagerly responded to management*s request to assist in identifying ways to streamline operations, only to learn that their efforts led to the loss of @,>>> -obs. 0ccording to one of company*s former employees, .It was cut your own throat. It makes you feel used/. VI. S(MMAR- AND REVIE) Le"t!re En*an"er 10.1 8EEPING T9E C(STOMER 9APPAhat should a company do for angry customersD 0ccording to experts3 -ust about anything it can. ?tudies show customers tell twice as many people about bad experiences as good ones, so complainers left unhappy can send a company*s image crashing. ?imply listening to complaints boosts brand loyalty and a customer*s tendency to buy again. %ne research firm calculated the return on company dollars invested in resolution of customer complaints and inquiries. The average return for makers of consumer durables like washing machines and refrigerators was !>> percent. In other words, if manufacturers spent E! million handling consumer complaints, they reaped E' million in benefits. :or banks, it was as high is !;> percent. Le"t!re En*an"er 10., PROD(CTIVIT- :OTTLENEC8 IN T9E O//ICE7 T9E 8E-:OARD The modern office is likely to be equipped with personal computers linked through local area networks to each other and to a host of specialized equipment, from laser printers to data bases storing millions of customer records. Aithin this state of the art operating system is a turn of the century bottleneckFthe computer keyboard.

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The computer keyboard is simply a transplanted typewriter keyboard, the same keyboard that has been used since the !G@>s. Ahile the arrangement of keys is familiar, it is far from efficient. Ahen the first typewriters were introduced, keys were arranged alphabetically #vestiges of this arrangement can be seen on the second row of keysF( : 1 5 J H $.& 7rinting bars were mechanically pushed against the paper by the pressure on the keys. Typists soon became proficient enough to cause -ams as they typed faster than the mechanical bars could move. Typewriter manufacturers went back to the drawing boards and designed a new keyboard to slow typists down to speeds within the limits of the crude mechanism. The resulting keyboard is referred to as .6werty/, named for the first six keys of the top row. Heys were placed awkwardly to force slower typing. The .0/, for instance, one of the most frequently used keys, was placed under a typist*s left hand little finger, the weakest finger on the hand. ."/ requires an awkward reach using the middle finger of the left hand. 9esults were encouraging Ftyping speeds declined. Today mechanical keys have been replaced by electronic ones, but the keyboard arrangement has remained unchanged. In the !@)>s 0ugust (vorak designed a better keyboard that groups the most frequently used letters on the home row and eliminates many awkward reaches. The (vorak system is faster to learn, easier to type, less tiring, and less likely to cause errors than 6werty. Csing it increases typing speed by more than '> percent. Iet the system never caught onFtypists did not want to learn a new system when their typewriters all used 6werty, and manufacturers did not want to produce (vorak typewriters as long as typists used 6werty. Le"t!re En*an"er 10.. T9E NE) REALIT-7 REEVAL(ATING 4(ST5IN5TIME INVENTORTEC9NI$(ES %ne of the business techniques imported from Japan in the !@G>s was the concept of -ust in time #JIT& inventory. It entails having raw materials and components delivered to the user -ust at the time they are needed for production. "ffective use of JIT requires close coordination between the supplier and the organizational buyer. The cost of materials and other goods and services needed to produce a product is about half the revenue received for it. 9educing this cost, even a small amount, can create a significant improvement in a company*s bottom line. ?tatistics from the C.?. (epartment of ,ommerce show a steady decline in the amount of inventory carried by producers relative to the sales of their products or services. Just in time inventory and delivery have become the reality for organizational marketers.

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Ahen marketers and suppliers cooperate as partners, JIT has often worked well. 4ontreal based :uture "lectronics is hooked up by an electronic data interchange system to 2ailey ,ontrols, an %hio based supplier of control systems. "very week, 2ailey electronically sends :uture its latest forecasts of what materials the ,anadian company will need for the next six months. :uture "lectronics can then stock up in time. Aal 4art ?tores Inc. is widely cited as one of the best practitioners of inventory management. The 2entonville, 0rkansas based discount retailer is constantly trying to better its performance. 0mong its current pro-ects is an inventory reporting system it is developing with AJ5 ?ystems Inc. in ,arlstadt, B.J., and 9ank Kideo ?ystems of 0merica in Borthbrook. ?ince the bulk of movie videotape sales are on weekends, Aal 4art will take an electronic inventory of its shelves nationwide every ?unday night and automatically notify the video distributor, which will then place an order with 9ank early 4onday morning to manufacture the replacement tapes for delivery to stores on Thursday before rentals pick up again. Ahen cooperation has been lacking, JIT has become something of a corporate shell game in many industries as companies vie to keep their inventory on some other companies* books. 0nd there is evidence that despite all the money companies have spent on computers to track sales and inventory, -ust in time inventory doesn*t always work.

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.The reality today is that with -ust in time, there are still a lot of empty shelves in the stores/, says 7erry ,aicco, president of Toronto based ,onsumers (istributing Inc. MANAGEMENT IN ACTION Notes &or Topi"s &or Dis"!ssion an A"tion !. +s& a manager ho, - ality, efficiency, and responsi!eness to c stomers are defined and meas red in his or her organi.ation. #$%!& ?tudents may interview many different types of managers. "ach manager will have unique definitions of quality, efficiency, and responsiveness to customers. 2elow are some general definitions that should encompass managers* definitions. 6uality refers to goods and services that are reliable, dependable, and satisfying in the sense that they do the -ob they were designed for and do it well, so that they give customers what they want. 6uality may be measured by the number of defective parts per lot size. "fficiency refers to the amount of inputs required to produce a given output. 1enerally, the fewer inputs needed to produce a given number of outputs, the higher the efficiency of the process. "fficiency may be measured by the equations for total factor productivity or partial productivity. These equations look at the amount of input relative to the output. 9esponsiveness to customers refers to actions taken to be responsive to the demands and needs of customers. %rganizations can increase responsiveness to customers by providing affordable, high quality products with many desirable features that are customized to consumers* unique needs. ,ompanies should also strive to provide quick service. 9esponsiveness to customers may be measured in percentage of returned merchandise or customer survey responses. '. Go into a local store, resta rant, or s permar&et and list the ,ays in ,hich yo thin& the organi.ation is "eing responsi!e or nresponsi!e to the needs of its c stomers. /o, co ld this " siness0s responsi!eness to c stomers "e impro!ed1 #$%'&

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0 drug store that is part of a national chain is located on a busy corner in a large city. The store is responsive to the needs of its customers because it provides a variety of products, such as school supplies, seasonal items, cosmetics, greeting cards, medicine, and others items. In addition, the prices are reasonable and lower than prices at smaller, privately owned drug stores. 0lso, store brands provide customers with high quality products at lower prices than national brands. The store also has other features, such as film developing and prescription filling. %ne main issue at this store is the long lines at the checkout counters. This aspect of the production system is very unresponsive to customers. ,ustomers often get frustrated because they have to wait so long, and may begin to go to other stores where the wait is shorter, even if their prices are higher. The store might look at ways to fix this situation. They should move all staff to the checkout lines at the busiest times of the day, typically during lunchtime and afternoon rush hour. They should also limit special services, such as film processing and raincheck cashing, that are performed at the counter during peak times. These suggestions may reduce the amount of time customers wait to be checked out, thereby increasing the store*s responsiveness to customers. ). 2hat is efficiency, and ,hat are some of the techni- es that managers can se to increase it1 #$%+& "fficiency refers to the amount of inputs required to produce a given output. Inputs may include labor, component parts, skills, knowledge, or time. %utputs can be any goods and services that the customer wants. These may be products or they may be intangible things, like customer service. 4anagers can increase efficiency in several ways. %ne is to improve quality. Ahen quality rises, less employee time is spent making defective products that have to be discarded or repaired. (esigning products with fewer parts can increase efficiency since fewer parts to assemble reduces the total assembly time and makes products easier to assemble #e.g. less effort.& 4anagers can also change their facilities layout, or the way in which machines, robots, and people are grouped together. %ne layout may be more effective than another, depending on the product. :lexible manufacturing can also increase efficiency by reducing the time required to set up production equipment. Iet another tactic is -ust in time inventory, which reduces inventory holding costs and frees capital that would otherwise be tied up in inventory. 0nother way is to implement self managed teams.

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+. 2hy is it important for managers to pay close attention to their organi.ation0s prod ction system if they ,ish to "e responsi!e to their c stomers1 #$%'& The attributes of an organization*s outputs their quality, cost, and features are determined by the organization*s production system. The ability of an organization to satisfy the demands of its customers is derived from its production system. 2y monitoring this system, managers can find ways to improve quality while keeping prices low, as well as find ways to increase efficiency. ,ustomers want value for money, and an organization whose efficient production system creates high quality, low cost products is best able to deliver this value. <. 3Total c stomer ser!ice is the goal to,ard ,hich most organi.ations sho ld stri!e4. To ,hat degree is this statement correct1 #$%'& Aithout customers, most organizations would cease to exist. It is important for managers to correctly identify and promote organizational strategies that respond to customer needs. To this extent, the above statement is correct. Iet organizations should not strive to have total customer service at the expense of other important factors in the production process. If an organization offers a level of responsiveness that is more than that production system can profitably sustain, the entire system will suffer in terms of efficiency and cost effectiveness. 0 company that customizes every product to the unique demands of the individual customers will likely see its cost structure become so high that the cost of production exceeds revenues. 0lso, efficiency will suffer because time and effort is required to customize and provide .total customer service/. To this extent, total customer service should be balanced with focus on efficiency and effectiveness. 00,?2 standards3 !, ), @ NOTES /OR :(ILDING MANAGEMENT S8ILLS Manag#ng a P'"/(&t#"n S) tem (LO11 ,1 .1 0) !. 2hat is the o tp t of the organi.ation1 The organization that is the focus of these questions is a housecleaning service. The service provides cleaning for residential buildings and private houses. ?ervices include vacuuming, dusting, bed making, cleaning of windows and floors, straightening of furniture, sweeping, and other cleaning activities.

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'. 5escri"e the prod ction system that the organi.ation ses to prod ce this o tp t. The production system that is in place requires each cleaning person to perform all cleaning tasks individually. Ahen the person arrives at the house, he or she starts in one end of the house and performs all the tasks in one room before moving on to another area of the house. 0ll of the cleaning serviceLs staff are part time workers who work flexible hours and do not receive benefits. 0fter cleaning an entire house, the cleaning person computes the amount of time it took to complete all the tasks and submits a time sheet to the manager at the home office. 4embers of the cleaning staff are paid by the hour, not by salary. The manager then bills the house for the number of hours required for cleaning. ). 2hat prod ct attri" tes do c stomers of the organi.ation desire1 ,ustomers prefer a lower price to a higher price. They prefer higher quality cleaning service to low quality service, especially since many customers only use the service once or twice a week. They are willing to pay a little more so that the service is not needed as often. ,ustomers also want quick service. They prefer that the cleaning staff not be there any longer than is necessary. ,ustomers also like that the cleaning service provides several services, as opposed to a small number of services that might be limited to certain areas of the house or certain tasks. :inally, customers like to feel that their service is tailored to them and their unique needs. 4embers of the cleaning staff go out of their way to provide customers with service that meets their schedules and demands. +. 5oes its prod ction system allo, the organi.ation to deli!er the desired prod ct attri" tes1 The production system allows the organization to keep prices low because employees are part time workers that do not receive benefits. 0lso, overhead is low since there is no need for a large amount of office space. 5igh quality service is delivered because the organization carefully screens its employees and trains them intensely. 0 new employee must accompany a more experienced employee for a few weeks before the new employee is allowed to work on his or her own. The cleaning service does not always deliver quick service, though, since some houses are larger and require more cleaning than others. This creates a large amount of work for one person to do on his or her own.

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<. Try to identify impro!ements that might "e made to the organi.ation0s prod ction system to "oost the organi.ation0s responsi!eness to c stomers, - ality, and efficiency. The organization may try using self managed teams to clean the houses that repeatedly require more effort, time, and resources. If teams of cleaning staff are formed, they could go to the houses together, with each team member performing one task in all areas of a house. :or example, one person could be responsible for vacuuming all rooms, while another is responsible for dusting all rooms. This way, less time would be spent cleaning a house and more houses could be cleaned in the same amount of time it normally takes to clean fewer houses. This strategy would improve the efficiency of the cleaning staff. 0lso, managers could devise a system that charges each house according to the amount of resources needed to clean it. This way, the houses that required more would be charged more, and the houses that required less would be charged less. This would increase the organization*s responsiveness to customers in that the service would be customized to the unique needs of each house, without sacrificing efficiency. 00,?2 standards3 !, ), @

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MANAGING ET9ICALL(Note7 St! ent responses ;i%% 'ar#.) 1. Either "y yo rself or in a gro p, disc ss ho, to thin& thro gh the ethical implications of sing ne, operations management techni- es to impro!e organi.ational performance. The implementation of new operations techniques, such as JIT, T64, or flexible engineering, often require a substantial shift in organizational culture for which employees must be prepared. The human cost of improving productivity must be acknowledged and thoughtfully balanced against other stakeholder concerns, since employee support is vital to the new undertaking. 2. 2hat criteria ,o ld yo se to decide ,hat &ind of techni- e is ethical to adopt and6or ho, far to p sh employees to raise the le!el of their performance1 7ushing employees to raise their level of performance often induces stress. 9easonable levels of stress can sometimes yield positive consequences. 5owever, when employees begin to exhibit signs of being physiologically or psychologically overwhelmed by management induced pressures, the new operational techniques that have created this unacceptable level of tension must be immediately reevaluated. 3. /o, "ig, if any, of a layoff is accepta"le1 7f layoffs are accepta"le, ,hat co ld "e done to red ce their harm to employees1 Improved operations techniques, as well as technological advances and the cyclical nature of a market economy often make layoffs inevitable. 5owever, providing ample forewarning can reduce harm to employees by layoffs, so that they have time to plan and prepare. 0lso reasonable severance packages, outplacement assistance, and if necessary, retraining often helps to reduce the trauma inflicted upon employees by layoffs. 00,?2 standards3 !, ', M, ;

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Notes &or Sma%% Gro!p :rea6o!t E2er"ise H"+ t" C"mpete #n t!e San/+#&! B( #ne (LO11 ,1 .1 0) !. 7dentify the prod ct attri" tes that a typical sand,ich shop c stomer ,ants the most. ,ustomers are central to the survival of almost any organization, so it is crucial that managers find out what customers want and devise ways to satisfy the customers* needs. 0 typical sandwich shop customer will prefer a lower price to a higher price. ,ustomers will also prefer a higher quality product to a lower quality product. Ingredients must look appetizing and taste fresh. ,ustomers also want quick service. 4any people do not have a long time for lunch, and a long wait will likely deter many potential customers. In general, customers will like a sandwich shop that provides many .extras/, and does not charge for these additional features. 0 customer will probably disapprove if the shop charges extra for condiments or other basic toppings. 0lso, customers like flexibility and would probably like a sandwich shop that makes their food to order, and does not prepackage their sandwiches. ,ustomers like to be able to make their own sandwiches, and generally do not like to be told that there are no substitutions. '. 7n ,hat ,ays do yo thin& yo ,ill "e a"le to impro!e on the operations and processes of e#isting sand,ich shops and achie!e a competiti!e ad!antage thro gh "etter 8a9 prod ct - ality, 8"9 efficiency, or 8c9 responsi!eness to c stomers1 5igh quality products are reliable, dependable, satisfying, and capable of getting the -ob done. ?ince a substantial portion of the shop*s .product/ is customer service, orders must be handled quickly, accurately, reliably, and consistently. 5igher product quality obtained through improved customer service can increase efficiency by lower operating costs and thereby boosting profits. 0 production system that maximizes the use of workers, floor space, and time will also increase efficiency. %n a periodic basis, managers should conduct informal market research among customers to determine the attributes they desire so that the sandwich shop can be sure to meet them. 00,?2 standards3 !, ), @

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:e t*e Manager H"+ t" B(#*/ F*at Pane* D# p*a) (LO 11 ,1 .1 0) 1. 2hat &inds of techni- es disc ssed in the chapter can help them to increase efficiency1 Ahen hiring people, it will be important to screen for teamwork skills and the ability to work in a cross functional team setting. The production facility should be designed to incorporate flexible manufacturing technologies and use a -ust in time inventory system, in order to adapt to changing market conditions and customer demands. '. 7n ,hat ,ays can they go a"o t de!eloping a program to increase - ality1 The attempt to improve quality requires finding ways to measure quality, setting quality improvement goals, and soliciting input from employees concerning potential improvements in product design and the manufacturing process. ). 2hat are the critical lessons that these managers can learn from operations management1 :esson ;1< The goal of most start ups is to break even and begin earning profits as soon as possible. Therefore, the management of efficiency is extremely important because increased efficiency lowers production costs that, in turn, lead to profit generation. :esson ;2< In its eagerness to please its new customers, managers of this start up must be careful not to promise a level of responsiveness to their customers that their company can not yet profitability sustain. :esson ;3< 2e cautious of the temptation to continually increase the demands placed on employees to increase productivity. (o not impose unreasonable levels of stress upon employees. 00,?2 standards3 !, ), @

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BUSINESS WEE0 CASES FOR DISCUSSION Ca e S)n"p # 7 No One Does Lean Li6e t*e 4apanese Japan has long been a global leader in lean production. 2ut now, as Japanese companies face increasing competition from low cost rivals in Horea, ,hina, and other parts of 0sia, they are working double time to stay ahead. 4atsushita is at the forefront of this effort. 4atsushita*s management focus is upon increasing efficiency. 0lthough their plant in ?aga has doubled its efficiency over the previous four years, management feels there is still additional fat to be trimmed. 1(e t#"n : 1. 2hat !al e chain techni- es has Mats shita "een sing to impro!e its performance lately1 ,onveyor belts were ripped out and replaced with clusters of robots. Bew software synchronizes production so each robot -umps into action as soon as the previous step is completed. :actories have been rearranged so that they can quickly shift gears to make products for which demand is greatest. Inventory costs have been substantially reduced due to a dramatic increase in the speed of production. The need to constantly re tool robots was reduced when engineers designed a new circuit board. 2. 2hy is it diffic lt for all companies to implement lean prod ction1 Implementing lean production requires substantial start up costs. Bew equipment and technology must be purchased, factory space must be reconfigured, and workers must be retrained. 0lso, an organizational culture that embraces innovation and change must in place. %therwise, both management and workers would probably respond negatively to the uncertainty that a total re haul of value chain operations at the functional level would introduce. 00,?2 standards3 !, ), +, @, !'

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C*apter 10 Vi eo Case Tea"*ing Note Pane'a B'ea/ C"mpan) Tea"*ing O3<e"ti'e3 To observe how a fast casual restaurant chain delivers value to customers, builds loyalty, and achieves a competitive advantage. Vi eo S!mmar#3 7anera 2read ,o. combines some of the best aspects of fast food and sit down venues. Its bakery cafNs offer quick meals throughout the day and a casual, sit down place where customers are welcome to linger. 7anera prides itself on high quality food, the inviting atmosphere, and great customer service provided by managers and employees empowered to make decisions that increase responsiveness to customers. The 7anera formula leads to high levels of employee commitment and customer satisfaction and has fueled tremendous growth for the company. $!estions7 1. /o, do =anera >read0s corporate !ision and strategy lead to a competiti!e ad!antage in the resta rant ind stry1 :ounder and ,"% 9on ?haich envisioned a bakery cafN that serves nourishing food with the speed of fast food restaurants and the engaging environment of sit down venues. :rom the vision, 7anera has developed a strategy that emphasizes high quality food, moderate prices, excellent service, and a unique .gathering place/ environment. 7anera has concentrated on this concept and perfected it while carefully planning and controlling growth. '. /o, does =anera achieve responsiveness to customersD The 7anera experience is designed to satisfy customers and provide value for their money. The company*s food, service, and setting are tailored to customers* needs. The foundation of 7anera is fresh, high quality food, selections people want, moderate prices, quick and friendly service, and a welcoming atmosphere. ,"% 9on ?haich visits 7anera outlets and talks to both customers and store managers and staff. That way he keeps close to the customer and learns what they want, and close to the employees, whose feedback helps improve or maintain operation efficiency. ). 5ow does its corporate culture help make 7anera 2read a high performing companyD

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7anera ranks high in food quality and customer loyalty. The company is adding restaurants yearly and its stock is performing well. Its corporate culture helps deliver that high performance. The culture is based on a sound organizational vision and is built as the company educates and enables managers to lead and empowers front line employees to make customer service decisions. ,"% ?haich imparts the core value of recognizing every stakeholder in the business, including team members and customers.

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